President Temer Opens up Capital Structure of Airline Companies to Allow 100% of Foreign Ownership

04/12/2017 - 12h59

On the same day that Azul airlines launched its IPO on the São Paulo Stock Market, President Michel Temer signed a Provisional Decree allowing for the opening of 100% of the capital structure of Brazilian airline companies to foreign investors. Until today, the limit in vigor had been 20%.

The rationale for the change is to allow for the capitalization of the national carriers, who are confronting a fall in passenger demand, and to attract new carriers that already have foreign capital.

The idea is not a new one and had been presented previously by the government of Dilma Rousseff in a version that would have allowed for foreign ownership of up to 49%.

The initiative is in response to interest & demand from all of the carriers active in the domestic market who are seeking foreign capital resources. Specialists are divided regarding any practical effects related to the change.

Lawyer Guilherme Amaral, from the ASBZ law firm, confirmed that he has received inquiries from foreign investors uncertain about the real veracity and effect of the announcement.

"The feeling of legal uncertainty really intensified with the announcement that baggage fees had been liberated that was subsequently suspended".

One business deal in the works expected to be facilitated by the measure is Avianca Brasil, which confirmed that it is preparing for a merger.

Latam and GOL, the two largest competitors in the Brazilian Market, both have well known histories of deploying foreign capital to the legal limit. Azul, which just announced its IPO, reached an agreement recently to sell an ownership stake to Chinese group HNA.

(MAELI PRADO, JOANA CUNHA and EULINA OLIVEIRA)

Translated by LLOYD HARDER

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