Brazil has erected multiple barriers to the development of its aviation industry, said Peter Cerdá, regional vice president for the Americas at the International Air Transport Association (IATA). The effects are evident in the turbulence and restructurings within the sector, most recently seen with Azul’s Chapter 11 filing in the United States.
A major concern for the industry is the ongoing tax reform. According to IATA projections, demand in the Brazilian market could decline by as much as 30% if the current proposal is enacted.
“My biggest concern in Brazil is that the government wants more competition and lower prices but isn’t willing to help us reduce costs,” Mr. Cerdá told Valor during IATA’s annual meeting, held this year in New Delhi, India.
“The industry has been working to become more efficient, but the government must do its part. Brazil has become a country with many barriers to overcome,” he said. In addition to the tax reform, the industry is also being squeezed by the increase in the Tax on Financial Transactions (IOF), which is expected to add an annual cost of R$600 million to Brazil’s airlines.
Currently, domestic airfares are taxed at 9%, but the rate is set to rise under the proposed reform. The final figure is uncertain, but estimates suggest it could reach around 27%. International tickets, which are currently tax-exempt, would also be subject to the full tax rate under the new rules. Although the reform still needs several years to take effect, the approved text stipulates that departures from Brazil would be taxed at the full rate.
An exception will be made for regional aviation, which will have a lower tax rate, but the specifics still require regulation.
IATA estimates that with a 26.5% tax rate, the average domestic airfare in Brazil would increase from $130 to $160. Meanwhile, the average international fare would rise from $740 to $935.
Tax reform dominated IATA’s discussions about the Brazilian market on the first day of the annual conference, which brings together global aviation leaders. Sources noted that the topic has gained momentum within the association amid pressure from international airlines concerned that new taxes could discourage investment in Brazil, the largest market in Latin America.
Mr. Cerdá stressed that aviation is vital for Brazil, given its vast territory. “There’s no way to get from São Paulo to Manaus without aviation,” he said. In Latin America, he added, the airline industry is still seen as a luxury rather than a form of public transportation.
The industry’s systemic challenges in Brazil, including a litigation rate above the global average and higher fuel costs, help explain the crises facing the country’s airlines. Azul was the only major carrier that had not yet sought restructuring in the United States. Gol expects to complete its restructuring process in June, while Latam reorganized between 2020 and 2022.
Mr. Cerdá said he is optimistic about Azul’s process, noting that Chapter 11 has proven effective in other airline restructurings.
He also argued that Brazil does not necessarily need more airlines to boost competition and lower fares, contrary to the government’s focus on attracting new low-cost carriers. “We see many markets with three airlines or fewer, such as Colombia, Spain, and other European countries. You don’t need ten airlines to have competition,” he said.
While the government aims to attract new players, the sector is moving in the opposite direction. Shareholders of Azul and Gol are reportedly in talks about a potential merger after both groups conclude their restructuring efforts.
Mr. Cerdá commented only that consolidations are a prominent strategy in today’s global aviation industry, which has previously relied on global alliances and codeshare partnerships.
Despite the headwinds, IATA expects air travel demand in Latin America and the Caribbean to grow by 10.9% in 2025 compared to last year, outpacing the global forecast of 8% growth.
In contrast, North America is projected to see just 1.6% growth this year, reflecting a weakening U.S. market. The industry there is grappling with declining demand from Europe and Canada amid the tariff and immigration crises fueled by the current U.S. administration.
On a positive note, Mr. Cerdá said that part of the capacity lost in North America is being redirected to Latin America, with airlines increasing international flight offerings…
