July 11, 2016 / 6:53 PM / in 2 years

UPDATE 2-Brazil gov't to push for end to airline foreign ownership cap

(Adds decree details and Quintella comments on airport auctions)

By Leonardo Goy and Alonso Soto

BRASILIA, July 11 (Reuters) - Brazil’s interim government plans to remove foreign ownership limits on domestic airlines through a presidential decree or an act of Congress this year, Transportation Minister Mauricio Quintella said on Monday.

Facing opposition from some senators, Interim President Michel Temer agreed in June to partially veto a decree allowing foreigners to own up to 100 percent of Brazilian airlines. That will leave maximum foreign ownership of airlines at 20 percent, but Quintella said the government still wants to lift the cap altogether.

“We will insist on 100 percent ... We have to think now about reopening the debate in the Senate,” said Quintella from his office overlooking the two-chamber Congress in Brasilia.

Temer, a conservative who has replaced leftist President Dilma Rousseff while she faces an impeachment trial, agreed to the partial veto to prevent lawmakers from striking down the complete decree, which contained measures that paved the way for the sale of the state-run airport operator Infraero.

In his comments to Reuters, Quintella also harshly criticized the chief executive of airline Azul, Antonoaldo Neves, who voiced opposition to raising foreign ownership of domestic airliners to 100 percent in an interview with newspaper Folha de S.Paulo over the weekend.

“Azul is the only airline opposing this,” Quintella said. “It is natural that he doesn’t want competition, but that’s not what the country wants.”

Azul Linhas Aéreas Brasileiras SA, Brazil’s third-largest airline, is controlled by JetBlue Airways Corp founder David Neeleman.

A two-year recession has curbed air travel in Latin America’s largest country and weakened the local currency, which battered the profitability of Brazilian airlines by driving up the cost of fuel and aircraft leases.

Foreign capital could help shore up the finances of local airlines, especially Gol Linhas Aereas SA, which has had limited success restructuring its costly debt burden.

Gol, partly owned by U.S. carrier Delta Airlines Inc , dominates the Brazilian market together with the local unit of Chile’s Latam Airlines Group SA.

China’s HNA Group took a $450 million stake in Azul last year and has shown interest in buying its smaller rival, Avianca Brasil, which has also attracted interest from Delta and United Continental Holdings Inc, sources told Reuters last month.

Quintella said the government is preparing to auction off concessions to operate four airports, which could provide it with at least 1 billion reais in revenues in 2017. The auction, expected later this year, is for airports in Florianopolis, Salvador, Porto Alegre and Fortaleza.

Reporting by Alonso Soto and Leonardo Goy; Editing by Tom Brown

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