Aviation

The Brazilian aviation industry remains one of the most important in the Southern Hemisphere. Brazil is one of only six countries in the world that manufactures commercial jets and has been one of the top 10 export destinations of U.S. aerospace products for many years.  

Opportunities 

There are significant opportunities for U.S. companies to do business and/or become a supplier to the Brazilian aviation sector. There are major subsectors and segments in the industry that U.S. suppliers should focus on, which include but are not limited to OEMs (original equipment manufacturers), aircraft repair & maintenance.

Companies with know-how and technology in these areas are welcome to establish partnerships with local Brazilian companies and are encouraged to participate in future public tenders and reverse auctions opened by the Brazilian government. To succeed in Brazil, U.S. companies 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 market. 

Leading Sub-Sectors 

Commercial Aviation 

Commercial flights in Brazil remain below pre-pandemic levels, but the market continues to recover. Analysts indicate that the industry will surpass 2019 total flight levels by the fourth quarter of 2022. This trend has been common worldwide where the number of passengers boarded globally reduced drastically during the COVID-19 pandemic and has since began recovering, with a projected 3.4 billion passengers to be transported in 2022.

Brazil possesses a large commercial aviation market. According to Agência Nacional de Aviação Civil (ANAC), in 2021 Brazil conducted over 546,000 domestic and 53,000 international flights. In 2019, its markets ranked 10th globally in terms of annual domestic flight passengers with 119.4 million passengers transported. Unsurprisingly, this number decreased considerably during the pandemic. However, in 2021, a total of 67.3 million passengers were transported, a rebound of 30% from 2020.

Demand is strongest for U.S. suppliers in three subsectors: OEMs, general aviation, and repair and maintenance. A fourth niche, which is growing rapidly, is the drone and UAV market.

With regards to OEMs, Embraer is a global company headquartered in São Paulo with businesses in commercial and executive aviation, as well as in defense and security markets. Founded in 1969, the company has become a leading manufacturer of commercial jets up to 150 seats. 

Currently, Embraer imports approximately 60% of its components from North America, mostly from the United States. Embraer’s selection criteria take technical solutions, product quality, commercial and aftermarket support, and several other factors into consideration. It requires certifications such as AS9100, EN9100, JISQ9100 and NBR15100.  Depending on the type of product, additional certifications may be required.

The other major Brazilian OEM is Helibras, the Brazilian subsidiary of Airbus Helicopters. Helibras sold 14 helicopters in 2019, 9 in 2020 (impacted by the pandemic), and 19 in 2021.

 

The chart below presents the number of aircraft by manufacturer per airline that operated domestic flights in 2021:

 

Embraer, through its subsidiary EVE Air Mobility, created on October 15, 2020, is accelerating the development of solutions capable of making the Urban Air Mobility market a reality. Its main project is the Electric Vertical Take-Off and Landing Vehicle (eVTOL), with its first prototype presented on May 8, 2018 (before the company was created). Its first simulated flight took place in September 2021.

The eVTOL is similar to a helicopter, but at a lower cost and enables trips of short time and distance through a vertical take-off and landing, which excludes the need for a long runway. The eVTOL is developed with electric motors, which guarantees silence and sustainable use.

Initially it will be driven by a pilot, but there are goals to make the vehicle autonomous.

Embraer plans to start eVTOL production in 2026, with the first flight to be carried out in Rio de Janeiro. The vehicles will be able to carry up to four passengers plus the pilot. The fleet will have 200 units and 37 landing sites, called verti-ports, which are expected to be fully operational in 2035. Two have already been announced: at Galeao Airport and the Henrique Simonsen Business Center, in Barra da Tijuca.

General Aviation  

While the COVID-19 pandemic harmed many business sectors, executive aviation saw an increase in activity. A desire for health security saw more people prefer private flights to protect themselves from contamination, and this generated an increase in demand for air taxis at first, and then soon after, for the acquisition of aircraft. This demand drove an increase in the market for used aircraft around the world and caused not only higher prices, but also a shortage in available aircraft.

In 2021, general aviation operations increased 24.7% from 2020, 3.5% higher than pre-pandemic levels. In the second half of 2021, the number of general aviation flights reached approximately 50,000 per month. For 2022, operations in the category should remain stable until the end of the year, with the possibility of a minimum reduction due to the resumption of commercial flights for domestic travel.

The aviation segment with the largest number of companies authorized in Brazil continues to be the agricultural sector, with 294 companies able to operate services for this important component of the country’s economy. Next are public air services activities, with 217 entities. The other categories in order of importance are aerial photography, air reporting, air advertising, air inspection, aero-cinematography, aerial survey, air taxi, firefighting, scenic flights, aerial demonstration, and external load.

During 2021, 1,220 aircraft were sold in the country, slightly higher than the 1,154 sales in 2020. 227 aircraft were imported, of which 94 were new and 133 used at the time of sale. Turboprop aircraft were the largest category of imported aircraft.

Furthermore, in 2021, 321 general aviation aircraft were imported, 34% new and 66% used. The most imported aircraft were conventional piston engine models, with 160 units.

Brazil has 3,240 airports/aerodromes according to ANAC, 503 are public, and 2,737 are private including 1,340 helipads and 183 helidecks. Ninety-eight percent of the country’s air passenger movements are concentrated in 65 airports. Thirty-one of those airports are in major cities with terminals able to process over one million annual passengers. Since 2019, the GOB has invested $600 million in the expansion of regional aviation across the country.

Repair & Maintenance  

ANAC reports that, in 2021, the civil aviation fleet consisted of 22,569 aircraft, an increase of 165 units compared to 2020. Of this total, 15,853 aircraft were used for general aviation, 6,026 for experimental aviation, and 690 for commercial aviation.

In 2021, manufacturers Cessna, Neiva, Piper, Embraer, Beech and Flyer accounted for 54% of all aircraft in Brazil.

The main manufacturer of commercial aircraft was Boeing, with 232 aircraft, or 33.6% of all commercial aircraft. Flyer was the main manufacturer of experimental aircraft, with 18% market share. Finally, Cessna Aircraft had the largest share of the general aviation market, with 3,819 aircraft, or 24% of general aviation aircraft.

Commercial aviation is almost entirely comprised of jets and turboprops, approximately 96% of the aircraft. At the end of 2021, there were 510 aircraft with jet engines, 14 less than in 2019 and one more than in 2020.

Currently, to carry out maintenance services, there are 748 bases approved by ANAC, 600 of which are in Brazil. The most common type of service is cell maintenance, modification, and repair. To provide repair and maintenance services in Brazil, the company needs a Maintenance Organization Certificate (COM) issued by ANAC.  The Brazilian region with the highest concentration of maintenance bases is the Southeast Region, with 50.2% of the total; São Paulo has 180 bases. The Midwest has 17.7% or the maintenance facilities and Southern 15.2%.

In 2020, the market for aircraft repair and maintenance was estimated at $700 million; however, it is projected to grow at approximately 5% over the next 5 years. This relatively strong market for repair and maintenance is driven by the fact that more than 40% of the general aviation fleet is 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.

Airlines

The number of passengers on commercial flights increased by 33.3% in 2021 compared to 2020. A total of 66.4 million passengers were transported in domestic flights and 900,000 in international flights. With the reduction of social isolation measures, combined with mass vaccination in the country, Brazil registered a 38% growth in domestic flights in 2021. Despite this, international flights showed a reduction of 39.5%, compared to the previous year.

The first quarter of 2022 saw passenger numbers increase 42.7% compared to the same quarter in 2021.

Passenger services are dominated by Azul, LATAM, and Gol. Together, these three companies are responsible for 98.4% of all passenger transport in the Brazilian market. Among the top 3, Azul had the largest share of the market, holding 36.7% of the total, followed by LATAM (31.6%) and Gol (30.1%).

The most used commercial aircraft is the Boeing 737-800 (B738) jet, with 16% of all commercial aviation operations, followed by Airbus A320s with 15%, and Embraer’s E195s with 14%. The most used turboprop is the ATR-72, from the French-Italian company ATR, with an 8% share.

There are 13 domestic air transportation companies certified to operate in the country, concentrated in five Brazilian states: São Paulo, Paraná, Amazônia, Goias, and Rio de Janeiro. Besides the domestic airline companies, ANAC has certified 72 foreign companies 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. 

Ground Service Providers (GSP) 

Ground Service Providers (GSP) play a key role in the aviation sector in Brazil. Currently, GSPs account for 40% of all the services at Brazilian airports, according to the International Air Transport Association (IATA). Demand in this market has grown continuously, and Brazil’s 120 GSPs are responsible for creating 40,000 jobs.  

As the GSP sector continues to develop, there will be demand for services like baggage transportation, aircraft cleaning, safety inspections, check-in, aircraft fueling, surface transport for crew and passengers, x-ray for hand and checked luggage, and air cargo handling. 

Distribution & Sales Channels

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

• AIAB – Aerospace Industries Association of Brazil – www.aiab.org.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   

Defense and Security 

The development of strategic sectors such as defense and space are flourishing thanks to a strong relationship developed between Brazil and the United States over recent years. Currently, there are successful government-to-government and industry-to-industry efforts promoting joint ventures and bilateral commercial cooperation. These programs seek to leverage unique capabilities and technological advantages to promote innovation and cooperation across industries.

Public safety remains a fundamental concern in Brazil, resulting in considerable investment in security equipment and technology. The pervasive nature of the problem has gained enormous public and political visibility, leading the federal government to create a Public Security Department to coordinate a portfolio of law enforcement agencies throughout the country.

Opportunities

There are significant opportunities for U.S. companies to do business and/or become a supplier to the Brazilian defense and security sectors. There are major subsectors and segments in these industries that U.S. suppliers should focus on, which include but are not limited to OEMs (original equipment manufacturers), space launch technologies and communication satellites, and unmanned aerial vehicles (UAV). The Brazilian defense and space sectors also offer unique business opportunities in the segments of wheeled and tracked armored vehicles, short-range air defense systems, weapon systems, attack helicopters, communication satellites, sensors, radars and systems integration, satellite constellations, launch vehicles, space operations centers, and others.

Companies with know-how and technology in these areas are welcome to establish partnerships with local Brazilian companies and are encouraged to participate in future public tenders and reverse auctions opened by the Brazilian government. To succeed in Brazil, U.S. companies 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 market. 

Leading Sub-Sectors 

Safety and Security Industries 

Over the next decade, the Brazilian government security program aims to strengthen border control, combat organized crime, improve the prison system, create a national information system for public security agencies, and combat drug trafficking.  

At the state level, public security secretariats are also investing in the acquisition of new technologies to respond to the public outcry against crime across the country.

 

According to expert analysis, the Covid 19 pandemic so rapidly changed health, social, economic, and technological habits, that it moved ongoing digital transformations forward five years in a two-year period. In this process, analytics capable of counting people, measuring temperature when entering an establishment, identifying employees who do not comply with distancing and wearing a mask, among others, have boosted the safety and security sector.

In 2022, companies are expected to explore more strategic technologies, including solutions that involve artificial intelligence and native cloud computing, according to a report by the consultancy Gartner.

Accordingly, the security market has moved beyond the traditional human-based monitoring that has dominated the market since the 1960s, where only a single occurrence can be responded to at a time. Growth in the use of analytics, migrating to intelligent monitoring, and innovative, proactive solutions that prevent occurrences, anticipate risks, and stop criminal actions before they happen, are the major trend.

In addition, while monitoring, intelligent security also collects valuable data that can be used in different ways by all sectors of both law enforcement and the private sector. More integration with the Internet of Things (IoT) and other technologies, and more devices capable of improving monitoring will be integrated into smart security systems, such as temperature sensors, lighting, and elevators, bringing even more efficiency to operations.

Greater migration to the cloud, whether in a simple way, such as backing up cell phone photos, or more complex, like the storage of entire security operations, making data more reliable and accessible, has become a valuable resource for the security market and the trend is for companies to migrate more from local storage to the cloud. Privacy laws have also been strengthened. With the passing of the General Personal Data Protection Act (LGPD), the privacy of people and their data has become mandatory.

Cyber security is a priority for many companies. Between January and June 2021, Brazil suffered more than 16 billion attempted cyberattacks, according to data collected by FortiGuard Labs. As a result, both the public and private sector understand the importance of adopting a strong cybersecurity architecture.

Private Security

Today, the private security market in Brazil, regulated and supervised by the Federal Police, is made up of 2,471 specialized companies — which provide surveillance services upon contract — and 1,154 organic companies – companies that directly hire security guards. The number of guards with active registration with the Brazilian Federal Police totals 502,318 working private guards in specialized companies and 23,790 in organic companies.

Property security constitutes the largest amount of private security in Brazil. More than 50% of specialized companies and 99.1% of organic companies operate exclusively in asset protection. In the case of specialized companies, the rest of the market is distributed among establishments that, in addition to surveillance of assets, are authorized to carry out armed escort, personal security, and transportation of valuables. Another sector is security training companies.

It should be noted that private security companies in Brazil prefer to purchase lethal weapons over non-lethal weapons. As an example, in the year 2020, in the Southeast Region, companies acquired 4,438 lethal weapons and only 563 non-lethal ones.

Electronic Security

The electronic security market in Brazil was valued at approximately BRL 7.17 billion in 2021; and is forecasted to grow at 12% in 2022 The electronic security industry creates more than 250,000 direct jobs and more than 2 million indirect jobs. The resumption of economic growth, based on rising indicators, also reinforces the cautious optimism with which the market enters 2023.

With more than 26,000 companies and an average market growth rate of 8% per year, players in the market expect to meet the repressed demand of public and private security for solutions that use artificial intelligence, sensors, and the Internet of Things (IoT) to help prevent or solve occurrences without the use of lethal weapons - which are restricted to police authorities or authorized surveillance companies.

UAV

Brazil had the largest market share in the Latin American small UAV market. The Latin American small UAV market is projected to witness a compound annual growth rate (CAGR) of over 5% from 2022-2027. The acquisition of small UAVs for intelligence, surveillance, and reconnaissance (ISR) applications is driven by Brazil’s growing defense budget.

The use of small UAVs in Brazil is steadily increasing in the civil and commercial sectors. Small UAVs are being widely adopted for monitoring applications such as mining, agriculture, engineering, and construction. They also are expected to be used in other potential applications including transport and security.

Drones are currently being used by various government agencies. For example, under the Protected Areas of the Amazon Region (ARPA) program, the Chico Mendes Institute for Biodiversity Conservation (ICMBio) is planning to test small UAVs for surveillance and monitoring of the Amazon rainforest.

To operate any type of UAV, users need to register with ANAC, the Brazilian Civil Aviation Authority.

The tactical UAV market is anticipated to record a CAGR of 19.85% from 2020–2025. The increasing sales of tactical UAVs are mainly due to the increasing acquisitions by the military, which is working to improve its autonomous capabilities. The integration of technologies such as artificial intelligence, cloud computing, hypersonic technologies, and small drone swarms into existing tactical UAV technologies could provide future market opportunities for the development of advanced tactical UAV systems.

Brazil is currently searching for UAV applications in reconnaissance, surveillance, and target acquisition (RSTA). Brazilian law enforcement and military branches are looking for integrated UAV tactical mission solutions, which could include target designation, attack, chemical/biological detection, mine countermeasures, theater air missile defense, electronic warfare, and information warfare. The market includes the use of tactical UAVs in law enforcement and other applications including railroads, firefighting, and oil and gas, among others.

Over the past decade, the Brazilian Air Force has been operating a mixed fleet of Elbit Systems Hermes 900 and Hermes 450 UAVs to perform a range of missions including homeland security and deforestation monitoring operations in the Amazons.

There are significant opportunities for UAV applications that support the Brazilian military’s SISFRON and SIZGAAZ missions. SISFRON and SIZGAAZ are the MOD’s priority programs for land and sea border monitoring, respectively. The difficulty of securing Brazil’s land and sea borders cannot be underestimated, especially since Brazil’s land borders are the third-longest in the world and stretch over notoriously remote terrain. Solutions that are interoperable between armed forces and law enforcement, provide real-time decision-making capability, and have extended ranges would be particularly well-suited to the environment.

Drones

The market for drones is segmented by application (construction, agriculture, energy, entertainment, law enforcement and others) and type (fixed-wing or rotary-wing).

Technological advances, in terms of payload and electronics, are expected to increase the rapid growth in demand for drones. The market is still in an early phase, in terms of mass adoption and use. Various regulations are currently impeding market growth.

Drones are being adopted in a variety of applications, including providing internet in remote locations, aerial photography and video recording, wildlife surveying and documentation, and public service missions.

The services provided by drones have increased in recent years, as demonstrated by the growth in the number of drones used for professional activities. According to market sources, Brazil follows global trends, and its drone market is divided among sectors including infrastructure (41%), agriculture (26%), logistics (10%), safety (8%), entertainment (7%), insurance (5%), and mining (3%). 

The Brazilian Civil Aviation Agency classifies the drones into 3 classes, according to the weight supported during takeoff: 

Class 1 - Greater than 150 kg; 

Class 2- Between 150 and 25 kg;

Class 3- Between 250 grams and 25 kg. 

Drones below 250 grams are considered only for recreational purposes and do not enter the classification.

Only class 1 and 2 drones require an Airworthiness Certificate (CA) for operation; they also need an RAB registration like any aircraft in the Brazilian fleet. Class 3 drones require SISANT System Registration of Unmanned Aircraft.

There are approximately 80,000 registered drones in Brazil, indicating that the Brazilian market is maturing and now undergoing a period of investments in new companies, products, and services in the sector.

Defense 

The federal budget proposal for FY 2023 for the defense sector is around $23 billion. The National Defense Strategy (NDS) continues to be the guide for medium and long-term planning for the defense sector in Brazil. The three strategic sectors highlighted in the NDS are: nuclear, cyber, and space. Major Brazilian strategic defense projects include: the Submarine Development Program (PROSUB) and the Navy Nuclear Program (PNM) coordinated by the Brazilian Navy; the Guarani armored wheeled vehicles, the Integrated Border Monitoring System (SISFRON) and cyber defense coordinated by the Brazilian Army; and the KC-390 aircraft, the Grippen AM-X aircraft modernization, and Space System Strategic Program coordinated by the Brazilian Air Force. 

In 2019, the United States officially designated Brazil as a Major Non-NATO Ally (MNNA). The MNNA designation is a unilateral U.S. decision that identifies its top, strategic defense partnerships.  Brazil is only the second country to receive MNNA designation in the Western Hemisphere and it reflects the strong bilateral defense relationship between the two countries. The MNNA helps support collaboration on the development of defense technologies and provides a number of benefits to the Brazilian government, including special access to the U.S. defense industry, increased joint military exchanges, as well as special access to military equipment financing. 

In December 2021, Brazil’s Congress ratified a United States-Brazil bilateral agreement on research development, test, and evaluation. The agreement should expand opportunities for both countries to collaborate and share information on the development of new defense capabilities and pave the way for potential future cooperation on applied research, development of emerging technologies, analysis, operational studies, demonstrations and testing, and evaluation prototypes. 

Space  

The strategic relationship between Brazil and the United States in the space sector has been rapidly growing in recent years with several foundational agreements signed, such as the Space Situational Awareness Agreement, the CubeSat Agreement to Study Solar Physics, Scintillation Prediction Observations Research Task – SPORT, and the Peaceful Uses of Outer Space Cooperation Agreement. In March 2019, Brazil and the United States signed a technology safeguards agreement that was ratified by the Brazilian Congress and entered into force in December 2019. This agreement allows the use of U.S. technology in space launches from Brazil, specifically the Alcantara Space Launch Center in Maranhão. 

Recently, the Brazilian Space Agency published two public calls to identify companies, domestic or foreign, that were interested in carrying out suborbital and orbital launch operations using the Alcantara Space Center. The technology safeguards agreement is helping unlock bilateral commercial cooperation in a range of advanced technologies related to space. According to Brazil’s Strategic Program for Space Systems (PESE), priorities for the space sector include development in the following areas: satellite constellations, launch vehicles, a space launch center (Alcantara), and a space operations center.  

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.  Some aerospace, defense, and space technology might be subject to ITAR or BIS regulation. U.S. companies should contact the U.S. Department of State and/or the Bureau of Industry and Security to learn about regulations and restrictions before engaging in any business transactions. 

Selling to the Government 

To conduct business with the Brazilian government, 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 transfer technology (subject to pertinent export control regulations) and oftentimes engage in a long-term partnership with the Brazilian aerospace and defense industry for the co-development and local production of components, parts, and assembly.  All government acquisitions are published at  https://www.gov.br/compras/pt-br/.

Pricing

Most Brazilian Armed Forces acquisitions are done through public bids. Generally, bids are evaluated based on technical specifications, price, and availability with an emphasis on lowest price.  The company that presents the lowest price and complies with all technical requirements and documents requested in the bid wins the contract.  Foreign Military Sales (FMS)* are an important and well used government-to-government acquisition mechanism. Sole source procurement is rare and generally only occur with a national security basis.  

*More information about the FMS program can be found at https://www.dsca.mil/foreign-military-sales-faq

Limitations on Selling US Products and Services 

Aeronautical products must have a certification issued by  ANAC – National Civil Aviation Agency, Brazil’s agency responsible for the regulation, inspection, and safety of civil aviation activities, aeronautical products, and airport infrastructure.   

Distribution & Sales Channels

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. 

Principal Business Associations 

• ABIMDE – Brazilian Defense and Security Industries Association
• AIAB – Aerospace Industries Association of Brazil
• COMDEFESA/ FIESP – Department of Defense and Security / State of Sao Paulo Industry Federation
• ABESE - Brazilian Association of Electronic Security Equipment   
• ABSEG – Brazilian Association of Security Professionals

FENAVIST – National Federation of Security Companies