Abag attacks taxes and access issues

 - February 2, 2007, 8:54 AM

Brazil’s business aviation association has a lot more to celebrate this year than it did 12 months ago, with growing demand for aircraft and solid financial results from executive charter companies flowing from significant improvements in the local economy. But ABAG (the Portuguese acronym stands for Associação Brasileira de Aviação Geral) continues to focus on sensitizing the government to the needs of the industry and convincing officials that executive aviation is a business tool and not an extravagance.

After avoiding the tax on vehicle ownership in 2003, the industry faced another tax hurdle last year, when Brazil’s finance ministry decided to apply the social contribution tax (known as PIS/Cofins) to imported goods. “Because the aviation industry depends almost exclusively on imported parts and components, this tax represented a huge threat to the industry,” said ABAG executive vice president Adalberto Febeliano.

The tax would have increased the price of imported components by nearly 10 percent. While ABAG was able to get the tax for airplane components overturned, the task took months of lobbying the government.

Febeliano said that Brazil’s tax code still needs to be modified, because it continues to present a significant obstacle to business aircraft ownership.

Another growing concern relates to airport access for the nation’s business aviation community. Business aviation interests have made progress at several key airports in Brazil, but recent economic growth has put the squeeze on airports by generating more airline traffic, and the recent government decision to suspend the code-sharing agreement between Varig and TAM could prompt a rise in domestic flights.

Despite these concerns, several measures that passed last year are likely to help the business aviation industry. For example, Brazilian airport management company Infraero limited the number of scheduled airline shuttle flights arriving at and departing from Santos Dumont, Rio de Janeiro’s downtown airport. The reduction in flights has opened access to that airport for business aircraft.

Likewise, Infraero plans to transfer an increasing number of flights out of Belo Horizonte’s downtown Pampulha Airport to Confins Airport.

Furthermore, traffic saturation at the airport at Brasília, the nation’s capital, was beginning to pose access problems for business aircraft operators. The airport operator is adding a second runway, which is expected to improve the situation significantly.

Nonetheless, there is still work to be done. The congestion at São Paulo Congonhas Airport has yet to be resolved, and ABAG is concerned that the imminent arrival of very light jets in Brazil will exacerbate the problem of airport and airspace saturation.

Supposedly, there are plans to build a new airport in São Paulo, but despite previous government pledges the industry is worried that construction will begin only when the situation becomes critical. Febeliano added that the new Air Navigation Management Center, which is expected to begin operating shortly, will help limit potential air traffic problems in the future.