Brazil domestic airline market remains challenging after flat growth in 1H2013

Brazil's domestic market has cooled down along with the country's slumping economy, recording RPK growth of less than 0.1% in 1H2013. While growth should return in 2H2013 it will be very modest and far below previous levels.

Brazil was one of the world's fastest growing domestic markets in 2010 and 2011, when domestic RPK growth of 23.5% and 15.9% was recorded. Growth slowed to 6.8% in 2012 as carriers started to cut capacity and trim back on expansion plans.

Load factors have improved significantly since mid-2012, providing a glimmer of hope that capacity levels are now sustainable following a period of irrational competition. With capacity returning to more rational levels and four airline groups accounting for over 99% of the market following a wave of consolidation, profitability should eventually improve in the world's fourth largest domestic market.