Brazil's new VAT set to lift airline fares and shrink routes

The Brazilian government’s forthcoming value‑added tax (IVA) under the tax reform is expected to raise the average domestic airline ticket from about US$130 to US$160 – a rise of roughly 23% – and increase international fares from US$740 to US$930, a jump of around 26%. IATA’s regional vice‑president for the Americas, Peter Cerdá, warned that the higher costs could depress demand for air travel by up to 30%, potentially trimming annual passenger volumes from a record 100 million in 2025 to below 90 million.

IATA also reported that Brazil has lost nearly 10% of its air routes since 2019, with 85 routes disappearing and the total falling from 859 to 774. While airlines have compensated by using larger aircraft – raising seat capacity by about 4% – the reduction in connectivity, especially to interior cities, is expected to push fares higher and hamper further investment in the sector.