The South America aviation fuel market is expected to value at USD 16.71 billion in 2026, up from USD 5.20 billion in 2020, registering a growth at CAGR of 18.57% during the forecast period. The recovering number of air passengers, on account of the cheaper airfare in recent times, stronger economic conditions, and increasing disposable income are among the major driving factors for the market. The growing market of renewable biofuels is likely to drive the aviation biofuel segment significantly. However, the recent outbreak of COVID-19 tremendously affected the consumption of aviation fuel. With the closure of international and domestic airlines to curb the spread of the virus, the demand for aviation fuel is expected to decline during the pandemic.
With increasing connectivity globally and decreasing airfares, the commercial sector is expected to dominate the aviation fuel market during the forecast period.
South America is one of the leading regions in biofuels. With an increasing shift towards aviation biofuels, significant opportunities are likely to be created in the near future.
Brazil is the largest consumer of aviation fuels in South America, resulting in the dominance in the region. With growing market, the nation is expected to continue its dominance during the forecast period also.
Key Market Trends
Commercial Sector to Dominate the Market
Commercial aviation includes operating scheduled and non-scheduled aircraft, which involves commercial air transportation of passengers or cargo. The commercial segment is one of the largest consumers of aviation fuel, and it accounts for a quarter of total operating expenditure for an airline operator.
The total number of passengers transported in Latin America was 21.73 million in 2020 (IATA), registering a decline of 72% compared to 2019. This was mainly due to the outbreak of COVID-19, leading to travel restrictions and lockdowns. However, the demand for domestic travel and cargo movements and the growth of low-cost carriers in the region are significant drivers for the revival of the aviation market in Latin America.
Moreover, the privatization of airports in countries such as Brazil, Jamaica, Honduras, Paraguay, and Peru, is expected to develop the airport infrastructure and enhance capacity, thereby supporting the market studied in the region.
On the other hand, the short-haul flights in the region have been increasing their share in the air traffic. In Latin America, the low-cost (LCC) and ultra-low-cost (ULCC) movements are in full swing. At present, more than ever, low-cost carriers in the region seem to be taking off faster than legacy airlines.
The COVID-19 pandemic, leading to lockdowns globally and in the region combined with very restricted national and international travel, severely hit the aviation industry in 2020. However, the market has shown signs of recovery. It is expected to revive pre-COVID-19 levels by the end of 2022, with the widespread availability of a vaccine, declining COVID-19 cases, and the revival of the tourism sector.
Brazil to Dominate the Market
Brazil is the largest consumer of aviation fuels in South America. The products specified for use in aircraft in the country are aviation kerosene (QAV), aviation gasoline, and alternative aviation kerosene (alternative QAV).
The sales of aviation fuels remained stable in the past years, except in 2020, wherein the sales for aviation kerosene and aviation gasoline dropped from 6.98 billion m3 and 43 million m3 in 2019 to 3.46 billion m3 and 38 million m3 in 2020. This in itself is a direct testament to the impact of the COVID-19 pandemic on the market.
The impact of COVID-19 is likely to last till the end of 2021. However, with the ease in travel restrictions, the aviation industry in the country is expected to rebound by mid-2022, which in turn brings the demand for aviation fuel to pre-COVID levels. As of August 2021, the carriers operating in the country had recovered 44% of their pre-pandemic traffic, as reported by the National Civil Aviation Agency (ANAC).
Another factor that affected the sales of aviation fuel in-country was Petrobras’ supply stoppage of imported aviation due to the results of the chemical tests that ran on an imported batch which raised the potential issue. This also caused significant fuel distributors BR Distribuidora and Raizen to suspend the sale of the product,
Brazil is expected to pioneer the development of renewable fuels for aviation, which is expected to replace traditional jet fuel. Although there are no specific federal policies for sustainable aviation fuel (SAF), initiatives are in place at the state level. However, over the years, many organizations, such as The Boeing Company, worked aggressively to initiate the supply of sustainable aviation biofuels while reducing Brazil’s carbon emissions.
Overall, the aviation fuel market for Brazil is expected to register a decent growth during the forecast period owing to the supporting government initiatives, the rebound of air travel post-COVID, and significant technical developments of biofuels which are likely to further aid the market’s growth.
The South America aviation fuel market is moderately fragmented. Some of the major companies include Petroleo Brasileiro S.A., BP PLC, Royal Dutch Shell PLC, TotalEnergies SE, Repsol SA, and others.
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