Airlines will present a plan to reduce ticket prices, says minister – News

Airlines will present a plan, in the next 10 days, to reduce air ticket prices in Brazil, as declared this Tuesday (14) by the Minister of Ports and Airports, Silvio Costa Filho. The speech took place after a meeting with company representatives, at the department’s headquarters, in Brasília. The minister highlighted that high costs have harmed consumers.

“The companies have committed, within the next 10 days, to present a plan to seek to reduce the cost of tickets in Brazil. We know that the increase in tickets is a global issue. In Europe and the United States we have had an increase, but we cannot accept nor allow abusive increases”, stated Costa Filho.

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Asked about possible financing from the National Bank for Economic and Social Development (BNDES) for the sector, the minister highlighted that the bank’s role “is fundamental”.

“THE FNAC [Fundo Nacional de Aviação Civil, gerido pela Secretaria Nacional de Aviação Civil, ligada ao Ministério de Portos e Aeroportos]we have been working alongside BNDES, it is an instrument that will help strengthen, from the point of view of resource capitalization, seeking to reduce the cost of tickets”, he assessed.

For Costa Filho, through FNAC and BNDES, “it is natural that not only private companies, but airlines can obtain and have access to financing, to buy new aircraft, requalify the planes and structure the companies.”

He highlighted that the federal government cannot interfere in the prices charged by firms.

‘Unjustifiable’ prices

Silvio Costa admitted, however, that the prices charged by companies are “unjustifiable”. “In some cases, it’s true, we buy tickets for R$200, R$300, R$400 in some sections, but there are others that went from R$1,500 to almost R$3,500, R$4,000. They are unjustifiable. We are prioritizing this agenda. We truly hope to build a collective proposal, which, in the end, strengthens the Brazilian population”, stated the minister.

Price and tax monitoring

Regarding the inspection of ticket prices, the minister stated that the Administrative Council for Economic Defense (Cade) and the National Civil Aviation Agency (Anac) have actively participated. He considered that the Executive, with regard to taxes, has also played its role.

“In relation to aviation kerosene, which was a desire of the airlines, the federal government is doing its part. This year we have already had a 14% reduction in the cost, it makes no sense to reduce kerosene, which represents 40% of the cost of the flight , and we don’t have a reduction in ticket prices”, he criticized.

Asked about the reasons that led to the increase in air travel, Costa Filho cited the Covid-19 pandemic and judicialization.

“Firstly, the airlines suffered a lot of problems due to the pandemic, to be fair, they went through very difficult times and are having cash problems even to put aircraft traveling around Brazil. Some have 20, 15 planes on the ground, because they don’t have money for maintenance or purchasing a new engine to fly. When we have fewer aircraft, we have less power to make offers”, explained the minister.

“The second point, of the judicialization of the world, 70% is here in Brazil. The operational and judicial costs, airlines pay in Brazil R$ 1 billion just due to legal actions. We understand the difficulties and we have tried to listen, try to construct a proposal, which [as empresas] they had to introduce us. From then on, we will take all appropriate measures”, he added.

Inflation and high prices

Air tickets are among the sub-items that contributed most to maintaining the transport group’s participation in the increase in the Broad National Consumer Price Index (IPCA) this year. In the calculation for October, air fares increased by 23.7%, according to the Brazilian Institute of Geography and Statistics (IBGE) last Friday (10).

The higher value of plane tickets this month was already expected, as it had been predicted in the release of the Broad National Consumer Price Index 15 (IPCA-15), considered the preview of inflation, which showed a 23.75% increase in that amount. subitem, on October 16th. Furthermore, airfares had already registered an increase in the IPCA-15 and in the September IPCA, of 13.29% and 13.47%, respectively.

The increase may be related to the increase in the price of aviation kerosene (QAV) and the approaching end-of-year holidays. The rise in airline ticket prices in October, in fact, is not out of the ordinary for the sector: it usually happens at this time, when families start planning end-of-year trips.

According to Anac, the value of airline tickets has fluctuated due to several factors, such as the aforementioned price of the QAV and the exchange rate, which determines the variation of the dollar in relation to the real.

How is the ticket price calculated?

Anac explains that ticket pricing is done by airlines, because the sector is governed by tariff freedom, a regime established by the federal government in 2001. This means that, by law, the agency cannot interfere with market prices. Anac’s duties include monitoring the tariffs sold by companies.

Just as they can set prices as they wish, airlines have seats with different prices on the same flight, to cater to different user profiles and achieve higher levels of aircraft occupancy.

But, in addition to the QAV, the variation in the dollar exchange rate and the seasons of greatest demand for travel, such as the end-of-year holidays, Anac informs that there are other elements that have an influence on the composition of airline ticket prices by companies and that lead to constant fluctuation of values, such as:
• distance from the airline;
• degree of market competition;
• cost evolution;
• restrictions on airport infrastructure and air navigation;
• aircraft occupancy rate;
• flight time;
• advance purchase of the ticket;
• contractual conditions for rescheduling and refunding the ticket;
• checked baggage allowance;
• meal service on board;
• seat assignment;
• carrying out promotions, among others.