January 12, 2017 / 11:21 PM / in a year

UPDATE 1-Brazil to allow 100 pct foreign ownership of airlines -ministry

(Adds ministry sourcing and comments)

SAO PAULO, Jan 12 (Reuters) - The Brazilian government is drafting a decree to allow 100 percent foreign ownership of local airlines, a Transportation Ministry spokesperson said on Thursday, a move that could attract investors to a recession-beaten industry.

Newspaper Valor Econômico, citing three unnamed aides to President Michel Temer, earlier on Thursday reported that the presidential decree would boost regional aviation with subsidies favoring smaller planes such as those made by Embraer SA .

The regional plan is not necessarily related to the decree, the ministry spokesperson said, adding that next week the government could announce investments in several airports.

The foreign ownership decree may be published by the end of January, according to Valor.

Foreign ownership of Brazilian airlines was the subject of intense debate last year. Legislative uncertainty left investors wondering if the government would pass rules to shore up the industry during Brazil’s prolonged recession.

The spokesperson said the text was still being reviewed by the ministry’s legal department, after which it would go to the chief of staff’s office and then to Congress.

Spokespeople for the president and officials of the civil aviation agency Anac did not return requests for comment.

In March, former President Dilma Rousseff issued a decree lifting the limit on foreign ownership of airlines from 20 percent to 49 percent. Lawmakers raised that to 100 percent during a congressional review. Temer in July vetoed the provision, leaving the original 20 percent limit in place.

Valor reported that the new decree’s language about foreign ownership was “quite simple” and provided far more details about proposed subsidies for regional routes.

The draft proposal calls for subsidies of about 1.2 million reais ($380,000) per route between select cities in less-populated northern states covering the Amazon rainforest, according to the report.

The measure would subsidize up to 60 seats per flight, Valor reported, giving Embraer regional jets with about 70 seats an economic advantage over larger planes from global heavyweights Boeing Co and Airbus Group SE.

Valor also reported a proposed investment of 300 million reais in 58 regional airports this year, down sharply from 7.2 billion reais in a plan announced by Rousseff in 2012 that got little traction.

$1 = 3.17 reais Writing by Ana Mano; Editing by Lisa Von Ahn and Richard Chang

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