Brazilian government to allow 100% foreign capital in domestic airlines
Provisional law must be approved by the Brazilian Congress within 120 days
The Brazilian government has decided to open national airlines to foreign capital that can now take 100% of the shares of these companies. Until then, international groups could only have 20% participation in this sector.
The law was enacted by current President Michel Temer, who will step down in the coming weeks, however, was endorsed by his successor, Jair Bolsonaro, who defends the opening of the commercial aviation market.
The government used a local file, the so-called “provisional measure,” a legal instrument that has the same effect as a law, but with a maximum duration of 120 days. In order to be effective, the law will need to be voted and approved by the Brazilian Congress within that term.
Avianca crisis accelerates law
The opening of the air transport sector in Brazil was already prepared a few years ago but always found ferocious defenders of the protection of Brazilian companies. However, with Avianca Brazil’s claim for bankruptcy protection in recent days, the government has found a reason to use the provisional measure.
In debt to several aircraft leasing companies, Avianca Brasil had to go to court to prevent the return of about 14 aircraft. The airline now guarantees that it will honor its financial commitments and even expect a capital injection from United Airlines – a sign that the new law was not just a coincidence.
A large country, Brazil today has a huge air transport sector and is divided mainly into four airlines – Gol, LATAM, Azul and Avianca, the smallest of them. Despite this, there is enough potential to expand the national routes, but there is a lack of air infrastructure for this to happen.
With great contrasts, Brazil has at the same time one of the busiest airports in the world (Guarulhos, in Sao Paulo) and precarious landing stripsused as aerial terminals.
The concern with the new law is that instead of increasing competition, what the government wants, the opening will eventually concentrate the air transport service even more. Currently, the four airlines already have foreign partners: Delta and Air France KLM have Gol shares, United Airlines has a small stake in Azul, Avianca is part of a multinational group and LATAM is controlled by Chilean partners in addition to of shares owned by Qatar Airways.