Brazil finalizing decision on US$1.6bn airport auctions

The Brazilian federal government is close to hammering out a solution to a controversy over the upcoming auction for the concession of 16 airports, which is expected to generate investments of around 8.6bn reais (US$1.63bn).

The original government plan was to offer concessions for the 16 airports in three blocks, mixing more and less profitable airports, but it is now planning to offer the airports in four lots, due to a controversy. 

That controversy involves Santos Dumont airport in Rio de Janeiro, which is the country's third busiest airport.

The federal government wants to allow Santos Dumont airport to handle international flights, but that is being resisted by RIOGaleão, controlled by Changi Airports International, which is the concessionaire of Rio’s Galeão international airport.

To protect Galeão, the Rio de Janeiro’s state government pressured the federal government to impose a limit on the number of flights Santos Dumont can handle. Amid the pressure, earlier this year the federal government created a working group with Rio de Janeiro officials to reach a solution.

Now, the government will offer Santos Dumont separately from the other airports, which will be offered in blocks. The measures to guarantee protection for Galeão international airport and limit Santos Dumont are likely to be unveiled in the auction notice, which is pending final approval before it is published.

“This was an agreement made by the federal government with the government of Rio de Janeiro state, because we think that this way the competition will be fairer and we will evolve this modeling process according to the debates that are being carried out," said infrastructure minister Tarcísio Gomes de Freitas in a release.

According to experts, the solution is likely to lead to certain changes in terms of companies interested in each block during the auction.

"This new division into four blocks will likely result in a different profile of companies interested in each asset. In the case of Santos Dumont, this will certainly be an asset that will attract interest from large international airport operators, but in relation to blocks with smaller airports, we will probably see interest from smaller companies more focused on executive aviation," Paulo Dantas, an infrastructure and project finance specialist at law firm Castro Barros Advogados, told BNamericas. 

The new structure of the auction – which still needs to be approved by the country's audit court (TCU) and will likely take place during the first half of this year – will be:

SP/MS/PA/MG block: comprised by the airports Congonhas (the country's second busiest airport, in São Paulo state); Campo Grande, Corumbá and Ponta Porã in Mato Grosso do Sul state; Santarém, Marabá, Carajás and Altamira in Pará state; and Uberlândia, Uberaba and Montes Claros in Minas Gerais state. The investment projected in the airports in this block is 5.88bn reas and the minimum fee for the auction is estimated at 255mn reais.

Aviação Geral block: This block includes Campo de Marte airport in São Paulo state and Jacarepaguá in Rio de Janeiro. A total of 560mn reais in investment is projected and the minimum fee is 138mn reais.

Norte II block: The block is comprised by the airports in Bélem in Pará state and Macapá in Amapá state, with 875mn reais in estimated investments and a minimum fee of 57mn reais.

Santos Dumont block: This will only include Santos Dumont airport, involving an estimated investment of 1.3bn reais and a minimum fee of 731mn reais.