ANALYSIS: Azul's widebody jets cap years of steady growth

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Brazilian low-cost carrier Azul's decision to add widebody jets to its fleet was hardly surprising given its rapid expansion in recent years, as it went from an airline with just five aircraft five years ago to become the South American country's third biggest airline.

The carrier plans to acquire 11 Airbus jets - five A350-900s and six A330-200s - to help it launch its first international service to the USA from a new terminal at its base of Viracopos-Campinas airport by early 2015. Azul says that it will announce its US gateways later this year. The A350s and three of the A330s will be leased from ILFC, says the lessor. Airbus says none of the aircraft are direct orders from the manufacturer.

Since launching operations in December 2008, Azul has gone from strength to strength in South America's biggest market, under the leadership of JetBlue Airways founder David Neeleman.

The airline announced a merger with Brazilian carrier Trip in May 2012, and the combined carrier operates a fleet of more than 130 aircraft comprising Embraer narrowbodies and ATR turboprops. While it scrapped a planned initial public offering in August 2013 due to adverse market conditions, Azul is not slowing down in gaining a bigger share of the pie at home.

Statistics obtained from Brazil's civil aviation regulator ANAC show that Azul and Trip hold a combined 17% share of the domestic passenger market in 2013 in terms of revenue passenger kilometres. This is compared with the 3.7% share Azul alone had in 2009, its first full year of operations. This went up to 6% in 2010, 8.6% in 2011 and 10% in 2012.

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Since its launch, Azul has carved a niche out for itself in the Brazilian market by offering service on routes not served by other carriers. Its fleet of Embraer regional jets and ATR turboprops has allowed the carrier to operate on these routes profitably, in a way that larger rivals TAM and Gol cannot with their bigger aircraft. Azul said in 2013 that it estimates it is the only carrier on more than 70% of its routes.

Azul's success has attracted the attention of TAM and Avianca Brazil, both of whom have said they are studying potential orders of regional aircraft to serve smaller Brazilian cities, especially as Brazil's government works to incentivise regional aviation for airlines.

With its growth in Brazil, it was hardly surprising that international carriers soon began courting Azul to be a partner. Industry observers have pointed out that Azul would have been an ideal replacement for TAM in the Star Alliance, after TAM left to join Oneworld. Star subsequently announced that Avianca Brazil, whose sister airline Avianca is already a member, will become part of the alliance this year.

But with Avianca Brazil's smaller share - 7.2% in 2013 - in the domestic market, Star members United Airlines and TAP Portugal have signed interline agreements with Azul. United has repeatedly stressed it needed a new Brazilian partner with TAM's departure from the alliance.

It is not clear yet how Azul will leverage on airline partnerships when it begins its international service to the USA by early 2015. Azul's executives were not immediately able to comment. The airline's decision to begin with service to the USA departs from the airline's previous statement that it would likely remain within Latin America if it launches international flights.

Up to two to three years ago, the airline's executives have said that South America was the most logical region for international flights, with Argentina a prime candidate for getting Azul's international service. But since then, several rounds of mergers in the Latin American airline industry have largely consolidated intra-Latin American capacity between the region's two major airline groups, LATAM Airlines Group and Avianca, making it harder for new entrants to serve major trunk routes.