Brazil bill to restore free checked bags alarms airlines

By Gabriel Araujo

LIMA/SAO PAULO (Reuters) -A Brazilian bill that would bar airlines from charging fees for checked bags has spooked a domestic industry already plagued by bankruptcies, fueling accusations the move would discourage the kind of low-cost operators that could lower fares overall.

The measure, which cleared the Lower House last week but still requires Senate approval, would allow passengers to travel with a free carry-on on domestic flights and bar carriers from charging for checked bags of up to 23 kg.

If enacted, it would roll back a 2017 rule that allowed fees for checked luggage and would undercut some standard low-cost policies, frustrating carriers that had hoped to sell “basic” fares that include only an item stored under the seat.

Regulatory changes have long worried carriers in Brazil, where the industry has had a bumpy ride recently, with Azul filing for bankruptcy protection as Gol came out of it. LATAM Airlines emerged from Chapter 11 in 2022.

NO TRADITION OF ULTRA-LOW-COST CARRIERS

Unlike other major aviation markets and South American peers such as Chile and Argentina, Brazil does not have a tradition of ultra-low-cost carriers. Consumers have complained that luggage restrictions have not helped lower fares.

“There has been no reduction in ticket prices, and we need to defend consumer rights,” said Congressman Alex Manente, who authored the amendment allowing for free checked bags.

LATAM and Gol, which had introduced basic fares on some international routes, have defended the policy as giving customers cheaper options and boosting competition.

“This bill moves Brazil backward at a time when aviation should be helping drive economic growth,” said Peter Cerda, the head of airline lobby group ALTA. “It’s like going to the cinema and being forced to pay for popcorn as part of your ticket.”

Consumer protection agency Procon-SP last month complained of “cuts in services and constant price increases”. Ticket prices in Brazil rose 9.4% in the year through mid-October, outpacing a 4.94% overall price increase.

MARKET CAN NOT AFFORD REGULATORY INSTABILITY, SAYS GOL

Gol CEO Celso Ferrer told an event hosted by ALTA in Lima last month that basic fares would allow airlines to grow more, and that the market could not afford regulatory “instability.”

“I think that’s one of the key reasons why we don’t see more companies operating in a bigger way in Brazil,” LATAM Brasil CEO Jerome Cadier said of regulatory uncertainty at the same event.