Increase in foreign ownership levels being considered in fast-growing Brazilian market: share wrap
Brazil’s Ministry of Defence, in a Bill sent to Congress, proposed to raise the foreign ownership cap applying to airline ownership, potentially enabling international parties to acquire up to a 49% stake in Brazilian airlines (up from the current 20% limited). GOL’s shares were 2.3% lower yesterday.
The Ministry, in its submission, stated the measures are designed to “increase the supply, competition, and quality of services”, with additional foreign capital enabling the nation’s airlines to expand in line with increased demand levels.
The ownership regulations represent one aspect under a government proposal to modernise air transport prior to the World Cup and Olympics Games, to be hosted in Brazil in 2014 and 2016, respectively, with large increase in air traffic expected over these periods.
The Brazilian Senate approved a Bill raising the limit for foreign ownership in Brazilian airlines to 49% in Nov-2009, although further approvals from other areas of Government were still required.
ANAC expects passenger growth of 10% in 2010
Last week, the Director of Brazil’s Civil Aviation Authority (ANAC), Solange Vieiera, stated he expects Brazilian air traffic to grow by “another 10% or even more” in 2010, following a significant expansion (of 17% growth) in 2009.
Mr Vieiera stated that due to this significant growth, “some airports could reach the limits of their capacity”. He added, “we are conducting a study to see which airports are closest to capacity. We will then make preventive investments”.
In the US market yesterday, Southwest Airlines celebrated its 25th Anniversary of service at both Chicago Midway and Lambert-St Louis International Airports. The LCC has expanded significantly at these two destinations over the past 25 years, reflecting its overall strong growth profile up until the global economic crisis hit in 2008, with details of the expansion at the two airport as follows:
- · Chicago Midway: The LCC expanded operations at the airport from eight daily services to St Louis on 17-Mar-1985 to 198 daily services to 50 nonstop destinations as of Mar-2010. The carrier is currently the largest carrier at Chicago Midway, and the third largest carrier in Chicago. Chicago was the 21st city to join Southwest's system, and is now the second busiest city in the airline's 68-city network;
- · Lambert-St Louis: Southwest is now the second largest carrier in terms of daily departures at St Louis with 70 services to 25 nonstop destinations as of Mar-2010, compared to 17 daily nonstop service to four cities upon the launch of services to St Louis on 17-Mar-2010. With new nonstop service to Nashville, New Orleans, Raleigh-Durham, San Diego, Seattle/Tacoma, and Los Angeles, commencing 09-May-2010, Southwest will be the largest carrier at St Louis with 83 daily flights to 31 nonstop destinations. St Louis was the 22nd city to join the Southwest system and is now the 16th busiest city in the airline's 68-city network.
Selected LCCs daily share price movements (% change): 17-Mar-2010