I INTRODUCTION

The year of 2019 was one of highs and lows for the aviation market in Brazil. There were many difficulties and challenges, such as Avianca's bankruptcy procedures, that had great impact on the market, causing a concentration of market share for the remaining airlines, issues with application of the Cape Town Convention, offer scarcity and controversy regarding the redistribution of the slots which were used by Avianca. However, despite all challenges that the Brazilian economy had experienced in that year, the aviation market grew and had an increase in revenue of 1.4 per cent in relation to the year of 2018.2

Furthermore, there were important regulatory developments made by the Brazilian National Aviation Agency (ANAC), such as the new regulations for fatigue management implemented by the Brazilian Civil Aviation Regulation No. 117 of 19 March 2019, that sets forth the criteria and standards that aircraft operators need to comply with in order to fight crew fatigue, and the increase in penalties for irregular air freight, for example. Both measures seek to increase safety in Brazilian flight operations.

Regarding liability and litigation, for international flights the enforceability of the Warsaw and Montreal Conventions was pacified by the rulings made by the Brazilian Supreme Court in 2017. The ruling, however, is only applicable for material damages. Nevertheless, the Consumer Defense Code is still being applied for moral damages by most courts in cases involving international flights. For national flights, the Consumer Defence Code is still applicable to both material and moral damages, even when conflicting with the dispositions of the Brazilian Aeronautical Code. Also, the rates litigation related to air transport issues has increase significantly in Brazil all though the past year, which contribute to offset the positive impact of applying the Warsaw and Montreal Conventions to airline companies operating in Brazil.

It is important to note that, towards the end of 2019 and the beginning of 2020, a new issue arose: the covid-19 pandemic. The outbreak of the disease began in the Chinese province of Wuhan, quickly spread around the globe, and was declared a pandemic by the World Health Organisation on 11 March 2020. It is still too soon to understand the depth of the impact of the pandemic, but its effects can already be felt on the markets, with civil commercial and business aviation being one of the most hard-hit sectors. Certain experts are predicting that the level of the air travel industry will return to the numbers of 2019 only in 2022.

II LEGAL FRAMEWORK FOR LIABILITY

Assessing legal liability in Brazil can be more challenging than it appears at first sight, especially for air transport services, due to the several layers of applicable legislation that need to be considered. Furthermore, the interpretation of the legislation by Brazilian courts is not uniform, so airlines need to resolve litigations mostly on a case-by-case basis. Those factors, along with the facilitated access to legal procedures since the creation of Special Civil Courts for small claims are responsible for the high rates of litigation in Brazil.

Most recently, Brazilian courts have seen a sharp rise in air transport-related litigation: in 2018, the courts registered 64,000 cases, but there was 109,000 new cases registered just in the first semester of 2019, according to a survey made by IBAER (the Brazilian Institute of Aeronautical Law). This spike in aeronautical litigation is attributed mostly to start-ups that offer services to passengers to mediate and seek compensation of damages from airlines.

Nevertheless, for international air transportation, application of the Montreal and Warsaw Conventions is pacified, and is mostly broadly considered by the courts, after an important ruling of general repercussion made by the Brazilian Supreme Court in May 2017 (theme 210/ leading case RE636331). However, the application is limited to material damages, leaving it up to the court to decide on the amount of moral damages based on the full indemnification principle established by the Civil Code (Federal Law No. 10,406 of 10 January 2002) and the Consumer Defence Code (Federal Law No. 8,078 of 11 September 1990).

Even though the excessive litigation in Brazil is cause for attention, airlines and the government are working together to counteract that, searching for alternative forms of conflict resolution, such as mediation, for example. Even with the joint efforts of market players, the culture of the courts to favour full indemnification when possible is unlikely to change in the near future, and the best approach is to search ways for airlines and passengers to work together and reach an agreement outside of court.

i International carriage

Brazil is signatory of several international treaties and conventions regarding air transportation and civil aviation, among which we may mention the following:

  1. the Convention for the Unification of certain rules relating to international carriage by air, commonly known as the Warsaw Convention of 1929, incorporated into Brazilian legislation by Decree No. 20,704 of 24 November 1931;
  2. the Convention on International Civil Aviation, commonly known as the Chicago Convention of 1944, incorporated into Brazilian legislation by Decree No. 21,713 of 27 August 1946;
  3. the Convention for the Unification of Certain Rules for International Carriage by Air, commonly known as the Montreal Convention of 1999, incorporated into Brazilian legislation by Decree No. 5,910 of 27 September 2006; and
  4. the Cape Town Convention on International Interests in Mobile Equipment of 2001, incorporated into the Brazilian legislation by Decree No. 8,008/2013.

Regarding application of international treaties, an important development worthy of mention is the Ministerial Order No. 527 of the Ministry of Infrastructure authorising the celebration of bilateral treaties conceding up to the 7th air liberty for air transport of cargo (but not for the transport of passengers).

Further, as already mentioned above, the Avianca bankruptcy has caused an impact in the application of the Cape Town Convention. Avianca's bankruptcy set a precedent recently for debt reorganisation claim of airline companies, due to it being the first claim made by a relevant airline company since the Brazilian Bankruptcy Law and the Cape Town Convention became enforceable. In the Avianca lawsuit, the designated bankruptcy judge authorised the postponement of payments due to aircraft lessors by 30 days, applying the terms of the Cape Town Convention, but after the 30-day term had ended, the bankruptcy judge decided to extend the postponement term without any legal provision authorising this extension. Eventually the payment suspension granted was overruled by the appeal court and the leased aircraft were successfully repossessed by their respective lessors as per the terms of the Cape Town Convention. It is evident that this precedent will have an impact on future rulings, but its repercussions are still unforeseeable, since, even though the bankruptcy judge order could be seen as a violation of the terms of the 1st paragraph of Article 199 of the Brazilian Bankruptcy Law and of the Cape Town Convention by Brazilian courts, the negative impacts of the violation were mitigated once the decision that postponed rent payments was overruled by the appeal court.

ii Internal and other non-convention carriage

Regarding the internal civil aviation market, that remains outside the scope of international treaties, the most relevant Brazilian legislation is the Federal Law No. 7,565 of 19 December 1986 (commonly known as Brazilian Aeronautical Code (CBA)). The CBA covers most, if not all, of the relevant issues for civil aviation in Brazil, from operational issues, safety, definition of criteria for manufacture of aircraft, air traffic control, aircraft registration, certification and legal liability of air transport carrier (including airline companies and air freight companies).

Nevertheless, many times rulings overlook the CBA criteria for air transport liability, favouring the Consumer Defence Code and the concept of full indemnification and consumer protection. As already mentioned, this is one of the factors that contributes to the judicialisation of conflicts between airlines and passengers, breeding a culture of litigation rather than mediation.

Further, the CBA is undergoing revision and modernisation by the Brazilian legislators, which is an opportunity to promote a more uniform form of damage compensation, more aligned with international standards. On the other hand, there is also pressure from consumer protection entities that may have an impact on the final approved text for the new CBA.

Other relevant pieces of aeronautical legislation include: Federal Law No. 11,182 of 27 September 2005, which created the ANAC, having as purpose to regulate, supervise and manage Civil Aviation issues in Brazil to guarantee the safety and quality of air transport services and transparency of the procedures link to civil aviation; and Decree No. 6,834 of 30 April 2009, that regulates the competence of the Aeronautical Command, the government body that is responsible for air traffic control.

Also, the Brazilian Civil Code sets forth the general rules for civil liability and damage recovery, stating the principle of full indemnification in Articles 186 and 927 and must be taken into consideration when assessing legal liability in general, including liability for air transportation and civil aviation – in which case, it should be applicable in combination with the provisions of the CBA.

iii General aviation regulation

The same general rules applicable to domestic air carriage are also mostly applicable to civil aviation in general. The Brazilian Civil Code is the broadest legislation and is also applicable to other sectors, not just aviation. Article 186 of the Brazilian Civil Code defines illicit act as the act of causing damage to others, by wilful misconduct, negligence, imprudence or malpractice and Article 927 provides that those that perform an illicit act must compensate the damage.

Further, the sole paragraph of Article 927 provides that those who practice high risk activities are liable for damages even when acting without fault or ill intent (i.e., strict liability). Courts understand that most business practices as high-risk activities, and provisions of the sole paragraph of Article 927 of the Civil Code mostly applies. When the Consumer Defence Code is applicable, most likely strict liability will likewise apply.

Regarding transport in general, Articles 730 to 733 of the Civil Code also apply. The general rule is that the transporter is liable for baggage damage, except in cases of force majeure events.

Moreover, for air transportation or civil aviation in general, the provisions of the CBA are applicable, even though most are outdated due to the development of new technologies and changes in market dynamics since the date of the Law. On that note, most of the limitation of liabilities for air transport are defined in a unit that is no longer used. Once the CBA is revised by legislators, these issues hopefully will be resolved.

Aside from all the above, another complex situation is regarding liability in force majeure events, since in spite of the legislation excluding liability in these cases, some situations that could be classified as force majeure (such as weather conditions, for instance) are considered part of the risk of the activity and, therefore, hold the airline liable for such events.

iv Passenger rights

Passenger rights are mostly contained on the ANAC Resolution No. 400 of 13 December 2016, as amended from time to time. Most of the rights included on Resolution 400 intended for a more transparent and clear relation between passengers and airlines, and to align the Brazilian regulations to international standards, making the Brazilian aviation market more attractive to low-cost airlines.

Despite the fact that Resolution 400 gave more flexibility for airlines to customise their products, there are still rules that are mandatory in order to protect passenger rights, with a minimum mandatory criteria of passenger protection that need to be complied by airline companies. Those rights regulate, inter alia, baggage claims, mandatory compensation for flights delayed or cancelled and the right for a full refund in the event of ticket cancellation within 24 hours of its purchase.

It is also relevant to consider that provisions of the Consumer Defence Code are applicable to airline–passenger relations in complementation to Resolution 400 and is broadly applied by courts for air transport liability.

v Other legislation

Labour law

For carriers, labour claims are one of most relevant issues when assessing liability, aside from consumer claims. Recently the general Labour Law (Decree No. 5,452 of 1 May 1943) was revised and several of its dispositions were altered by Federal Law No. 13,467 of 13 July 2017. The modification's intended to facilitate and allow for more flexibility in negotiations between employers and employees and to update the provisions of the Labour Law to accommodate modern work relations. One of the changes with the greatest impact was regarding use of outsourcing in a broader way, which has benefited airlines through the use of outsourced labour for a wider range of activities within the organisation.

Regarding air crew workers, specifically (i.e., pilots, flight attendants and aeronautical mechanics), there were also an update to the applicable legislation, by Federal Law No. 13,475 of 28 August 2017, which regulates aspects that are specific to these types of service, such as time limits for shifts, criteria for crew scheduling, the limits and responsibilities of crew members, among other relevant issues.

Competition law

The Competition Protection System in Brazil is established by Federal Law No. 12,529 of 30 November 2011 and airlines, as well as its employees, are liable in case they perform acts that are considered harmful for the competition and for Brazilian economy as per the terms of the applicable legislation. Further, some mergers, acquisition of companies and company reorganisation may need approval of the CADE.

Anti-corruption law

To combat acts of corruption, Brazilian legislators have edited Federal Law No. 12,846 of 1 August 2013, which defines acts of corruption and establishes penalties for individuals performing the act and the companies involved.

Environmental law

Environmental risk is one of the most relevant concerns that need to be addressed by carriers and in aviation operations in general, as both individuals and companies can be held liable for environmental damage (in civil, criminal, and administrative stances). It is important to note that environmental risk cannot be limited and liability extents to include even force majeure events, therefore, proof of a relation of cause and effect between the act and the damage is enough for an individual or entity to be considered liable. Environmental protection is enforced by a complex system of laws and regulations, that has its basis on the Federal Constitution.

Aviation has many environmental effects that need to be considered, such as waste management, CO2 emissions, for instance, and companies could be held responsible for their environmental impact. A way to mitigate the risk would be the voluntary acquisition of carbon emissions credits or create a more efficient waste management programme, for example.

Data protection law

Data protection has come to be a cause of concern in recent years, as technology advanced and access to private information has become more vulnerable to violations. Due the foregoing, Brazilian legislators have recently approved the Data Protection Law (Federal Law No. 13,709 of 14 August 2018, as amended from time to time) that is not yet fully enforceable. Companies have until 3 May 2021 to conform and comply to its terms.

III LICENSING OF OPERATIONS

i Licensed activities

The ANAC, created by the Federal Law No. 11.182 of 27 September 2005, is the governmental agency that has the purpose to regulate, supervise and manage Civil Aviation issues in Brazil to guarantee the safety and quality of air transport services and transparency of the procedures linked to civil aviation.

The ANAC's activities include, inter alia, the definition of certification procedures for aviation crew members (pilots, flight attendants and aeronautical mechanics), registration and record-keeping for aircraft (made by the Brazilian Aeronautical Registry (RAB)), the definition of certification procedures for airlines, air taxi companies and other aviation activities and definition of procedures to ensure safety of aircraft manufacture process.

According to the applicable laws and regulations, companies rendering services in aviation, such as air transport of passengers and cargo, air taxi services, aerial photography and other aviation-related businesses need to be previously subject to licencing and certification procedures by the ANAC. Also, flight crew members, such as pilots, flight attendants and aeronautical mechanics and engineers also need to be certified by the ANAC.

Furthermore, the Aeronautical Command is responsible for the air traffic control, as per the terms of the Decree No. 6,834 of 30 April 2009.

ii Ownership rules

In June 2019, legislators approved the revision of the CBA, authorising the increase of the allowance for foreign capital participation in airlines from 20 per cent to 100 per cent. It is expected that the revision promotes more competition, with the possibility of new companies participating in the local aviation market and to increase foreign investment in existing carriers.

iii Foreign carriers

Brazilian laws and regulations regarding licencing and certification establish three steps for foreign carriers to operate regular airlines to and from Brazil: (1) designation by the country where the company is organised; (2) the ANAC issuing an authorisation for the foreign company to function in Brazil; and (3) the ANAC issuing an authorisation for the foreign company to operate in Brazil.

In addition to the foregoing, it is necessary to register the company and to obtain a taxpayer ID number from the Brazilian tax authorities. Further obligations may be requested, depending on the location where the carrier will operate.

Once the designation is in place, the following two steps of ANAC procedures can be initiated.

The authorisation to function in Brazil depends on validation by ANAC of the applicant's corporate documents, in order to verify that they meet the criteria set forth in the applicable legislation and of the legal representative of the company in Brazil. The representative can be a Brazilian citizen or a registered foreign citizen, as long as they have a CPF (taxpayer ID card) issued by Brazilian federal tax authorities.

To issue the authorisation to operate, ANAC evaluates documents related to the company's operational security program and its operational specifications. In addition, the company need to present documents proving the absence of debt owed to the Brazilian government and ANAC.

IV SAFETY

Brazil is a signatory to ICAO, the International Civil Aviation Organization. It follows its guidelines and the determinations for the adoption of the operational safety programme (SPO) created the SGSO (operational safety management system), which should be implemented by Brazilian operators. The ASSOP (Operational Safety Advisory) created in 2019 is responsible for supervising and managing the SPO.

The CBA gives the attribution to the Aeronautical Accident Investigation and Prevention System (SIPAER) the competence to plan, guide, coordinate, control and execute air accident investigation and prevention activities, carried out by the Accident Investigation and Prevention Center Aeronautics (CENIPA).

In addition to the rules established by the CBA there are a number of rules regarding safety which are regulated by ANAC and the Ministry of Defense.

The Brazilian Civil Aviation Regulation (RBAC) No. 121 established among other things safety requirements to be met by Brazilian companies that are certified to perform scheduled air transport services, such as: (1) requirements for operation on certain routes; (2) communication capabilities; (3) minimum requirements for ground handling; (4) minimum requirements for aircraft maintenance; (5) maintenance programmes; (6) limitations for aircraft operations; (7) aircraft configuration requirements; (8) training and training programmes; (9) qualification standards; and (10) licences required for crew, mechanics and flight dispatchers.

On the other hand, RBAC No. 135 establishes among other things safety rules applicable to companies that perform charter flights, air taxi companies and companies that render specialised air services.

The RBAC No. 145, which provides for aeronautical product maintenance organisations, required that all maintenance organisations, until 8 March 2019, adopt the SGCO. This evidences the importance of maintenance in managing security levels. In terms of professional certifications, in August 2019, the ANAC implemented the CAT (digital technical qualification certificate), allowing civil aviation professionals to have their licences in full digital format as well as reissuing Level 6 of language proficiency.

V INSURANCE

Insurance in Brazil is regulated by the following framework:

  1. the Brazilian Civil Code;
  2. Decree-law No. 73 of 21 November 1966; and
  3. Complementary Law No. 126 of 15 January 2007, as amended from time to time.

Any individual or company exploring an aircraft has the legal duty to hire insurance covering damages to passengers, crew, the aircraft itself and damages on the ground. The amount of the insurance policy will be calculated considering the liability limitations established in the CBA and the international treaties to which Brazil is a party. The requirements for mandatory insurance demands that the aircraft owner or operator obtains air operator third party liability insurance – RETA Insurance – under the following conditions:

  1. regular or non-regular air transport services: RETA Insurance, covering the owner or operator third party liability for future risk of damages caused to: (1) passengers and passengers' assets; (2) crew; (3) people and assets in the ground; and (4) the aircraft total value; all of them under the limits provided for in the CBA; and
  2. private air transport: RETA Insurance, covering the owner or operator third party liability for future risk of damages to: (1) the crew; (2) people and assets on the ground; and (3) the aircraft total value.

Note that the Brazilian government is authorised to assume the third party liability for damage caused to assets or people (passengers or not) by terrorist attacks, war acts or any connected event against aircraft registered in Brazil, operated by Brazilian public air transport services companies.

VI COMPETITION

The Brazilian Federal Constitution regulates the principle of free competition, providing that economic agents with market power cannot restrict competition. Thus, any practice adopted that causes or may cause damage to free competition qualifies as an anticompetitive behaviour.

As a policy of defence of competition and economic regulation, Brazil adopts the Brazilian System for the Defense of Competition carried out by the CADE and by the Seprac (Secretary for the Promotion of Productivity and Competition Advocacy) of the Ministry of Finance. This system has a preventive and repressive character to violations against the economic order.

The same competition regulations that apply to any other market also apply to the aviation industry in Brazil. These regulations are applied by the CADE. The ANAC also regulates the landing and departure rights and fares charged. The CADE and the ANAC enacted a convention on mutual assistance and cooperation for competition matters in aviation. The CADE applies the regulations to operations that can impact competition in a certain relevant market. The CADE usually adopts a four-step methodology to analyse the competition particulars of a determined transaction: (1) relevant market; (2) market share; (3) exercise of economic power; and (4) efficiencies.

The non-exhaustive list of infractions considered anticompetitive are listed under Article 36 of Law No. 12.529 of 30 November 2011 followed by sanctions provided by Article 37. Among the anticompetitive acts are cartels, predatory prices, resale price fixing, territorial and customer base restrictions, exclusivity agreements, abuse of dominant position, refusal to hire, sham litigation and creation of difficulties for the competitor.

The cartel, considered the worst anticompetitive behaviour, not only will be punished on an administrative basis but it is also qualifies as a crime as provided by Law No. 8,137 of 27 December 1990 with a penalty of imprisonment from two to five years and a fine for directors and administrators.

VII WRONGFUL DEATH

In air accidents as a result of the transportation of passengers, the victims (their families) will have the right to compensation. The repair will cover material and moral damage caused by the harmful event. The material damages shall encompass all expenses borne by the family, from the identification of the deceased to the funeral ceremony. It is also understood that the dependents of the deceased must be compensated, based on the income received, projections and life expectancy of the deceased. On the other hand, moral damages shall encompass an indemnification to compensate emotional suffering caused by the loss of the loved one. Quantification varies according to the case-by-case analysis made by the courts.

VIII ESTABLISHING LIABILITY AND SETTLEMENT

i Procedure

The commercial relationship between passenger and airlines in Brazil is characterised as a consumer relationship and is mainly regulated by the Consumer Protection Code for domestic flights demands and by the Warsaw and Montreal Conventions. In 2017, there was a major shift in the jurisprudence when the Brazilian Supreme Court has ruled that the Warsaw and Montreal Conventions to which Brazil is a signatory shall take precedence on international flight demands over the Brazilian Consumer Code with respect to material damages.

If there is a conflict between a passenger and an airline, it can be resolved: (1) directly with the airline through its customer care services; (2) the Consumer Protection Agency (PROCON); (3) the ANAC; or (4) the Brazilian Courts (Small Claim Courts or Civil Courts).

PROCON shall defend and protect consumers' rights and interests. Therefore, in the event of a conflict between a passenger and an airline, the passenger may file a claim with PROCON, which in turn forwards the registered claim to the airline. The latter must submit a response within a specified period, usually of five working days. PROCON's operation is similar to a conflict mediator, and it aims to reach a resolution or a settlement that serves both the consumer and the airline. However, if the matter brought to PROCON affects not just one individual but consumers in general, PROCON is authorised by law to penalise the airline and apply pecuniary sanctions.

The ANAC offers consumers a direct communication channel, exclusively available for the registration of complaints regarding the airline's violation of the consumer code or of any laws/regulations of the industry. The flow of responses works similarly to PROCON: once the claim is filed it is forwarded to the airline for the purpose of reaching a resolution for the matter or a settlement, which will end the matter definitively and without the intervention of the justice system. The ANAC is also authorised to penalise any airline which acts might be affecting the of consumers on a collective basis.

The consumer can also choose to file its claim before a special civil court (only for the total amounts of less than forty times the Brazilian minimum wage), in which the lawsuit follows a simpler procedure and the timeline for judgment takes an average of six months to one year. Another option is for the claim to be brought to a Civil Court in which the procedures tends to be more complex and the timeline for judgment takes longer and increases costs. Settlements can be reached at any time by the parties and are often encouraged by the judges in court. Additionally, the Brazilian Civil Procedure Code instigates the parties settling by offering the parties a mediation hearing, which must be attended by the parties, once a lawsuit is filed.

In Brazil, most claims involving passengers and airlines are usually filed before the Special Civil Courts due to the nature of the pleading and no cost to the consumer. If the pleading sum is an amount equal to or less than 20 times the Brazilian minimum wage, there is no need for the assistance of an attorney.

Regarding the limitation period for consumers to file a claim, for a long time, the judiciary constantly applied the five-year term established by the Brazilian Consumer Code for both national and international flights, often disregarding the two-year term established in the Warsaw and Montreal Conventions (which should have been applied for international flights), to which Brazil is a signatory.

In 2017, however, with the recognition of the supremacy of the international conventions of Warsaw and Montreal over the Consumer Protection Code, the Brazilian judiciary started to apply the two-year term, as per the provisions of the Warsaw and Montreal Conventions, whenever the claim filed involved an international flight.

ii Carriers' liability towards passengers and third parties

According to Brazilian Law, air transportation is considered to be a service and the carrier or airline is considered the provider, and the person who uses air transportation is considered a consumer. The relationship between them is ruled by the Brazilian Consumer Code. Therefore, the air carrier as the recipient of the profits must assume the risk of the activity.

The liability of the airline towards its consumers is considered to be objective and independent on an analysis of fault or intent, according to the Brazilian Consumer Code. Therefore, carriers' liability to its passengers is based on the link between the damage caused and action or lack thereof from the service provider. Therefore, having identified this link, the airline shall indemnify the passenger for the damages suffered. The only exception is if the airline can prove that the consumer or a third party has exclusively caused the damages, or that the service was provided flawlessly.

The carrier's liability towards third parties, on the other hand, will be subjective and the Brazilian Civil Code will guide its analysis (not the Brazilian Consumer Code). In this case, for the airline to be compelled to indemnify a third party (which is not a consumer), it must be proven the service provider's fault or intent, and that the damage or illicit claimed is irrefutable. The judge will first confirm if the damage or illicit did in fact occurr and whether if it was caused by an action (voluntary), omission, negligence, recklessness or malpractice of the supplier.

The limitations brought by the international conventions of Warsaw and Montreal regarding international air transportation were often disregarded by the Brazilian judiciary on the grounds that in view of being a consumer relationship, the Brazilian Consumer Code would prevail, which guarantees full compensation of damage suffered by the consumer, regardless of proof of fault or intent.

Regarding compensation for material damage on international flights, as with the recognition of the supremacy of the international conventions of Warsaw and Montreal on the Brazilian Consumer Code by the Supreme Court in 2017, the Brazilian judiciary has applied a limitation on property (material) damages whenever the lawsuit was based on an international flight.

iii Product liability

In most cases, the liability for providing air transport would be, exclusively, to the airline registered as the operator of that certain aircraft before the RAB.

It is important to mention, however, that the Brazilian Consumer Code establishes that everyone involved in the supply chain (air transport) is considered liable for the damage, both material and immaterial. For example, in the event of loss of luggage, unjustified delay or flight cancellation, the airline will be held responsible.

Therefore, in the event of an accident, according to the Brazilian Consumer Code, the consumer (or its heirs) shall be able to involve all those who are directly or indirectly in the provision of air transport services (including, without limitation, both the aircraft manufacture and owner), as they are considered jointly liable according to the Brazilian Consumer Code.

iv Compensation

A large part of the lawsuits filed before the Brazilian judiciary involving airlines are based on flight delays, cancellations and loss of luggage, situations that may cause some discomfort, annoyance and losses to passengers.

In this context, the question is how to define in which hypotheses the psychological disorder is capable of characterising indemnifiable moral damage and which are the parameters to quantify the moral damage once characterised, since the current legislation does not establish parameters or criteria for its characterisation.

Since the recognition of the supremacy of the international conventions of Warsaw and Montreal over the Brazilian Consumer Code by the Supreme Court in 2017, the Brazilian judiciary applied limits to the payment of indemnities for property (material) damages whenever the claim is based on an international flight. However, in relation to claims pleading compensation for moral damages, the judiciary continues to apply the Brazilian Consumer Code.

In addition to the payment of indemnities for material and moral damage, in the case of an accident, the airline may also be compelled to pay for medical expenses, funeral expenses, in addition to eventual compensation for permanent damage that causes an incapacity to the injured individual (the quantification of which depends on the degree of disability caused). Also in the event of death, family members will be compensated (i.e., children and wife, in addition to those who demonstrate that they were financially and emotionally dependent on the victim).

IX DRONES

Operations with drones in Brazil are mainly ruled by three institutions: (1) the Airspace Control Department (DECEA), which is responsible for controlling the access to Brazilian air space; (2) the ANAC which approves the drone's operation; and (3) ANATEL (the National Telecommunications Agency), which is responsible for the certification and approval of the equipment.

Although the use of drones has increased throughout the years, their operation has brought new risks to air transport operations. Hence the DECEA and ANAC have intensified the rules for their use, as well as the inspection of operations.

The main perils of the use of drones are: (1) the risk of collision between an aircraft and a drone, which could cause serious damage to the aircraft, especially to its wings, nose, windshield and mainly its engines; and (2) the risk of what we call 'ripple effect' to the air transportation network structure, which is caused by the temporary suspension of operations. A simple collision may cause the aircraft to crash. Therefore, in order to bring greater security to airspace, airports must close their terminals once the presence of a drone is reported or identified. Disruption in flight schedules might result in successive delays, a fact that may affect airlines negatively.

The ANAC and DECEA have recently intensified restrictions on drone operations, focusing on minimising risks at airport areas. Current restrictions forbid any drone operation of any kind within airport's grounds and in a perimeter of 5.4km around it. In the perimeter from 5.4km to 9km, drones are permitted to fly up to an altitude of 30 metres, and only from a perimeter of 9km from the airport are drones permitted to fly to an altitude of up to 120 metres. Different permission can be granted by individual permits, allowing drones to fly in otherwise forbidden areas.

X VOLUNTARY REPORTING

According to the CBA, any person who becomes aware of an aircraft accident or the existence of aircraft wreckage has a civil obligation of reporting to any Brazilian Authority (preferably the Air Force Command) through the fastest available means. In order to secure the confidentiality of the information, as well as the protection of whoever reported it, the process is confidential and anonymous.

SIPAER is responsible for investigating claims arising from accidents, incidents or ground events involving aircraft. Therefore, whenever a claim is filed, CENIPA shall conduct the investigation, which is SIPAERs main centre.

SIPAER's investigation has the purpose of improving aviation safety and preventing the recurrence of accidents, incidents or ground events involving aircraft. The main idea is to analyse and identify acts, conditions or circumstances that, individually or together, may represent risks to the integrity of people, aircraft and other assets.

Further, a final report shall be issued pointing out the possible elements, which have contributed, directly or indirectly, to the occurrence of the accident and making safety recommendations, which, if adopted, can help to eliminate or, at least, mitigate the potential risk of recurrence.

Finally, it is important to mention that all sources of information and the whole investigation (including all materials, analysis and reports), as a rule, cannot be used as evidence in any legal or administrative proceedings except if determined to be presented by a court order.

XI THE YEAR IN REVIEW

In 2019, the commercial aviation industry demonstrated significant growth in comparison to 2018,3 despite all the challenges the Brazilian economy had to face during this period, as previously pointed out in Chapter I of this publication.

Looking back through the year, there were several ups and downs that directly affected the aviation industry in Brazil. One of the events with the highest impact in the industry was Avianca's bankruptcy, causing the concentration of market share for the remaining airlines and certain issues with the application of the Cape Town Convention within the scope of the judicial recovery of Avianca, and the controversy regarding the use of slots (especially the ones that were being used by Avianca). Other relevant events were the opening of the Brazilian market to the operation of new airlines with 100 per cent foreign capital, as well as the auction of twelve airports by ANAC, which represents 9.5 per cent of the domestic market in Brazil, as a continuation of the Brazilian programme of airport concessions launched back in 2011.4

The attention of international players towards Brazil has been growing since the then recently elected President Mr Jair Bolsonaro approved Law No. 13,842 on 17 June 2019,5 which approved the increase of the allowance for foreign capital participation in airlines from 20 per cent to 100 per cent. Currently, at least five low-cost airlines were authorised to operate in Brazil, raising expectations and creating a completely new scenario.

Furthermore, there were important regulatory developments made by ANAC, such as the rules that were enacted to regulate fatigue of pilots and crew (RBAC N.117/2019), and the increase in penalties for irregular air taxi companies. Both measures are intended to increase safety in Brazilian flight operations for commercial and business aviation sectors.

The covid-19 outbreak has caused impacts of enormous importance in the social and economic environment of people throughout the world, and that it is not different in Brazil. These impacts include the aviation industry (both commercial and business aviation sectors), which is facing the increasing challenges to adapt to new guidelines. The outbreak of the disease began at the very end of 2019 in China and quickly spread across borders. At this point in time, it is hard to predict how the pandemic will evolve and continue to affect businesses and industries, especially the aviation industry, and what changes will be permanent after this situation is solved.

XII OUTLOOK

In 2019, Law No. 13,842 of 17 June2019 which authorised the participation by foreign capital of 100 per cent in Brazilian airlines stimulated the sector's competitiveness. As a result of such change of law, low cost companies started to include Brazil in their routes, for example, the Chilean Sky Airline, the Norwegian, the Argentine FlyBondi and the Chinese Air China, as well as interested ones such as the Chilean subsidiary of the American JetSmart, the Colombian Avian and the foreign company GulfAir that does not operate at low cost.

Despite the covid-19 pandemic scenario, the aviation industry is under a process of carrying out several measures implemented by ANAC as well as by the international aviation regulatory bodies. Such measures aim for to maintain of the viability of operations, while complying with all safety and health recommendations under the new scenario, which was imposed as a result of the covid-19 pandemic. It also seeks to fill the gaps left by the decreased demand of consumers of air transportation, in order to distribute operational activities among their categories, authorising or easing permissions and prohibitions, imposing additional security mitigations to maintain the same level of operational security.

Brazil has plans to enter into agreements with several countries, such as Canada, Chile, China, Peru, Russia, the United Kingdom and the United States. In addition, it joined the Aviation Leaders Council at the invitation of IATA, the International Air Transport Association, assuming a prominent role in the discussion on the resumption of air transport.

Worldwide cooperation is expected in planning the resumption of air transportation again .In addition, airlines and the business aviation industry in general very much welcome the modernisation and update of civil aviation regulations to bring more players and certainty to the business.


Footnotes

1 Ana Luisa Castro Cunha Derenusson is the head of the aviation practice and Rita de Cassia Fernandes de Godoy, Isabel Sevzatian Silveira, Julia Gazineu Machado Sanches and Ingrid Santos Alves Rosa are advocates at De Luca, Derenusson, Schuttoff Advogados.