Executive Summary
Commercial Aviation
There are three major segments that U.S. suppliers in this industry should focus on, which are the original equipment manufacturers (OEMs), the General Aviation, and the Repair & Maintenance markets. A fourth niche, still small but growing rapidly, is the UAV (unmanned aerial vehicles) market.
OEMs – Embraer is a global company headquartered in Brazil with businesses in commercial and executive aviation, as well as in defense and security markets. Founded in 1969, the company became a leading manufacturer of commercial jets up to 150 seats. In July 2018, Boeing and Embraer signed a Memorandum of Understanding to establish a strategic partnership. However, on April 25, 2020, Boeing announced that it has terminated its Master Transaction Agreement (MTA) with Embraer, under which the two companies sought to establish a new level of strategic partnership.
Currently, Embraer imports approximately 56% of its components from North America, mostly from the United States. Embraer always welcomes the registration of new and qualified companies in its Supplier’s Portal www.embraersuppliers.com. Embraer’s selection criteria take into consideration: technical solutions; product quality; commercial and aftermarket support; supplier’s performance, expertise and financial health; and manufacturing capability. It requires certifications such as, but not limited to, AS9100, EN9100, JISQ9100, and NBR15100. Depending on the type of the product, additional certifications might be required.
The other major OEM is Helibras, the Brazilian subsidiary of Airbus Helicopters. In 2019, approximately 36 helicopters were produced in its Brazilian plant, serving the military and civil markets. Companies interested in supplying parts or technology to Helibras should send an e-mail to procurement@helibras.com.br. Information on requirements to become a supplier is also available on the company’s website www.helibras.com.br.
Commercial aviation share has been decreasing since 2015 and has kept a 1% reduction rate until the first six months of 2019 in comparison with the 2018 fleet.
General Aviation
According to the Brazilian Association of General Aviation (ABAG), general aviation plays a strategic key role on the development of Brazilian transportation and logistics industries by establishing connections with 5,568 municipalities, through 2,567 airport spread across the Brazilian territory, which in 2018 were responsible for more than 600,000 landing and takeoff operations. It all happened with approximately 7,800 airplanes and helicopters in activity, being 610 jets, 1,130 turboprops, 1,160 helicopters and about 4,900 piston engine aircrafts, distributed among passenger air taxis, load and aero medics services, private operators, and flight instruction providers.
Cessna, Neiva, Piper, Embraer and Beechcraft together represented 50% of the existing fleet. According to a study conducted by the Brazilian General Aviation Association, 40% of the fleet is concentrated in the Southeast region, but in 2018 the South and the Midwest regions registered the highest growth rate of 5.99% and 4.17%, respectively.
In a subcategory sector within the general aviation industry, the aerial agricultural sector has never had a negative year in fleet growth. According to the National Agricultural Aviation Companies Union, in 2018, 79 aircraft were added (5 helicopters and 74 aircraft).
Repair & Maintenance
According to the Brazilian National Civil Aviation Agency, the Brazilian fleet consists of 22,219 aircraft composed of 640 commercial aircraft, 15,914 general/business aircraft, and 5,665 experimental aircraft. Due to the political and economic disruptions going on in the country, demand for new aircraft has slowed down over the last couple of years, but the demand for replacement parts will likely continue growing over the next few years.
In 2018, the market for aircraft repair and maintenance was estimated at US$730 million and has annually expanded 5-6%. The relatively strong market for repair and maintenance is driven by more than 40% of the general aviation fleet being composed of one or two-engine piston-powered aircraft with more than 30 years of use. The average age of the general aviation fleet is currently 30 years, while the commercial aviation fleet has an average age of six years. To provide repair and maintenance services in Brazil, a company needs a Maintenance Organization Certificate (COM) issued by the National Civil Aviation Agency – ANAC. There are 522 maintenance bases currently in Brazil with a valid COM. The importation of parts and components for the aeronautical industry amounted to US$9.2 billion in 2018. Around 36% of the imports have their unit value in the range of US$10 thousand and US$100 thousand.
Unmanned Aerial Vehicles (UAVs)
There is no official data on the size of the UAV market in Brazil, but it is estimated to be approximately US$80 million. Following a worldwide trend, the market should grow rapidly over the next few years, mainly in the agricultural and inspection segments. In May 2017, the Brazilian National Aviation Agency (ANAC) approved the special regulation for the commercial use of UAVs throughout the Brazilian territory. UAV operations in Brazil must follow the ANAC regulations as well as the regulations established by the Brazilian Air Space Control Department (DECEA) and the National Telecommunications Agency (ANATEL). According to ANAC, there are currently around 2,400 companies registered for drone operations in Brazil.
The services provided by drones have increased over the last years, perceived by the increase in the number of drones used for professional reasons. The main activities are agricultural mapping, mainly used in ethanol production. In 2019, most drones (64%) were used for recreational reasons and the owner’s registries are mainly individuals.
Airlines
Currently, there are 11 air transport domestic companies with regular certification to operate in the country; they are concentrated in five Brazilian states: São Paulo, Paraná, Amazônia, Goiás, and Rio de Janeiro. There are 72 foreign companies certified to operate regularly in the country. The United States hosts most of these companies, followed by Argentina and Colombia, with seven, five, and four companies, respectively.
In 2018/2019, the highest concentration of operations was made by Azul (29%), followed by GOL (27%) and LATAM (24%). Although Azul has the most operations in 2018/2019, it is not the biggest company in terms of transported passengers. Azul uses mainly narrow-bodied aircrafts and connects, although not exclusively, smaller airports in Brazil. The most used aircrafts in commercial aviation are the Airbus A320 (20%) and the Boeing Bt38 (22%).
In 2019, 107 million passengers were transported by Brazilian and international airlines, 1.2% more than in the previous year.
Ground Service Providers (GSP)
Ground Service Providers (GSP) plays a key role to bolster the aviation sector in Brazil. Currently, it accounts for 40% of the potential service types in Brazil. According to the International Air Transport Association (IATA) world average is 50%, showing that the country is in the right path to reach this goal. In comparison to May 2016 and December 2018, there has been a 30% rise in the segment. Brazil has 120 GSPs which, together, are responsible for generating more 42 thousand direct jobs.
Market Entry
Limitations on Selling US Products and Services
Aeronautical products must have a certification issued by ANAC – National Civil Aviation Agency, responsible for the regulation, inspection, and safety of civil aviation activities, aeronautical products, and airport infrastructure.
Import Requirements & Documentation
As in most industries, having a local office or a trusted and well-respected local representative with extensive contacts and a solid sales record is a critical business practice to succeed in Brazil and is required.
Some of aviation technology might be subject to ITAR regulation. U.S. companies should contact the State Department to learn about regulations and restriction before engaging in any business practices.
Selling to the Government - if applicable
To conduct business with the Brazilian government Agencies, U.S. companies must be prepared for a long and complex engagement. In addition to the ever-present desire for offsets, U.S. firms must be prepared to engage in long-term partnership with the Brazilian local partners.
Distribution & Sales Channels - if applicable
Brazil is a geographically large country. Aircraft part suppliers without local representation may find it difficult to build relationships, get timely information, and gain access to decision-makers.
Principle Business Associations
ABIMDE – Brazilian Defense and Security Industries Association – www.abimde.org.br
AIAB – Aerospace Industries Association of Brazil – www.aiab.org.br
COMDEFESA/ FIESP – Department of Defense and Security / State of Sao Paulo Industry Federation – www.fiesp.com.br
ABAG – Brazilian Association of General Aviation – www.abag.org.br
ABEAR – Brazilian Airlines Association – www.abear.com.br
IBA – Brazilian Aviation Institute – www.institutoaviacao.org
ABESE - Brazilian Association of Electronic Security Equipment - www.abese.org.br
ABSEG – Brazilian Association of Security Professionals www.abseg.org.br
FENAVIST – National Federation of Security Companies - www.fenavist.org.br
Current Market Trends and Demand
To provide repair and maintenance services in Brazil, the company needs a Maintenance Organization Certificate (COM) issued by the National Civil Aviation Agency – ANAC. There are 522 maintenance bases currently in Brazil with a valid COM. The importation of parts and components for the aeronautical industry amounted US$9.2 billion in 2018. Around 36% of the imports have their unit value in the range of US$10 thousand and US$100 thousand.
Due to the COVID19 pandemic, according to Brazilian local aviation authority ANAC, as of April 20 the number of flight operations has been reduced by 91.6%. The number of cities served by Brazilian airlines decreased from 106 to 46, while the number of weekly flights fell from 14,781 to 1,241. Gol, a domestic market leader, reduced its flights by 92%, maintaining 50 daily flights. The number of flights of Latam Airlines was down by 95%, with all international flights suspended. Azul maintained 70 daily flights, 90% less than in the pre-pandemic periods. Regional airlines VoePass and MAP suspended their operations, as of 23rd of March.
Opportunities
Aircraft Parts
Better integration is expected in areas of supply chain and procurement, composites and metallic structures, automation technology, connectivity and MRO. The industry welcomes competitors and development of the existing supply chain within the aerospace sector to respond to the challenges imposed by the COVID-19 pandemic on the aviation industry in Brazil.
UAV
According to consultancy PwC, Brazil follows global trends and has its drone market divided among sectors including infrastructure (41%), agriculture (26%), logistics (10%), safety (8%), entertainment (7%), insurance (5%) and mining (3%). Although the country has a greater emphasis on the use of drones in the agricultural sector, where its drone industry grew approximately 25% in 2019.
GSP
Services like baggage transport, aircraft cleaning, safety inspections, check-in, aircraft fueling, surface transport for crew and passengers, X-ray for hand luggage and checked luggage, air cargo handling, export and import, among other activities, are part of the GSP activities. Brazilian airports privatization has boosted the sector over the past years.
Airports
As a result of Brazil’s airport privatization program, airport infrastructure presents significant business opportunities for U.S. companies as the winners of airport concessions upgrade existing infrastructure. In addition to design and consultancy services, opportunities exist in areas such as passenger bridges, docking systems, baggage handling systems, handling equipment, check-in conveyors, x-ray integration, baggage claim carousels, x-ray machines and other safety and security equipment.
Companies with know-how in the areas of airport management and operations are welcome to establish partnerships with local Brazilian companies and are encouraged to participate in future privatization auctions. To succeed in Brazil, U.S. manufacturers must either be established in the country or have a well-informed local representative. Much like in other sectors in Brazil, it is important to have a distributor or system integrator that can offer post-sale and maintenance services, replacement parts, and repairs. Whether introducing a product to the market independently or entering with an existing local partner, it is necessary to have a coherent market entry strategy to penetrate the Brazilian airport industry.
