SAO PAULO, Brazil – Brazil’s government is backing legislation to significantly boost the stake foreigners can hold in domestic airlines, the defense minister said Thursday.
Nelson Jobim, whose ministry oversees civil aviation, said raising the limit on foreign ownership to 49 percent from 20 percent would increase competition and draw investment to help ease an air traffic crunch.
Brazil’s booming economy has given business and pleasure travelers much more cash to fly around a country nearly the size of the continental United States, he said, straining the capacity of the two dominant carriers, Gol Linhas Aereas Intelligentes SA and TAM Linhas Aereas SA.
“We have demand way above our capacity,” Jobim told foreign reporters.
The founder of U.S.-based JetBlue Airways Corp., David Neeleman, plans to start a Brazilian airline next year, but it will begin with just three jets and isn’t expected to reach its goal of 76 planes until 2014.
Neeleman holds Brazilian citizenship, so he isn’t affected by the limits on foreign investment in airlines.
But the restriction has hindered other foreign investment and may have contributed to a lack of significant international bids for bankrupt carrier Varig, which was bought by Gol several years ago.
Jobim also said that Brazil has largely resolved the problems that caused aviation chaos last year.
The government is investing in improvements to ease airport congestion and airlines have accepted more-stringent government supervision, Jobim said.
Jobim got his job last year when President Luiz Inancio Lula da Silva fired the former defense minister following mass flight cancellations and delays, radar breakdowns, controller strikes and the nation’s deadliest crash. A TAM jet barreled off the runway at Sao Paulo’s Congonhas airport in July, killing 199 people. The cause has not yet been determined.