IATA calls for urgent change in Brazil’s aviation industry

The International Air Transport Association (IATA) has praised President Dilma Rousseff’s strategic focus on Brazilian aviation and urged a quick follow-up with critical reforms to improve the industry’s competitiveness, saying that preparations to host the FIFA World Cup and the Olympics make urgent progress necessary.

IATA’s director general & CEO Giovanni Bisignani said that President Rousseff has recognised the power of air transport to drive long-term gains in the quality of life in Brazil, and her intention to create a ministry-level Civil Aviation Secretariat is an opportunity to achieve change.

He added that IATA is eager to use its global expertise to play a collaborative role in delivering on the President’s expectations with a strategic plan focused on competitiveness.

Bisignani highlighted five areas for change:

Infrastructure & regulatory framework: The INFRAERO model, which controls 94% of Brazil’s airports, is broken. Terminals at thirteen of the top twenty airports cannot cope with current demand.  Sao Paulo, which handles 25% of Brazil’s traffic, is in a critical state with insufficient capacity and services that do not meet global standards. Concessions could be a way forward, but they must be accompanied by transparent, robust and independent economic regulation supported by effective industry consultations.

Bisignani said that while ANAC’s proposed high level framework for airport regulation is mostly in line with IATA’s recommendation and ICAO’s principles, four important changes are critical to shore-up Brazil’s competitiveness:

  • ATAERO must be abolished. This 50% surcharge on fees contravenes ICAO principles.
  • There is a need for greater transparency and assurances that there will be no cross-subsidization among airports.
  • The solution to insufficient capacity must not be peak hour pricing. Efficiency gains and infrastructure development are the way forward.
  • The 70% increases for international carriers as a result of a fee recalculation are not acceptable. Charges must come down, not go up.

"If these four issues are not resolved, the benefits of concessions will be lost," said Bisignani.

Fuel Pricing: Brazil must follow-up on the 2009 elimination of the $100 million PIS/COFINS fuel tax by addressing the Petrobras import parity pricing policy. A recent study concluded that Petrobras is over-pricing jet fuel by $400 million annually.

Bisignani said that there is no justification that Brazil’s jet fuel prices should be 14% more expensive than in the rest of the region.

"Brazil produces 80% of its fuel needs from its own refineries. It makes no sense to peg prices to the Houston market and include all theoretical costs for importation – including transport. It is destroying the competitiveness of Brazilian aviation," said Bisignani.

Global fuel averages at 29% of an airline’s operating cost, but for Brazil’s airlines it is 37%.

Air Traffic Management: IATA urges Federal Government support for DECEA’s improvement efforts. Bisignani said that while airlines have invested in avionics to support more efficient flying, the infrastructure on the ground does not match their capabilities in the air.

Specifically, IATA is encouraging the implementation of more efficient operating procedures (RNAV and PBN) to increase capacity and efficiency in both Sao Paulo and Rio. Moreover, IATA is encouraging the Department of Airspace Control (DECEA) to adopt a process for continuous improvement based on analysis of performance data against agreed performance targets.

Environment: Aviation is united and committed to improving fuel efficiency by 1.5% annually to 2020, capping net carbon emissions from 2020 with carbon neutral growth, and halving  net emission by 2050 (compared to 2005). Governments, through ICAO, have agreed to find a global approach on economic measures related to CO2 emissions.

"Aviation is the only global industry with a global plan – by industry and by governments," said Bisignani. "Brazil must support the global approach. That means stopping plans by Guarulhos City to impose environmental taxes that are counter-productive to global efforts. And the government should follow-up on the leadership of TAM’s sustainable biofuels test flight by creating the fiscal and legal framework to support a sustainable Brazilian biofuels industry."

FIFA World Cup and the Olympics:  Bisignani said that Brazil’s airports will not be capable of successfully hosting the FIFA World Cup or the Olympics without major changes.

"Time is running out for major infrastructure projects. We are concerned that Sao Paulo’s Terminal 3 is being planned without industry consultation. Whatever is achieved, we will need to make the current infrastructure work much harder with better processes."

He said that one simple solution would be for all airport stakeholders – ANAC, INFRAERO, customs, immigration, public health and agriculture – to institutionalise cooperation.

"Airlines could bring solutions to improve terminal operations and reduce congestion, including IATA’s Fast Travel standards for implementing self-service technology, and e-freight to improve cargo handling efficiency. These solutions exist today and can deliver major improvements," said Bisignani. IATA also encouraged ANAC to add a new dimension to its safety oversight by adopting the IATA Operational Safety Audit as a requirement for all airlines operating to Brazil.

Aviation has grown by an impressive 10% per year since 2003. The Brazilian domestic market is the fourth largest in the world after the US, China and Japan.

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