Competition in Brazilian air transport is highlighted in OECD report

The efforts of the National Civil Aviation Agency (ANAC) to promote competition in air transport, as well as the challenges to improve the conditions of competition in the sector, were themes of the OECD’s Competition Assessment Review of Brazil, a project carried out by the Organization for Economic Cooperation and Development in partnership with the Administrative Council for Economic Defense (CADE). The study was presented at the National Competition Day, on September 27th, in Rio de Janeiro. The document brought recommendations closely aligned with the elimination of barriers to competition, the philosophy that guides the Agency.

The study, which also analyzed the Brazilian port sector, aims to help develop the country’s transport infrastructure sectors by encouraging competition. For ANAC director Ricardo Catanant, who attended the presentation event of the report as substitute director-president of the Agency, the work done by the OECD contributes to the confrontation of complex discussions, such as the one involving the deregulation of baggage allowances, among many others that represent barriers to competition and to the increase of options for air transport users.

“In our role of promoting competition, the Agency works looking at the cost of the sector, to improve the conditions of competition, without losing focus on safety” said the director of ANAC. The OECD competition assessment report analyzed both the structure of the Brazilian air transport market and the institutional view of the sector, focusing also on aspects related to the administration and concession of airports; their ancillary services, such as aviation fuel supply; the allocation of slots to airlines; and civil aviation personnel.

Civil Aviation Professionals

With regard to the requirement for practical training of future aeronauts, for example, the OECD suggests implementing a more flexible and less burdensome system for Civil Aviation Instruction Centers (CIAC) that provides training for non-commercial pilot licenses. It proposes allowing these centers to self-declare as training organizations. Currently, applicants for a civil aviation license must undergo practical training at a CIAC, where they may be required to receive theoretical instruction, depending on the license applied for. The OECD suggests reviewing and updating these rules.

Another aspect addressed in the report with regard to aeronauts concerns the management of human fatigue during the working day. The OECD points out that the way Brazil has set the flight and duty time limitations and rest period requirements is prescriptive, imposing higher costs on airlines than neighboring countries. But while it is indeed prescriptive, the Brazilian law has provisions that allow the regulator to establish mechanisms to enable airlines to apply the limit established based on the standards and recommendations of the International Civil Aviation Organization (ICAO). “ANAC is working to make the regulation simpler, to be implemented with a view to increasing adherence to the Fatigue Risk Management System (SGRF),” said Catanant.

Airport Concession

With respect to competition among airports, the OECD identified the need to reduce differences in the parameters of concession contracts from the seven rounds of bidding that have already taken place. Although justifiable in relation to the moment when they were adopted, unequal rules can subject concessionaires to different regulatory regimes, even for similar airports, which can compromise the level playing field. The Organization recommends that consideration be given to harmonizing airport concession models to ensure that all players are subject to the same regulatory environment.

ANAC has already been adopting the improvements implemented in the most recent concession rounds to previous concession contracts. “We seek to harmonize and update the contracts in what is possible, but making additions to existing contracts depends on the will of both parties, a challenge that is also reflected in the report’s recommendation,” pondered director Ricardo Catanant. The Agency’s understanding is that airports can adopt their own commercial strategies, under the regulator’s supervision, to avoid distortions, and without regulatory interventions that reduce supply or increase prices.

Aviation Fuel

By the way, still in the airports’ environment, the OECD’s recommendations for increased competition in fuel distribution have already been a flag of ANAC, including in the field of regulatory changes. The recommendation is to adopt clearer legislation to ensure the effective application of a regime of free access to aviation fueling infrastructure.

The obligation of free access is established in the concession contracts, which currently cover 59 public airports and handle about 96% of all passengers in the country. The subject is one of the topics on the Agency’s Regulatory Agenda, which seeks to establish a regulation that allows the new entrant access to the aviation fuel distribution market in conditions to compete with the distributors established there, but that recognizes the different challenges at each airport. “The discussion on access to Refueling Parks shows the synergy between ANAC and OECD, since the ongoing revision of the Agency’s regulations is in line with the report’s recommendations,” Catanant highlighted.

Aligned with the Organization’s recommendations also regarding the allocation of slots (arrival and departure times at coordinated airports), ANAC took an important step, in 2022, to increase competition among airlines. The OECD report brought guidelines that had already been studied by the Agency’s technical area and were part of the regulatory review approved by the Board in June, such as implementation of the secondary slot market. “On this point, by the way, we understand it is possible to advance and expand market solutions to manage airlines’ access to congested airports,” said the director.

Opening the airline industry

For ANAC’s director, the work within the OECD may help the Agency to face difficult discussions. A structured assessment, such as the one in the Competitive Assessment Report, helps to identify points that need to be worked on and shows the need to evaluate how countries handle their air service agreement negotiations and do not always value the opening of international civil aviation markets. “We must use the OECD’s support to increase openness in the air transport sector, including in countries that are members of the Organization, which is still too restricted by virtue of agreements that, for example, limit frequencies or establish restrictions on foreign capital in airlines,” Catanant said.

The expectation is that the partnership between ANAC and OECD consolidates, bringing to the Agency greater ability to contribute to the economic development of the country by fostering the growth of air transport. The Organization’s strategy will be more efficient, in terms of results to be achieved globally, the greater its ability to mitigate restrictions on competition that cut across several countries, in addition to sharing best practices and means to reduce barriers and difficulties in business environments.