Brazil plans new airport auction after Galeão concession return
The concessionaire of Rio de Janeiro’s Galeão international airport will return its concession, shaking up the federal government’s airport auction plans.
“| can’t say that this was a big surprise, because Galeão airport had already suffered from low passenger volumes for years,” Paulo Dantas, an infrastructure and project finance specialist at law firm Castro Barros Advogados, told BNamericas.
Concessionaire RIOGaleão, controlled by Singapore’s Changi Airport, justified the return with collapsing passenger numbers dur ing the pandemic. The contract was valid until 2039.
“In 2020 and 2021, the federal government acted diligently to support the civil aviation sector. The recovery, however, has been slow and COVID-19 will continue to affect the aviation industry for years to come,” said RIOGaleão in a press release.
The return of the concession of Galedo airport, formally called Tom Jobim airport, forced a change in the government’s concessions agenda.
This year, it planned to offer 16 airports in the seventh, and last concessions round, but now aims to launch an additional one in 2023 for Rio de Janeiro’s biggest airports, Galeão and Santos Dumont.
“As we are creating an eighth round, we will now have the same operator for Galeão and Santos Dumont. This resolves a series of issues and removes a series of concerns that were being expressed by the productive sector in Rio,” infrastructure minister Tarcisio Gomes de Freitas said in a press release.
Some challenges remain, however.
“It won’t be simple to leave everything ready for a new auction of Galeão airport for the next year, because there is now a process for discussing all indemnities involving the parties. However, it is not impossible to achieve that timetable as there is already a legal learning curve regarding concession contract returns,” Leticia Queiroz de Andrade, an infrastructure-focused partner at law firm Queiroz e Maluf, told BNamericas.
7TH CONCESSION ROUND
The government was planning to auction concessions for 16 airports in the first half, in three blocks with more and less profitable ones, expected to generate investments of around 8.6bn reais (US$1.63bn). The largest airports were expected to be Santos Dumont and Congonhas, in São Paulo.
The 15 airports now planned to be offered are expected to generate investments of 7.3bn reais.
The new structure is as follows:
SP/MS/PA/MG block: contains Congonhas (the country’s second busiest airport, in SAo Paulo state);
Campo Grande, Corumbá and Ponta Porã in Mato Grosso do Sul state; Santarém, Marabá, Carajás and Altamira in Pará state; and Uberlândia, Uberaba and Montes Claros in Minas Gerais state. Projected investment is 5.88bn reais and the minimum fee is estimated at 255mn reais.
Aviação Geral block: includes Campo de Marte airport in São Paulo state and Jacarepaguá in Rio de Janeiro, with projected investment of 560mn reais and a 138mn-real minimum fee.
Norte II block: Comprises the airports in Bélem, Pará state, and Macapá, Amapá state, with 875mn reais in estimated investments and a minimum fee of 57mn reais.
RIO DE JANEIRO AIRPORTS ISSUE
Concessions for Rio de Janeiro airports were mired in controversy before.
The government wanted to authorize Santos Dumont airport to handle international flights, against the opposition of RIOGaleão and Rio de Janeiro state.
Rio de Janeiro state demanded the federal government at least limit the number of international flights at Santos Dumont to minimize competition with Galeão. In response, the federal government and Rio de Janeiro created a work group to find a solution.
In parallel, RIOGaleão was trying to renegotiate its federal fees due to the pandemic’s impacts.
Civil aviation authority Anac authorized compensations for various operators affected by low passenger numbers, but was reluctant to support RIOGaleão, alleging the concessionaire already faced financial troubles before the pandemic, a source, requesting anonymity, told BNamericas.
Changi won the concession for the airport in 2013 in consortium with Odebrecht, offering 20.8bn reais, which market participants considered excessive, given the 5.9bn-real minimum fee.
The airport’s demand forecast model was also criticized, but the sector was euphoric amid record GDP and the approaching 2014 FIFA World Cup and the 2016 Olympic Games.
The optimistic scenario did not materialize, however, and many economic models for concessions won between 2011 and 2014 failed.
In addition, the Lava Jato anti-corruption probe impacted Odebrecht, forcing the company to sell assets and exit the airport consortium in 2017.