Brazil remains the carrier’s biggest market opportunity in Latin America
By DAVID CASEY
The flexibility of Azul Linhas Aéreas’ fleet has enabled the Brazilian carrier to recover faster than its competitors and will ensure the airline can maintain its rapid growth in the country’s domestic market, according to president Abhi Shah.
Speaking at Routes Americas 2023 in Chicago, Shah explained that between 2008 when Azul launched commercial operations and 2019, Brazil’s market grew from 50 million to more than 100 million passengers. He added that the country’s population of about 214 million citizens means that there remains a “huge opportunity” to further connect cities and regions.
“About 50 to 60 cities that we serve had never had service before, and that changes economies and changes livelihoods,” Shah said. “We fly some places in the Amazon where it’s a 45-minute Azul flight on an ATR or a Caravan, or else it’s three days by boat.”
Azul serves 158 destinations at the present time—153 of which are within Brazil. OAG Schedules Analyser data shows that overall capacity during March 2023 will be about 3.3 million available seats, compared with 2.7 million during the same month in 2019. The domestic market accounts for about 96% of total capacity this month.
Shah said Azul’s fleet flexibility has been core to the LCC’s growth and recovery since the pandemic. The carrier, founded by David Neeleman, operates aircraft ranging in size from nine-seat Cessna Grand Caravans to 334-seat Airbus A350-900s.
“We have recovered the fastest in the market domestically—we’re about 30% bigger than before the pandemic,” Shah said, explaining that the airline was able to use smaller Caravans and ATR aircraft to test levels of demand as traffic came back.
“We had no idea what the demand was at about 80% of the routes that we served before the crisis had no nonstop competition,” he added.
Shah said that while Azul’s fleet of eight different aircraft types adds complexity to its business model, it enables the carrier to “explore different demand patterns” and cater to smaller markets that its counterparts are unable to. LATAM Airlines Brasil has mainly A320-family aircraft, as well as some Boeing 767s, 777s and 787s, while GOL Linhas Aéreas is an all-737 operator.
Although Azul has expanded by almost a third since 2019, Shah revealed that the airline continues to be the sole operator on around eight out of 10 routes in its network. He said: “We haven't encroached on our competition as we’re not here to steal from them. They can steal from us, but that’s a lose-lose game.”
On the international side, Azul serves two points in Uruguay—Montevideo (MVD) and Punta del Este (PDP)—as well as Orlando (MCO) and Fort Lauderdale (FLL) in the US. It also flies to Portugal’s capital (LIS) and will next month launch a new route to Paris Orly (ORY) in France. However, some destinations, including Buenos Aires (EZE) and Cordoba (COR) in Argentina, remain suspended and are unlikely to resume.
“We’re not as relevant in other parts of Latin America—we used to fly to Argentina, but we don’t anymore as costs are high and fares are low,” he said. “We will continue to do some long-haul as it is good for our portfolio—it adds value to our network and adds value to our loyalty program. But I think our opportunities are therefore very much in domestic Brazil.”
Azul has 11 codeshare partners at the present time, including Copa Airlines and Avianca—both of which also codeshare with rival GOL. Shah said Azul is happy “playing with everybody right now” and has no problem that Copa and Avianca have partnerships with competitors.
“It’s better for the customer as they will have more options,” Shah said. “We think exclusivity holds back options for your customer.”
Earlier this month, Azul reached crucial agreements with the majority of its lessors to significantly restructure its balance sheet. The arrangements with lessors represent roughly 90% of its lease obligations to reduce lease payments, replace COVID-19 related deferrals and dissolve the gap between Azul’s contractual lease rates and current market rates.
The company stated that lessors represent 80% of Azul’s gross debt, which was roughly BRL22 billion ($4.2 billion) at the end of 2022.
Shah said the move gives the airline “a runway to focus on our growth and implementing our business plan, as opposed to worrying about COVID deferrals and how to deal with them.”
