MercoPress. South Atlantic News Agency

Brazil announces open skies policy with US and an end to the 20% ownership cap

Beltrao said that the Open Skies treaty with the United States would be taken up by Congress at the beginning of the Brazilian legislative year in February

Brazil’s Congress will finalize as soon as February legislation opening the way for deregulation of flights to and from the United States, Minister of Tourism Marx Beltrao said. He also expects legislators to approve a plan to allow foreign carriers a bigger chunk of Brazilian airlines. Both measures are part of a government drive to push down fares and boost tourism, which accounts for an estimated 3.7% of GDP.

 “It’s already on the agenda as an urgent matter to be voted,” Beltrao said in an interview on a visit to New York, referring to the foreign ownership cap issue in particular.

The minister said that the so-called Open Skies treaty with the United States would also be taken up at the beginning of the Brazilian legislative year in February. Beltrao said he did not expect major opposition to the agreement.

The deal would clear the way for a partnership between American Airlines Group Inc and LATAM Airlines Group SA , allowing them to coordinate schedules and offer more connections.

Flights between Brazil and the United States are expected to surge by 30% as a result of the treaty, said Vinicius Lummertz, president of Brazilian tourism board Embratur, citing American Airlines.

Beltrao acknowledged that lifting Brazil’s 20% ceiling on foreign airline ownership is more controversial. Still, he said Azul SA, Brazil’s third-largest airline after Gol Linhas Aereas Inteligentes SA and LATAM’s local unit, is the only one opposed to the plan.

He said that if ownership was opened 100%, “airlines from other countries will be able to enter the Brazilian market and fly domestically, so given that boosts competition for the existing players, that can hurt them financially,” he said. “But the others are against Azul’s position, they want to open the market.”

Brazil’s government is open to lifting the ownership ceiling to somewhere between 50% and 100% initially, Beltrao said. The bill would allow foreign carriers such as Delta Air Lines Inc, which already has a 12% stake in Gol, to boost their holdings.