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Brazilian airport administrators fear collapse

. Jul 13, 2020
Covid-19 airport The "new normal": airports are much less crowded due to the pandemic. Photo: Felipe Menezes/Inframérica

The aviation industry has been one of the worst-hit sectors by the Covid-19 pandemic. Most flights are still grounded, even though airlines have already begun resuming some of their activities. The outlook is bleak: three major Latin American carriers recently filed for Chapter 11 bankruptcy protection in the U.S. Airlines have cut over 2,000 jobs and more layoffs are on their way. Companies will not only require massive government stimulus, they also need antitrust watchdogs to authorize mergers that would be otherwise unthinkable in an already heavily-concentrated market. But while the focus so far has been on the carriers’ woes, other key players in the sector are set to be badly hit by the coronavirus crisis, such as airport administrators.

</p> <p>We are not yet able to fully measure the extent of the crisis, but that the situation will remain grim for some time is a near certainty. &#8220;With Brazilian borders closed to foreigners, it is hard to predict when we will have regular international flights again,&#8221; says Rogério Coimbra, corporate director at Inframérica — a multinational which runs airports in Brasília and Natal. &#8220;To make matters worse, many countries have not opened to Brazilians,&#8221; he tells <strong>The Brazilian Report</strong>.</p> <p>Both the <a href="https://brazilian.report/coronavirus-brazil-live-blog/2020/06/30/uruguayans-only-latin-americans-allowed-european-union/">U.S. and the European Union</a> have kept Brazil a long way away from the list of nationalities allowed into their respective borders. Those restrictions are set to stay put for the foreseeable future, considering that the coronavirus remains out of control in Brazil —&nbsp;and that Latin America is now the epicenter of the pandemic.</p> <p>Two weeks ago, the International Air Transport Association (IATA) asked countries in the region to <a href="https://www.iata.org/en/pressroom/pr/2020-06-15-01/">urgently inject money</a> into the sector to avert a full-scale collapse. IATA expects the aviation industry in Latin America to shred 4.1 million jobs overall and post losses of USD 98 billion in 2020. Meanwhile, the association claims that local government support amounts to only 1 percent of companies&#8217; 2019 operational revenue — against 25 percent in North America, 15 percent in Europe, and 10 percent in the Asia-Pacific region.</p> <p>In Brazil, revenue is set to drop 53 percent —&nbsp;causing a BRL 10.2 billion loss to companies. But the ripple effects on other sectors will also be felt profoundly. The aviation sector&#8217;s supply chain should trigger losses of USD 6.25 billion, eliminating 299,700 jobs.</p> <h2>Ghost airports</h2> <figure class="wp-block-image size-large"><img src="https://brazilian.report/wp-content/uploads/2020/07/airport-administration-1024x683.jpg" alt="airport administration" class="wp-image-44347" srcset="https://brazilian.report/wp-content/uploads/2020/07/airport-administration-1024x683.jpg 1024w, https://brazilian.report/wp-content/uploads/2020/07/airport-administration-300x200.jpg 300w, https://brazilian.report/wp-content/uploads/2020/07/airport-administration-768x512.jpg 768w, https://brazilian.report/wp-content/uploads/2020/07/airport-administration-1536x1024.jpg 1536w, https://brazilian.report/wp-content/uploads/2020/07/airport-administration-scaled.jpg 2048w, https://brazilian.report/wp-content/uploads/2020/07/airport-administration-610x407.jpg 610w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>From third-busiest hub to an empty terminal. Photo: Felipe Menezes/Inframérica</figcaption></figure> <p>With most planes still grounded, <a href="https://brazilian.report/newsletters/brazil-daily/2020/06/25/brazils-central-bank-sets-out-rules-for-buying-corporate-bonds/">flight terminals have become ghost towns</a>. In Guarulhos Airport, Brazil&#8217;s busiest, traffic has fallen 88 percent. In Brasília&#8217;s Juscelino Kubitschek International Airport the number of passengers dropped by as much as 97 percent at one point. And that impacts an entire ecosystem of companies — from service providers to airport shops, which have been closed for the best part of the past four months.&nbsp;</p> <p>In Brasília, airport administrator Inframérica has renegotiated multiple contracts with store tenants. &#8220;Some had closed for good, but we tried to work out a solution with every single one of them. Others reduced hours or suspended activities, but we expect a gradual resumption in June,&#8221; says executive Rogério Coimbra.</p> <p>In March, Inframérica recorded only 842,000 passengers at the federal capital’s airport — a 39-percent drop from March 2019. In April, when most states were still under heavy quarantine, traffic hit its lowest ever point, with the month registering a total number of passengers that would be expected in a single day in pre-pandemic times: only 45,500, or 97 percent less than one year before. In the northeastern city of Natal, dependent on tourism, numbers were even bleaker. Both in April and May, airport traffic was 94 percent lower than 2019 levels.</p> <p>Before the pandemic, Brasília had ten daily flights to nine international destinations. Since March 15, not a single aircraft has headed overseas.&nbsp;In Natal, routes to Lisbon and Buenos Aires were suspended four days later.</p> <p>Mr. Coimbra told <strong>The Brazilian Report</strong> that Inframérica has so far been able to avoid massive layoffs thanks to a collective bargaining agreement with trade unions, allowing the company to reduce the hours and salaries of over 1,000 workers. But it is hard to imagine airport administrators moving forward without significant layoffs — especially considering the sheer amount of investments required to implement the new sanitary standards.</p> <p>At the bare minimum, post-pandemic air travel will include cameras with temperature verification, new social distancing measures, and multiple hand sanitizer dispensers.</p> <figure class="wp-block-image size-large"><img src="https://brazilian.report/wp-content/uploads/2020/07/new-normal-airport-1024x683.jpg" alt="new normal airport" class="wp-image-44348" srcset="https://brazilian.report/wp-content/uploads/2020/07/new-normal-airport-1024x683.jpg 1024w, https://brazilian.report/wp-content/uploads/2020/07/new-normal-airport-300x200.jpg 300w, https://brazilian.report/wp-content/uploads/2020/07/new-normal-airport-768x512.jpg 768w, https://brazilian.report/wp-content/uploads/2020/07/new-normal-airport-1536x1024.jpg 1536w, https://brazilian.report/wp-content/uploads/2020/07/new-normal-airport-scaled.jpg 2048w, https://brazilian.report/wp-content/uploads/2020/07/new-normal-airport-610x407.jpg 610w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>Cameras with temperature verification will be a new feature. Photo: Felipe Menezes/Inframérica</figcaption></figure> <h2>No passengers? No problem!</h2> <p>Before the pandemic, <a href="https://brazilian.report/business/2020/01/10/brazil-infrastructure-privatizations-2020/">infrastructure privatizations</a> were among the government&#8217;s biggest bets for spurring growth. The agenda included 22 airport concessions this year — and a total of 43 airports were set to go into private hands by 2022, when President Jair Bolsonaro&#8217;s term is up.&nbsp;</p> <p>The pandemic has put the future of this plan in doubt. Investors became increasingly risk-averse and the aviation industry has not exactly been posting stellar results.&nbsp;</p> <p>The privatization of Campinas airport, in the state of São Paulo, ended up being an utter failure, and administrators want to <a href="https://g1.globo.com/sp/campinas-regiao/noticia/2019/12/13/viracopos-oficializa-intencao-de-devolver-concessao-em-novo-plano-de-recuperacao-judicial.ghtml">hand the facility back</a> to the government.</p> <p>Inframérica is trying to pull a similar move with the airport in Natal. Viability studies predicted 4.3 million passengers for 2019, though actual numbers proved to be just over half of that figure. Moreover, airport tariffs in Natal are 35 percent lower than in the rest of the country, jeopardizing the profitability of the operation. Now, a new bidding process is set to choose another company to take over the terminal — and Inframérica expects to receive a compensation package for non-amortized investments.</p> <p>Another factor against the government&#8217;s privatization hopes is Brazil’s economic depression — which will hamper traffic, considering people won’t have the money to travel.&nbsp;</p> <p>Still, the Jair Bolsonaro administration is as enthusiastic about its plan as it was before the pandemic. The worst health crisis in a century has seemingly not dented the confidence of Infrastructure Minister Tarcísio de Freitas: &#8220;We will sell, and we will sell off a lot [of assets]. We&#8217;re selling the 43 airports. It&#8217;s a bold move, as everyone is taking airports from the market,&#8221; he said. The plan is to raise at least BRL 24 billion in private investments. This is perhaps less bold, and more delusional.

 
Renato Alves

Renato Alves is a Brazilian journalist who has worked for Correio Braziliense and Crusoé.

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