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Saturday, December 1, 2007

Latin America Notebook: Growth Engines

Claudio Agostini

BUSINESS AVIATION IS A GROWing market in Latin America. That is particularly true in countries directly affected by the conjunction of specific trends — the rising price of oil, the related increase in demand for oil production, and the growth of foreign direct investments.

These trends are benefiting the economy of countries like Brazil, Mexico, and Venezuela. That is reflected in the growth of the population of what are called high-net-worth individuals. That group increased 10.2 percent in the region in 2006, compared with 2005, and is continuing to grow faster than the global average.

Leaders in that growth are Argentina, Brazil, Peru, and Chile, according to the World Wealth Report, compiled by the global consulting and professional services firm Capgemini and the financial powerhouse Merrill Lynch.

Two Latin American countries also benefit from being part of the BRIMC. That relatively new term, which stands for Brazil, Russia, India, Mexico, and China, is derived from the term BRIC, coined some years ago by Goldman Sachs to identify the world’s emergent economies.

The Brazilian economy also has benefited from the recent decline of inflation and favorable exchange rates of the real against the U.S. dollar. Both are driving up imports in general and aircraft, including helicopters and very light jets, specifically. Expectations are that these trends will continue next year as a result of the country’s strong economy and its stable political situation. That should carry over into aviation markets, given the current lead times for the delivery of ordered aircraft of 1.5-2 years.

Helicopters represent about 10 percent of Brazil’s total civil aircraft fleet. According to the national civil aviation agency, ANAC, in October there were 11,320 fixed-wing aircraft and 1,085 helicopters registered in the country. The fleet of helicopter, both new and used, is projected to grow considerably in 2008 and 2009 if orders made throughout 2007 are executed. The offshore support and passenger transport represent the largest-growth sectors of the helicopter market.

That market is highly concentrated in Brazil’s three key southeast states. São Paulo has 465, Rio de Janeiro 224, and Minas Gerais 110, collectively representing nearly 74 percent of the country’s total fleet. They all have considerable room for growth in their fleets, as do other states with new, wealthy, developing cities. That growth is fostered by increased appreciation in Brazil for the diverse utility of the helicopter.

To seize the advantage of those trends, Eurocopter and AgustaWestland are taking strong actions to support and expand their local activities.

Eurocopter, through its subsidiary Helibras, is expanding its facilities in the state of Minas Gerais. There, Helibras has a production line for Esquilos, the variant of the AS350 built under license locally. Next year, Helibras plans to begin offering maintenance for the AS365 Dauphin’s transmission gearboxes and other services, to be announced in the coming months.

AgustaWestland is doubling its facilities in São Paulo state to support the expected increase of deliveries and sales next year and in 2009. It already is scheduled to deliver 20 units in 2008 — three AW139s, 10 AW109S Grands, and the remaining seven units a combination of A109E Powers and A119 Koalas. Furthermore, about eight used Powers are also expected to enter service during 2008, according to Eduardo Brandão, sales and marketing director of Ocean Air Air Taxi, AgustaWestland’s aggressive local sales representative and maintenance center.

On the related safety and maintenance fronts, ABRAPHE (the Assn. of Brazilian Helicopter Pilots, based at Campo de Marte Airfield in São Paulo City) has become the newest member of CENIPA, the government’s Aviation Accident Prevention Center. The center has developed a Helicopter Group, which will take effect in 2008. ABRAPHE also has improved and plans to expand its HeliCam service, which is composed of a series of real-time cameras placed in critical flight areas that can be accessed through their Website to help helicopter pilots and whoever needs timely images of weather and other conditions. The system is operating along Rio de Janeiro’s and São Paulo’s coastlines and is being expanded to other required areas.

The development of Brazil’s aeronautical industry is being driven by the successful indigenous aircraft manufacturer Embraer, based at São Jose dos Campos in eastern São Paulo state, about 55 mi from São Paulo city. Embraer is particularly responsible for the growing relevance of local third-tier aerospace suppliers.

As result, the São Paulo Federation of Industries, FIESP, the strongest federation in the country, is about to create an Aviation Working Group to mobilize and improve the industrial base through research, studies, recommendations, and actions and support development of local industries to better integrate them into local and global supply chains of the aviation industry. (São Paulo represents accounts for about 34 percent of Brazil’s gross national product, 40 percent of its industrial production, and 90 percent of its aerospace industry.) Beyond that, the group is developing a helicopter sub-group within the Aviation Working Group, which is expected to be implemented at the same time, in March.

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