Brazil aviation deal eases risk to order for Embraer jets

martes 11 de noviembre de 2014 12:50 GYT

By Brad Haynes and Luciana Otoni

SAO PAULO/BRASILIA Nov 11 (Reuters) - Opposition lawmakers in Brazil agreed to restore a key part of President Dilma Rousseff's regional aviation plan, backing off a change that threatened at least one airline's order for jets made by domestic planemaker Embraer.

Senator Fernando de Souza Flexa Ribeiro and government ministers reached a deal on Tuesday to subsidize up to 60 seats on less profitable routes to smaller cities, restoring a cap that he had tried to remove, according to an advisor to the senator and a senior official at the finance ministry.

The chief executive of Azul Linhas Aereas, Antonoaldo Neves, had warned that removing the cap would unfairly advantage larger planes made by Boeing and Airbus. Neves told Reuters on Monday he would put off and cancel deliveries of Embraer jets if lawmakers made that change.

Embraer jets seat 70 to 120 passengers, so a subsidy on up to 60 seats per plane, depending on capacity, would subsidize a greater portion of travellers on Embraer jets than those riding larger planes made by Boeing and Airbus.

The deal appeared to be one of the first key agreements that President Rousseff's government reached with a strengthened opposition since her narrow reelection last month, but it may require more spending on the aviation program.

As part of the accord, Brazil would spend 1.3 billion reais ($500 million) per year to subsidize flights to smaller cities, according to a senior finance ministry official. An earlier version of the bill had considered half as much spending.

In Rousseff's second term she faces the challenge of steering legislation through an unruly Congress while managing a budget deficit that led analysts to warn of a credit downgrade.

Brazil's two biggest airlines, Gol Linhas Aereas Inteligentes SA and the TAM division of Latam Airlines Group SA have said they were also considering buying Embraer jets under the new regional aviation plan.

TAM CEO Marco Antonio Bologna said on Tuesday the airline will decide by March on an aircraft to fly regional routes.

($1 = 2.56 Brazilian reais) (Editing by W Simon)