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Continuously Delayed, Brazil’s Aid Package Now Expected In September

An Azul A330-200 taking-off from Campinas. (Photo: AirlineGeeks | João Machado)

As Brazil’s domestic COVID-19 pandemic turns five months old, the largely-awaited government relief package to airlines is still a big question mark for investors and industry executives alike. While conditions of the aid are still a topic of discussion between the government and airlines since the beginning of the demand crash, Bloomberg, via UOL, has reported another potential delay in the arrival of the cash. Now the money may only be transferred to the airlines in September.

According to the report by the news agency, the deal is now expected to be closed after second quarter results are presented by Azul Brazilian Airlines and GOL Airlines, the two major airlines that have shares outstanding on São Paulo’s stock exchange.

From the beginning of the pandemic in the country, the deal has been negotiated between airlines and the National Bank for Economic and Social Development (BDNES), a government-owned bank. According to both sources, while the bank has asked for more guarantees and collateral, the airlines have asked for lower taxes. Already in March, BNDES President Gustavo Montezano had claimed the financing was expected to come in April, but deadlines have been constantly postponed ever since.

Additionally, according to these sources, doubts over the conditions of LATAM Brasil’s bailout are now more prominent,as the company has been added to the debt restructuring process that LATAM Airlines Group is facing under Chapter 11 bankruptcy in the U.S. This is because there are doubts over whether the bank could help an airline that is facing this process, possibly in line with BNDES’s concerns over loan guarantees.

There were already concerns over the possibility of a bail-out to LATAM Brasil, not only because the airline is managed by a Chilean group but also because the airline has no shares outstanding in Brazil, and BNDES had planned to build a financing plan involving private investors in the free market. But LATAM Brasil falls entirely out of the bank’s region of authority.

According to Bloomberg, LATAM stated that negotiations are “still ongoing” and financing through the debtor-in-possession process, that the company has been using during its Chapter 11 rebuilding, “offers BNDES priority over all of LATAM’s liabilities prior to the Chapter 11 entry.”

Federal Senate Approves Aid Measures

The past week was already positive for the airlines in the country as Brazil’s Federal Senate approved the Provisional Measure of aid to the airlines, presented by the government in March. The most important act of the measure — which now is effectively a law — allows companies to make refunds in up to 18 months after the request by the passenger, not 12, as is usually required. The act will now return to the executive for the presidential sanction.

The new legislation also added, by request of the Ministry of Infrastructure, more obstacles to the judicialization of misunderstandings between passengers and airlines. Now passengers suing airlines will have to prove the losses they had suffered or risk their suit being dismissed entirely. Additionally, it will need to prove the delay, cancellation or other issue was effectively an airline’s fault.

Up to this point, Brazil was known to be an excessively expensive country to airlines when it came to judicial costs. While 50% of LATAM Airlines Group passengers are carried to, from or within Brazil, 99% of its lawsuit costs are concentrated within this 50% of passengers, LATAM Brasil CEO Jerome Cadier stated in a forum last year.

João Machado


  • João Machado

    João has loved aviation since he was six-years-old when he started visiting his home airport in Porto Alegre, southern Brazil. As he always loved writing, in 2011, at age 10 he started his very own aviation blog. Many things have happened since then, and now he is putting all his efforts into being an airline executive in the future.

    View all posts

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