Hurray! There is a great news for Brazil as well as European aviation businesses, because this year we are going to welcome Norwegian airline in country.
The European airline companies got approval from Brazilian government to being flying in the country, which will expand the network of trans-Atlantic flights to South America. But the airlines will face strict regulations that could work against its no-frill model.
Brazil government has approved this bill in Aug 8 prohibiting airlines from charging passengers to choose seats. Now the Norwegian Airline companies are proceeding with great caution in order to succeed in new market and consequently creating new jobs and boosting economic value. If we talk about Norwegian air it is difficult for them to operate as a modern airline, not as the airline form the past.
Bringing newfangled financial ways to Brazil is no easy task for carries. While some global airlines rack up as much as 40% of sales with ancillary fees for items like baggage or priority seating, in Brazil they’ve struggled to get permission to levy those extra charges.
Ancillary Windfall
Previous year, the 10 airline companies earned the most amount of ancillary revenue reported almost $30 billion in additional sales- up from $2.1 billion in 2007, according to a car trawler and Idea works report.
After Brazilian aviation industry regulators allowed airlines to start charging for luggage in 2016, Brazil own GOL Linhas Aereas Inteligentes SA saw the revenue category that includes ancillary sales rise 15% to 370 million reais ($89 million) in fourth quarter of 2107 when compared to the company’s fillings.
Now the revenue is at the huge risk, with the national lawyer’s association campaigning to eliminate baggage fees, calling the practice illegal and abusive to consumers. The airlines operating in the country have been supporter and raised the voice speaking at an event in Sao Paulo this week, Gol CEO, Paulo Sergio Kakinoff praised the 2002 decision to deregulate ticket prices.
Free Competition
Kakinoffsaid that they have always been in favor for competition free from regulations, Gol would not exist were it not for the freedom to determine prices.”
Since deregulation, the average ticket price dropped to 200 reaisfrom 600 reais, Avianca Brazil CEO FredericoPedreira said in an interview “it is been more than proven that deregulation brings more competition and more economic development. In opposition to this some airlines speak against Brazil Government proposal to outlaw fees for seat assignment.
On the other hand, Latam airline group SA said that “laments the proposal of a regulation that goes against the service model adopted by global airlines”
Senator Jose Reguffe told Agenica Senado that consumers have a right to choose their seat free when they buy tickets for a flight.
Abusing Consumers
He also added that to charge this fee is an indirect way for the companies to raise even more costs targeted to consumers.
Not all airlines are against the proposal, Azul SA which was created by JetBlue Airways corp. also the founder David Neeleman, has also agreed that no customer should have to pay for choosing a seat.
The same bill circulation to whole board and if everything remains under control it will go to the president for signature.
If the proposal become protocol, it will be a guideline for Norwegian airlines to plan and implement a low-cost model in Brazil with the flights to London from Sao Paulo starting next year what has typically been a high cost route. A search shows flights on the route in October start at $760.
News Source: Bloomberg
