Fabio Falkenburger, Marina Estrella Barros, Pedro Amim, Vitor Barbosa and Vittoria Psillakis Mickenhagen

The aviation sector was one of the most affected by the economic chaos generated by the Covid-19 pandemic. Extremely affected by traffic restrictions, airport operators, airport service providers and airlines have seen demand plummet dramatically during the pandemic, suffering severe impacts on their revenues.

Data released by the National Civil Aviation Agency (Anac) indicate that, in 2020, demand reduction was 48.7% in the domestic market and 71% in the international market. With vaccination advancing at slow pace, 2021 also presents itself as a challenge for all companies in the sector.

While the scenario is not one of the most encouraging for the market in general, long-term planning keeps airport concessions as an attractive option for investors. During the 6th round of airport concessions, announced during the pandemic and held on April 7, 22 federal airports were auctioned, divided into three regional blocks. In the so-of-turn of the sector's economic downturn, auction achieved significant result, yielding to the federal government more than R$ 3 billion in grants, with an average premium of 3,822.61%.

State concessions

At the state level, São Paulo takes a swing at the success of federal concessions and heats up the market in July. Through the Agência Reguladora de Serviços Públicos Delegados de Transporte do Estado de São Paulo lo (Artesp), the state government will conduct the concession for expansion, maintenance, operation and realization of investments necessary for the operation of 22 airports, divided into two blocks of 11 airports. Available on the Artesp website, the bid notice stipulates that the the proposal and other envelopes for participation shall be personally filed y the proponents on July 15, in a public session at B3's head office.

The block concession strategy has become common in the aeronautical sector and its main objective is to enable investment in airports that would not be attractive in individual bids. Airports with significant passenger movements and, in some cases, surpluses, with not so expressive airports, or airports with different investment demands, are grouped into the same block. The idea is that the balance between initial revenue and investment forecasts will make the block attractive to the private investor, also considering the expected evolution of less attractive airports.

Considering the assets of the current concession, the 11 airports of the northwest block, which includes São José do Rio Preto, have a minimum contribution of R$ 6.8 million and planned investments of R$ 181.2 million over the 30 years of the concession. For the 11 airports in the southeast block, headed by Ribeirão Preto, investments of R$ 266.5 million are planned over the 30 years of concession and the minimum contribution is R$ 13.2 million.

In addition to the minimum fixed contribution to be paid as a condition for signing the concession agreement, the new cocessionaires will pay variable contribution corresponding to 1% of the gross revenue obtained from the 13th month of the beginning of the concession.

Brazilian or foreign legal entities may participate in the bidding process, alone or in a consortium.  Prooftechnical qualification will be evidenced by means of demonstrating previous experience (at least 12 months) in the management / administration of infrastructure assets in the sectors of communication, transport or logistics of transport, energy, production, distribution or refining of fuels, basic sanitation, housing or provision of public services. For the northwest block, the assets used for purposes of demonstrating experience shall have a minimum value of R$ 31,173,143.00. For the southeast block, the minimum value is R$ 37,779,483.00. Prior to the signing of the concession agreement, the winning bidder must also demonstrate its own experience, or experience of third party subcontractor, in the operation of at least one airport that has processed at least 50,000 passengers.

The possibility of hiring a third party to meet the requirements of proof of experience in the operation of airports was a innovation  received with enthusiasm in the 6th round of federal concessions and that should be trend in the sector, since it allows the participation of a greater number of bidders, increasing competition.

Federal rebidding processes

Anac has already published the first draft of the rebidding notice of The Airport of São Gonçalo do Amarante. Subject to the first round of federal concessions in 2011, the airport is being returned by the current concessionaire under the Rebiding Law, enacted in 2017. With the signing of the amendment agreement for the rebidding and the first draft of the notice published, it is expected that the auction will take place between the end of 2021 and the first half of 2022.

Viracopos Airport, granted in the 2nd round of federal concessions in 2012, will also be returned and will go through the rebidding procedure. The amendment agreement was signed at the end of 2020. However, unlike São Gonçalo do Amarante, the project is still in the study phase and there is no forecast for the publication of the draft notice or holding the auction.

7th round of federal concessions

Another project that promises to increase the attractiveness the sector is the 7th round of federal airport concessions, currently in the process of contracting technical studies to support the modeling of concessions for exploration, maintenance and operation of 16 airports in the North and airports between Rio de Janeiro–Minas Gerais and São Paulo–Mato Grosso do Sul .

In the northern block, the most attractive airport is Belém Airport, due to the tourist potential of the region. Between Rio de Janeiro–Minas Gerais and São Paulo–Mato Grosso do Sul attention turns to two of the country's main airports in terms of passenger movement and location – Santos Dumont Airport (RJ) and Congonhas Airport (SP). The dispute promises to be fierce and beat the record of premiums achieved by the federal government in the other rounds.

Aviation sector will still feel the effects of the pandemic for some time, mainly due to the significant change in behaviour caused by the adoption of remote work on a large scale. However, air transport remains of vital importance in the globalized and complex economic scenario we live in. The industry is already learning to reinvent itself and the future remains promising.