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Comentários sobre o efeito da COVID-19 na aviação

Por Rircardo Bernardi e Lucas Bernardes Augusto


As extensively discussed over the past years, the COVID-19 pandemic unleashed an unprecedented economic crisis across the world and hit hard the aviation industry.  Different measures were pursued throughout the world to provide aid to local airlines, since the economic downturn threatened their viability.

Although one may say that the Brazilian Government has not provided significant financial aid to local carriers, during this period long-wanted measures were implemented to modernize the legal system and promote a more friendly business environment to help emerging the aviation industry in the mid-to-long term.

These measures – which will be briefly dealt with in this article – have encompassed important changes to the Brazilian Aeronautical Code to attack the existing excessive litigation in Brazil, as well as to protect travelers, reduce tax costs, and increase efficiency, including for the operation of foreign carriers in the Country.

New legislation (Law 14.034 published in 2020) was passed at the Congress to update the Aeronautic Code, which has been helpful to avoid liability for flight delays out of airline´s control and compensations for presumed moral damages which are the main cause for litigation in the country. The new law provides that indemnification for extra-patrimonial damage (moral damage is included within the concept of extra-patrimonial damage) caused by flaws associated with air carriage services will be subject to evidence of damage and its significance, to be produced by the passenger. Thus, the law prohibits compensation for presumed (in re ipsa) moral damage.

According to the same legislation, airlines will not be held liable for flight delays if it presents evidence that, for causes beyond its control, it was impossible to adopt the necessary and sufficient measure to avoid the damage. This is in line with art. 19 of the Montreal Convention. The law clearly establishes that airlines cannot be held liable if delays result from the following circumstances:

  • landing or takeoff restrictions imposed by air traffic control authorities resulting from meteorological adverse conditions;
  • landing or takeoff restrictions resulting from lack of airport infrastructure;
  • restrictions for flights, landing and takeoffs determined by civil aviation authorities or other governmental authority; and,
  • declaration of pandemic status or publication of rulings resulting therefrom, aiming at prohibiting or restricting air carriage services or airport operations.

In addition to this legislation and based on it, Courts have been issuing rulings denying claims for presumed moral damages associated with flight delays and baggage loss/delays and enforcing the provisions of the Montreal Convention, although this will be a long process and will require continued efforts to educate judges about the Convention and to assure correct interpretation and applicability of Law 14.034/20. Currently most the decisions in Courts are still averse to airlines in these situations, notwithstanding the improvements already seen.

Following the modifications implemented in the Brazilian Aeronautical Code, the Brazilian National Civil Aviation Agency have also released new directives that simplified the authorizations and steps needed for foreign carriers to operate in Brazil.  In this line, based on the new regulations, foreign carriers still need to request authorization to operate scheduled flights in Brazil, to be issued by ANAC, but the dual and more bureaucratical process that existed in the past (divided into two regulatory processes, the first to open a branch for the foreign carrier followed by authorization to operate) has been revoked, in compliance with the reform of the Brazilian Aeronautical Code, mentioned above.

In another effort to simplify the operation of foreign carriers, ANAC has now determined that foreign carriers will no longer be required to produce local OpSpecs, to be approved by the Agency. Instead, ANAC will accept OpSpecs issued by the Aviation Regulatory Agency with jurisdiction in the country where the airline is headquartered.

The operation of scheduled and non-scheduled flights has also been simplified.  For instance, although ANAC may restrict non-scheduled operation whenever it understands that the magnitude and nature of the operations have the potential to impact the capacity and frequency limits defined in international understandings, the Agency has simplified the process and no previous authorization will be required for non-regular operations involving aircrafts with a maximum certified configuration of seats of up to 19 seats and a maximum payload capacity up to 3,400 kg (7,500 lb.), or helicopters.

Restrictions applicable to the operation of regular flights have also been eased.  As an example, breaking one of the most relevant limitations applicable to operation of foreign carriers, new rules exceptionally authorized foreign carriers to perform air carriage between points within the Brazilian territory (cabotage), in situations of evidenced public interest, in the following circumstances: (a) if there is no domestic carrier certified to provide the requested service, or, if there is a certified national carrier, it does not have access to the necessary equipment or other conditions for the performance of the service; or (b) the service is intended to supply, in an emergency, a situation of abnormality in the offer of air transport services.

The regulatory framework applicable to code sharing transactions also changed.  These operations must still observe rules and limitations provided for under bilateral or multilateral international agreements with respect to routes and operations, but specific requirements set in the past, such as the obligations for foreign carriers to be designated under the existing ASA/MoU, have been lifted.  That said, notwithstanding the approval process has been simplified, the rules expressly establish that in no circumstances the code sharing agreement may permit a foreign airline to commercialize local carriage within the Brazilian territory.

In addition to the modifications above, which were intended to create incentives for foreign airlines to operate in Brazil, the Federal Government also implemented measures intended to ease the burden on domestic airlines, especially by reducing tax costs on aircraft transactions.

One of the most relevant involves the levy of withholding income taxes on lease payments.  In this line, even though for decades the Federal Government had zeroed the withholding income tax levied on the remittance of payments from Brazilian airlines to lessors under cross-border leases of aircrafts and its engines, this benefit lasted until 2019, when the Brazilian Federal Government resumed the collection of taxes.  Such modification of the legal framework severely increased risks of deficiencies in connection to lease payments – since, in a sum, lessees became subject to 15% income tax on commercial aircraft and engine lease payments performed by airlines – but the Pandemic scenario further pressured the Federal Government into lifting this financial burden on airlines.

In this line, at the end of 2021, after more than two years of uncertainty resulting from the implementation of different rules involving this matter, the Federal Government at last adopted measures intended to address the concerning situation of the local aviation industry by again reducing to zero the rate of withholding income tax levied on finance lease payments to be remitted by scheduled airlines between January 1st, 2022, and December 31, 2023.  As of December 31, 2023, the rules currently in force escalate the applicable withholding income tax rate on such payments 1% per year, until the end of 2026. There were also other initiatives that resulted in the reduction of taxes levied on the aviation sector.

Lastly, similarly to other jurisdictions, different stakeholders in Brazil have been actively participating of discussions on a pathway to decarbonizing the aviation industry, including the utilization of SAF to reduce CO2 emissions. A robust regulatory environment and creation of proper incentives will be crucial to enable the implementation of a more sustainable aviation in Brazil.

According to forecast scenarios considered by IATA for passenger traffic, air transport marked in Brazil can grow by 105% in the next 20 years, resulting in an additional 106 million passenger journeys by 2037. If met, this increased demand would support approximately US $38.7 billion of GDP and almost 1.4 million jobs. Such predictions can be achieved if measures like the ones described in this paper are further developed, to consolidate a more robust regulatory environment which will serve as a pathway towards consistent growth and development of the aviation industry.


Publicado originalmente em Inglês no site Lexology: http://assets.leadersleague.com/guides/Bresil/BBC_2023.pdf