IATA Comments On Brazilian Aviation Sector

by Mike Godfrey, Tax-News.com, Washington

31 August 2009

The International Air Transport Association (IATA) has set out an agenda for the Brazilian civil aviation sector, leveraging positive actions by the government of Brazil to improve competitiveness and deliver broad economic benefits.

“The new Civil Aviation National Policy is a great opportunity. Air transport supports 2.6% of Brazil’s economy. Thousands of jobs and billions of dollars of business depend on its success. Brazil must use the national policy to build a more competitive industry by overcoming major fiscal and infrastructure handicaps,” said Giovanni Bisignani, IATA’s Director General and CEO. Bisignani made his comments in a speech to industry and government leaders at the British Chamber of Commerce in Sao Paulo, Brazil.

Bisignani held positive meetings with ANAC, the Ministry of Defense and the Minister of Institutional Relations and noted many recent encouraging developments in Brazilian aviation. These include the elimination of the PIS/COFINS tax on jet fuel which collected USD100m annually, the adoption of the IATA Operational Safety Audit (IOSA) by the Brazilian government, and the staged liberalization of air fares. “As Brazil prepares to host the 2014 FIFA World Cup, we look forward to working even more closely with the government to further improve the competitiveness of Brazilian aviation and achieve cost-efficient infrastructure improvements,” said Bisignani.

During the course of the meeting, Bisignani offered IATA’s support to the Brazilian government in two key areas:

• Airport Concessions: Brazil is contemplating airport concessions to help speed infrastructure improvements. “Private investment with the right conditions can help improve infrastructure but concessionaires must be governed by robust economic regulation. Our common goal is to ensure that the airport is run efficiently, serves and consults with its customers and drives economic development. This is a natural role for ANAC. IATA is happy to bring its global expertise to ensure that ANAC has the independence to carry its mission effectively,” said Bisignani.
• Congestion at Sao Paulo’s Guarulhos Airport: Bisignani offered support for early implementation of IATA’s Worldwide Scheduling Guidelines at Sao Paulo’s Guarulhos airport. “Congestion pricing is not a solution. IATA’s Worldwide Scheduling Guidelines are helping airports around the world manage congestion. As we evaluate longer term solutions, we look forward to working with INFRAERO to make the most of existing terminals and infrastructure and to a robust consultation process on future developments,” he added.

Bisignani also noted the need to improve the competitiveness of the Brazilian aviation sector by working together to addressing two specific issues:

• Petrobras’ import parity pricing policy: “This adds 30 cents to every gallon of jet fuel sold in Brazil. This USD450 million annual competitive disadvantage makes no sense for a country that supplies 80% of its fuel needs domestically. The result is that 32% of the cost structure of Brazil’s airlines goes to fuel, compared to a global average of 23%. We must find a policy that brings prices in line with market realities,” said Bisignani.
• ATAERO Tax: Airport charges paid to INFRAERO, Brazil’s airport operator, do not equally recover costs for each individual airport. Airlines pay a 50% surcharge (USD370 million annually) known as ATAERO to cover the gaps. “INFRAERO must be funded on a cost recovery basis, with charges that are transparent, agreed with users and in line with international standards,” urged Bisignani.

Finally, Bisignani urged Brazil’s government to be a strong voice driving aviation forward on two key priorities: environment and liberalization.

Environment: IATA is leading industry efforts on aviation and the environment with three sequential targets: a 1.5% average annual improvement in fuel efficiency to 2020, carbon neutral growth by 2020 and a 50% absolute cut in emissions by 2050 (compared to 2005). “Brazil is critical to these goals. As a leader in biofuels, I hope that the Brazilian government will provide the fiscal and legal framework to encourage investments in sustainable biofuels which can significantly reduce aviation’s carbon footprint. Brazil is a major player in the UNFCCC process and at ICAO which is tasked with handling aviation’s international emissions. It has a leadership responsibility to ensure that ICAO can bring to the UNFCCC a position that supports a global sectoral approach to aviation emissions and reflects the industry’s globally harmonized approach to controlling emissions,” said Bisignani.

Liberalization: Brazil was one of 15 governments participating in IATA’s Agenda for Freedom. An IATA study showed that market and ownership liberalization in Brazil had the potential to generate up to 400,000 new jobs and up to BRL24bn (USD12.84bn). “CONAC’s proposal to increase foreign ownership possibilities to 49% and a recent liberal bilateral agreement with Chile are steps in the right direction. As the region’s largest economy, I hope that Brazil can take leadership to promote liberalization in Latin America and globally,” concluded Bisignani.

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