Aug. 21 (Bloomberg) -- American Airlines and David Neeleman’s Brazilian startup Azul are following the travelers and are being led to an airport almost 100 kilometers (62 miles) from Sao Paulo.
Viracopos, Brazil’s sixth-biggest airport, now finds itself on the global air-traffic map as burgeoning industrial growth in the region anchored by Campinas, population 1.14 million, spurs demand. The area is home to the makers of Samsung phones and Mercedes-Benz trucks, as well as orange and sugar-cane exporters.
American Airlines Group Inc. and Azul Linhas Aereas Brasileiras SA are validating the area’s rise to prominence by adding U.S.-bound flights from Viracopos, competing with Sao Paulo, Brazil’s largest city and home to its busiest airport, Guarulhos International. They’re also tapping into interest from an emerging middle class that has almost tripled to about 100 million since 2002.
“The tide of economic growth raised Campinas along with the rest of Brazil; there’s an opportunity there,” said Mike Boyd, a former airline executive who runs the Evergreen, Colorado-based consulting firm Boyd Group International Inc. “It’s a major commercial center and that’s what airlines want to get into and we’ll see more of this going forward.”
Over the past decade, the interior of Sao Paulo state, which includes Campinas and cities like sugar-cane-dominated Ribeirao Preto, saw faster growth in consumer spending than the city of Sao Paulo, according to IPC Marketing, a Sao Paulo-based company that specializes in consumer spending potential. The number of companies located in the interior of the state, and the population have also increased at a faster rate than in the city.
“The market in the interior of Brazil is impressive, and Viracopos is in one of the richest zones of Brazil in terms of GDP,” said Aluizio Margarido, commercial director at Viracopos airport. “There’s a lot of demand from foreign company executives to fly abroad, in addition to which we have a very wealthy population.”
Even with the drive, Campinas can also be easier to access for Paulistanos since traffic in the city can get tied up for hours.
Azul, founded in 2008 and based in Barueri, Brazil, was the first airline to tap the greater Sao Paulo market by choosing to create a hub in Campinas, which was then largely being used for cargo. The carrier now flies to more than 50 destinations in Brazil from Viracopos, largely unchallenged by rivals, and helping increase passengers at the airport to more than 9.5 million last year from from 900,000 in 2008, according to Brazil’s aviation regulatory agency Anac.
Orlando, New York
Since 2003, air travel in Brazil has more than tripled while the number of passengers traveling by bus has dropped by 19 percent, according to Anac statistics.
Azul will start flying Airbus Group NV A330-200 planes to Fort Lauderdale, Florida, from Viracopos as early as December, and will later add Orlando, Florida, and New York in anticipation of increasing demand for international destinations, Neeleman told reporters in April. Azul declined to comment further.
Last month, American announced it would shift some seasonal flights between Sao Paulo’s Guarulhos and Miami and New York to Viracopos. It will be the Fort Worth, Texas-based company’s 10th destination in Brazil, said Dilson Vercosa, American’s regional sales manager based in Sao Paulo.
American, which has the most routes to Latin America among North American carriers, also has the highest yield, an industry benchmark that measures the average fare per mile flown, outside the U.S. It will start flying daily to Miami and three times a week to New York from Campinas in December on Boeing Co. 767-300 planes.
“The country has 200 million inhabitants and over the past 20 years has gone through a huge transformation with a stronger currency, inflation under greater control and an increase in the acquisitive power of the middle class,” Vercosa said in an e-mail. “That’s why we’re interested in the country and why we’ve had success also in decentralizing our operations from Sao Paulo and Rio de Janeiro.”
American fell 2.1 percent to $39.76 at 11:34 p.m. in New York.The shares have risen 61 percent this year through yesterday, compared with a 41 percent increase in the Bloomberg U.S. Airlines Index.
Gol Linhas Aereas Inteligentes SA, the low-cost carrier and biggest Brazilian airline, last month started flying four times a week to Miami from Viracopos, with a stopover in Santo Domingo, on Boeing 737-800 jets.
“This new route was designed to give Gol’s clients more convenience, mobility and practicality,” the Sao Paulo-based company said in an e-mailed response to questions.
Panama’s Copa Airlines said last month it will start daily flights between Panama City and Campinas in December. The Copa Holdings SA unit called Campinas the Silicon Valley of Brazil because it’s home to the country’s second-biggest concentration of research and development centers.
“It’s a region in constant development and has a lot of economic potential,” said Emerson Sanglard, Copa’s regional marketing manager of South America, in an e-mailed response to questions. “The new flights will allow a faster and more practical exchange between the interior of Sao Paulo and the main economic and tourist destinations in the Americas.”
Viracopos, one of the first airports in the country to become privatized, along with Guarulhos and Brasilia’s airport, is in talks with other international airlines to offer flights to destinations in Latin America and Europe, the airport’s commercial director Margarido said.
The group that won the right in 2012 to operate the airport said it should complete initial renovations by the end of the year, an initial step to serve an estimated 80 million passengers by 2042.
Guarulhos is estimated to cater to 130 million passengers by about the same time, according to a 2011 study by the Brazilian aviation regulatory agency. Asked yesterday about the shift of some flights to Viracopos, the Guarulhos airport said it has added service from eight new airlines in about the past two years.
The flight shuffle between the airports isn’t over. Avianca Brasil Chief Executive Officer Jose Efromovich said this week that the closely held airline plans to start offering flights from Viracopos as early as next year.
“There’s a huge amount of repressed demand in the interior of Sao Paulo,” Viracopos’s Margarido said.
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