The spectacular growth of air traffic in Brazil the last few years, especially in its southeast region, has put severe pressure on airport infrastructure
The warning signs had been there since the emergence and fast-tracking of low-fare carrier Gol and the concurrent rise of TAM. Since 2000 their combined growth has resulted in an almost doubling of air traffic in Brazil. As a consequence, airport infrastructure in the country has become seriously overstretched.
"While the airlines were using the limited capacity as efficiently as possible, and the remedies have been talked about for many years, there was a lack of [government] vision and co-ordination," believes Richard Lark, chief financial officer at Gol. The fact that airport management consisted largely of political appointees also equated to convoluted and lengthy decision-making processes.
But Infraero, the government agency responsible for 68 airports accounting for 97% of Brazil's air traffic, has not been inactive. Since the turn of the century it has built several new airports, upgraded many others, and addressed congestion issues in the Rio de Janeiro and Belo Horizonte markets by moving connecting flights from Rio's Santos Dumont to Galeão International, and from Belo Horizonte's Pampulha airport to Confins. Everywhere, says Lark, except in São Paulo.
"The 1985 Guarulhos International project comprised the airport and a mass transport link to downtown São Paulo, but the latter never happened," he says. "We had a great airport, but it was too far. What happened was that more traffic moved into Congonhas, airlines scheduled larger aircraft, and air-taxi and business jet traffic squeezed into the more convenient city centre airport. Although the number of movements [at Congonhas] is still fewer than in 1998, it created a perception among passengers of increased discomfort and overcrowding and the very real issue of delays. Government agencies exhibited a lack of co-ordination and airlines started to lose money. It created a lose-lose situation for everyone."
These difficulties were brought sharply into focus in July with the crash of a TAM Airbus A320 with heavy loss of life, at a time when runway repairs were still in progress. This led inevitably to speculation about the runway's part in the crash, although this has since been discounted as a factor.
Knee-jerk reactions
However, as an immediate result of the tragedy, the government replaced the president of Infraero, José Carlos Pereira, who had been in the post for only 13 months, with the head of Brazil's space agency, Sérgio Maurício Brito Gaudenzi. It also appointed Nelson Azevedo Jobim as the new head of the defence ministry, which controls Infraero, replacing Waldir Pires. It was one of several knee-jerk reactions by the state. The fall-out from the crash has also re-opened the debate about the relevance of grouping Brazil's airport system within a single, government-owned entity.
Respício Antônio do Espírito Santo, president of the Brazilian Institute of Strategic Studies and Public Policies in Air Transport, believes the Infraero system to be totally obsolete. "Infraero should be broken up and airports run by individual management, whether public or private," he says. "Once this has been achieved, it would then be time to think about what model of airport ownership and operation would be best suited to Brazil. Airports could still be maintained as a national asset, even if the path to privatisation is eventually taken. The secretary of state, Dilma Rousseff, has stated that concessions to private groups could be a possibility [for example at the new Natal International airport], but with the present turmoil resulting from the accident, to talk about privatisation is unlikely to be politically acceptable."
This line is also being taken by Sérgio Gaudenzi. "Infraero must in future open up to attract capital from the private market, but I do not believe in privatisation. While there does not appear to be a formula to maintain all airports without closing those that are in deficit but are vital for the remote regions of the country, I will not be able to think about privatisation," he says.
Yet, there are no legal obstacles to privatisation of the airport sector, only a lack of political will. Espírito Santo adds that only private management would be possible facilities and land would remain in government hands. "This alone would enable government to access new capital and reduce public expenditure, but it would also gain much needed international management expertise. As it stands, government reticence and indecision is keeping international investors away."
There are only two examples of privately managed airports in the country, and both are small. One - Cabo Frio - is located in the State of Rio de Janeiro and has been operated by concessionaire Costa do Sol since 2001. The other is the tourist airport of Porto Seguro in the northeastern state of Bahia, managed since 2000 by concessionaire Sinart.
Industry observers agree that a move towards private management could eliminate the two major problems inherent in the present system: cross-subsidisation of airports, rather than income being ploughed back into the few profitable facilities and aviation fees that are charged at the same level at all airports. As a result of the latter, the main airlines tend to focus on the busier hub airports. Gaudenzi says that although defining the level of fees is the responsibility of civil aviation administration ANAC, Infraero participates in these discussions: "We are not considering reducing fees, but what is being studied is the practicality of raising them at the major hub airports, to enable us to lower those at more distant airports."
About half of Infraero's income comes from cargo, concessions for food and retail and other non-aviation activities, Gaudenzi says. "The collection of tariffs would be insufficient. It is important [at the smaller airports] to increase traffic to generate financially positive operational conditions." But he emphasises that "as a state-owned body, our responsibility goes beyond organisational profits. We must participate in the efficient operation of the country, both from a social and enterprise point of view".
To deflect criticism over the inadequacy of airport infrastructure, Brazil's minister of planning, budget and management, Paulo Bernardo Silva, says that the government intends to "re-evaluate" the allocation of resources of its national accelerated growth plan (PAC), with a view to redirecting 2 billion reais ($1.1 billion) into airport infrastructure. The additional funding would bring investment in airport development through PAC to 7 billion reais over the next three years.
Investment boost
Gaudenzi says that with an equal amount of funding from Infraero, the total spend will be 14 billion reais. "In the past, investments have been made from Infraero's own resources," he says. "But in the next three years, we will need governmental budgetary reinforcements. Although Infraero is not directly responsible for the crisis, as part of the civil aviation system of the country it participates in the decisions to minimise the problems."
The government also decided after the TAM crash to limit flights at Congonhas to point-to-point routes within a radius of 1,000km (540nm) to reduce weight on the runway, and to ban charter flights and business jet traffic. Most of the latter are being redirected to Campo de Marte. Congonhas can no longer operate as a connecting airport. From 62 movements an hour in 2001, this has now been almost halved to 33 an hour. This has affected capacity and costs, as TAM, Gol and other airlines have been forced to move flights to the international Guarulhos facility, which has almost overnight become an important domestic hub. There has been a knock-on effect on international flights, which have been moved to less busy times to equalise traffic through the day. The government also plans to shorten both runways at Congonhas to create runway safety areas, and will prohibit transport aircraft from using the shorter runway.
Landing restrictions are also being imposed on the longer runway during wet conditions. There are other immediate priorities identified for funding under PAC, expected to cost some 395 million reais.
New São Paulo airport
The gravity of the situation can be measured by the fact that Brazil's President Luiz Inácio Lula da Silva appeared on national television soon after the crash, acknowledging the crisis and stating that measures will be implemented to solve the problems. He also suggested the possibility of building a new airport at São Paulo, which would serve to relieve pressure on Congonhas. ANAC is due to release a study into the viability and location of a new airport by the end of the year.
Pending a decision on the new airport and as a matter of urgency, the Southeast Regional Administration of Infraero is undertaking a major 1 billion reais development at Guarulhos, which is being financed out of the national growth plan. Central to this is a third terminal, which will add another 12 million passenger capacity to the 17 million of the existing two terminals, a third runway, and an airport express rail link to the city.
The long-term plan also envisages a fourth terminal. The masterplan forecasts traffic reaching some 25 million annually by 2013, with Congonhas remaining static at a reduced 14-15 million. In 2006, Guarulhos handled 15.8 million passengers and Congonhas 18.5 million.
The preparation of bids for the construction of the third terminal is in the final stages, with preliminary work due to start before the end of 2007. Construction of the airport express train has also been given high priority. More than 25 Brazilian and international companies have expressed an interest in taking this project forward.
Construction is planned to start in 2008, with completion scheduled for 2010. Planning for a third runway to the north of the present terminal area is at an early stage, awaiting social and environmental impact studies. A second runway at Viracopos/Campinas and a fast train service to the city centre are also being discussed.
TAM's president Marco Antonio Bologna warns there will be an infrastructure bottleneck and a slowdown in traffic over the next two years. The authorities are now investing significant sums of money to rectify the accumulated shortcomings. But work will have to be fast and targeted if Brazil's infrastructure is to cope with the resumption of above average traffic growth.
Infraero in figures
Infraero was established in 1970. The agency is under the direct control of the Ministry of Defence and manages 68 airports, which account for 97% of Brazil's air traffic, 81 air navigation stations and 32 cargo logistics terminals. Headquartered in the capital Brasília, its airport system is organised into eight geographical regions - North, West-Central, North-East, North-West, South, East, South-East and East-Central.
The South-East region, which includes five airports in São Paulo state and three in Mato Grosso do Sul, has the highest concentration of traffic, followed by the 14 airports of the East region, headed by those in the states of Minas Gerais, Rio de Janeiro and Espírito Santo, especially in Rio and Belo Horizonte. The two regions account for more than half of all the country's air passengers, half of aircraft movements and 60% of air cargo tonnage. The state of São Paulo incorporates 21.5% of Brazil's population, generates 35% of gross national product and accounts for 35% of exports. Its five airports - Guarulhos, Congonhas, Viracopos/Campinas, Campo de Marte and São José dos Campos - were responsible for just over 36 million passengers in 2006, or 35% of Infraero's total. What is perhaps even more significant is that these generate almost half of Infraero's revenues and of the eight airports out of 67 that recorded a profit last year, three are located in São Paulo state. This shows how important Guarulhos, Congonhas and Viracopos are to the airport group.
Infraero's airports handled 102 million passengers in 2006, up 6.4% on 2005, and just over 1.5 million tonnes of cargo and mail. Although Infraero had what it called a "successful year" in 2006 with 16.4% higher revenues of 2.04 billion reais ($855 million) and an operating profit of 502 million reais, special cost and debt provisions, especially in relation to the Varig bankruptcy, pushed it to a net loss of 135 million reais.
Source: Airline Business
