Airlines Lobby for Brazil to Amend Laws Limiting Ancillary Fees

Brazilian laws limiting the amount of fees airlines can collect on ancillary expenses, such as checked baggage and seat selection, are receiving criticism from carriers worldwide lobbying for change.

Airlines based in Brazil, as well as others who fly there, are missing out on ancillary fees that have become a major profit generator for carriers around the world.

“It’s just a very consumer friendly place and people expect a lot and the government perpetuates that,” David Neeleman, CEO of Azul Linhas Aereas Brasileiras, told Bloomberg News.

Airlines, both homegrown and foreign, want the Brazilian government to back down from their passenger-friendly travel laws. Airlines have argued that the lack of ancillary fees is resulting in imposing higher ticket prices in order to offset losses, thereby hurting consumers.

“They’re messing with the economics of airlines,” aviation consultant Jay Sorensen told Bloomberg News. Sorensen said he thinks Brazil’s passenger-friendly laws are bankrupting the country’s airlines.

Excessively heavy luggage, which is not regulated or charged for under current Brazilian law, also increases aircraft fuel burn. As a result, airlines have been lobbying for the government to impose limits and allow surplus charges. Baggage fees are the primary source of ancillary revenue for airlines around the world.

“The whole world thinks one way, and in Brazil, we’re inventing things that just turn into costs and that increase ticket prices,” Ronaldo Jenkins, director of security and operations at Brazilian airline association ABEAR, told Bloomberg News.

ANAC, Brazil’s aviation regulation agency, is looking into the baggage issue. Lowering fares for passengers with lighter luggage is one of the proposals the agency is currently considering. New rules are expected to go into effect in 2015.

The International Air Transport Association (IATA) estimated that net profits per departing passenger for airlines worldwide will average $5.65 in 2014. Ancillary revenue per departing passenger for airlines worldwide, according to the IATA forecast, will average $13.93.

[Photo: iStock]