Get ready for takeoff: Brazil to loosen foreign ownership rules for airlines

Luciana Magalhaes – Dow Jones Investment Banker/Wall Street Journal, 12/13/2010

Bloomberg News

With Brazil preparing to lift the foreign ownership cap on its air carriers from 20% to 49%, expect more mergers and capital-raising in the next two to three years — and opportunities for foreign airlines to penetrate Latin America’s largest market.

With Brazil’s buoyant economy and its role as host to the 2014 World Cup and 2016 Olympics, the country’s airlines are cleared for take-off.

As of October, Brazil had 16 operating airlines. Two — TAM S.A. and Gol Linhas Aereas Inteligentes S.A. — are dominant, but there are at least four more substantial smaller carriers that could need capital or larger partners, or may want to go public.

The industry fundamentals are excellent. In the first half of the year, domestic traffic grew 28%, well above the 8% global growth rate, according Sao Paulo’s brokerage Coinvalores. For the full year, the domestic Brazilian flights are likely to end up 20%, more than twice the robust 7.5% projected GDP expansion.

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