The rapid growth in Brazil's domestic airline industry shows no sign of slowing, although the market is consolidating with the latest in a spate of mergers and acquisitions.
Today's announcement confirms the union of the two large low-cost-carriers, Trip and Azul, giving a combined share of more that 14% of the domestic market. Azul is the larger of the two airlines, with almost 10% market share, and this is reflected in the merger agreement which gives Azul control of the merged company. When the merger is completed, the new airline will overtake Avianca Brazil to become the third largest in the country, after Gol (which is in the process of acquiring Webjet) and TAM.
There are clear synergies between the two companies. Both are headquartered at Sao Paulo's Campinas Viracopos airport, and both operate complementary fleets of Embraer regional jets, and ATR turboprops.
The future shape of this huge market will now be dominated by just four airlines. Tam, Gol/Webjet, Azul/Trip and Avianca Brazil already account for 99% of the domestic capacity. While Tam and Avianca Brazil adopt a traditional "full service" business model, Gol and Azul/Trip follow a "low cost" strategy with fewer service frills.
The next front in the continuing competitive battle is likely to be the international market, currently dominated by TAM following some years of aggressive expansion, and its recent association with LAN Airlines. Meanwhile Avianca Brazil continues to expand its international route network, in association with its sister companies of the Avianca TACA group.
Finally Gol, after its recent focus on domestic and shorter regional flights, is starting to renew its interest in international markets, having re-commenced services to the United States (Miami), in association with Delta Airlines.
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