22-Aug-2013 9:34 AM

Brazil SAC confirms proposals submitted by carriers; Labour Minister urges suspension of layoffs

Brazil's Secretariat of Civil Aviation (SAC) confirmed (20-Aug-2013) the suggestions submitted by TAM Airlines, Gol, Avianca Brazil and Azul to combat financial difficulties being experienced in the sector. The carriers submitted nine proposals, five of which deal with operational measures such as the modernisation of the national air navigation structure, expansion of airport capacity and improvements at 61 "priority" airports nationwide. The SAC identified four main proposals which directly influence operational costs:

  • Fix the price of aviation fuel "in accordance with the international market", as fuel costs amount to 43% of operational costs in Brazil, compared to 33% of average costs in foreign markets;
  • Utilise the National Civil Aviation Fund (FNAC) to defray air navigation charges at airports which handle over one million passengers p/a for 180-240 days, which Brazilian Association of Airlines (ABEAR) president Eduardo Sanovicz notes could reduce operational costs by 6%; The FNAC is currently used to subsidise rates for regional aviation;
  • Approve Senator Francisco Dornelles proposal to exempt the aviation sector from the "Social Contribution on Billing" (CONFINS) tax and "Social Integration Programme" (PIS) tax, which ABEAR says could boost revenue by 3.65%;
  • Unify the value added tax on aviation fuel at 6%, rather than the 12-15% rate which currently applies and various among states.

Civil Aviation Minister Moreira Franco said the SAC is already addressing the first five proposals through the creation of a working group which is addressing the issues "with a sense of urgency", and said that the four main proposals depend on Government and congressional action, stressing the need for "political mobilisation" on the part of Congress. Mr Franco said it would be "difficult" to change the pricing structure of aviation fuel, noting it would require political involvement in Brazil's semi-private energy firm Petrobras' pricing, which is not aviation-specific. Meanwhile, Minister of Labour Paulo Roberto dos Santos Pinto urged carriers to suspend any plans for layoffs in response to the difficulties. [more - original PR - Portuguese]

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