Brazil’s tax reform could reduce air travel demand by 21%, ALTA study finds

Brazil’s tax reform could increase domestic airfares by 16.1% and reduce passenger demand by 21.1%, according to a 2026 study by the Latin American and Caribbean Air Transport Association (ALTA). The association’s projections highlight potential consequences for air connectivity, airline capacity and tourism under a modeled taxation scenario.

The study, published on ALTA’s website on August 28, 2026, examines the potential effects of Brazil’s tax reform under Complementary Law 214/2025. The analysis uses a reference rate of 26.5% for the new CBS and IBS consumption taxes. Brazil’s Federal Revenue Service identifies 2026 as a testing year, with the transition to the new tax system scheduled to conclude in 2033.

Higher Airfares Could Reduce Passenger Demand

ALTA estimates that domestic airfares in Brazil could increase by 16.1% under its central taxation scenario. The association projects a corresponding 21.1% decline in domestic passenger demand, equivalent to approximately 20 million fewer passenger journeys annually.

The study compares an estimated pre-reform effective sectoral tax burden of approximately 9% with a reference CBS/IBS rate of 26.5%. The 9% benchmark is a modeling assumption rather than a specific tax previously levied on domestic tickets.

For international round-trip tickets sold in Brazil, ALTA estimates a 13.3% increase in fares and a 17.8% reduction in passenger demand. The international scenario assumes that the reference tax rate applies to the Brazil-originating portion of the journey, representing half of the total ticket price. The modeled decline corresponds to approximately five million fewer passenger journeys annually.

Brazil’s Air Connectivity Faces Potential Pressure

ALTA warns that lower passenger demand in Brazil could reduce airline load factors, trigger capacity adjustments and slow network expansion. The study also highlights the financial constraints facing Brazilian airlines, which accumulated approximately R$55 billion in net losses between 2015 and the third quarter of 2025. These historical losses reflect several factors and are not attributed to the tax reform.

The potential disruption comes as Brazil’s aviation market continues to expand. According to the Brazilian Ministry of Ports and Airports, domestic traffic reached 59.38 million passengers between January and July 2026, up 4% year on year. International traffic increased by 8.2% to 17.79 million passengers over the same period.

ALTA’s projections therefore describe potential future pressures on a growing market, rather than a decline already recorded in Brazilian air traffic.

Tourism Could Face Long-Term Economic Effects

ALTA estimates that Brazil’s Travel and Tourism GDP could be approximately US$7.7 billion lower in 2036 than under its reference growth scenario. The association also projects around 360,000 fewer tourism-related jobs supported, representing nearly one-quarter of the additional employment expected under the baseline.

These figures represent differences between modeled scenarios, not observed job losses or cumulative economic losses between 2026 and 2036. The estimates assume that lower air travel demand translates proportionally into reduced tourism activity before potential substitution effects.

Brazil’s international tourism figures currently show a different trend. Data published by the Ministry of Ports and Airports on September 10, 2026, indicate that more than four million international tourists arrived by air between January and July 2026, an increase of 12% compared with the same period in 2025.

ALTA’s findings illustrate how taxation could affect Brazil’s future aviation and tourism growth under the assumptions examined. Actual outcomes will depend on the final implementation framework, airline pricing decisions, market conditions and passenger responses.