Domestic Traffic across Key Markets

We updated our domestic air traffic model through April for most countries; a few are lagging in their published data.  There have been big changes since our last review in November.

Tier 1 & 2: The EU’s Paradox and Canada’s Recalibration

• The European Union (Tier 1): In a striking paradox, the EU has moved to the highest performance level among Tier 1 markets. This comes despite aggressive regional “green” political initiatives and a public narrative of environmental antipathy toward commercial aviation. The underlying consumer demand remains decoupled from political rhetoric.
• Brazil (The Next Tier 1?): Brazil’s domestic momentum is surging at a historic rate. The country reached a major milestone by logging consecutive record-breaking months at the start of the year. If this trajectory holds, our model will require Brazil to graduate from Tier 2 to Tier 1. Here’s what is driving Brazil’s air travel demand.
  • ANAC Domestic Capacity (ASK/ASM): Domestic capacity expanded by 4.4% year-over-year in April 2026, following a historic 2025, when total demand surged 11.5% YoY and crossed the 100-million domestic passenger milestone for the first time.
  • Macro Indicator 1: Real GDP Growth: Brazil’s macro economy is growing moderately but steadily, sitting at 2.3% in 2025 and an estimated 1.6% to 1.9% for 2026.
  • Macro Indicator 2: Unemployment (The Catalyst): Dropped to a historic low of 5.1%.
  • Macro Indicator 3: Real Average Household Income: Surged by 5.0% year-over-year, hitting a record high of R$3,613.
  • In mature Tier 1 markets (such as the US or Western Europe), the relationship between domestic capacity growth and GDP growth is typically tightly bound by an elasticity coefficient of roughly 1.0 to 1.2. In Brazil, our tracking reveals a massive elasticity multiplier of 2.4-2.7 relative to GDP. Capacity isn’t just creeping up with the economy; it is running away from it.
  • The near-perfect 1:1 correlation between Real Average Household Income growth (+5.0%) and Domestic ASM capacity expansion (+4.4% in April) proves that the expansion is consumer-backed and structurally stable. This is no longer an emerging, volatile Tier 2 market driven by seasonal anomalies; it is displaying the deep, resilient consumer base of a Tier 1 core aviation market.
• Canada (The Tier 2 Distortion): This is the most critical data adjustment in our model. In late 2024, Canada altered its counting methodology. Historically, Canadian metrics essentially double-counted domestic legs. The new framework reveals that true Canadian domestic traffic is at a much lower absolute level than previously modeled, prompting us to evaluate moving Canada to a lower tier.

Tier 3 & 4: South American Divergence

• Chile (Tier 3): While the majority of our tracked global markets have stabilized at or above 2019 baselines, Chile is structurally lagging behind its regional peers, showing a slower-than-expected economic recovery in domestic capacity.
• Argentina (Tier 4): Lower-tier markets are overwhelmingly outperforming pre-pandemic levels. Argentina, in particular, demonstrated extreme volatility, with a massive traffic spike in January, reflecting rapid shifts in domestic economic policy and currency fluctuations that drove local travel.

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