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AIRPORTS MANAGEMENT AND REGULATION MODELS

AIRPORTS MANAGEMENT AND REGULATION MODELS Brazil Concession Process; Regulatory and legal framework Amsterdam, April 26 th , 2012. Rubens Carlos Vieira Director of Airport Infrastructure. The Brazilian Concession Process Regulatory and Legal Framework. Agenda.

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AIRPORTS MANAGEMENT AND REGULATION MODELS

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  1. AIRPORTS MANAGEMENT AND REGULATION MODELS Brazil Concession Process; Regulatory and legal framework Amsterdam, April 26th, 2012 Rubens Carlos Vieira Director of Airport Infrastructure

  2. The Brazilian Concession Process Regulatory and Legal Framework

  3. Agenda • Brazilian Regulatory Structure; • Brazilian Airports Legal Provisions; • Concessionaire`s Rights and Obligations; • Understanding the Brazilian airports concessions; • Bidding Process Participation; • Participation of Foreign Entities; • Airports Operation and Exploitation in Brazil; • The Regulatory Framework;

  4. Brazilian regulatory structure

  5. SAC – Secretariat of Civil Aviation; • Public Politics for aviation and airports; • Guidelines for concessions and other forms of airports exploitation; • ANAC – National Civil Aviation Agency; • Technical and Economic Regulation; • Management of grants (concessions, perpetual franchise); • Supervision of air services and airport operations; • DECEA - Department of Air Space Control • Grants for air navigation services exploitation; • Air navigation services supervision;

  6. Brazilian airports legal provisions Legal Framework; • Federal Constitution (art. 21, XII, “c”) • Brazilian Aeronautical Code (arts 30 and 36, IV); • Law n. 11.182, 2005 (arts 8, XXIV, 48 and 49); • Law n. 8.987, of February 13th, 1995 • Federal Decree n. 7.205, of June 10th, 2010; • Federal Decree n. 7.624, of November 22nd, 2011; • Management Model admits; • Management by public entities; • Management by private companies;

  7. Thefirst concessionof a national (primary) airport in Brazil • ASGA was the airport was included in the Brazilian Privatization Program (PND); • Agency (ANAC) held Auction No. 01/2011 on August 22, for the Concession to jointly build and to maintain and run ASGA; • The Inframérica consortium won the auction with a BRL 170 million bid and 228.82% premium. • Inframérica have three years to build the terminal and the right to operate the airport for 25 years. • The contract can be renewed for five years at most, after which the airport will revert to public control.

  8. ASGA Auction session results Highest bidder, 228,82% over minimum value National Civil Aviation Agency

  9. A Consortium formation Special Purpose Entity - SPE

  10. Results of the second round of concessions

  11. Results of the second round of concessions

  12. Concessionaire´s rights and obligations

  13. Economic Regulation

  14. Understanding the Brazilian airports concessions • Purpose • Induce private efficiency in service provision, sharing gains with users • Assure regulatory stability and business attractiveness • How efficiency gains are split with users • Auction selects the most efficient investor • X factor shares efficiency gains from technological progress • Commercial revenues are partially directed to lower tariffs (hybrid single till) • Model assures a minimum level of service • Investment trigger • Model encourages higher service quality • Q factor

  15. Understanding the Brazilian airports concessions • Steps for a concession process: • 1) Decree of Federal Government allowing the airport concessions; • 2) Anac performs the studies, the auction term, the concession contract and plans for the competitive bidding; • 3) Public Audiences; • 4) Competitive Bidding – Brazilian Stock Exchange (BOVESPA); • 5) The concession contract is signed between Anac and the concessionaire.

  16. Understanding the Brazilian airports concessions • Main characteristics: • 1) Model similar to those of Continental Europe; • 2) Applied to individual airports; • 3) More detailed regulation; • 4) Emphasis on performance rather than controlling; • 5) Price-cap regulation;

  17. Bidding Process Participation • Brazilian and foreign legal entities may take part • Generally in consortium • Participation Limits • Legal entities which are unsuitable; are impeded of being contracted by the State; have been convicted of environmental crimes; took part in the project structuring studies; whose staff were part of ANAC’s or Secretariat of Civil Aviation staff up to 180 days before the bidding documents were disclosed • Airlines as well as their parent, subsidiary and/or affiliate companies • A consortium in which airlines as well as their parent, subsidiary and/or affiliate companies have a share above 10%.

  18. Participation of Foreign Entities • Foreign legal entities, alone or in a consortium, must: • Provide all equivalent qualification documents attested by the Brazilian consular authority in their country of origin; • Provide a certificate from their embassy in Brazil acknowledging the legal and administrative validity of the qualification documents in their country of origin; • Be legally represented in Brazil in order to answer judicially and administratively; National Civil Aviation Agency

  19. Airports Operation and Exploitation in Brazil ... The airport has already fulfilled these requirements.

  20. Brazilian airport management models • Management Models: • Public Power Management; • Union – by itself (directly); • Infraero (a Union company) – primary airports (the biggest ones); • States and Municipalities – secondary airports (regional ones); • Private Sector Management; • Concessions – primary and/or secondary airports; • Perpetual Franchise (authorizations) – secondary airports;

  21. Brazilian airport management models • by Concessions: • Union; • Concessions of primary (national) airports*; • States and Municipalities; • Concessions of secondary (regional) airports**; * Airportsmanagedby Infraero. ** Airportsmanagedby States andMunicipalitieswhichfirmedagreements (convênios) withtheUnion.

  22. Regulatory Framework • Innovation of nowadays legal dispositions for Brazilian Aviation • Free prices - air services exploitation; • Art. 49 (Law n. 11.182, 2005); • Free mobility; Brazilian Scheduled Airlines can fly from any airport to other since the airports fulfil with safety and capacity requirements. • Art. 48, § 1º (Law n. 11.182, 2005)

  23. Regulatory Framework • Results from the innovation of the legal framework: • Free prices and free mobility increased potentially the air services competition; • The more competition increases, the higher is the pressure on airport services; • Limited capacity airports imposes limitation on air services growing; • Restrictions on public budget require private investment on airport infrastructure.

  24. Final Considerations • Brazilian Government has chose CONCESSIONS as a form to handle the national (primary) airports to private management; • Till the moment 4 big airports have been auctioned by concessions: ASGA, GRU, VCP and BSB. • New airports concessions depends on Government decisions. • The high fees offered for the main concessioned Brazilian airports indicate optimism in relation to the process. • Anac is getting strong to face the challenges of regulating and supervising concessions contracts.

  25. Thanks Rubens Carlos Vieira Diretor rubens.vieira@anac.gov.br

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