June 24, 2016

Brazilian Chamber of Deputies Votes to Eliminate Foreign Ownership Limitations on Investments in Brazilian Airlines

Holland & Knight Aviation Law Blog
Richard B. Furey | Lucas Scaff

On June 21, after a long discussion and sometimes heated debate, the Brazilian Chamber of Deputies, approved a provisional measure that would, among other things, eliminate the current limitations on foreign ownership of Brazilian commercial airlines and air-taxi companies.

The measure, Provisional Measure 714 (PM 714), as originally enacted on March 1, 2016 by Brazil’s now-suspended President Dilma Rousseff, would have increased the percentage – from 20 percent to 49 percent -- of voting shares in Brazilian airlines and air taxi companies permitted to be held by non-Brazilians. Read more on this topic in our March 28, 2016, Aviation Law Blog post.

However, the Chamber of Deputies incorporated certain amendments to PM 714 so that, according to the text of the regulation passed by the Chamber of Deputies, foreign investors would be permitted to acquire voting shares of commercial airline companies and air-taxis with no limitations, therefore permitting non-Brazilians to obtain controlling rights. The airline/air-taxi company would still be required to be incorporated according to the Brazilian corporate legislation, have its management based in Brazil (although not necessarily composed by Brazilians) and maintain its headquarters in Brazil.

PM 714 now goes to the Brazilian Senate for its approval. The Senate may vote directly for the acceptance or rejection of the MP as approved by the Chamber of Deputies, or may propose new amendments to the legislation (although any revisions to the Deputies’ previously-approved text would need to be voted on again by the Chamber of Deputies). The final wording of the legislation would then go to the President for approval or rejection.

This legislation could be a significant development for Brazil’s aviation sector by potentially promoting greater investment, particularly at a time such as now when the sector is dealing with increasing operational costs and decreasing passenger demand in some routes. Of course the PM must first become law and for that we’ll need to wait and see whether the Senate and the President will support it.

Richard Furey is a Partner in the Structured Finance Group of Holland & Knight LLP. Lucas Scaff is an Associate in the São Paulo office of Machado Meyer Sendacz Opice Advogados and a foreign lawyer intern at Holland & Knight LLP.

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