Brazil: LATAM, Gol, and Azul complain about fuel prices, ask for tax reductions

RIO DE JANEIRO, BRAZIL – Brazil’s Minister of Economy, Paulo Guedes, received at the beginning of the week the presidents of Latam, Gol, and Azul, the leading airlines operating in the country, who expressed to the Secretary of State their concern about the increase in the price of aviation fuel and requested tax breaks for the sector, reported the local media Valor Economico.

According to the companies, the fuel price rose 76% in 2021 and now represents 50% of their costs, above the 30% previously recorded, amid the pressures introduced by the war in Ukraine. The companies estimated that this item caused a loss of R$16.5 billion (US$3.5 billion) for the industry last year and led to an increase in tariffs.

The agency in charge of consumer protection in São Paulo, Procon-SP, requested the airlines clarify the reasons for the increase in baggage fees and inform in detail what items make up the fare.

DARTS AGAINST PETROBRAS

According to the airline operators, part of the increase is due to the lack of competition in the fuel market. They denounce the monopoly of the state-owned oil company Petrobras. The companies had previously met with the Administrative Council for Economic Defense (CADE) representatives and, in March, raised their complaints about the oil company before the agency, requesting that jet fuel be included in an investigation initiated in January on price readjustments.

“There is a de facto monopoly in the production and import of QAV (Aviation Kerosene) by Petrobras, which acts as an almost exclusive supplier in the country,” state the associations that signed the petition, quoted by Folha de Sao Paulo.

The entities point out that Petrobras makes small price fluctuations, charging more when there is no competition and less when other companies seek to import, taking advantage of the fact that competitors are obliged to use its logistics infrastructure.

TAX CUTS

Faced with this scenario, the executives asked for a tax refinancing program (Refis) or air traffic control fees deferral. In addition, they asked for rebates on the payroll tax, the hazardous work premium, the Cofins (Social Security Financing Contribution) on imports, the ICMS (Tax on the Circulation of Goods and Services), and the income tax on aircraft leasing.

Although the government opened itself to the possibility of creating a dialogue table to discuss the accusations against Petrobras, tax cuts seem less viable. A proposal to cut the income tax on aircraft leasing was already proposed at the end of 2021, but it has not been received in congress, and the deadline for it to be ratified by legislators is April 30.

When consulted by Folha, Latam highlighted the difficulties posed by the current scenario, pointing out that it forced the postponement of the launching of new routes and raised the price of tickets and services by up to 30%.