With delivery of Galeão, Rio sees more difficulty for the reaction of the airline industry

the announcement of delivery of the Tom Jobim International Airport concession, Galeão, causes concern in Rio de Janeiro. With the setback, analysts and local leaders see risks of the Rio de Janeiro capital being left behind in the race to recover the airline industry. Therefore, they call for urgency to build a way out of the case.

The RIOgaleão concessionaire announced on Thursday (10) the request to the federal government to return the Galeão, citing the impacts of the economic crisis and Covid-19 on the airline sector. The terminal, located on Ilha do Governador, has been facing difficulties in resuming operations.

After the company’s announcement, the Minister of Infrastructure, Tarcísio Gomes de Freitas, announced that the terminal will be tendered in 2023, on a block with Santos Dumont, in downtown Rio. The idea is that both airports have the same operator.

In practice, the measure postpones the Santos Dumont auction, which was scheduled for the first half of 2022.

“The departure of a major airport operator causes reputational damage of the first order. There is nothing to celebrate”, says economist Claudio Frischtak, from consultancy Inter.B.

“What will happen until 2023? It is not known. The risk that exists is that the process will stall up ahead, which can generate a deterioration of the two assets [Galeão e Santos Dumont]. The scenario is very bad”, he adds.

Sérgio Duarte, president of Rio Indústria, which brings together businessmen in the sector, understands that the delivery of the Galeão concession may delay the attraction of new flights to the state capital.

“The decision is worrying because this is a moment of recovery of flights. Rio’s competitors are fighting for new markets. If the model proposed by the government works, the solution will only come from 2023. The time lost until then is great” , points.

Galeão was awarded to the private sector in 2013, with a bid of R$19 billion from a consortium that included Odebrecht, now Novonor. The value was almost four times greater than that defined in the public notice. The term of the contract would run until 2039.

Currently, RIOgaleão is controlled by Changi Airports, from Singapore, which has a 51% stake in the business. Infraero has the remaining 49%.

In a note, the concessionaire stated that it will continue operating the terminal until a new operator is defined at auction by the federal government.

“RIOgaleão will continue to maintain safety and quality standards in the airport operation and will honor the commitments and contracts with its employees, creditors, tenants and suppliers throughout the re-bidding process”, said the company.

Galeão was planned to receive large aircraft and plays an important role in cargo logistics in the state of Rio. The terminal is far from other neighborhoods in the metropolitan region whose road connection is the Linha Vermelha, a frequent location for shootings.

Data from Anac (National Civil Aviation Agency) indicate that the airport has been facing difficulties to resume the pre-pandemic level of operation.

In 2021, the Ilha do Governador terminal received 3.8 million passengers, between departures and arrivals. The number is equivalent to 28% of the number recorded in 2019 (13.7 million), before Covid-19.

Plot with Santos Dumont

The announcement of the departure of RIOgaleão took place amid fears of predatory competition with Santos Dumont, which had been included by the federal government in the seventh round of airport concessions, scheduled for this semester. Santos Dumont would be one of the crown jewels in dispute, alongside Congonhas, in São Paulo.

The concession model that was being proposed for the airport in downtown Rio, managed by Infraero, generated an exchange of barbs between Rio de Janeiro authorities and the federal government in recent months.

For local leaders, a large increase in the supply of flights on Santos Dumont, after the auction, could generate predatory competition with Galeão.

Therefore, the assessment was that it would be necessary to adopt restrictions on the expansion of the flow at the terminal in downtown Rio. The suggestion was met with resistance from the federal government.

After pressure from politicians and businessmen from Rio de Janeiro, the Ministry of Infrastructure even announced that the Santos Dumont auction would be carried out in isolation from the other terminals in the seventh round.

Now, with Galeão’s setback, the government intends to establish a model for transferring the two airports together to the private sector. Less than 20 kilometers separate the two assets.

In a tone of irony, the mayor of Rio, Eduardo Paes (PSD), called for a “quick solution” to the case.

“Congratulations to the brilliant minds involved! This shows a lot our country’s credibility with international investors (in this case, the Singapore government is included). SQN [sigla para a expressão “só que não”]! I hope they at least make lemonade out of lemons and be quick in the solution to be given”, wrote the mayor on social media.

The infrastructure manager of Firjan (Federation of Industries of the State of Rio de Janeiro) Isaque Ouverney, understands that the joint concession of Santos Dumont and Galeão will be positive if it aims at a coordinated operation between the airports.

“The situation today is unbalanced. There is competition between the two airports”, he says.

“What is worrying is the issue of speed. It is necessary that the process consider the importance of the two assets and occur quickly”, he adds.

In the view of analysts and local representatives, the delivery of Galeão reflects a combination of factors, which began with imbalances in the modeling of the concession.

“Original sin was the concession model”, points out economist Claudio Frischtak, from Inter.B.

“It was a stupid model, with huge problems. It kept Infraero as a partner. Then came the impact of the pandemic”, adds Frischtak, who considers a coordinated operation between Galeão and Santos Dumont necessary.

Marcus Quintella, director of the FGV Transportes study center, believes that the economic and social difficulties experienced by Rio de Janeiro in recent years have also hampered the situation at the Ilha do Governador terminal.

“The airport is the gateway to the city, but it does not attract flights alone”, he says.

“The federal government is passing the problem on to the management of the next government, which can be the same or another”, evaluates Quintella, noting that Brazil will have elections in 2022, before the deadline for the auction of Galeão and Santos Dumont.

He still questions, from the users’ point of view, the possibility of only one group controlling the two airports. “That creates a monopoly. It’s not healthy,” he says.

Representatives of the productive sector have a different opinion.

“We have to look at the two airports from a strategic point of view. They have to be complementary. Santos Dumont needs to be more focused on air shuttles, on faster flights. Galeão should absorb the demand from other cities”, says Sérgio Duarte, president of Rio Industry.