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The changing face of Brazilian airports

Rubel Thomas

Director/TEAD Brasil

Published  Friday, October 9, 2009

Brazil's airport industry will be going through significant changes in the near future. National airport authority Infraero plans to spend 2.67bn reais (US$1.53bn) on terminals to prepare for the 2014 World Cup, while civil aviation authority Anac is working on an airport concession model to attract private investors.

BNamericas spoke with Rubel Thomas, former president of airline Varig and director of international freight terminal TEAD Brasil, to find out which airports need the most improvements and what he thinks about the concession models that are currently being discussed by authorities.

BNamericas: Infraero has announced an aggressive investment plan to prepare its airport network for the 2014 World Cup. Which airports do you feel need the most improvements and what are those improvements?

Thomas: Airports in São Paulo state need to be improved. Viracopos airport in particular needs a lot of work. It needs to be enlarged for international operations. A new runway that is 4,000m long and 60m wide has been proposed. However, to support this expansion efficient transportation is also a must and a train connection is needed from São Paulo to Viracopos.

Congonhas airport is currently operating beyond its capacity. Rather than expansion, the problem would be better dealt with by building another airport to take on some of its demand. This airport should be located 30-40km from downtown São Paulo city but I cannot name a specific place.

Finally, Guarulhos international airport needs to be expanded as the situation there is nearly as bad as at Congonhas.

BNamericas: Do you think the investment goals of Infraero are attainable?

Thomas: Currently, the country is investing less than it should in airports. It's not easy as authorities are facing increasing demand for airport logistics, as well as the upcoming World Cup.

Infraero has announced it will invest a tremendous amount of money. As long as the goals are viable and actually happen, it would be nice. However, it will be difficult. I'm not saying the government cannot do it as they just raised the capital of Brazilian federal energy company Petrobras by 100bn reais. If there is political will, it will happen.

BNamericas: What obstacles are in the way?

Thomas: For one thing, next year is an election year. Much of the government's energy will go toward campaigning and campaign-related matters while work on infrastructure projects will slow down.

After the election, one way to alleviate difficulties is through private participation. With help from domestic and foreign companies, achieving these goals will be more viable.

BNamericas: A tender to operate São Gonçalo airport in Rio Grande do Norte state is scheduled for launch in November. This would be Brazil's first airport concession granted to a private company. Do you think the country will continue to move in this direction?

Thomas: This is definitely a good and appropriate move at this time. Additional investment is needed from private companies and I believe the government will continue to move in that direction. However, five or six different concession models have been selected for review. Some government officials like the idea and some don't. The bureaucratic process will take some time.

Once the model is decided, I think Viracopos will be one of the first airports to be concessioned because it needs a lot of investment to improve the way it handles demand and to provide high-quality services. The second airport could be Guarulhos.

BNamericas: Anac has said that one of the airport concession models under review has no limit on foreign capital, allowing foreign firms to obtain 100% control. Is this good?

Thomas: Foreign investment will be good but the cap on how much should be allowed really depends on which concession model is selected. There is also talk of a cap of 49% or anywhere from this to 100%. A good idea would be a partnership between a strong Brazilian company like construction firms Odebrecht or Camargo Corrêa and a foreign company.

There will definitely be a limitation on airline participation and there is a proposal to set a 49% limit. This has not been approved yet but it's at the final stage and is being reviewed. All airlines will be interested in getting involved as it will be to their advantage.

BNamericas: Do you agree with Infraero president Murilo Marques Barboza's proposal to raise airline tariffs for busier airports at peak times to spread demand more evenly between airports?

Thomas: I think demand doesn't work this way and that infrastructure improvements need to be made to deal with the demand in the current locations. For example, if I want to go from São Paulo to Frankfurt, I don't want to go to Rio de Janeiro just because it is cheaper.

Another example. Do you think the new airline Azul Linhas Aéreas wants to land in Viracopos? No, it wants to land at Congonhas or at the Santos Dumont airport in Rio de Janeiro but these are too crowded.

Brazil, for political reasons, already made this mistake in the past when the Galeão international airport in Rio de Janeiro was built to serve flights from cities such as Belo Horizonte, Curitiba, Salvador and Porto Alegre. The idea was that passengers would first go to Galeão before flying abroad. But demand was highest in São Paulo city back then and it still is now.

BNamericas: Do you have any ideas of what should be included in a good concession model?

Thomas: Well, they should not privatize an airport like Viracopos on its own. Viracopos is "filet mignon" so whoever runs Viracopos should also take on five or six other smaller, less profitable airports. No company will accept a deal with only low-profit airports.

BNamericas: Do you think a concession model will be selected by year-end?

Thomas: I don't think so. If there were no doubts, one model would be under discussion but there are five or six models and there are many different opinions in the air. It will get pushed back to next year which is a political year and all everyone talks about is politics. This is going to take some time.

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