US & Brazil

[Hope777]

http://www.bloomberg.com/news/2010-12-06/u-s-brazil-reach-open-skies-aviation-agreement-u-s-says.html?cmpid=yhoo

 

[autofixer]

Alright...that is a good thing. There are probably 4 or 5 more cities we could serve in Brazil; that is, if we had the planes. We know about Sao Paulo, but maybe Brasilia, Belo Horizonte, Manaus (could be served with a 757) and Belem (maybe a 757). There are several others but we would need 767s or larger to serve them.

Here is a list of metro areas by poplulation: Sao Paulo - 20,000,000, Rio - 12,000,000, Belo Horizonte - 5,400,0000, Brasilia - 3,450,000, Manaus - 2,050,000 and Belem - 2,250,000. Lots of folks in Brazil. I am too lazy to look at the figures as to how many folks fly to the USA from Manaus, Belem, and Belo Horizonte but the cities have a very large poplation base.

 

[smoot4208]

Alright...that is a good thing. There are probably 4 or 5 more cities we could serve in Brazil; that is, if we had the planes. We know about Sao Paulo, but maybe Brasilia, Belo Horizonte, Manaus (could be served with a 757) and Belem (maybe a 757). There are several others but we would need 767s or larger to serve them.

I can say with 100% certainty that US will not serve any of the above mentioned cities other than GRU and GIG even if it had an abundant supple of 757/767s

 

[back2CLT]

Doesn't sound like a good thing to me. One of the reasons US liked Brazil is because of its high-barrier to entry which helps keep airfares up. Having to compete with Delta or American or TAM running increased frequencies or serving secondary Brazillian markets can only drive down fares and likely traffic on US.

 

[jimntx]

In addition to Rio, Sao Paulo, and Recife, we (AA) are adding flights to Belem and Brasilia soon. Just announced. (Or, that may be adding Recife also. I don't follow it that closely because I won't live long enough to proffer for International. )

 

[FWAAA]

Doesn't sound like a good thing to me. One of the reasons US liked Brazil is because of its high-barrier to entry which helps keep airfares up. Having to compete with Delta or American or TAM running increased frequencies or serving secondary Brazillian markets can only drive down fares and likely traffic on US.

I'm confused. Why would lower fares drive down traffic to Brazil? Wouldn't lower fares help increase traffic?

As for US, every time I've looked, US' business class fares on CLT-GIG nonstop are fairly high (as expected) but US' connecting fares from major east coast cities are farily affordable compared to AA's fares. Of course, the O&D between CLT and GIG is very low, so US isn't getting very many of those expensive nonstop fares - most of US' traffic is connecting to/from somewhere else, meaning US' yields to GIG can't be very high as it is.

 

[Travelpro72]

Hey, little stand alone US Airways should be able to hold its own quite easily against the big boys. Right? Go Brazil. 😉

 

[back2CLT]

Perhaps I worded it strangely, fares would drop because demand is dispersed among a greater number of flights, which lowers load factors. Yes, if fares dropped too much, demand would rise until equilibrium is reached.

 

[FutureUScapt]

In addition to Rio, Sao Paulo, and Recife, we (AA) are adding flights to Belem and Brasilia soon. Just announced. (Or, that may be adding Recife also. I don't follow it that closely because I won't live long enough to proffer for International. )

I think you mean Belo Horizonte, not Belem. AA has not publicly announced any intention or desire to serve Belem to date.

AA's network to Brazil has increased rather nicely over the past few years as more flights became permissible under the most recent bilateral. In 2008, AA added Belo Horizonte, Recife, and Salvador flights to its longstanding GRU and GIG flights and this year AA has added/will soon add BSB and DFW/JFK-GIG flights.

I'm confused. Why would lower fares drive down traffic to Brazil? Wouldn't lower fares help increase traffic?

As for US, every time I've looked, US' business class fares on CLT-GIG nonstop are fairly high (as expected) but US' connecting fares from major east coast cities are farily affordable compared to AA's fares. Of course, the O&D between CLT and GIG is very low, so US isn't getting very many of those expensive nonstop fares - most of US' traffic is connecting to/from somewhere else, meaning US' yields to GIG can't be very high as it is.

You are right; lower fares won't drive down traffic to Brazil in aggregate. However, as more nonstops are permitted, there is a chance that US could see a material portion of its connecting traffic disappear if OA add nonstops/additional nonstops in markets where US currently gets a significant portion of its feed from (i.e. NYC area, MCO, LAX, etc). Remember also that the US imposes Visa restrictions on Brazil, which equates to a lower demand than there otherwise would be. If and when those restrictions are ever removed, traffic will skyrocket arguably even more than it will with the introduction of Open Skies.