LABACE Convention News

LABACE Opening Sees Welcome Optimism

 - August 13, 2019, 1:33 PM

LABACE 2019 opened with assurances of the importance of general aviation to the aviation industry, and to Brazil, by government authorities on the ground and in the air. “The economy” is the wind that propels the business aviation market, and the keynote speaker—economist and former Central Bank director Alexandre Schwartsman—gave a compelling explanation of how this recession has been deeper and longer than any other since the turn of the millennium and the recovery slower than any in the last 40 years. He also explained why pension reform and other government reforms are of such importance to balanced growth.

The repetitions of government support were especially welcome in light of the perception under previous governments that business aviation was tolerated only until commercial aviation needed its limited airport space.

Ricardo Bezerra of Brazil's regulatory authority National Civil Aviation Agency (ANAC) commented, “It’s a special honor for me to participate again at LABACE, for my last time as a director of ANAC, with my term ending in April. In this time of crisis, when the sector has not grown as much as expected, we at ANAC have done our homework, bringing our regulations in line with the best international practices…simplifying regulations and bringing ANAC into closer alignment with those we regulate.”

Bezerra noted the launching at LABACE of digital licenses for pilots, flight crew, mechanics, and ground handlers. In the fight against clandestine, unlicensed charter, he noted that as well as increased inspection, ANAC had increased fines, now 10 times as heavy.

ANAC had also responded to the industry’s concerns about regulations to bring the fractional share concept to Brazil, and in the regulation of the category of light-sport aircraft. These are now permitted for use by pilot training schools, which Bezerra foresaw as incentivizing domestic production and “heating up the market.” But he also stressed that safety is of the greatest importance and “must always be taken into account in making changes.”

Lt. Gen. Paulo João Cury, who commands the Brazilian Air Force’s logistics arm, observed that LABACE is always “an opportunity to meet friends,” and he spoke of the Air Force’s coming needs: “The aging fleet must be renewed. The helicopter fleet is new now, the KC390 is here, and the Gripen is coming.”

Major-General Walcyr Josué de Castilho Araujo, vice-director of airspace control department DECEA, spoke of the importance the department gives to general aviation. “DECEA is, was, and will be able to support the growth of general aviation, guaranteeing the fluidity and safety of air traffic.”

He cited Sirius air traffic control software (a product of Embraer subsidiary Atech) as providing for more efficient use of airspace and said that improvements to flight information systems will “allow access to information by users of the area we’ve called uncontrolled airspace.”

New technology has allowed better surveillance of airspace, and pilot-ATC communication via datalink has also been implemented—all steps toward the goals of, he said, “Better service at lower cost...to make better use of the limited infrastructure. We are all using a finite infrastructure,” he concluded.

Ronei Saggioro Glanzman, federal secretary of civil aviation, spoke of the industry’s enthusiasm and optimism and hailed Brazil’s “continental territory, significant population, and economy,” where “aviation has room to grow. In fact, it’s general aviation that gets to small places.” He noted that the economy appears poised to take off, thanks to pension and future tax reform, and predicted, “When the economy grows, aviation explodes.”

Specific steps mentioned by Glanzman were provisional measure 863, which opened Brazilian aviation to foreign investment, lifting previous limits. “Foreign capital has a strong tendency to come to developing markets,” he suggested.

As fuel is aviation’s largest operational expense, the federal government, in coordination with the states, has adopted a policy of reducing excise taxes in São Paulo, Bahia, and some other states as an incentive to increase the number of flights. The federal program of airport privatization has also led to “beautiful infrastructure” being built through private investment.

Glanzman then announced the launch at LABACE of a program of investment in general aviation airports, in such items as PAPI approach path guidance indicators and night illumination. “Last year it was almost 30 million [Reals] in investments, and this year it will be 60. We have the national aviation plan, revised every two years, and a technical-advisor committee of general aviation users.”

He added “the idea is to amplify general aviation airports, with revenue from the National Civil Aviation fund, following criteria of the technical commission and the national aviation plan. Resources are limited, but general aviation is included.

“Commercial aviation serves trunk routes, regional aviation serves regional routes, but for reaching everywhere, the country, in fact, needs general aviation,” he concluded—ending by saluting LABACE as “a legacy that ABAG has created for Brazil.”

It's the Economy!

Economist Alexandre Schwartsman said the current recovery is weak and the greatest weakness is the government budget and debt, but Congress’s willingness to move on the overdue public pension reform is a good sign. However, he said, “It’s a long road ahead, and Argentina’s recent problems are an example” of how difficult it the road can be.
The most recent recession was “not a ‘normal’ recession,” he noted. It was the third since the turn of the millennium, but deeper and longer than the others, with an 8.2 percent difference from peak to valley, and the recovery has been slower than past recoveries, long or short. Unemployment is dropping at a “glacial” pace, and many reemployed workers have taken lower-paying jobs in the informal economy.

The value of the dollar, stronger now than several years ago, is often cited as a reason for lower aircraft sales, but Schwartsman used a chart from the last 30 years to show that the current exchange rate is about average for the time. “It’s not the problem.”

Another Brazilian bugaboo is inflation, after the country and the economy suffered through serial bouts of hyperinflation. However, inflation is “controlled, with expectations of low inflation,” which means reductions in interest rates.

The problem rather is that over many years Brazil spent more than it produced. The government debt was dropping as a percent of GDP, but around 2013 or 2014 began to grow. Interest on the debt consequently began to grow as well, and investment is low.

“Government spending has increased at an unsustainable rate,” he said, pointing to “20 years of increase in federal spending.” Of that, the largest increase by far has been public pensions. In 1997, it was 5 percent of spending, and now it’s almost 9 percent. Government spending went from 14 percent of GPD to 20 percent, and pensions are almost half of that.