June 24, 2020 / 10:03 AM / a month ago

Exclusive: Indigo Partners' JetSMART met Brazil officials in March to set up domestic flights

SAO PAULO (Reuters) - Indigo Partners-backed JetSMART presented Brazil’s air travel regulator, ANAC, on March 10 with a plan to enter the domestic market and disrupt the three established players there, ANAC told Reuters.

JetSMART already offers low-cost flights in Chile and Argentina and its private-equity backing has positioned it as the rare carrier able to make an investment during the coronavirus pandemic.

JetSMART told Reuters it is still eyeing an expansion in Brazil despite the collapse in passenger traffic triggered by the pandemic.

“Even though the pandemic has substantially reduced demand, we are still analyzing new operations in the region, although we are following the shape and speed of the market recovery in Brazil and other countries,” JetSMART CEO Estuardo Ortiz said in a statement.

JetSMART and ANAC spoke in response to queries from Reuters, which had initially heard about the meeting from an industry source familiar with the situation.

The move would be an additional headache for Brazil’s three established airlines: Gol Linhas Aereas Inteligentes (GOLL4.SA), LATAM Airlines Group (LTM.SN) and Azul SA (AZUL.N), which have been heavily affected by the coronavirus.

But JetSMART’s entry would also be a coup for Brazil’s government which has been trying to lure low-cost airlines into South America’s largest air market, with little success so far.

Brazil’s airlines are in weak shape.

LATAM filed for bankruptcy protection last month, while Gol’s accountants are pushing to add a so-called going concern warning, a sign of doubt as to whether the airline will be alive a year from now. Azul has hired restructuring lawyers although it is so far renegotiating its debt without a bankruptcy filing.

LATAM and Azul announced a code-share agreement last week, allowing them to sell certain domestic tickets jointly.

At the meeting in March, JetSMART said it was interested in starting domestic operations “soon,” ANAC said, although it did not provide Reuters with a more detailed timeline.

“We believe (JetSMART) is still interested,” ANAC told Reuters.

Indigo Partners, which also owns Frontier and Wizz Air (WIZZ.L), has been making bullish bets despite the crisis. It made an unsuccessful bid to buy Virgin Australia out of bankruptcy and maintains an order finalized with Airbus in late 2017 to buy more than 400 planes.

Reporting by Marcelo Rochabrun in Sao Paulo; Editing by Matthew Lewis

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