Authors: Luciana Goulart Penteado, Partner, and Victor Hanna, Associate, Demarest Advogados
Overview
The main purpose of the Open Skies Agreements in Brazil is to deregulate certain areas of the air transport industry and, consequently, encourage the market to work freely, which causes various effects in liberalized markets. Unfortunately, in Brazil, as there is a very specific (and even bureaucratic) structure that rules the aviation sector, several barriers end up slowing down the necessary modifications in the sector and effectiveness in the implementation of the Open Skies agreements. The barriers generated by bureaucracy and government intervention end up making it more difficult to fully develop the aviation sector in the country and, consequently, to re-empower the economy.
Open Skies Agreements and the Necessary Modernization and Easing of the Rules for the Development of the Brazilian Aviation Sector
Currently, the necessity of creating a free-market environment for the aviation sector has been the object of much discussion, especially concerning to the commercial aviation, which would certainly depend on a stronger implementation of an Open Skies international policy, in addition to the modernization and liberalization of the specific rules of each country.
Such policy seeks, beyond the liberalization of the rules, a reduction of the government's intervention in the sector. As known, for the Open Skies policy to be effective, it is indispensable to have bilateral and even multilateral air transport agreements between two or more ratified nations.
The Agreements represent an expansion in the whole air services offer, resulting in a lower cost to fly, also for tourists and to entrepreneurs. The Open Skies, in an international scope, is an agreement which is good for the consumers, fosters competition and to the growth of the aviation sector, as it allows more flexibility in the decisions made by the companies of the sector, due to the autonomy to choose the destination of the flights, the quantity offered and the price.
Hence, the Open Skies tends to make the commercial and tourism relationships stronger among the countries which are part of the agreement, improving the air services and making the prices of the tickets even more competitive, while the governments have more commitment to guarantee a safe and competent aviation.
Specifically regarding to Brazil, bilateral agreements aiming to increase air frequencies between important economic blocks were signed, especially with the United States and the European Union, in 2011.
Moreover, a series of new rules to the sector's regulation have been implemented amidst several political discussions, so as to align the Brazilian aerospace structure to current international practices.
The main purpose of the Open Skies agreements is to deregulate certain areas of the air transport industry and, consequently, encourage the market to work freely, which causes various effects in liberalized markets.
The negotiations promote a greater connectivity between countries, through new bilateral air transport policies promoted by ANAC (National Civil Aviation Agency). The agreements introduce new dynamics of the international market to the Brazilian air transport, in such a way that, the restrictions to the implementation of new flights are eliminated and, consequently, the competition among airline companies increases.
Hence, the agreement will provide more freedom regarding the prices of the tariffs, and will allow the unlimited quantity of weekly flights that are operated between Brazil and the countries which signed the Open Skies agreement.
Then, for the sake of example, Brazil, which previously had access to 15 countries of the European Union, will be able to access 27 member countries of the EU after the ratification of the Open Skies agreement by the National Congress. This means that the agreement will allow airline companies in Brazil and in the EU to freely define the number of flights they intend to operate, as well as the countries and cities they intend to serve and the tariffs they wish to charge.
On the other hand, it should be pointed out that the agreements do not encompass the releasing of domestic flights to foreign airline companies.
Still in the negotiations scenario, the conclusion of the Open Skies agreement between Brazil and the United States was of great importance. Unfortunately, though, such agreement is not into full force yet due to internal bureaucracies.
As it was negotiated, the agreement will allow a gradual raise in the number of flights. As a result of this negotiation, the Brazil-USA market tends to present a significant growth.
Hence, although the agreements have not yet been ratified, the opening of the market has been gradually increasing since 2011, the year on which the Open Skies was signed.
Currently, Brazil has Open Skies agreements signed with Bahrain, Canada, Qatar, Chile, Singapore, South Korea, Costa Rica, the United Arab Emirates, Ethiopia, Ghana, Hong Kong, Iceland, Jamaica, Mexico, Oman, Kenya and Zimbabwe.
Is very important to emphasize that in Brazil, as there is a very specific (and even bureaucratic) structure that rules the aviation sector, several barriers end up slowing down the necessary modifications.
The Union, as manager of the system of aviation and airport infrastructure, is responsible for managing, delegating and granting all issues inherent to the aerospace, as it is expressed in the Federal Constitution.
Thus, in 2005, the ANAC (National Civil Aviation Agency) was created and regulated, through Law No. 11.182, as the responsible for civil aviation and regulation of the Brazilian air transport. Such independent governmental agency also has a fully independent structure, and its main function is to regulate and inspect aerospace, aviation and airport infrastructure activities.
The regulatory nature of the Agency can be divided in two fronts: economic and technical regulation. Economic regulation is related to the monitoring and possible interventions in the market, with the purpose of fostering competition and the improvement of the services in the sector. Regarding to technical regulation, ANAC regulates and makes the inspection of the industry, providing the safety of the airline operations and ensuring the labor training requirements.
Hence, it is evident that there is a strong governmental intervention in the aviation sector, which makes it too bureaucratic and even political.
Thus, in order to demonstrate the necessary procedures in the scope of the previously mentioned agreements, we explain that the ANAC shall initially conduct the whole negotiation with the other nations. After that, the agreement are sent for analysis and ratification by the National Congress and it is later sent to be signed by the Office of Foreign Affairs to, after some time, finally become effective.
Regarding to the modernization and easing of the rules, it is important to point out that, after many discussions about the review and update of the fundamental rules of the relationship formed between passengers and airline companies in Brazil, ANAC approved Resolution No. 400/2016, defining the new General Air Transport Conditions, and restating new rights and duties of the passengers.
Among the main alterations, we have the ones that will cause greater impact in the sector: (i) end of the obligation to allow the shipment of free amounts of baggage by the companies in domestic and international flights; (ii) possibility of giving up flying in up to 24 hours after the purchase of the ticket, without burden to the passenger; (iii) making reimbursements in up to 7 days; (iv) reduction of the terms to return the baggage and indemnity in case of loss; and (v) impossibility of cancelling the return flight by the company, in domestic flights, if the passenger informs that he wishes to use it, (vi) the correction of the name, surname or agnomen of the passenger, without burden until the time of check-in, except in case of international flight involving different companies (interline).
Undoubtedly, the scope of such measures is to harmonize Brazilian rules with the current international practices and, this way, foster free competition among the companies of the sector, which will certainly stimulate the growth of the aviation market, making it possible for new investments and players to enter (mainly low-cost companies).
Considering that Brazil is one of the main markets in worldwide air transport, the changes brought by the new Resolution place the country on an international level, as the authorities finally saw the need to align the conditions and general rules to what is already practiced around the world, making it possible to promote a drastic reduction in judicial conflicts and also in the high operating costs that the companies have to face in the local market.
Thereby, the country becomes more attractive for the arrival of new investments, which will help in the profitability of the aviation sector. In this way, it is vital to remove the restraint to the participation of foreign capital in airline companies, which, nowadays, is limited to 20%, and has been the object of a wide discussion in the Legislative Branch, due to political influences. Such measure, together with the new rules, will certainly contribute to the growth of such market.
In view of the current scenario, the importance of the implementation of the Open Skies agreements is evident, as well as the need for modernization and easing of the rules and the uniform and standardized regulation for the development of the aviation sector. This is a worldwide trend that still finds barriers in several countries due to government intervention and internal bureaucracies.
Conclusion
In Brazil, specifically, several agreements are not fully effective due to waiting, for years, approval at the National Congress. Additionally, several rules recently implemented, which aim to modernize the sector and make it compatible with international rules, are stopped by judicial measures and interventions by the Legislative Branch.
The barriers generated by bureaucracy and government intervention end up making it more difficult to fully develop the aviation sector in the country and, consequently, to re-empower the economy.
Therefore, it is necessary a deep restructuring of the aviation sector, through Open Skies agreements, the easing of rules, as well as investments in transport structure. Such measures will certainly contribute to the expand of the sector in all directions, and will even help the economy growth of the country.
Additional resources
http://www.anac.gov.br/livroanac10anos.pdf/view
https://ceabbrasil.com.br/blog/o-market-da-aviacao-em-2017/
