Azul founder David Neeleman anticipates the Brazilian airline’s cargo business will take off in the coming years thanks to booming growth of e-commerce in Latin America.
“Forty percent year-over-year,” Neeleman tells FlightGlobal on 17 March, speaking of Azul’s cargo business. “It’s going to get bigger and bigger, and then you get economies of scale, and you just keep getting bigger and bigger as you can deliver to more and more [destinations].”
The Sao-Paolo based airline, which last week reported a profit for the coronavirus-plagued fourth quarter of 2020, thinks its freight operation will help drive a post-pandemic recovery.
While passenger revenue crawls back to normal levels, Azul’s fourth-quarter cargo revenue jumped to R255 million ($45.7 million), up 66% from the same period in 2019. For the full year, its cargo revenue increased 31.8% over 2019 levels, to R705 million.
The carrier expects the sharp upward cargo trend will continue as it partners with e-commerce companies that are desperately searching for delivery solutions to far-flung cities across the vast country.
With the e-commerce sector still in its infancy in Brazil, Azul is poised to take advantage of that huge opportunity, says Neeleman, also Azul’s chairman.
“Brazil has infrastructure problems. They don’t have an equivalent to UPS or FedEx down there. They have the postal service,” he says. “People order stuff and it comes in two weeks. You just can’t get overnight there.”
Azul’s fleet of 162 aircraft, which range from nine-passenger Cessna Caravan turboprops to widebody Airbus A330s, allows the airline to quickly shift aircraft among routes in response to demand, and makes it one of the biggest logistics companies in the country. That lets Azul score tens of millions in revenue from its freight operations monthly.
“We serve 3,200 communities with our logistics operation in Brazil – so we’re filling a need that didn’t exist,” Neeleman says. “If we can [deliver a package] within one or two days, it just changes the volume completely.”
On 4 March, Azul posted a R543.4 million profit for the fourth quarter of 2020. Although down 38% from its fourth-quarter 2019 profit, the carrier stands out among the world’s airlines for turning a profit at all amid the Covid-19 pandemic.
In addition to the positive cargo news, factors key to Azul’s recovery, executives said, include fleet flexibility, increasing domestic-travel demand and limited competition, with Azul facing no airline competitor on more than 70% of its routes.
SECOND VIRUS WAVE
Azul has also said that Brazilian domestic air travel demand has recovered at among the fastest rates in the world.
In the final three months of 2020, Azul flew 91% of its pre-pandemic capacity with an average load factor of 81%. By March, it was operating 700 flights daily to 117 destinations, more than before the pandemic.
However, a new wave of the highly contagious virus has hit Brazil in the past few weeks, and the airline will likely have to cancel “maybe 50 flights a day” for “a short period of time”, Neeleman says.
On 8 March, Azul reported a February load factor of 79%, with domestic capacity 9.3% higher than in 2019. Chief executive John Rodgerson said at the time that “the next couple of months will be challenging with weak seasonality and the second wave of the pandemic”.
“It’s unfortunate, it’s summer down there, you wouldn’t expect there would be that much transmission,” Neeleman says.