Business

Brazilian government goes to the rescue of airline companies

The coronavirus crisis is unravelling the travel industry

Brazil will aid airlines due to coronavirus crisis says Minister of Infrastructure Tarcísio de Freitas. Photo: YouTube Screenshot

As the coronavirus crisis unravels traveling across Latin America, Brazil took a decision to rescue airline companies. The announcement was made throughout a press conference today. Brazilian President, Jair Bolsonaro, announced, in the company of his ministers, the renegotiation of airlines debt. Rescue measures for companies will also be taken by the Ministry of Infrastructure in conjunction with the Ministry of Economy.

According to the Brazilian Minister of Infrastructure, Tarcísio de Freitas, the aviation sector is one of the most impacted in coronavirus outbreak because companies have costs in dollars, and Brazilian real was strongly devalued in recent days. Therefore, the Brazilian government will take measures to preserve the cash from these companies with a focus on consumers.

Airlines will have up to 12 months to return money to passengers who ask for reimbursements until December 31, 2020. The new executive order will also change the payment schedule for fixed and variable contributions the firms make to airport terminal administrators. The collection of navigation fees from airlines will also be postponed. Payments that should be made between March and June this year will be extended to September through November.

Crisis

Brazilian airline GOL announced the suspension of flights abroad until June 30. The measure aims to adapt operations to the new scenario of demands for air transport amid the coronavirus pandemic, according to Época. The company said it is complying with travel restrictions imposed by the authorities of the countries in which it operates, in South America, Central America and the Caribbean, in addition to recommendations from United States authorities. Operations within Brazil will also be reduced. Among national and international operations, the company expects to decrease its flights between 60% and 70% by mid-June.

LATAM Airlines Group is canceling 90% of its all international flights due to the coronavirus pandemic, which is leading to a continental isolation. According to The Wall Street Journal, The International Air Transport Association said global airlines would need $ 200 billion to avoid mass bankrupticies, as countries close their borders to international travelers due to COVID-19.

An airlines industry group in Latin America told Reuters that require immediate government aid or they will face a “pandemic bankruptcy”, said Luis Felipe de Oliveira, the head of trade group ALTA. According to him, the group has been sending letters to governments throughout the region and that the airline industry crisis created by the coronavirus outbreak is “unprecedented.”

Jerome Cadier, president of LATAM Airlines in Brazil, told Estadão that the survival of airlines will rely on the measures of the Brazilian government. For this reason, airlines negotiate with the Ministries of Infrastructure and Economy a credit line for current assets, a temporary delay of the collection process and different rules for returning tickets to consumers.

Executive order

Meanwhile, Brazilian Minister Tarcísio de Freitas highlighted the sharp drop in the number of flights in both international and domestic demand. “The companies have cash difficulties and some measures are being taken to preserve the cash of these companies, always thinking that the focus is on the consumer”. What the government does not want, in the words of the minister, “is the bankruptcy of companies and discontinuity in the service, because after the crisis has passed we would have the supply problem and this will have an impact on the tariff”.