Government wants more foreign investment in airlines

26/07/2011 - 08h01

The government has decided to include a proposal to increase foreign capital participation in national airlines up to 49%, in a short list of priority projects for the year's second semester.

The president Dilma Roussef wants the project to be approved by the Congress before the end of the year.

As ascertained by Folha, Dilma intends to present the new model regarding concession of airports and release the new rule at the same time --before the end of the year.

The order is to speed up the proposal's submission for approval, which has been stopped for almost two years in the Legislative department due to demobilization within the government itself.

The government envisions using its entire supporting base in Congress to make the change feasible. The new SAC (Civil Aviation Department), a ministry set up to clear the department's bottlenecks, is already making arrangements to submit it to the Legislative department.

Laws currently in force allow foreign companies to hold 20% of Brazilian airlines' shares. The new rule increases that amount to 49%. So, at least 51% of the voting shares will remain in Brazil.

But there is an exception to that limit in the government's proposal: if there is any interest in the Brazilian side, the limit may go up to 100%, by means of international agreements, as long as both parties agree mutually.

Besides increasing competition, the change will also bring more juridical security to the ongoing TAM (Brazil) - LAN (Chile) merger.

In 2010 the companied announced they had reached an agreement to create Latam Airlines, the biggest airline in Latin America. ANAC (Civil Aviation National Agency) has already approved the merger, but other regulatory bodies will look into the case.

The agreement also allows LAN to increase its investment in TAM.

REGIONAL AVIATION

Besides expecting to increase competition in a highly concentrated and ever vulnerable to financial crisis area, the government wants to use the rule to foster regional aviation, a market niche still lacking investment.

If approved, the new rule will help capitalizing companies facing problems. It is also regarded by SAC as a possibility to raise air transportation offer and make more room for business.

SAC and the Presidential Staff are making final adjustments in the private concession model. Before the end of the year, the government promised to release tender to privatize the Guarulhos and Viracopos (both in São Paulo) and the Brasília airports.

The reason for government's rush to have the project approved --currently awaiting to be voted in Congress-- is that it intends to present a broader set of measures for the aviation market.

Translated by THOMAS MUELLO