Brazil has enjoyed a decade and a half of economic stability now.
It can claim seven years of strong growth, with only a minor upset during the global economic crisis. And during that time span, its poorest 10% experienced a 50% rise in income.
In fact, out of a population of roughly 190 million, over 30 million people have risen out of poverty. Now in the middle class, they have money to spend on discretionary items for the first time.
By the Brazilian government’s measurements, fully 52% of the country’s population can now claim middle class status, with monthly incomes between $610 and $2,600 a month.
Naturally, that has led to soaring consumer confidence.
A study published in January 2010 showed it reached its highest level in Brazil since January 2005. And the prospects remain positive for the months ahead… including for an industry particularly hurt by the global downturn.
Stepping Off the Bus
In the past, Brazil’s upper class has dominated the air travel consumer base… largely because they were the only ones that could afford it.
But times change. Recent data shows that over 100 million Brazilians now have the kind of cash needed to fly.
That creates a unique situation for the country’s airline industry. They want to win over new customers. But in order to do that, they have to first lure them away from buses, which the masses have always relied on in the past.
Practically speaking, it shouldn’t be a difficult sell, considering the cost difference.
For example, a 1,200-mile bus trip within borders takes 36 hours and costs 555 reals per adult. Add in another 100 reals for food and other expenses along the way, and it becomes even more costly.
In comparison, flying the friendly Brazilians skies takes a mere two hours and could cost as little as 360 reals. Yet even with those advantages, many people still find the idea intimidating.
Fortunately, local airlines think they can overcome that roadblock.
Making The Friendly Skies Just a Bit More Friendly
Gol ADR (GOL, Financial) and Tam ADR (TAM, Financial), the two big Brazilian airline companies, have both begun aggressive marketing campaigns.
Gol, the largest low-cost, low-fare airline in Latin America, has taken to the streets. As part of a drive to win over consumers, the company is handing out leaflets comparing air travel to buses. And when people do make the switch, staff members are there to talk first-timers through the process of buying and using airline tickets.
The company also opened its first store in December. Located in Largo 13, a busy low-to-middle income, shopping district in Sao Paulo, it sits strategically down the street from several bus companies’ ticket booths.
And both Gol and Tam have set familiar marketing ploys in place, such as installment plans. Passengers can pay for their tickets in up to 36 monthly installments at Gol with 6% monthly interest. Tam, Brazil’s largest air carrier, extends it even further to 48 months at similar rates.
Those charges might seem high, but Brazilian consumers don’t seem to mind them all that much. Most first-time fliers there never use the bus again for longer journeys.
Sunny Skies Ahead For Brazilian Airlines
The market for Brazilian airlines is expanding quickly. In the past seven years, the industry has grown 2.5-3.5 times faster than Brazil’s GDP.
And the growth just keeps continuing.
At Tam, passenger numbers rose by 30% in January over the same month last year. For this year as a whole, the company expects growth of 12% – 16%. Meanwhile, Gol’s traffic rose by 31% in January compared to the same month last year. It foresees 12.5% – 18% growth in 2010.
Business should only improve in the years ahead for the airline companies, as air travel in Brazil fast becomes a popular means of transportation.
And Gol and Tam should experience further boosts since Brazil is hosting the 2014 World Cup and 2016 Olympics in Rio de Janeiro.
Gol’s CEO, Constantino de Oliveira Junior, summed it up nicely recently. “It is difficult to see an end to this cycle.”
Investors should pay heed and take a flyer on one of the Brazilian airline stocks.
Good investing,
It can claim seven years of strong growth, with only a minor upset during the global economic crisis. And during that time span, its poorest 10% experienced a 50% rise in income.
In fact, out of a population of roughly 190 million, over 30 million people have risen out of poverty. Now in the middle class, they have money to spend on discretionary items for the first time.
By the Brazilian government’s measurements, fully 52% of the country’s population can now claim middle class status, with monthly incomes between $610 and $2,600 a month.
Naturally, that has led to soaring consumer confidence.
A study published in January 2010 showed it reached its highest level in Brazil since January 2005. And the prospects remain positive for the months ahead… including for an industry particularly hurt by the global downturn.
Stepping Off the Bus
In the past, Brazil’s upper class has dominated the air travel consumer base… largely because they were the only ones that could afford it.
But times change. Recent data shows that over 100 million Brazilians now have the kind of cash needed to fly.
That creates a unique situation for the country’s airline industry. They want to win over new customers. But in order to do that, they have to first lure them away from buses, which the masses have always relied on in the past.
Practically speaking, it shouldn’t be a difficult sell, considering the cost difference.
For example, a 1,200-mile bus trip within borders takes 36 hours and costs 555 reals per adult. Add in another 100 reals for food and other expenses along the way, and it becomes even more costly.
In comparison, flying the friendly Brazilians skies takes a mere two hours and could cost as little as 360 reals. Yet even with those advantages, many people still find the idea intimidating.
Fortunately, local airlines think they can overcome that roadblock.
Making The Friendly Skies Just a Bit More Friendly
Gol ADR (GOL, Financial) and Tam ADR (TAM, Financial), the two big Brazilian airline companies, have both begun aggressive marketing campaigns.
Gol, the largest low-cost, low-fare airline in Latin America, has taken to the streets. As part of a drive to win over consumers, the company is handing out leaflets comparing air travel to buses. And when people do make the switch, staff members are there to talk first-timers through the process of buying and using airline tickets.
The company also opened its first store in December. Located in Largo 13, a busy low-to-middle income, shopping district in Sao Paulo, it sits strategically down the street from several bus companies’ ticket booths.
And both Gol and Tam have set familiar marketing ploys in place, such as installment plans. Passengers can pay for their tickets in up to 36 monthly installments at Gol with 6% monthly interest. Tam, Brazil’s largest air carrier, extends it even further to 48 months at similar rates.
Those charges might seem high, but Brazilian consumers don’t seem to mind them all that much. Most first-time fliers there never use the bus again for longer journeys.
Sunny Skies Ahead For Brazilian Airlines
The market for Brazilian airlines is expanding quickly. In the past seven years, the industry has grown 2.5-3.5 times faster than Brazil’s GDP.
And the growth just keeps continuing.
At Tam, passenger numbers rose by 30% in January over the same month last year. For this year as a whole, the company expects growth of 12% – 16%. Meanwhile, Gol’s traffic rose by 31% in January compared to the same month last year. It foresees 12.5% – 18% growth in 2010.
Business should only improve in the years ahead for the airline companies, as air travel in Brazil fast becomes a popular means of transportation.
And Gol and Tam should experience further boosts since Brazil is hosting the 2014 World Cup and 2016 Olympics in Rio de Janeiro.
Gol’s CEO, Constantino de Oliveira Junior, summed it up nicely recently. “It is difficult to see an end to this cycle.”
Investors should pay heed and take a flyer on one of the Brazilian airline stocks.
Good investing,
Tony Daltorio
Investment U Research
Investment U Research
