Brazil interim government to veto FDI changes

Dino D'Amore
By Dino D'Amore June 30, 2016 20:33

Brazil interim government to veto FDI changes

Brazil’s interim government said yesterday that it will have to veto a proposal to scrap limits on foreign direct ownership of local airlines because opposition to the legislation is too strong in the upper house and the government does not wish to see its flagship air transport sector bill completely de-railed.

“The bill will be approved as it is and then the government will veto this proposal [on foreign ownership],” Presidential Chief of Staff Eliseu Padilha told reporters. “Afterwards, we will send this issue back for a deeper debate in the Senate.”

Interim President Michel Temer, who has replaced suspended President Dilma Rousseff while she stands trial in the Senate for allegedly breaking fiscal rules, supports lifting limits on foreign ownership in a bid to help Brazilian carriers struggling with the deepest recession in decades in Latin America’s largest economy.

Gol Linhas Areas Inteligentes SA shares were down 5% on the news.

Also this week we have to wonder about the fortunes of THY. Turkish international inbound tourism has been shrinking rapidly for six quarters in a row now and THY was depending on transfer traffic to continue its rapid growth using the Emirates model. It obviously remains to be seen if THY will experience a fall in passenger numbers over this quarter and beyond, but if it does, the rate of fleet growth will have to be slowed. This is especially true given that THY has been moving for a high-frequency model as opposed to the lower frequency with larger aircraft, A380 model adopted by Emirates. The high-frequency model is more susceptible to shocks as it takes far less of a fall in passenger numbers to seriously dent load factors. THY could yet be exposed and if it does have to pare-back on frequencies, it might just wish it had an A380 or 747-8I on certain routes.

Dino D'Amore
By Dino D'Amore June 30, 2016 20:33