March 7, 2018 / 8:16 PM / 7 months ago

Brazil Senate approves Open Skies air deal with United States

BRASILIA (Reuters) - Brazil’s Senate on Wednesday approved an Open Skies agreement between Brazil and the United States that clears the way for a partnership between American Airlines Group Inc (AAL.O) and LATAM Airlines Group SA LTM.SNLFL.N.

FILE PHOTO: An American Airlines jet takes off from Washington National Airport in Washington, U.S., August 9, 2017. REUTERS/Joshua Roberts

The treaty will be sent to President Michel Temer, who is expected to sign it into law. The agreement allows an unlimited number of flights between Brazil and the United States, the favorite destination of Brazilian tourists, and should result in lower airfare prices.

It is expected to lead to increased interest by the U.S. airline industry in the potentially huge Brazilian market.

FILE PHOTO: A LATAM Airlines plane takes off from Congonhas airport in Sao Paulo, Brazil September 11, 2017. Picture taken September 11, 2017. REUTERS/Paulo Whitaker

The Open Skies treaty was signed in 2011 but faced opposition from lawmakers lobbied by local airline interests in Brazil, who feared competition from U.S. carriers.

The accord was a requirement for the U.S. Department of Transportation to approve a business deal between American Airlines and LATAM, the two largest carriers in the region, which would see them co-ordinating schedules and offering more connections.

Brazil’s anti-trust agency has already given the green light for the partnership. In 2016, Chile-headquartered LATAM signed the joint business agreement with American, and another with IAG’s (ICAG.L) British Airways and Iberia, all members of the Oneworld Alliance.

American Airlines applauded the treaty’s approval.

“Open Skies agreements have proven to increase travel choices and enhance competition, resulting in greater benefits for consumers and positively impacting economic growth,” the airline said in a statement.

Brazil’s third-biggest airline, Azul Linhas Aéreas (AZUL.N), which started in 2008, initially opposed the agreement, arguing that it needed to establish itself in the Brazilian market before it was opened up to further competition.

The treaty was backed by GOL Linhas Aéreas Inteligentes (GOLL4.SA), Brazil’s second airline in which Delta Airlines Inc (DAL.N) has a 9.48 percent stake, and Avianca Brasil, which hopes to seal a business deal with United Continental Holdings Inc UAL.N in the near future.

Brazil’s center-right government is backing separate legislation to remove or ease limits on foreign investment in Brazilian airlines, currently restricted to 20 percent of common voting shares.

Flights between Brazil and the United States are expected to surge by 30 percent as a result of Open Skies, according to Brazil’s tourism board Embratur.

The number of Americans traveling to Brazil has also increased 70 percent since Brazil introduced an electronic visa system in January, according to preliminary data gathered by the Brazilian government.

Reporting by Anthony Boadle and Maria Carolina Marcello; Editing by Rosalba O'Brien

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