LABACE Convention News

If You Build Airports, Will Airplanes Come?

 - August 15, 2018, 11:15 AM
he Catarina Executive Airport is part of a larger project by JHSF on a sizable plot of land straddling the highway leading west from São Paulo to Sorocaba. On one side of the highway, JHSF completed and operates a fashion outlet mall, and half a dozen additional plots await office towers, hotels, or other uses. Across the highway is the airport and beyond it and so far just on paper, an eventual luxury condominium development, not JHFS's first. Catarina Executive Airport began as a fast-track project that was to be ready for the 2014 World Cup, and then the 2016 Olympics, including not only an 8,000-foot main runway, enabling the largest intercontinental private jets to arrive directly at the airport, but also an auxiliary runway, and an airport terminal and space for FBOs, MROs, and private hangars.

While Brazil’s economy has become more stable over the last two decades, it still swings between boom and bust. The upcoming presidential election has injected additional uncertainty, with vendors all singing the same tune: once exchange rates stabilize and any candidate wins, customers will start making buying decisions again. But how do economic swings, and especially long downward ones like the recession from which the country is only now recovering, affect people who don’t just buy and sell but must make large, long-term investments? AIN spoke with long-term infrastructure projects Aerovale, Catarina Executive Airport, and WWA World Way Aviation, the largest FBO in Brazil. Aerovale and WWA are privately financed, while Catarina is a project of publicly held luxury construction firm JHSF.

The Aerovale project in Caçapava, beyond São José dos Campos in the direction of Rio, is still recovering from work stoppage brought on by environmental demands that led the project to seek protection from creditors. Rogério Penido told AIN in July that the project is around 55 percent complete, with earthmoving complete and the runway paved, and is “moving forward very slowly” while ensuring that environmental protection obligations continue to be met. The company is “undergoing financial restructuring," he said, "and we’re studying partnerships with investors,” with the goal of bringing the project to completion and operation. Penido built his fortune as a paving contractor and brought to Aerovale not only his own money but also his trucks, bulldozers, and expertise. Originally planned as an industrial and logistics industrial park, strategically located on the main highway from Rio to São Paulo, Aerovale was moving forward just as the first licenses for private airports were being issued. But it was designed to be viable without business aviation.

The Catarina Executive Airport is part of a larger project by JHSF on a sizable plot of land straddling the highway leading west from São Paulo to Sorocaba. On one side of the highway, JHSF completed and operates a fashion outlet mall, and half a dozen additional plots await office towers, hotels, or other uses. Across the highway is the airport and beyond it and so far just on paper, an eventual luxury condominium development, not JHFS's first. Catarina Executive Airport began as a fast-track project that was to be ready for the 2014 World Cup, and then the 2016 Olympics, including not only an 8,000-foot main runway, enabling the largest intercontinental private jets to arrive directly at the airport, but also an auxiliary runway, and an airport terminal and space for FBOs, MROs, and private hangars.

Catarina's first LABACE included a vast chalet featuring an enormous scale model of the airport. In 2018 its booth has four aerial photos of the runway, which has now received three of an eventual six layers of asphalt. The auxiliary runway is gone, replaced in the plans several years ago by a long taxiway, and in the current incarnation by a shorter taxiway. But the runway has kept its full 8,000 feet. One of the ramp areas projected for MROs or FBOs is not on the plans but could support a logistics terminal.

The project originally had JHSF's formidable financial strength as one of its pillars. The conglomerate itself, though, has been battered by the larger recession and sold off a major portion in its shopping centers, the crown jewels of its portfolio. By retrenching, reexamining the market, and adapting the project to its changes, the Catarina airport has remained alive.

In the race to be the first business aviation airport, a third contender, closer to the city on the Rodoanel highway southwest of Congonhas, was announced with pomp and circumstance—the location was the auditorium of the president of the Republic's offices in São Paulo—by well-connected backers. The selected plot, however, was within the city limits, making it more vulnerable to anti-development pressures, and was not purchased but merely optioned. Plans, some of the many permits needed, and paperwork were produced in abundance, but not a shovel of earth was turned. The only vestige of the project is a Facebook page abandoned to chain-sales postings.

Less long-term than the airports, World Way Aviation's FBO at Sorocaba airport is not only Brazil's largest business aviation facility but has received the top marks in South America in AIN's annual FBO survey in both of the two years since it has opened. FBO manager Thiago You told AIN, “Twenty large business jets will fit in WWA's hangar. We get three or four new aircraft every year, but it's not enough. We've had a 100 percent renewal rate by clients.” You noted that with MRO facilities for Dassault, Embraer, and Gulfstream at Sorocaba, WWA will sometimes receive aircraft after service is complete. He also sees the proposed internationalization of the Sorocaba airport as a boon to his business, and for the airport's MRO tenants.

But You sees a lack of the large aircraft for which the hangar was built. “We're not seeing new big aircraft coming in [to Brazil]. With the crisis, some left, and what's replaced them are smaller. In 2012 [and] 2013 there were big, new aircraft, and we're not seeing that now. We're not seeing new operators in the volume of the past.”

You also sees the Brazilian market as not yet understanding the value of hangarage. “About 70 percent of damage to business aircraft is hangar rash. Some don't understand the hangar as preserving an asset. They do first-class everything, but when it comes to hangarage, they economize. The manufacturer recommends hangarage, and they forget that, and only remember when the maintenance bill comes.”

Part of WWA's strategy is to leverage through partnerships. WWA is a member of the Air Elite network, sponsored by World Fuel, and is participating at LABACE at WWA's booth (2006). WWA joined Air Elite when there were 38 members, and now it's up to 75. The network includes FBOs in Ecuador and Colombia. “We've never dropped our quality level” in response to the crisis, You observed. “We continue trying to stay one step ahead of what the market demands.”

WWA is privately financed, by a large but low-profile real estate group, and seems prepared to wait out the crisis. You receives regular reports on nearby Catarina by tenants who fly over it on the way to Sorocaba, and notes, “They’ve gone too far to stop now.” He raises, however, the fundamental question of long-term investment amidst short-term crisis. “I built a hangar, and where are the planes? They built a whole airport.”