Brazil’s government considers easing airlines’ access to public aviation fund 

By Marcela Ayres

BRASILIA, Feb 19 (Reuters) – Brazil’s Ports and Airports Minister Silvio Costa Filho has asked the Finance Ministry to loosen conditions on loans to airlines backed by the National Civil Aviation Fund (FNAC), a public fund expected to release 4 billion reais ($764.76 million) starting in 2026, government documents show.

“It will be necessary to adjust the resolution to make FNAC credit more attractive,” Costa Filho wrote in an official letter last week to Finance Minister Fernando Haddad.

According to documents attached to the February 13 letter, which was seen by Reuters, the proposed changes include expanding the ways airlines can access FNAC to also cover services such as training for pilots and aviation workers. It currently covers the acquisition of domestically manufactured aircraft, as well as engines, parts, and related components.

Costa Filho also proposed raising the financing cap for all eligible items to 30% of an aircraft’s value, up from 10%, and explicitly allowing loan proceeds to be used to secure contractual guarantees.

Embraer, which is Brazil’s largest aircraft manufacturer, could potentially benefit from a higher financing cap backed by government support.

Costa Filho also asked the Finance Ministry to soften a rule that required airlines to increase the number of regional flights they offer to access FNAC.

Under the proposal, airlines would need to increase annual flight frequencies in Brazil’s Amazon and northeast regions by at least 15% – half of the current 30% – compared with the year prior to the financing request, or alternatively ensure that at least 17.5%, versus 20% currently, of total annual departures originate and land in those regions.

The Ports and Airports Ministry did not immediately respond to a request for comment.

The Finance Ministry did not immediately clarify whether or when the proposal would be reviewed by the National Monetary Council, Brazil’s top economic policymaking body.

In October, that body issued a resolution setting rules for the loans, following long-standing requests from the airline industry. The government argued that carriers needed support after the COVID-19 pandemic to purchase aircraft, conduct maintenance and buy sustainable aviation fuel.

Gol, LATAM and Azul are the largest airlines operating in Brazil by market share. 

Interest rates on the loans were set between 6.5% and 7.5% annually, depending on the credit line, compared with Brazil’s benchmark rate of 15%.

($1 = 5.2304 reais)

(Reporting by Marcela Ayres; Editing by Paul Simao)