Contributor - South America

Richard Pedicini

LABACE organizer Associação Brasileira de Aviação Geral (ABAG, or the Brazilian Association of General Aviation) believes that this year the quality of visitors will be better for exhibitors, but against the backdrop of the economic crisis the show will be similar in size to last year.

 


Before this 12th edition of the annual show, AIN spoke with ABAG director general Ricardo Nogueira about the group’s activities, the prospects for business aviation in Latin America, the current economic environment and the regulatory challenges his members face.

 


Nogueira said that the Association now has 74 members (unchanged since 2014) and that they “represent nearly every segment of general aviation.” They are all Brazilian–he made it clear that ABAG “has no interest” in representing all of Latin American business aviation, although he has clearly been taking interest in the market by traveling to aviation events with a view to the local prospects for Brazilian business aviation companies.

 


Asked about its core activities, and in particular what new initiatives and programs ABAG was introducing for its members, Nogueira explained, “At the start of every year, ABAG canvasses its members for suggestions on subjects to be developed with aviation authorities.” Recurring themes, he said, include the use of airspace and operational restrictions at major airports.

 


“With insufficient existing airport capacity, the government has given preference to commercial aviation in the use of the major Brazilian airports,” Nogueira said. “With countless restrictions on general aviation operations, the market has been heavily impacted in the coming and going that is natural to aviation. ABAG, in constant dialog with the aviation authorities, has sought to preserve a minimum capacity for GA. The solution is to increase airport capacity through the construction of new airports.”

 


However he did admit that the situation had eased off recently, acknowledging that, “It’s not worse, because there has been a retraction in commercial aviation because of the crisis.” TAM, Gol, Azul and others have all cut back flights to major destinations, and cut some destinations. With less commercial aviation competing for limited infrastructure/slots, pressure has been reduced–for now.

 


But what about the growth of small airports, and the need to establish new ones, that has been big news at previous LABACE shows? In general, ABAG has been in favor of the concession/sale of airports, but there’s a fear that this may not be the proper moment, according to Nogueira. The current situation is not ideal: “In government, there’s no one who knows how to manage an airport,” he said.

 


The ABAG leader argued that airports would only work commercially and grow if their locations made sense (and some apparently don’t). “What makes an airport pay? Renting hangars, having maintenance firms, especially for maintaining larger aircraft,” he stated. “A runway that can’t handle anything much heavier than a bicycle is limited to light aircraft, and can’t attract mechanic shops. They all want commercial aviation, because departure fees bring in money.”

 


New Air Law

 


Another major issue that has reared its head since the last LABACE event in 2014 is that Brazil’s aviation law is being reviewed. The stated goal of a newly formed government commission is to “make the air law more modern, something that will last for another 30 years.” There are several shortcomings at present, such as there being “nothing in the current air law on the environment, whether noise, air pollution or anything else,” said Nogueira.

 


After the first three meetings, the Brazilian Senate added representatives from ABAG, from air taxi association ABTAer, and from the Brazilian Airlines Association ABEAR.

 


Three subcommittees have been formed each with “several ICAO annexes” to cover, said Nogueira, adding that ABAG was now represented on all three. He said that the meetings are held on Mondays with a full commission meeting in the morning followed by the subcommittees in the afternoon, followed a brief session together to end the day. The first time he went to a subcommittee meeting in the capital Brasilia, several working groups were formed. He was on one with an air force general, looking at the issue of controlling air space, Nogueira’s field for 26 years when he himself served in the air force.

 


On arriving back in São Paulo he said that he contacted the other ABAG representatives about the other two subcommittee meetings so ABAG is now apparently fully engaged with the air law revision project. He said that ABAG has been accepted by the commission as the spokesman for general aviation in the country. Describing the working procedure to AIN, he said that there is a spreadsheet on the Senate website listing in parallel columns ICAO recommendations, current air law (the CBA code), and equivalent law from around 15 countries. “The most important is what’s in red,” he said. “Where there is no provision in the CDA.”

 


Economic problems

 


Looking back on 2014, Nogueira said GA activities had “retracted” and that after the FIFA World Cup soccer tournament “activities didn’t start up again with the same intensity, showing the country’s cooling economy, with the greatest retraction being in aircraft charter.” That is, rather than being a bonanza for business aviation, the World Cup forced a reduction, and demand didn’t recover when the World Cup was over.

 


However, he noted that despite this the Brazilian business aircraft fleet grew in absolute terms during 2014, compared to the size of the fleet in 2013.

 


He did not comment on trends going forward in terms of fleet growth, flying activity or profitability but he said that the global drop in oil prices did not feed through to the sector because of the Petrobras crisis–where there has been a government clamp down after the corruption scandal. In fact there was a price increase in real terms, he said, it became “the largest factor in operational cost–and the increase in the price of fuel was the major factor in the reduction of GA operations.” Given that 40-45 percent of the cost of aviation is fuel it was not surprising that there was a drop in GA flying activity overall, suggested Nogueira.

 


At the same time the Brazilian currency, the Real, weakened. “Because the purchase of aircraft and parts are made in U.S. dollars, the increase in the exchange rate heavily impacted companies [as well].”

 


For the longer term, however, Nogueira holds little hope that next year will be better. “One formerly heard from aviation businesses that perhaps in the second half of 2016 there could be the start of a recovery. Before that, no one believes in an economic recovery.”

 


However, Nogueira indicated that it is not unusual to find Brazilian businesses that do not expect a recovery before 2017. “It’s a very long recession for small companies,” he said, giving an example of a charter company with three planes that might be flying only two, the third having had parts taken out to keep the others flying. “And then there’s no money for parts to get the third back in the air.” He suggested that there was “a strong movement to sell aircraft this year. Lighter, cheaper aircraft are being sold less, but also flown less.”

 


Wider market?

 


So what trends does Nogueira predict for business aviation in the rest of Latin America? “There are movements to improve the environment for commercial and cargo aviation, but there is nothing similar for GA beyond Brazil,” he replied. “I don’t know of any association outside Brazil, with the exception of Argentina where there is one that includes all civil aviation segments and sectors–commercial, cargo, general, pilots, MRO, mechanics, sport flying [and so on].”

 


There are few significant aviation events in other parts of Latin America. Nogueira said there was one this year in Cartagena in Colombia, although it was focused more on cargo and commercial aviation.

 


He noted that there was quite a bit of cooperation in aviation between Colombia and Panama although the aviation interests there are focused on cargo, but he noted that Panama’s airport had amazing connections, with flights going all over the world.

 


There was an aviation event in Peru in November last year where Embraer was present with a Phenom, and Dassault took an aircraft there also, according to Nogueira, who attended. It was held at a Peruvian air force base so he had to go through 10 military checkpoints, identifying himself at each, and walk around three km from the closest permitted parking. He recalled that the visitors seemed to consist of people taking “selfies” with airplanes. “For the exhibitor, the visitors have to be qualified,” he emphasized, suggesting that business aviation potential in Peru is pretty limited. “No one goes to sell umbrellas where it rains once a year.”

 


The situation is similar for the aviation fair in Maringá (an agricultural center in the Brazilian state of Paraná). Again, in Nogueira’s view, there is no scope for business aviation there, as the public goes to see airplanes, not buy them. A show scheduled for Punta del Este, Uruguay, this February was cancelled, but a second attempt is scheduled for next February. After LABACE, Nogueira plans to go to Uruguay to work to make it happen, convinced there is scope for a new regional business aviation fair hosted in the resort city.

 


LABACE’s Future

 


And what of future plans for the LABACE show? Nogueira (who works closely with ABAG president Eduardo Marson Ferreira) suggested that if LABACE were at another location, other than São Paulo’s Congonhas Airport with its serious space constraints, it might be able to include more aviation stakeholders that don’t currently participate, both from other sectors and also including more light aviation.

 


He claimed that the proportion of visitors from each country to LABACE does reflect accurately the demand from each country for business aviation products and services. The ABAG leader added that in Latin America outside Brazil business aviation at present has little importance for policymakers and the demand for products is more from private individuals than from corporations. This could be the case throughout Latin America, unlike the U.S. market.

 


This year LABACE will include a seminar on the first day of the event on international operations, being run on a trial basis to see if it will work. “It’s a trial balloon, to see how much interest there is,” said Nogueira. It is along the lines of the NBAA’s International Operations committee events and will look at local travel to other South American countries, and global travel beyond the continent, he said. He added that it would be important for small operators who are not yet familiar with international operations and customs aspects.

 


He has also targeted the quality of visitors so exhibitors are happy that they are getting industry professionals, not just anybody that is interested in things that fly. “What interests us now is a qualified public [i.e. show visitors],” he revealed. In the seven years Nogueira has run the fair, ABAG has raised the entrance fee from R$50 to R$370. This has been intentional, he says, admitting that it makes the fair expensive for the general public and shifting the emphasis much more toward a professional aviation trade event.

 


At the last couple of LABACE shows there has been talk of a new venue, such as Campo de Marte airfield to the north of São Paulo city center. Nogueira did not predict any such move, and it appears that ABAG will continue making year-to-year decisions to stay at Congonhas.

 


Safety Role

 


Finally, Nogueira also stressed that safety is a central issue and the association urges its members to adopt the IBAC IS-BAO and IS-BAH programs. However the IS-BAH ground handing standard course that had been planned for LABACE 2015 was dropped as only two participants signed up (and ABAG needed a minimum of six to break even). Nogueira ascribed this to the economic environment: money is tight, and “meeting the standards will cost something, and no one has money to spend.”

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