Graduate Student Works WW Campus for Central & South America 11-2018 Open Skies Agreement Between Brazil and the United States: Regulations, Alliances, Economic Impacts and a General Long Term Projection Diego Alvim Embry-Riddle Aeronautical University Jose Simi Embry-Riddle Aeronautical University Mathias Gitahy Embry-Riddle Aeronautical University Rebecca Meadows Embry-Riddle Aeronautical University Follow this and additional works at: https://commons.erau.edu/brazil-graduate-works Part of the Business Analytics Commons, and the Marketing Commons Scholarly Commons Citation Alvim, D., Simi, J., Gitahy, M., & Meadows, R. (2018). Open Skies Agreement Between Brazil and the United States: Regulations, Alliances, Economic Impacts and a General Long Term Projection. , (). Retrieved from https://commons.erau.edu/brazil-graduate-works/23 This Capstone is brought to you for free and open access by the WW Campus for Central & South America at Scholarly Commons. It has been accepted for inclusion in Graduate Student Works by an authorized administrator of Scholarly Commons. For more information, please contact [email protected]. OPEN SKIES AGREEMENT BETWEEN BRAZIL AND THE UNITED STATES: REGULATIONS, ALLIANCES, ECONOMIC IMPACTS AND A GENERAL LONG TERM PROJECTION by Diego Alvim José Simi Mathias Gitahy Rebecca Meadows A Capstone Project Submitted to Embry-Riddle Aeronautical University in Partial Fulfillment of the Requirements for the Aviation Management Certificate Program Embry-Riddle Aeronautical University Sao Paulo, Brazil November 2018 OPEN SKIES AGREEMENT BETWEEN BRAZIL AND THE UNITED STATES: REGULATIONS, ALLIANCES, ECONOMIC IMPACTS AND A GENERAL LONG TERM PROJECTION by Diego Alvim José Simi Mathias Gitahy Rebecca Meadows This Capstone Project was prepared and approved under the direction of the Group’s Capstone Project Chair, Dr. Leila Halawi It was submitted to Embry-Riddle Aeronautical University in partial fulfillment of the requirements for the Aviation Management Certificate Program Capstone Project Chair: ___________________________________________ Dr. Leila Halawi Capstone Project Chair ________________ Date Acknowledgements This project required huge work, dedication, research and time from all of us. Still, the final paper would not have been possible without the support of many individuals and organizations. Therefore, we would like to first extend our gratitude to ABEAR for the efforts to bring together with SENAT and ITL, the opportunity, to us and our airline colleagues here in Brazil, to participate and complete the International Aviation Management course organized by Embry Riddle Aeronautical University. The expertise, knowlegde, experience, willingness brought by each professor, mentor and all involved during these last 14 months, were essential to this course and research. It seemed like a short time together, but it gave all of us a one time experience and made us even better professionals at our own airlines. We also would like to specially thank our employeers, the Brazilian airlines – Avianca, Azul, Gol and Latam that decided to invest and allow us to participate and complete this course. Last, but not least, we thank our families and colleagues for their encouragement and cooperation which also helped us to complete this course. Abstract Group: Alvim, D. Gitahy, M. Meadows, R. Simi, J. Title: Open Skies Agreement Between Brazil And United States: Regulations, Alliances, Economic Impacts And A General Long Term Projection Institution: Embry-Riddle Aeronautical University Year: 2018 This research has been developed based on the new United States and Brazil open skies agreement signed in 2018 with the goal to analyze regulations, alliances, economic impacts and a general long term projection. As a result, the model proposed indicates 14 potential new routes, 6 coming from São Paulo and Rio de Janeiro and 8 from other cities. The new routes create a new axis of air transport, with new direct flights programmed for the northeast, center-west and south regions. These new weekly frequencies allow an increase of 151 weekly frequencies between the two countries, going from the current 196 weekly frequencies to a total of 347, reaching a growth of 77% compared to the current levels. Based on the analysis of civil aviation market information between Brazil and the United States, the following proposals are consolidated and presented: investment in tourism promotion by the Ministry of Tourism of Brazil in the United States, investment in tourism promotion of the central and west coast of the United States in the Brazilian media and tour operators, facilitation of the North American visa process for Brazilians, concession of benefits and reduction of taxes on domestic flights (international feeders) and rapid analysis and approval of proposals for joint ventures between Brazilian and North American airlines. Table of Contents Page Capstone Project Committee............................................................................................... ii Acknowledgements ............................................................................................................ iii Abstract .............................................................................................................................. iv List of Tables .................................................................................................................... vii List of Figures .................................................................................................................. viii Chapter I Introduction ................................................................................................10 Project Definition ...........................................................................13 Project Goals and Scope ................................................................14 Definitions of Terms ......................................................................16 List of Acronyms ...........................................................................17 II Review of the Relevant Literature .............................................................19 History about Brazilian and US national aviation markets ............20 The process of air industry deregulation in Brazil .............24 The economic condition of Brazilian airline industry ...................27 BR-US international operations analysis .......................................30 A Path to the BR-US OSA .............................................................35 OSA: terms and definitions ................................................39 OSA worldwide overall analysis .......................................43 Airlines Alliances: types, terms and perspectives..............46 JV and JBA agreements .....................................................48 The BR-US OSA agreement approval law ....................................50 OSA impacts and results achieved worldwide...............................53 Summary ........................................................................................60 III Methodology ..............................................................................................63 Experimental Design ......................................................................63 Regulations ........................................................................64 Alliances ............................................................................65 Economic impacts ..............................................................66 General long term projection .............................................67 Data Source(s), Collection, and Analysis ......................................68 Coefficient of Opportunities ..............................................68 IV Outcomes ...................................................................................................72 The potential quantitative effects of BR-US OSA .........................76 Impacts of airline alliances ................................................77 Regulation and competition policy ....................................77 New routes and challenges .................................................81 Tourism industry impacts ..................................................82 BR-US OSA Broader issues ..........................................................83 Operational Costs between BR and US airlines ................84 Brazilian economics ...........................................................86 Cabotage flights .................................................................89 New Horizons ................................................................................91 The US Perspective ............................................................91 The Brazilian Perspective ..................................................93 Looking Ahead...................................................................94 V Conclusions and Recommendations ..........................................................96 Conclusions ...................................................................................96 Recommendations ..........................................................................97 References ........................................................................................................................100 List of Tables Page Table 1 Open Skiesbetween the United States and Latin American countries ...................12 2 Seat capacity evolution between Brazil and international markets .......................32