Brazil to loosen foreign ownership rules for airlines

Brazil to loosen foreign ownership rules for airlines

David Fleischer, 18.12.2010

 

Brazil is preparing to increase its foreign ownership limit on its airlines from 20% to 49%, and most sector analysts expect that this should produce more mergers and capital-raising initiatives over the next three years leading up to the World Soccer Cup playoffs in 2014.   This change should be in place by mid-2011. 

Currently, Brazil has 16 operating airlines – with two dominant carriers – TAM S.A. and Gol Linhas Aéreas Inteligentes S.A.  There are four other substantial carriers that could need capital and larger partners.  The Brazilian domestic air travel market is expanding at some 20% each year.

In August, TAM and LAN Chile announced a “hook up” (LATAM) that with the ownership expansion to 49% should become Latin America’s largest carrier as a holding company. 

Azul Linhas Aéreas Brasileiras was created in 2008 by David Neeleman, the founder of JetBlue Airways Corporation, with some financial backing from some JetBlue original investors.  Neeleman is a dual (US-Brazilian) citizen.  However, Neeleman told reporters that Azul is not interested in a partnership with a larger airline, and that Azul might launch an IPO in 2011. 

TRIP Linhas Aéreas, a regional carrier serving 80 cities would be able to receive more investments from its US partner – SkyWest Inc. (SkyWest Airlines and Atlantic Southeast Airlines).