Brazil: Rio’s Santos Dumont Airport to be auctioned jointly with Galeão in 2023

RIO DE JANEIRO, BRAZIL – Santos Dumont Airport, near downtown Rio de Janeiro, will be auctioned along with Galeão International Airport in the second half of 2023, announced yesterday, February 10, Infrastructure Minister Tarcísio Gomes de Freitas.

In a press conference, he confirmed Santos Dumont’s withdrawal from the 7th Round of Airport Auctions, scheduled to take place this year.

With the decision, the 7th Round was left with 15 airports to be sold in 3 lots: São Paulo-Mato Grosso do Sul-Pará (lot that includes the Congonhas Airport, in São Paulo’s capital and 8 other airports); Rio de Janeiro-Minas Gerais (which was left only with the airports of Jacarepaguá, in Rio de Janeiro, Montes Claros, Uberlândia and Uberaba, in Minas Gerais) and North 2 (comprising the airports of the capitals Macapá and Belém).

“It no longer makes sense to work with Santos Dumont in an isolated way in Round 7. We will consider the two airports together. We are going to assess the joint concession of Galeão and Santos Dumont. This is a reaction to the productive sector and Rio de Janeiro’s government concern,” the Minister said.

The deferral of the Santos Dumont auction occurred after the announcement that Singaporean company Changi, which controls the concessionaire that manages Galeão, will give up the business. The Asian company filed a request with the National Civil Aviation Agency (ANAC) to abandon the concession, after the agency early this month denied a request to review the contract balance.

According to Changi, losses with the decline in air traffic during the pandemic reached R$7.5 (US$1.4) billion. The concessionaire, which currently owns 51% of the airport, wanted to deduct this amount from the fees to be paid to the government until 2039, when the current contract would end. In updated values, the company would have to pay a little over R$1 billion per year.

The Minister announced that Changi will continue to provide services at Galeão until the new concession contract is signed. The other 49% of Galeão is managed by the state-owned Infraero.

“We have been monitoring this issue at Galeão for some time now, and this is due to the way the concession was made and the bid placed in the past. The proposal offered at the time was R$19 billion, exceeding R$30 billion in updated resources. This represents a payment of more than R$1 billion per year and revenue is not enough to cover this payment,” Freitas explained.

GROUP CLOSED

With the deferral of the Santos Dumont auction, the federal government and Rio de Janeiro state and municipal authorities working group will be closed. The group discussed the bidding model for Santos Dumont. Before the decision, talks were stalled because local authorities were against a potential expansion of Santos Dumont, which would further reduce air traffic at Galeão, struggling to recover pre-pandemic demand.

The Galeão concession contract has been in place since 2014. At the time, the consortium formed by contractor Odebrecht and Changi won the auction. In 2017, Odebrecht sold its share in the consortium to Changi, amid the contractor’s financial woes following Operation Lava Jato.

REPERCUSSION

Shortly before the press conference, Legislative Assembly of Rio de Janeiro president André Ceciliano lamented Changi’s withdrawal and advocated the suspension of the Santos Dumont auction.

“It is clear to me, having always fought for a balanced operation of the terminals in the Center and Ilha [do Governador, where Galeão is located], that following this announcement, the Santos Dumont auction must be immediately suspended in order to discuss a new model for Rio de Janeiro that renders the operations of Galeão International Airport viable, not only in terms of passengers, but also in terms of cargo handling and aircraft maintenance,” stressed the president of ALERJ.