President sanctions creation of Regional Aviation Program
On January 20, Brazil’s President Dilma Rousseff established the Regional Aviation Program by sanctioning part of Provisional Measure (MP n. 656/14) into a Law (Law 13.097/2015).
The Program provides for the refurbishment, construction and expansion of airports. The objective is to take development outside traditional regions of growth and urban centers whilst also encouraging advances in the country’s tourist industry. It also aims to integrate isolated communities into the national civil aviation network in order to facilitate the mobility of the members of the population living in these areas.
The sanctioned Law does not cover the issue related to the participation of foreign individuals and companies in domestic airline companies which is currently limited to 20 percent, but has for long been expected to rise.
The Law established subsidies for domestic airline companies to fly up to 60 passengers on regional flights with a limit of 50% of the seats available on each aircraft. For flights operating within the Amazon region, however, the 50% limit will not apply. It is also expected that the Federal Union will be authorized to grant the economic subsidy, which is to be drawn from the ‘Fundo Nacional de Aviação Civil’ (‘National Civil Aviation Fund’/‘FNAC’), up to a limit of 30% of the FNAC.
The model utilized is that of a concession, an administrative contract by means of which the Government delegates management and execution to a private sector entity that assumes responsibility for the costs and risks of a particular activity following a bidding procedure.
In converting the MP into Law 13.097, a total of 50 sections of the original version of the Program passed by the National Congress were either wholly or partially vetoed by the President.