Lula’s airline rescue plan wins approval in Brazil’s lower house

Brazilian lawmakers approved a long-awaited financial aid plan for the airline sector that is expected to provide 5 billion reais ($914 million) in credit for troubled carriers. 

The program, already passed by the Senate, was cleared in the lower house on Wednesday. It now needs to be signed by president Luiz Inacio Lula da Silva, who campaigned on a pledge to restore prosperity in Brazil and wants to cut fares enough to allow the poor to fly regularly. 

The government expects airlines to use the funds to purchase and maintain aircraft as well as invest in training their workforces. 

Government aid has been under discussion since late 2023, when sharp fare increases prompted Lula to order his cabinet to seek solutions to help companies that have been struggling since the pandemic. A plane crash this month outside Sao Paulo, which killed all 62 people aboard, brought renewed attention to the issue.

Lula’s program will use funds from Brazil’s national civil aviation fund to back loans from the country’s development bank, BNDES. 

Airlines in Latin America have been facing significant financial turbulence. Santiago-based Latam Airlines Group SA filed for Chapter 11 bankruptcy in 2020 and has since emerged from the process. Gol Linhas Aereas Inteligentes SA, meanwhile, filed for protection from creditors in January after a dozen attempts to restructure its debt. In April, it started talks with rival Azul SA on a possible deal.

Since Covid decimated the travel industry, ticket prices have skyrocketed amid high fuel costs, shortages of aircraft and lawsuits from unhappy costumers.

The new government funds will be available for all airlines, but Gol’s eligibility remains a question mark. According to Brazilian law, companies that are restructuring their debts in court face restrictions when accessing credit from public funds.

The government seeks to work on a solution for the carrier. One possibility for Gol would be accessing the funds through a private partner. “We will have a meeting with BNDES and Gol and see how we can help,” Ports and Airports Minister Silvio Costa Filho said at an Aug. 13 news conference.