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Open Skies agreements have been a controversial subject in the United States in recent years with Delta, American and United seeking to limit competition from Gulf carriers. But it’s a different story with Brazil, where a new agreement has U.S. carriers like American pleased to grow its presence in one of the world’s largest economies.
Seven years in the making, Brazil is about to sign an Open Skies agreement with the United States that’s poised to make airfares cheaper and boost tourism between both countries. It could also spur partnerships between American, Brazilian, and other Latin American carriers.
The agreement, which still needs Brazil President Michel Temer’s signature, comes at a time when Brazil’s arrivals to the U.S. are down more than 11 percent year-to-date through September, the most recent month for which data is available from the U.S. Department of Commerce.
Brazil is the United States’ eighth largest overseas source market for tourism, and Brazilian travelers are among the largest spenders in the United States, having spent more than $14 billion per year in recent years.
Open Skies will allow for an unlimited number of flights between Brazil and the United States, although capacity will differ by airport. There’s been an average of 243 weekly flights between both countries since January, with the number of weekly flights increasing 22 percent and 20 percent year-over-year in February and March, respectively.
U.S. Travel Association data show other Open Skies route airfares are 32 percent cheaper on average than routes not part of Open Skies.
Brazil’s economic recession in recent years has hampered outbound travel and the country is still recovering. The country also contended with Zika and political scandals during the past two years.
Brazil has made other efforts to facilitate travel from the U.S., such as the launch of electronic visas for U.S. travelers in January, but the U.S. hasn’t reciprocated. “If we have more Americans traveling to Brazil with the electronic visa, we have more competitiveness,” said Vinicius Lummertz, president of Embratur, Brazil’s national tourism board.
“I’ve talked to Florida Governor Rick Scott before and he was in favor of no visas for Brazilians to come to the U.S.,” said Lummertz. “I had the impression that tourism was more emphasized with the last U.S. administration. It’s crazy that in Brazil some people have to take a flight within the country just to get a visa for the U.S.”
About 25 percent of tickets sold by Brazilian travel agencies in 2017 were for U.S.-bound flights, according to data from the Brazilian Travel Agencies Association, which represents more than 2,400 travel agencies across Brazil. “Once approved, it will also be necessary to follow the international airlines’ strategies to ensure it will not cause any injury to our domestic industry,” said Carlos Palmeira, the association’s president.
“Today we have seven companies connecting Brazil to the USA and three of them are international,” said Palmeira. “Americans are the main foreign market for Brazil outside Latin America, which proves that there is demand in both directions.”
Brand USA, the organization responsible for marketing the United States abroad, said Brazil was one of its first marketing campaigns in 2012.
“We currently have the full slate of consumer marketing, cooperative marketing, and trade components invested in Brazil,” said Anne Madison, chief strategy and communications officer for Brand USA. “And there’s a good reason. According to the most recent National Travel & Tourism Office forecast the United States is expected to see a 17 percent increase in visitation from Brazil to the USA from 2017 to 2022.”
Madison said Brazil travelers’ current intent to visit the United States during the next 12 months is between 77-80 percent, based on a recent survey of international travelers conducted by Brand USA. Travel intent is up about seven percentage points since the organization’s 2017 survey.
Brazil’s U.S. Visa Waiver Ambitions
Some U.S. destinations like Miami, one of the largest gateways and U.S. destinations for Brazilian travelers, are happy with the breakthrough deal but feel the U.S. visa waiver program is the bigger issue.
Some 38 countries are part of the visa waiver program, which lets travelers from those countries enter the United States without a visa. So far Chile is the only Latin American country part of the program.
“With Brazil, the ultimate goal for Miami is to get the country in the visa waiver program,” said Rolando Aedo, chief operating officer of the Greater Miami Convention & Visitors Bureau, the city’s tourism board. “The visa issue is arguably bigger than the Open Skies issue.”
Aedo said the visa waiver program has generated more demand than Open Skies for countries part of both programs. “Open Skies deals don’t happen that often,” he said. “Waiving the visa and fee might be part of the discussions going forward. There was a visa-free pilot project held during the Rio Olympics that went well and we hope Open Skies is a precursor to a visa waiver. Especially with a country as vast as Brazil, that’s a bigger topic.”
Miami’s 2017 international visitation data show more than 525,000 Brazil travelers visited the destination (down 5 percent year-over-year). Aedo said Brazil’s decline wasn’t as bad last year as it was in 2016 as there was a 3.2 percent increase in airline seat capacity from Brazil last year.
“We were optimistic about Brazil even before full Open Skies,” said Aedo. “We saw American Airlines pullback service in 2017 that connected Miami and Brazil directly. Recently we’ve seen them add back service to these cities. Gol Airlines has also entered the competition with direct service from Miami. Avianca’s Brazil division launched directly from Miami, too.”
Miami International Airport offers incentive packages to airlines it wants to attract, such as waiving landing fees and helping with marketing resources. Miami’s tourism board developed another program to help sweeten the deal which includes establishing marketing offices in new markets.
“Our incentives won’t close the deal but it’s in addition to a very comprehensive route study that we offer,” said Aedo. “We’re also offering this package to carriers in Asia to get direct service to Miami.”
Will Open Skies Bring Back Brazil?
The United States is arguably Brazil’s most significant Open Skies agreement to date.
It has other agreements with countries such as Chile, Israel, Switerzland, and Uruguay, but nearly twice as many U.S. travelers visit the country than those from nearby Chile and Uruguay. Brazil also recently gave up on Open Skies with the European Union after negotiations fell through.
Brazil’s government is currently debating whether to allow more foreign ownership of the country’s airlines, which Lummertz said could also jumpstart more tourism between both countries.
Brazil remains more closed to international trade than other large economies like the United States, said Lummertz. “I think the bill will happen but not sure at what level,” he said. “Some people are saying 49 percent ownership would be sufficient.”
“There are a lot of partnerships going on right now with Latin American carriers,” said Lummertz. “My argument is that what they do is more important than what they are. If airlines help grow the economy, it shouldn’t matter as much who owns them.”
The big three U.S. carriers – American, Delta, and United – are trying to convince the U.S. government to rip up agreements with Qatar and the U.A.E. because they have partnerships with other U.S. airlines, said Erik Hansen, vice president of government relations for U.S. Travel.
“Open Skies were intended to provide competition,” said Hansen. “The Gulf carriers have taken a different approach, compete rather than promote with them.”
“The big three are willing to support Open Skies when they can partner and form joint ventures with other carriers,” said Hansen. “Brazil is a case in point on what their true intentions are. They’ll see the financial benefit from Brazil.”
Past Open Skies agreements have helped grow travel to the United States from countries with such deals, said Hansen. “We could have more economic growth with both visa waiver and Open Skies,” he said.
“I think we’re still stuck in the same place with Brazil on the visa waiver discussion but we need to remind Congress that the visa waiver program actually strengthens security,” said Hansen.