Brazil To Push For End To Airline Foreign Ownership Cap

July 11, 2016

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Brazil's interim government plans to remove foreign ownership limits on domestic airlines through a presidential decree or an act of Congress this year, Transportation Minister Mauricio Quintella said.

Facing opposition from some senators, Interim President Michel Temer agreed in June to partially veto a decree allowing foreigners to own up to 100 percent of Brazilian airlines. That will leave maximum foreign ownership of airlines at 20 percent, but Quintella said the government still wants to lift the cap altogether.

"We will insist on 100 percent… We have to think now about reopening the debate in the Senate," said Quintella.

Temer, who has replaced President Dilma Rousseff while she faces an impeachment trial, agreed to the partial veto to prevent parliament from striking down the complete decree, which contained measures that paved the way for the sale of the state-run airport operator Infraero.

Quintella was also critical of the chief executive of airline Azul, Antonoaldo Neves, who voiced opposition to raising foreign ownership of domestic airlines to 100 percent in an interview with newspaper Folha de S.Paulo over the weekend.

"Azul is the only airline opposing this," Quintella said. "It is natural that he doesn't want competition, but that's not what the country wants."

A two-year recession has curbed air travel in Latin America's largest country and weakened the local currency, which battered the profitability of Brazilian airlines by driving up the cost of fuel and aircraft leases.

Foreign capital could help shore up the finances of local airlines, especially Gol, which has had limited success restructuring its costly debt burden.

Gol dominates the Brazilian market together with the local unit of Chile's Latam Airlines.

China's HNA took a USD$450 million stake in Azul last year and has shown interest in buying its smaller rival, Avianca Brasil, which has also attracted interest from Delta and United airlines.

Quintella said the government is preparing to auction off concessions to operate four airports, which could provide it with at least BRR1 billion reais in revenues in 2017. The auction, expected later this year, is for airports in Florianopolis, Salvador, Porto Alegre and Fortaleza.

(Reuters)