The aviation fuel market in South America is expected to grow at CAGR of more than 12% during 2020 - 2025. The increasing 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.
- Argentina's aviation industry contributes about 2.1% to the country's GDP (IATA), supported by the air transport sector and foreign tourists arriving. The total number of air passengers to and from different airports in Argentina was at a record high of 20.43 million in 2019.
- According to Argentina's Ministry of Transport, more than three million passengers have traveled on low-cost airlines until 2019 in Argentina since the country's first budget carrier began operating commercial flights in January 2018. Therefore, as new airlines work to expand in the country in the upcoming years, the market is expected to be driven during the forecast period.
- Moreover, in Colombia, airlines are increasing their fleet size to carter to total passenger levels, which could reach 100 million by the end of the decade, in turn, promulgating the aviation fuel market in the country.
- However, due to COVID-19, the market growth is expected to be hampered as there is reduced demand for aviation fuel, which is expected to be restored post-2021.
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 have remained stable in the past years, with a monthly average of 3,658.81 thousand barrels for aviation kerosene in 2019 and 25.40 thousand barrels of aviation gasoline sales in the same year.
- Further, in South America, Brazil is expected to pioneer the development of renewable fuels from sugarcane, which is expected to replace traditional jet fuel. Currently, although there are no specific federal policies in place for sustainable aviation fuel (SAF), initiatives are in place at the state level.
- Moreover, in 2018, Brazil signed an Open Skies agreement with the United States that allows airlines to increase the number of flights between the two countries, in turn having a positive impact on the aviation fuel market.
- The aviation fuel market size in Brazil is expected to grow significantly. With a market size of USD 3.83 billion, the commercial sector held a significant market share in 2019 and expected to increase with increasing passengers traveling.
- However, due to the COVID-19 pandemic, until the end of 2021, the market studied is expected to be restrained, post which, with increasing passengers and air travel demand, the aviation fuel market is expected to grow for the rest of the forecast period.
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, Total SA, Repsol SA, and others.
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