Brazil’s Airlines Aren’t Able To Access Government Loans Just Yet

The Brazilian government will most likely give local airlines a loan of around 3 billion reais (569.10 million USD) per carrier in May. This would be a help for the airlines to survive during the coronavirus pandemic. Nevertheless, the airlines are expecting to have these loans this month. Let’s investigate further.

Azul Getty
Brazilian airlines are waiting for a State loan. Photo: Getty Images.

Brazilian carriers are looking for all the help they can get

The three domestic airlines of Brazil, GOL, Azul, and LATAM have reached out to the Brazilian development bank BNDES for help. This was first reported by Reuters

Although the three carriers are still operating commercial flights, they are looking for all the help they can get as international travels have all but dried up for Azul and GOL. However, LATAM still flies to Chile and the US, albeit with very reduced frequency.

As for the domestic sector, the three airlines have seen a 91.61% reduction in the number of flights per week. To battle this, the airlines have some initiatives going around. 

Azul, for example, hired a restructuring firm to work with it during the crisis. GOL will reduce its fleet from 130 Boeing 737 planes to 100 by letting its lease contracts expire. Meanwhile, LATAM recently canceled an order for 10 Airbus A350. The order was later picked up by US carrier, Delta Air Lines. 

Finally, the three Brazillian carriers are currently operating a skeleton route network, which allows the airlines to keep Brazil and its inhabitants connected. This is happening even as Brazil finds itself as the most affected country in the region from coronavirus. As of 17 April, Brazil had 30,961 cases, with 1,956 deaths. 

Avión GOL 4
GOL could reduce its fleet to 100 airplanes. Photo: GOL Linhas Aereas

GOL’s CEO expected the loan to arrive sooner

Paulo Kakinoff, GOL Chief Executive, said at the beginning of April that the help would take up to two weeks to arrive. But then, the timeline was pushed back into May. 

According to Reuters, this could be attributed to the fact that the amounts requested were higher than expected. 

Furthermore, BNDES “is requesting that airlines cut executive bonuses and investments as well as suspend dividends,” said Reuters. This request is similar to one made by the US government for the rescue funding it gave to its airlines

Additionally, the Brazilian government has granted other relief measures for the airlines. For example, it has deferred the air navigation services fees from March through December 2020. It has also deferred airport concession fees to December. Finally, it allowed the airlines to extend the period of ticket reimbursement for 12 months. 

LATAM Airlines Getty
LATAM Airlines is the only Brazilian airline to fly internationally at the moment. Photo: Getty Images.

Other Latin American carriers are looking for help

While Brazil is one of the leading examples of relief measures, other Latin American countries are not doing the same. The International Air Transport Association (IATA) says there’s only one other country in the region taking action. That country is Colombia. 

The Colombian government has deferred the tourism tax until 30 October. This country also reduced the tax on tickets and jet fuel from 19% to 5% until 31 December 2021. Colombia has also established a credit line of around 80 million USD. 

Recently there was also a controversy regarding Copa Airlines. Fake news was circulating that the airline asked for 700 million USD to survive. Copa denied this, assuring that the airline will take every measure it can to protect its future. Its CEO, Pedro Heilbron, recently said that the crisis will setback the airline for almost 30 years.

According to IATA, the governments from Mexico and Argentina are beginning to create some aid packages for the industry. The organization said that these first talks with the governments have been positive.

Still, there’s a lot to be done in the region. IATA estimates that Latin America could lose up to 18 billion USD. This would mean a 49% decrease in 2020’s Revenue Passenger Kilometers. 

What do you think of the measures taken by Latin American governments? Let us know in the comments.