Do we need to see connectivity as lost to understand its importance?

Article by José Ricardo Botelho, ALTA's CEO

In the current scenario, the Brazilian aviation industry is sending clear signals that it needs oxygen to ensure its viability. In this huge country, the sector faces significant adversities that transcend a single company, covering fundamental issues that affect not only established airlines, but also those wishing to enter the market and the population itself.

From 2010 to 2022, Brazilian carriers accumulated a significant loss of R billion, with just three years of net profit (2010, 2017 and 2019). According to the National Civil Aviation Agency - ANAC - figures from January to September 2023 show a loss of R.5 billion. We are facing a reality that demands immediate action to avoid an outcome that has no way back. All of them send out the same warning signals: very high operating costs, excessive judicialization, little legal security for investments and lack of strategic vision for an essential public service in a continental country such as Brazil.

In terms of aviation operational challenges, fuel plays an important role, since it represents 40% of these costs and has consistently been a determining factor in the economic unviability of companies. It is intriguing to note that, when it comes to setting the price of QAV (aviation kerosene), the PPI formula is used for 100% of the fuel distributed, even though 92% is produced domestically in Brazil. 

Why not really analyze the problem and find a suitable solution? This disparity requires an in-depth analysis, especially considering the direct impact on airlines' operating costs. This is not just about tourism, but a powerful engine that holds together a continental country, millions of people, millions of jobs, millions of opportunities.

In 2020, the enactment of Law 14.034 brought important measures, including the introduction of Article 251-A in the Brazilian Aeronautical Code. This legislation made proof of extra-contractual damage mandatory in situations of contractual defect in transport. However, the matter remains as to how long judicial decisions will not apply this legislation in a consistent manner. There is no denying the existing legal uncertainty in the country. In fact, this instability has become an obstacle to the entry of new foreign companies into the Brazilian market, which could bring significant investments and boost the aviation sector.

As for the domestic impact, the issue remains as to how long domestic companies will be blamed for supposedly non-existent causal links, claiming "business risk". Holding these companies responsible for events such as rains, storms and airspace closures makes no sense, especially when the decision not to fly is made to preserve lives. Something is wrong when Brazil is the world leader in number of lawsuits and a "vulture site" industry is encouraged to promote litigation, even though domestic carriers are recognized as among the most punctual on the planet. This runs counter to the basic principles of law.

It is essential that the judiciary adopt a cohesive approach to Law 14.034. This will not only strengthen legal security, but will also lighten the burden on the judicial system, which will be to the benefit of society as a whole. After all, an injustice is being perpetuated harming the very society it is intended to protect. How long will we continue to neglect a systemic view of the problem on a national scale?

During the pandemic, while other nations invested in their aviation, Brazil received no financial assistance. And, let's be clear, no one was asking for a donation, but for market measures that would enable a vital sector for the country to survive. Brazil needs to recognize the importance of connectivity for its development. The signs are clear and it is imperative that we wake up to the need for urgent measures. Fighting against the facts is not productive. The complexity of the situation increases every day and blaming one party unilaterally is not fair. Passivity can jeopardize the entire system and history teaches us that last-minute measures do not always have the rationality that a capital-intensive sector needs.

Without strong air infrastructures, economic growth and ideal living conditions are unattainable. Now is the time to tackle these challenges head-on, moving away from populism and empty promises, because the lack of effective management for this essential sector affects everyone.

We are not looking for magic solutions or a silver bullet, but it is time to make a collective effort to look proudly to the sky, admiring the legacy of Santos Dumont. This is not mere rhetoric, just look at the value attributed by the country of the Wright brothers, where even the legislation related to judicial recovery is safer than Brazil's and is sought after by everyone.

A healthy aviation is an essential engine for progress. Even in the face of difficulties, aviation plays a crucial role in Brazilian tourism, contributing to the 7.8% of GDP represented by this sector. It also plays an important social role, evidenced by the free transport of 5,820 items for transplants (organs, tissues, equipment and materials, to name a few) in 2023, according to data from the National Transplant Center (CNT in Spanish). We need to work together: government, productive chain and companies to overcome obstacles, ensuring that Brazil flies higher and higher. We should listen to the sound of this engine before the country's connectivity is unsustainably compromised.