ANALYSIS: Proposed Brazil airport slot rules met with opposition

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Newly proposed regulations to redistribute slots at some of Brazil's busiest airports have stirred up concerns among airlines and trade associations, setting the stage for another controversial development concering the country's airports.

In February, Brazil's civil aviation authority (ANAC) announced that it was proposing new regulations that would use airlines' on-time performances as a benchmark to determine whether they get to keep operating their slots at airports.

Airlines who fail to meet on-time performance requirements face having their slots taken away from them, as well as financial penalties.

ANAC, in announcing the proposed rules, said that they will optimise the use of airport slots and deter airlines from abusing scarce airport infrastructure in Brazil.

While the ANAC's justification might sound logical enough, the airline industry has been united in opposition against the proposed rules, saying that they will penalise airlines unfairly if they lose slots due to factors beyond their control.

The IATA has raised concerns, and believes that the new regulations will in fact harm air travel. The association points to its worldwide slot guidelines as the global standard for slot allocation at congested airports.

"When governments diverge from these, there is a risk that air travellers will be negatively impacted. For example, if Brazil's slot regulations differ from those of other countries, Brazilian airlines may find that in order to comply with their home country policies they cannot comply with those of other countries, to the detriment of air travel and commerce moving between the countries," IATA's head of worldwide airport slots Peter Stanton tells Flightglobal.

IATA and some member airlines have filed comments with ANAC, adds Stanton.

The Latin American and Caribbean Air Transport Association (ALTA) has similarly raised concerns, says its executive director Alex de Gunten. "We are very worried about the approach," he told Flightglobal on the sidelines of the ICAO Air Transport Conference in Montreal on 17 March.

Calling ANAC's draft regulations "unilateral", de Gunten acknowledges that while the use slots at congested airports is a real issue, the agency should work with the industry to identify a solution.

"Brazil has heard our concerns," says de Gunten, adding that he expects to meet with ANAC officials in two weeks to discuss the issue further.

As part of the proposed slot redistribution rules, ANAC has also suggested that it would redistribute the slots at Sao Paulo Congonhas airport to break the duopoly dominance of Brazil's two largest carriers, TAM and Gol. The move would result in the two airlines giving up some slots to the country's third largest carrier Azul-Trip.

Innovata data for March 2013 shows that TAM has almost half of the available seat kilometres (ASK) on routes out of Congonhas, while Gol holds a 46.7% share. Avianca Brazil has a small 4% share of ASKs. Azul-Trip, which operates to only Rio de Janeiro non-stop from Congonhas, has a negligible share of capacity.

Market share of ASKs on flights out of Congonhas

Source: Flightglobal FlightMaps Analytics

TAM and Gol have reacted negatively to the proposed changes to the Congonhas slots, calling them anti-competitive.

The window for comments on the proposed regulation closed earlier in March, and it is not clear yet when Brazilian authorities plan to impose the regulations if they go ahead, although it is certain that the ANAC would now have to take into account the feedback from the industry.

IATA's Stanton says that the association's guidelines recommend that airports should have a slot performance committee to monitor the use of slots. "Coordinators can identify poor punctuality trends and speak with those airlines that need to improve their performance. Withdrawal of slots should only be an absolute last resort, if the carriers fails to act on or respond to dialogue initiated by the coordinator," he says.

On-time performance data should not be used to determine how slots are given out, says Stanton. "The slot allocation process is a planning tool that starts six months prior to the season start, while punctuality is a daily operational issue affected by any number of factors, such as weather, air traffic management, service disruptions at airports, even labour disputes by air traffic or airport ground staff, none of which is directly attributable to the airline."

In the long term, governments need to realise the value of investing in airport infrastructure so that airlines can respond to air travel demand without having to work in a slot constrained situation, says Stanton.

In Brazil, the domestic air transport market supports almost 940,000 direct and indirect jobs, he points out. It contributes about 42 billion Brazilian reals ($20.9 billion) or 1.3% of the country's gross domestic product when the benefits of tourism are included.

The proposed slot regulations come on the heels of some controversial airport privatisation deals concluded in Brazil in 2012. ANAC had awarded long-term concessions of the Brasilia, Sao Paulo Guarulhos and Viracopos-Campinas airports to private consortiums. IATA director-general Tony Tyler had pointed out that the concessions netted about $14 billion for the Brazilian government, many times the minimum bid. Industry observers have raised concerns that airport fees could go up as a result.

Brazil has said it expects to publish the tenders for privatisation of Rio de Janeiro Galeao and Belo Horizonte Confins airports later this year.