Azul to add simulators to support rapid fleet growth

Washington DC
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Brazil's Azul plans to add a second E-Jet simulator and an ATR 72 simulator as the carrier prepares to rapidly expand its fleet.

Azul currently operates a fleet of 10 E-190s and eight E-195s, including three E-195s which were delivered over the last month. The low-cost carrier, following a new five-aircraft order placed earlier this week, now plans to add eight additional E-190s by year-end.

Azul CEO Pedro Janot says carrier is not having any problems recruiting enough pilots to accommodate the rapid growth but will need a second E-190/195 simulator. He says Azul's initial simulator, which was placed into service late last year at its Campinas base, is now being used 22 hours per day.

Janot expects a second simulator to be in service at the beginning of next year. Having a second simulator for 2011 is important because Janot says Azul plans to add another 12 E-195s next year, followed by 12 more per year in 2012 through 2015.

Azul also plans to place into service its first ATR 72-600 next year. Azul plans to acquire a simulator for the ATR but it is not yet clear when this will be added to its training centre.

Janot tells ATI it will take "around three years" for Azul to receive all 20 of the ATR 72-600s the carrier ordered earlier this week. But he says he does not yet know how many ATRs will be delivered next year.

"We don't have this plan yet. We're still in discussions with the manufacturer," Janot says.

Adding aircraft at a rate of about 20 aircraft per year for at least three consecutive years may seem daunting but Janot claims the most challenging phase for Azul was going from zero to 15 aircraft. "The worse job is done. Now it's something organic," Janot says.

He says Azul, which has already captured about a 6% share of the Brazilian domestic market, has not had any problems recruiting pilots because there is an ample supply of Brazilian pilots now flying abroad. "We're re-importing pilots," he explains.

He adds Azul is also now working to recruit pilots from Brazilian universities and general aviation operators.

Going forward the carrier plans to focus its growth on the ATR 72-600 and E-195. But Janot says Azul plans to keep its 10 E-190s, which include eight aircraft from its original 36-aircraft E-Jet order and two ex-JetBlue Airways aircraft it leased in late 2008 to accelerate its launch.

Janot says the E-190 is particularly needed for Azul's operation at Rio de Janeiro Santos Dumont airport, where the E-195 has some payload restrictions.

He says the ATR 72 will be able to access regional airports that even the E-190 cannot operate from without restrictions. Janot envisions using the ATR 72 to open new short-haul intra-state routes of less than 500 miles. This includes routes from Azul's Campinas hub to destinations within Sao Paulo state and from state capitals such as Porto Alegre and Belo Horizonte, where Azul already operates several E-190/195 routes.

Janot says the ATR flights will also help provide new feed to Azul's trunk routes at these state capitals which the carrier sees turning into "mini-hubs". Currently only about 20% of Azul's passengers connect to other Azul flights but Janot expects 30% to 40% of its passengers on the new ATR flights will connect.

Most of Azul's routes currently have no competition and Janot says Azul will continue its strategy of entering "virgin markets" with the ATR 72s. ATI reported earlier this week that Azul has a list of 40 Brazilian cities that may be served by its new ATR fleet, half of which currently have no air service.

Janot says for now the carrier has no plans to launch international scheduled services or codeshare with other airlines.

He also says Azul is on track to meet its original target of being profitable by the end of 2010.

He says Azul's accelerated fleet expansion will help the carrier meet this target because until now it didn't have a large enough fleet to generate cost efficiencies. Janot is also expecting an improvement in yields in the second half of this year. He acknowledges until now the carrier's fares have been low as Azul focused on "developing the market" and stimulating demand with promotions.

These promotions have helped generate very high load factors. According to Brazil ANAC figures, Azul had an average load factor of 86.3% in the first half of 2010 compared to an industry average of 67.4%.