Brazilian Federal Senate approves Bill to help the air sector

On Wednesday (July 15), the Brazilian Federal Senate approved Bill No. 23/2020 (PLV 23), which provides for the Federal Government’s aid to the air sector due to the effects of the Covid-19 pandemic, among other topics concerning civil aviation. PLV 23 is the result of amendments made by the Brazilian House of Representatives to the wording of the Provisional Presidential Decree No. 925 (PPD 925), edited by the Brazilian President on March 18, 2020.

Due to the amendments made to the original wording of the Provisional Presidential Decree 925, the PLV 23 – duly approved by the National Congress – will proceed to the President’s signature. Check out the new rules:

Airport Concessionaires

The PPD 925 – effective immediately after its enactment – set the postponement of the due date of fixed and variable contributions due in 2020 to the airport concession agreements, allowing its payments until December 18, 2020. The PLV 23 maintained the postponement and added the need for monetary adjustment of the values according to the Brazilian Consumer Price Index (Índice Nacional de Preços ao Consumidor – INPC).

In addition, PLV 23 determined that the postponement of the payment will not allow the Federal Government to promote the economic-financial rebalancing of the airport concession agreements.

Law No. 13,499/2017, which establishes criteria for the celebration of amendments to airport concession agreements, was also amended by the PLV 23. These criteria were revisited to ensure that, despite the postponement of the contributions and the possibility of economic-financial rebalancing of the concessions, it is possible to immediately revise some of the airport concession agreements, avoiding a possible interruption of services due to the crisis.

The main changes are the permission to use the institute more than once and the relaxation of the increase limit of rescheduled installments, in relation to the amount originally agreed. In addition, the Granting Authority is allowed to replace the fixed contribution with a variable one, as long as the original net value is maintained.

Airlines

Seeking to assist airlines and consumers, PPD 925 extended the deadline for reimbursement of airline tickets for transportation contracts signed until December 31, 2020. The deadline, previously fixed on 7 days by Resolution 400 of the Brazilian National Civil Aviation Agency (ANAC), was extended to 12 months, as from the date of the originally scheduled flight.

Also, even considering the cash reimbursement in twelve months, the refund of amounts paid to government entities, such as airport fees, must occur within 7 days from the request.

According to PLV 23, the rules will apply to flight cancellations that occurred between March 19 and December 31, 2020, observing the adjustment for inflation. The rules of the contracted service, as well as the provision of material assistance, when applicable, shall remain valid.

The approved wording also allows consumers to choose to receive credit for use within 18 months of its receipt, thus ruling out the incidence of contractual penalties (including in the event of cancellation by the passenger). The credit may be used in one’s own name or by a third party.

The rights to reimbursement, credit, rebooking, and rescheduling of the flight are independent of the form of payment, even if the purchase occurred via frequent-flyer or reward programs. In the case of payments in installments, the consumer may request the interruption of the collection of installments due and not yet debited.

Emotional Distress

Although not related to the initial wording of the PPD 925, PLV 23 amended the Brazilian Aeronautical Code (Código Brasileiro de Aeronáutica – CBA) to condition the compensation for emotional distress to the effective evidence of the distress or suffering caused to the passenger.

The CBA was also amended to provide that the air carrier will not be held liable for delays occurring due to unforeseeable circumstances or force majeure, when it is impossible to adopt the necessary means to avoid the distress or suffering. The hypotheses of force majeure have also been defined and cover weather issues and the unavailability of airport infrastructure. In all cases, the obligation to provide material assistance, reimbursement, and other alternatives to the passenger remains.

The changes aim to reduce the excessive reliance on courts of the airline industry and to reduce the risks and costs involved in the sector, seeking to create a more conducive environment for the development of new businesses (such as ultra-low-cost companies).

Aeronauts and Air Service Employees

To assist aeronauts and air service employees affected by the total unpaid suspension from work or salary reduction due to the coronavirus pandemic, PLV 23 provides for the availability of withdrawal from accounts linked to the Guarantee Fund for Length of Service (Fundo de Garantia do Tempo de Serviço – FGTS) up to the limit of the existing balance in the linked account.

Withdrawals will be limited to six installments of BRL 1,045.00 in cases of salary reduction and BRL 3,135.00 in cases of total unpaid suspension from work. Only the holders of linked accounts of employees of a company providing regular air transportation services shall be contemplated.

National Civil Aviation Fund (Fundo Nacional de Aviação Civil – FNAC)

PLV 23 has allowed the resources included in the FNAC to be used as the object and guarantee of loans to airport concessions, concessions for the provision of scheduled air transport services, and providers of air transport ancillary services when these prove to have suffered losses due to the coronavirus pandemic.

Loans may be granted until December 31, 2020, with a maximum elimination period of 30 months and settlement of debts until December 31, 2031, subject to a guarantee limit of BRL 3 billion and an interest rate adjustment of no less than the Long-Term Rate (Taxa de Longo Prazo). In case of a guarantee, this will be enforceable as of January 1^st, 2021.

Additional Tariff to International Boarding

Another provision included by the Brazilian House of Representatives concerns the Additional Tariff to International Boarding of USD 18.00. The PLV 23 determined that this amount will be extinct as of the year of 2021 and will no longer integrate the cost of international tickets of flights departing from Brazil.

The extinction of the Additional Tariff is in line with the Federal Government’s efforts to attract low-cost companies since it reduces the costs of operating international routes in Brazil.

It is worth noting that, unlike the original wording of PPD 925, the amendments introduced by the Brazilian National Congress will only be valid when signed by the Brazilian President. The President must, within 15 business days, approve or veto the Bill, either partially or totally, converting it into Law. In the event of a veto, the National Congress may reject it by an absolute majority of Representatives and Senators within thirty days of the President’s signature.

To learn more about the measures to assist the air sector, learn about the practices of Aviation and Infrastructure and Energy of Mattos Filho.