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Viewing cable 06BRASILIA631, BRAZIL'S NEW AIR REGULATORY AGENCY FACES CHALLENGES
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Reference ID | Created | Released | Classification | Origin |
---|---|---|---|---|
06BRASILIA631 | 2006-03-31 10:51 | 2011-07-11 00:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Brasilia |
VZCZCXRO8557
RR RUEHRG
DE RUEHBR #0631/01 0901051
ZNR UUUUU ZZH
R 311051Z MAR 06
FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC 4963
INFO RULSDMK/DEPT OF TRANSPORTATION WASHDC
RUEANHA/FAA WASHDC
RUEAYVF/FAA MIAMI ARTCC MIAMI FL
RUCPDO/USDOC WASHDC
RUEHRI/AMCONSUL RIO DE JANEIRO 1786
RUEHSO/AMCONSUL SAO PAULO 6651
RUEHRG/AMCONSUL RECIFE 4533
UNCLAS SECTION 01 OF 02 BRASILIA 000631
SIPDIS
SENSITIVE
SIPDIS
EB/TRA FOR JEFF HORWITZ
USDOC FOR 4332/ITA/MAC/WH/OLAC
USDOC FOR 3134/ITA/USCS/OIO/WH/RD
E.O. 12958: N/A
TAGS: EAIR EINV ECON CASC BR
SUBJECT: BRAZIL'S NEW AIR REGULATORY AGENCY FACES CHALLENGES
Ref: Brasilia 146
This cable contains business-sensitive information, please treat
accordingly.
¶1. (SBU) Summary. The National Civil Aviation Agency (ANAC) was
formally inaugurated in a March 20 ceremony in Brasilia. Emboffs met
with ANAC officials March 16 to discuss the agency's plans for the
airline industry. Settled are issues like where the agency will be
headquartered -- Brasilia -- and the powers it will wield, those
which were once the domain of several Ministry of Defense agencies,
including the ministry's soon-to-be defunct Civil Aviation
Department (DAC). Unsettled are issues regarding funding, how it
will interact with related government agencies and what to do with
Brazil's ailing flagship airline VARIG, which is operating under
bankruptcy-law protection. ANAC is closely examining the VARIG
problem and hopes it can be settled soon. Other GoB entities worry
that ANAC might poach on their turf. Leaders at INFRAERO, the
parastatal that manages Brazil's airports, expressed concern about
ANAC diverting both funding and political power from the
organization. Ministry of Development, Industry and External Trade
(MDIC) officials expressed concern about how ANAC could change the
face of air regulation in Brazil. For their part, ANAC
representatives plan to visit Washington to meet with FAA officials
in April/May 2006 and post supports these efforts. End Summary.
ANAC is Born
------------
¶2. (SBU) The first new regulatory agency created under the Lula
Administration, the National Civil Aviation Agency (ANAC) is now up
and running. Its directors assumed office on March 20, 2006 when
President Lula signed the agency's mandate in a public ceremony. At
the ceremony, the President thanked the Department of Civil Aviation
(DAC) for its role in bringing Brazilian civil aviation to this
point, and directed ANAC to move it forward. Emboffs met with ANAC
directors Leur Lomanto and Denise Abreu on March 16 at their
temporary headquarters at the Brasilia International airport. Our
interlocutors noted that full ANAC operations will not begin until
¶2007. They said that DAC personnel, the majority of whom are
military officers and enlisted men, will initially be subsumed into
ANAC but then incrementally replaced with civilians; ANAC should be
a completely civilian-staffed agency by 2012, barring delays. ANAC
directors are planning a trip to Washington to visit the FAA in
April/May 2006 to discuss regulatory and technical issues.
The Trouble with VARIG
----------------------
¶3. (SBU) The first and most troublesome item on the ANAC agenda is
VARIG, the ailing Brazilian airline plagued by serious debt issues
(USD 3 billion). ANAC views VARIG as a potential target for some
"readjustments," according to Denise Abreu, and the agency plans to
assign an expert to study VARIG's situation and then make
recommendations to an ANAC review board. During the March 16
meeting, Abreu pointedly asked Ambassador Alexander Watson, a
consultant for Boeing, if ANAC were to "reassign" VARIG routes to
other Brazilian airlines, whether Boeing would transfer the aircraft
currently under lease to VARIG to these airlines. She implied that
Boeing is at least partially responsible for many of VARIG's current
financial woes, including the legal actions in U.S. courts seeking
seizure of the carrier's leased aircraft. Ambassador Watson
responded that he could not speak for Boeing, but that he could pose
the question to Boeing management.
Safety Issues
-------------
¶4. (U) Three recent incidents under investigation by DAC and
INFRAERO show how much work ANAC faces. On February 13, just after
takeoff from Sao Paulo Guarulhos Airport, a 5 inch by 7 inch, two
pound piece of a VARIG Boeing 737 engine fell into an elderly
couple's kitchen. Luckily, no one was hurt and authorities do not
believe that Boeing holds any liability for the incident. The
incident occurred after VARIG began implementing a restructuring
plan to free up funding to bring back into service some planes
previously out of commission due to safety reasons.
¶5. (U) On March 22, at Sao Paulo Congonhas Airport, Brazil's
busiest, a BRA Transportes (a small domestic carrier) plane skidded
off the runway onto the taxiway during rainy weather after the pilot
BRASILIA 00000631 002 OF 002
turned sharply to avoid heading down an embankment and onto the busy
road below. This incident occurred less than a week after the new
head of INFRAERO disclosed that financial shortfalls would limit the
organization's ability to upgrade airport facilities in Brazil.
INFRAERO officials announced March 28 that Congonhas traffic will be
cut 50% to allow for further upgrades, such as rubber and oil
removal from the runways and runway expansion. Sao Paulo's Guarulhos
airport will receive two-thirds of the diverted traffic and Campinas
Viracopos airport, about 90 minutes away from Sao Paulo's center,
will receive one-third. The same night of the announcement,
officials diverted a TAM Airbus plane with a hail-damaged nose cone
from its planned landing at Congonhas to Guarulhos, citing the
longer runway and better conditions in inclement weather. All of the
incidents are still under investigation.
Sometimes Hostile Colleagues
----------------------------
¶6. (SBU) ANAC also faces financial challenges. The DAC, most of
whose functions ANAC is assuming, was funded out of the Ministry of
Defense budget, but ANAC will not be. Proposals to fund ANAC out of
airport taxes and landing fees have drawn opposition from INFRAERO,
the manager and operator of Brazilian airports, and itself primarily
a military entity. INFRAERO convinced members of the Brazilian
congress that ceding 50 percent of the international flight airport
taxes it currently keeps (the other half goes into the general GoB
coffers) to ANAC would overburden INFRAERO and got this provision
deleted from the legislation creating ANAC prior to passage. The
new head of INFRAERO, Brigadier Jose Carlos Pereira, has opined
publicly that ANAC will compete with INFRAERO for GoB attention and
funding.
¶7. (SBU) Meanwhile, a Ministry of Development, Industry and External
trade representative (MDIC) told emboffs that ANAC will "cause
trouble" with the agency's new regulatory efforts to liberalize the
airline industry, but was unspecific as to how ANAC might prove
problematic. Finally, DAC officers at the Ministry of Defense told
emboffs that the creation of ANAC has been its priority of late.
The reassignment of profitable routes, of great interest to
international and national carriers, and a priority prior to the
ANAC legislation, has now taken a back seat. The Ministry's future
role will focus on policy and air-traffic control while regulations,
authorizations, registrations will fall under ANAC's purview. ANAC
will also take over the duties of certifying aircraft, currently
performed by the Aerospace Technical Center (CTA) in the Airforce
Command.
Comment
-------
¶8. (SBU) ANAC has gotten off to a bumpy start. Although the fifth
and final director has not yet been named, at least the 5-year
period for completing the transition to civilian personnel seems to
have satisfied the requirements of Brazilian law and concerned DAC
officials. While ANAC's permanent headquarters will be located in
Brasilia - meaning that any diplomatic or official contact between
the USG and that agency will have to take place in Brasilia -- the
agency's final structure has not yet been decided. Resolution of
its funding situation will determine how much bite will accompany
its bark and could settle how well it will relate to its peer
agencies. Whether transfer of VARIG routes and Boeing planes to
other operators can really occur is an open question. In any event,
pressing agenda items such as increased traffic, market efficiency
and safety concerns, mean that ANAC will have little time to make
adjustments. Post reiterates its support for building this
relationship and encourages FAA, TSA and others to reach out to ANAC
during this critical phase of its development. End Comment.
Linehan