Measure would Strengthen Dominant Position of LATAM airlines and American Airlines.
Flights between Brazil and the United States are expected to increase by 30 percent as a result of Open Skies, says Embratur (The Brazilian Tourism Board—Brazil’s equivalent of Brand USA). This was one of the first responses to the March 7 approval by Brazil’s Senate of an Open Skies agreement between Brazil and the United States. The legislation was sent on to President Michel Temer, who was expected to sign it into law. (The Open Skies treaty was signed in 2011 but had faced opposition for the next six years from lawmakers lobbied by local airline interests in Brazil who feared competition from U.S. carriers. Those who stressed its national economic benefits eventually prevailed.)
The agreement between Brazil and the United States opens up airline slots between the two nations, allowing an unlimited number of flights between the two nations; one effect of the deal is that it cleared the way for a partnership between American Airlines Group Inc. and the LATAM Airlines Group. In January 2016, the two carriers had applied for permission to form a Joint Business operation. Such an agreement was a requirement for the U.S. Department of Transportation to approve the business deal between American Airlines and LATAM, the two largest carriers in the region, which would see them coordinating schedules and offering more connections.
In a related move, Brazil’s government last September approved a plan by American Airlines to build a maintenance center at Sao Paulo’s Guarulhos Airport, a $100 million investment that will help the carrier consolidate its South American operations.
Although headquartered in Santiago, Chile, LATAM—it is the result of a 2012 merger between Chile’s national carrier, LAN Chile airlines, and Brazil’s TAM airlines—is the dominant carrier in Brazil, where it has offices in São Paulo. In fact, according to consumer surveys conducted the past two years in Brazil, the name “TAM” remains the most popular airline brand. LATAM also has as subsidiaries LATAM Colombia, LATAM Ecuador, LATAM Paraguay, LATAM Argentina and LATAM Perú.
For Brazil, the Open Skies agreement is expected to lead to increased interest in Brazil as a destination by the U.S. airline industry in the potentially huge Brazilian market. The number of Americans traveling to Brazil has also increased 70 percent since Brazil introduced an electronic visa system in January, according to preliminary data gathered by the Brazilian government.
From the perspective of the U.S. inbound tourism industry, the Open Skies agreement can only help improve a dismal situation in which arrivals from Brazil to the United States have fallen 30 percent from 2014 to 2017, according to the latest figures supplied by the U.S. Department of Commerce’s National Travel and Tourism Office.