Brazilian airlines cut flights as jet fuel prices double

At the same time, the industry is concerned about the expiration, on May 31, of tax incentives for aviation kerosene, known in Brazil as QAV.

On April 2, data from the SIROS system of Brazil’s National Civil Aviation Agency (Anac) showed airlines expected to offer 2,193 flights a day in May in the Brazilian market. The same query on May 12, however, showed a projected daily supply of 93 fewer flights, a 4.3% drop.

With fewer takeoffs, Brazil lost about 14,000 seats a day this month. The data were compiled from Anac’s system by the Brazilian Airlines Association (Abear) at Valor’s request.

For May as a whole, the estimate before the crisis was for 67,980 flights, later reduced to 65,100. In May 2025, the figure was 66,300.

The cuts, however, vary by region. More profitable routes are being preserved, while less profitable segments are losing ground.

The survey shows that the most affected destination was Acre, which lost 14.7% of its expected flight supply for May. Amazonas followed, with a 13.6% decline, then Pernambuco, down 11.2%; Goiás, 9.8%; Pará, 9.3%; Paraíba, 6.3%; and Minas Gerais, 5.6%.

The figures also show that the situation is likely to worsen in June, with airlines’ supply projections pointing to a reduction of 121 flights a day.

Sharper impact ahead

The issue featured prominently in conversations between airline executives and analysts during first-quarter earnings presentations. Because the conflict began on February 28, its impact on first-quarter numbers was more limited. The stronger effect, executives said, is expected in the second and third quarters.

One of the ways Azul has sought to navigate the crisis has been to reorganize its network. On May 7, executives at the carrier said the company would cut its planned seat supply for May and June by 5% because of higher jet fuel prices.

Azul Chief Executive Abhi Shah said the airline has focused on fine-tuning capacity, raising fares and prioritizing more profitable routes. “We will make more cuts as necessary. We have been very proactive,” he said. Even so, he noted that Brazil’s airline industry has been less aggressive in cutting capacity than carriers in other parts of the world.

On fares, Shah said the sector has been conservative but has moved ahead with repricing in response to the crisis. Since the war began on February 28, he said, nine price-adjustment campaigns have been carried out, compared with three in the same period last year. “Today, we are seeing 30% growth in the average fare for future bookings,” Shah said.

Seat-growth guidance

Latam told the market on May 6 that it was canceling its 2026 seat-supply projections because of the oil crisis. The company had previously targeted an 8% to 10% increase in seats globally this year.

Latam Brasil Chief Executive Jerome Cadier said the airline has so far been making targeted adjustments to flights. For June, the company reduced its expected supply for the month by about 3%. “We have to look not only at the price of fuel [in the future], but also at demand elasticity.”

The company had previously projected average jet fuel prices of around $90 a barrel. It now assumes prices of about $170 a barrel for the second and third quarters and $150 for the fourth quarter.

Higher fuel prices added $40 million to Latam’s costs in March alone. For the second quarter, the company estimates fuel spending will be $700 million above what had been expected.

As a result, Latam now expects adjusted EBITDA to be $400 million lower than the range previously projected. Its current forecast is for EBITDA between $3.8 billion and $4.20 billion, compared with the previous range of $4.2 billion to $4.6 billion.

Gol is also monitoring the issue. People familiar with the matter said the airline reduced its planned seat supply by about 6% in May and June because of the rise in oil prices. The company was contacted but did not comment. Gol delisted from the Brazilian stock exchange and is no longer required to disclose its results.

Abra, the holding company that controls Gol and Avianca, has also been following the issue closely. At its latest press conference, in late March, executives pointed to a hedging strategy designed to help the group navigate the start of the crisis with more flexibility. The group hedged 50% of its fuel consumption between March and May and raised the hedge to 40% through the end of August.

Tax incentives

On May 1, state-controlled oil company Petrobras raised jet fuel prices by 18%. It was the third consecutive increase for the fuel. In March, the adjustment was 9.4%. In April, the increase was even steeper, at 54%. Outside Brazil, jet fuel rose to about $4 a gallon from $2.

The crisis in Brazil, however, is different from other markets, where companies face the risk of fuel shortages. Petrobras produces locally about 90% of the jet fuel used by domestic airlines.

Even so, Abear has voiced concern over the federal government’s decision not to extend the exemption from PIS/Cofins social taxes levied on aviation fuel.

On May 13, the government announced new measures to contain increases in diesel and gasoline prices, but jet fuel was left out. If the current scenario remains unchanged, the tax benefits granted to the airline industry will expire on May 31.

In a statement, Petrobras said it will continue to offer the market the option of paying part of the adjustment in six installments, with the first payment due in August 2026.

However, the mechanism has not proved effective. People with knowledge of the situation said the rates charged were considered high, at about 16% a year, above the Selic, Brazil’s benchmark interest rate, now at 14.5%.

On the other side, sources said distributors have not engaged with the installment plan. That is because they would be responsible for paying Petrobras in the event of a default by any airline. As a result, in many cases, distributors began requiring guarantees before allowing installment payments.