Brazil speeds up $1 billion rescue for troubled airlines

Brazil’s government is working on an emergency plan to help alleviate financial pressures on airlines and address the high cost of consumer litigation and a lack of competition, according to a person with knowledge of the matter.

The government is proposing using public funds as collateral for loans to the carriers from the country’s development bank, known as BNDES, the person said. It is expected to be issued it as a provisional measure in the coming weeks, allowing the changes to then take effect immediately. 

The amount of aid is still being discussed, but would not exceed 5 billion reais ($1 billion), the person said. While that is far from what companies need, it would help them to continue operating normally while they restructure debts, according to the person, who asked not to be named discussing private information. 

The government has been mulling a bailout for the industry for months. The plan took on added urgency after Gol Linhas Aereas Inteligentes SA filed for Chapter 11 bankruptcy protection on January 25.

A Finance Ministry representative declined to comment. 

Brazilian airlines have been struggling since the pandemic, and issues have been building amid rising fuel prices, delays in the production of new aircraft and currency volatility. 

While demand has rebounded even as companies jack up prices —  fares in Brazil have surged nearly 50% over the past year — carriers have also had problems with costs to handle frequent lawsuits from consumers. That has kept new airlines from coming into the market, the person said.