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Brazil’s hosting of the 2014 FIFA World Cup and Olympic Games in 2016 offers plenty of opportunities and challenges for airlines. Last summer’s Olympic Games in London were generally judged to have been a great success. One of the key reasons for this was that new stadiums and transport infrastructure improvements were delivered on time. A second was that organisation was good and customer service levels were rated highly.
Now, the spotlight turns to Brazil – which is hosting next year’s football FIFA World Cup and the 2016 Olympics – and a colossal amount of work is needed to bring the country’s infrastructure up to a level where it will be capable of handling millions of fans and provide a good service. Many of the country’s airport systems are already creaking under the strain of managing more passengers than they were designed to handle, the result of strong economic growth, and extensive upgrade work is required to bring them up to scratch.
“GOL will not change its fleet plan because of the World Cup and Olympics. Rather the company will [make use of] the additional traffic to increase the load factor – which nowadays is near 70 per cent. We will therefore get an opportunity to maximise the extra 30 per cent in the operation”André Brandi Carvalho
Head of IR and Planning, GOL
Brazil is also actively seeking to increase tourism generally, and new facilities will help the country to achieve this. So with the clock ticking, will Brazil be ready to host both events? And what are the benefits of hosting? “Tourism and mega-events are increasingly interdependent,” said Carlos Vogeler, Chairman of affiliates for the United Nations World Tourism Organization. “The impact of hosting mega-events is far longer lived than a few weeks. The hosting of these events is also a unique opportunity to showcase a country and its tourism positioning, attracting more visitors over the long-term through the development and implementation of legacy strategies.
“For Brazil as a host country, every real spent on the 2014 World Cup and 2016 Olympic Games has to be regarded as a long-term investment. Moreover, the impact in terms of image is worth millions of reals,” he added.
“The eyes of the world will be turned towards Brazil,” said Marcelo Pedroso, Director of International Markets for Brazilian state tourism promotion agency Embratur. “These large sporting events will have global repercussions for Brazil. These are fantastic opportunities to transform and reinforce the image of Brazil as a modern and diverse nation. What the spectators view on the TV, online, and in magazines and newspapers goes far beyond the competitions – they see the whole nation.”
Brazil’s Sports Ministry believes construction spending leading up to the World Cup will hit $15.8 billion, and Embratur estimates 600,000 foreign visitors will attend the four-week tournament – contributing to an estimated 7.2 million total overseas visitors next year. The infrastructure needs are massive, with 12 stadiums in the process of being either upgraded or rebuilt, not to mention additional road and rail improvements; will everything be finished on time?
“When it comes to the stadiums, the preparation for the FIFA World Cup is on track and we have the unique opportunity to test half of the 12 arenas during this year’s FIFA Confederations Cup,” said a spokesperson for FIFA. “Regarding the general infrastructure, the Local Organising Committee, FIFA, the Federal Government and the 12 host cities have achieved a very high level of integration. This makes us confident that the necessary infrastructure will be in place come 2014.”
Infraero recorded a mean average increase in passengers of 11.8 per cent between 2003 and 2012. With 12 host cities spread across thousands of miles, teams, officials, media and fans will be clocking up frequent flier miles getting from game to game. This presents a golden opportunity for Brazil’s airlines.
GOL’s strategy is particularly focused on domestic city pairs and it could reap significant benefits. “GOL will not change its fleet plan because of the World Cup and Olympics. Rather the company will [make use of] the additional traffic to increase the load factor – which nowadays is near 70 per cent. We will therefore get an opportunity to maximise the extra 30 per cent in the operation,” explains GOL’s Head of IR and Planning, André Brandi Carvalho. The airline recently ordered 60 new B737 MAX aircraft from Boeing and announced new routes to Miami and New York.
The carrier – which owns the rights and brand of former flag carrier Varig – purchased rival domestic carrier Webjet in 2011, ostensibly to gain access to the latter’s slots at busy airports like São Paulo’s international gateway, Guarulhos (GRU), and Rio de Janeiro’s domestic airport, Santos Dumont (SDU). Carvalho confirms: “The deal was done to increase penetration in strategic Brazilian aviation markets – such as Santos Dumont and Guarulhos. These airports represent the majority of passenger traffic volume in the domestic system.”
Beyond the World Cup, the summer 2016 Olympics will see the city’s two airports – and its roads and urban rail – put to the test when as many as 380,000 visitors enter the former Brazilian capital. Again, many new sporting venues are under construction, as is transport infrastructure, and the hope is that everything will be finished on time. If the authorities are nervous about overruns, they’re certainly not showing it. Embratur’s forecast for the total number of visitors in the country in 2016 is 7.9 million.
With massive numbers of passengers seeking to pass through Brazil in 2014 and 2016, some heavyweight upgrades of airport facilities are vital. Much of this work would have had to be completed at some point anyway, as the country’s powerful economy is driving frenetic aviation growth, and equipment is in need of updating – but the two giant sporting events have made this a priority for President, Dilma Rousseff. Or as Sidrônio Henrique Gomes de Araujo from Brazilian state airport authority Infraero perhaps understates it: “Infraero’s work for the World Cup and Olympics until 2014 is quite expansive.”
He goes on to specify what the work involves: “Passenger terminal makeovers, new control towers, expansions and improvements to runways and apron systems at the strategic Infraero-managed airports located in the World Cup and Olympics host cities – Rio Galeão, Confins, Manaus, Fortaleza, Porto Alegre, Curitiba, Salvador, Recife and Cuiabá.”
When pressed on the specifics of what Infraero wants to achieve, Gomes de Araujo explains: “There are passenger terminal makeovers at Galeão, Confins, Manaus, Fortaleza and Cuiabá, the enlargement of Galeão’s main runway and improvements to the apron system – and also construction of a new control tower in Salvador.”
He adds: “Last year, Infraero also finished many improvements to its airports, such as the passenger terminal makeovers for Natal and São Luís, the installation of passenger modules in Porto Alegre, Teresina and Imperatriz, and the refurbishment of the runway and apron system in Curitiba. We also concluded works on the airports currently under private concession – such as refurbishments and expansions in Brasília.” The cost? $2.9 billion of direct investment by Infraero up to and including 2014.
But to realise its goals, the Brazilian government has turned to overseas investment and expertise to modernise its gateways. The first candidates are São Paulo-Guarulhos, Viracopos serving Campinas and Brasilia which are to be run on a Build Operate and Transfer (BOT) basis by a series of consortia.
“In the case of the Brazilian airports, we use the term ‘concession’ to make clear that the process is regulated by a contract which, among other things, predicts the return of the assets to the state after some period of time – 20 years in the case of Guarulhos (GRU), 25 years for Brasilia (BSB) and 30 years for Campinas/Viracopos (VCP),” said Rogério Teixeira Coimbra, Secretary for Regulatory Policy at Brazil’s Civil Aviation Authority.
Brazilian state apparatus is also looking on the projects with a spirit of generosity – the BNDES National Development Bank authorised a $236 million loan to the Brasilia airport concession team in December 2012 to underwrite works which will take capacity from 15.4 million passengers to 20.7 million in 2014 and 24.4 million in 2016. Most of this cash will go on a new terminal with 15 air bridges – along with associated apron and aircraft parking development, new access roads and car parks.
Teixeira Coimbra explains the works are to be phased based on ‘demand triggers’. “When demand reaches a predetermined value for each airport, the concessionaries must initiate the next phase of expansion. The concessionaries must fulfill quality requirements based on service levels – in this case IATA’s Level C – among other requirements listed in the contracts. Additionally, Infraero has a share of up to 49 per cent in the consortia. Tariffs are regulated based on a ‘price-cap’ model with non-discriminatory discounts widely admitted. We have six types of tariffs: boarding, landing, parking, cargo, storage and a newly created connecting fee.”
São Paulo’s Guarulhos is Brazil’s main international gateway, with a network serving cities in Asia, Africa, Europe and North America. The work going on here involves a new terminal for seven million passengers a year, plus 20 air bridges, 12 remote stands and runway expansion. GRU’s concession was awarded to a consortium including Brazilian infrastructure firm Invepar, OAS and several pension funds. Invepar is also involved in highway construction and the Rio Metro extension – which is also scheduled to be complete in time for the World Cup.
Airports Company South Africa (ASCA) is also part of the consortium and its head of communications, Solomon Makgale, explained that the airport operator may be well placed for the job, given its prior experience of the 2010 FIFA World Cup hosted by South Africa. “We faced a number of challenges ahead of the World Cup in 2010 in South Africa. However, all of the airports [ended up] ready. In this project, quick-wins are being identified and implemented to show improvement to GRU already,” he said.
But whether it’s big or small projects, investment is forthcoming at all levels. “The government has an extensive programme of investment in regional airports which aims to increase the availability of airport infrastructure in locations with low air transport access,” points out Coimbra. “The investment plan at regional airports recently approved by the Secretariat of Civil Aviation comprises $115 million for airports located outside metropolitan areas.”
He adds: “It’s important to emphasise the dual role that the investment meets at smaller airports – on one side it meets a pent-up demand and, as a result, increases the welfare of the population, on the other it constitutes an important vector of regional development.”
The World Cup and the Olympics will both underscore the new democratic Brazil’s startling economic (and political) transformation. Between 2003 and 2011, Infraero recorded average passenger growth rates of 11.8 per cent. New airlines such as Azul have invigorated the market. Manufacturer Embraer has won orders for its E Jets series. “Brazil is also an extremely important tourism source market, thanks to its economic performance, rising middle class and strong currency,” points out Dr Carlos Voegler. “Tourism expenditures grew by an impressive 30 per cent in 2011, reaching $21 billion. This has positioned Brazil as the third largest outbound market in the Americas after the USA and Canada.”
If Brazil can get its airports and stadiums completed in time, you can be confident they will host international sporting events that will be talked about for all the right reasons for a long time to come.