Jan. 17 (Bloomberg) -- Tam SA and Gol Linhas Aereas Inteligentes SA, Brazil’s two biggest airlines, are raising prices to up to 10 times their regular fare during the World Cup to offset an expected surge in costs at cramped airports.
Round-trip tickets for the 56-minute flight between Sao Paulo and Rio de Janeiro, Brazil’s two biggest cities, on the Saturday before the July 13 soccer final are selling on Tam’s website for between 940 and 2,300 reais ($400-$975). Passengers can expect to pay about 452 reais for trips taking place the following weekend and 221 reais a month later. The same flight is going for as much as 2,100 reais on Gol’s website.
As the games get closer, Tam will charge as much as 2,600 reais per one-way trip during the tournament even as the government pressures airlines to keep prices low, according to a person familiar with the Sao Paulo-based company’s strategy. Tam, which has a 39 percent share of the domestic market, is raising fares because it’s concerned that disorganization at airports during the month-long event will hurt operations and pare margins, said the person, who asked not to be named because the pricing plan isn’t public.
“It’s not going to be a good month for us,” Jose Efromovich, chief executive officer of airline Avianca Brasil, said in an interview at Bloomberg’s Sao Paulo office. “The day that Brazil plays, this country stops. When I say stops, it’s worse than Thanksgiving Day in the States. You don’t see people walking on the street.”
Azul Linhas Aereas Brasileiras SA, the carrier started by JetBlue Airways Corp. founder David Neeleman, and Avianca voluntarily capped prices at 999 reais per leg after a government commission was set up to monitor prices at airlines and hotels.
Tam is betting passengers will be willing to pay higher fares amid increased demand, the person said. Tam in an e-mail said it doesn’t comment on speculation.
Gol, while not setting a specific cap, said in an e-mail it is “maintaining the lowest prices today and always.”
Last year, 98 percent of Gol’s passengers paid less than 1,000 reais per leg, and 85 percent paid less than 499 reais, including during peak travel periods, the company said in a Jan. 15 statement.
Santiago-based Latam Airlines Group SA, Tam’s parent company, fell 27 percent in the past 12 months through yesterday, compared with a 25 percent drop for Sao Paulo-based Gol.
Earlier this week Claudia Sender, president of Tam, said in a statement that her company will invest more than 50 million reais to run hundreds of extra flights during the World Cup. The company said its fares will be “competitive and accessible.”
Brazil’s civil aviation body, known as Anac, announced almost 2,000 additional flights yesterday to transport the estimated 600,000 foreign and 3 million domestic tourists to games in 12 cities across the country. The demand has raised concern about whether airports can cope with the increased load, with several terminals already running near or above capacity. Anac hopes the additional flights will lead to reduced prices.
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