2024 ATW Airline Market Leader: AZUL

Throughout its 15 years of operation, Azul has become a leader in the Brazilian and South American region and is now Brazil’s largest airline, serving over 160 destinations domestically and in the US and Europe.

The carrier grew rapidly by launching services to Brazilian markets previously underserved in the road infrastructure-challenged nation.

With CEO John Rodgerson at the helm and Abhi Manoj Shah as President, Azul has made air travel affordable for millions of Brazilians to places where there was no air service before this entrepreneurial carrier came along. And in the process, it has maintained strong customer service with onboard Wi-Fi, snacks and television.

Forecasting robust demand for the year ahead, Azul says it has secured strategic partnerships with its OEMs to ensure fleet reliability and availability.

Its orderbook is comprised largely of aircraft from Brazilian OEM Embraer, which the airline believes is “better positioned than others to deliver aircraft on time,” as Rodgerson said during a recent earnings call. Azul has 83 aircraft on order according to Aviation Week Network’s Fleet Discovery Database: 52 Embraer E195-E2s, 23 aircraft in the Airbus A320neo family, seven A330s, and an ATR 72.

“We feel good about where we are with Embraer,” Abhi Manoj Shah told investors. “We had three aircraft enter service in January of this year, and you will start to see a steady stream between June 2024 and January 2025—so far we’re on track.”

In addition to its confidence in deliveries, investments in maintenance capabilities and staffing over the last year have bolstered what Azul sees as a resilience to industry constraints.

“We realized late last year that we needed to invest in our operational capabilities to prepare for growth,” said Rodgerson. “We invested in operational staffing, allowing us to reduce aircraft ground time and increase aircraft utilization. We invested in fleet and engine availability, ensuring we have adequate spare engines. We invested in our maintenance facilities, bringing forward by three years additional heavy maintenance capabilities for which we are not dependent on external MRO capacity. Finally, we invested in pilots and flight attendants hiring … we are ahead of the curve and more in control in terms of our fleet availability and capacity.”

Azul ended 2023 with a passenger operating fleet of 183 aircraft, expecting its capacity to grow 11% by the end of 2024.

“If I look ahead right now at April, May and June—which is seasonally the weakest quarter—all of the three months are actually running ahead of March right now, in the domestic market,” Shah said, with international demand holding steady. “I think we’re going to be pretty happy with second-quarter seasonality this year.”

Overall, Azul expects positive unit revenue growth in the first two quarters, before getting into strong second half seasonality. It anticipates strong summer demand in Europe, particularly in Lisbon as well as in Paris, the site of this year’s Summer Olympic Games.

On the encouraging demand environment, as well as fuel price improvement and projected capacity growth, the carrier has updated its forward-looking guidance. It now expects 2024 EBITDA of approximately BRL6.5 billion ($1.3 billion), while its EBITDA in Q4 2023 increased 33.7% year-over-year to BRL1.5 billion ($295.5 million), and for the full year rose 61.4% to BRL5.2 billion ($1,025 billion).

In Q4, Azul reported operating revenue of BRL5 billion ($985 million), up 13% year-over-year, on a 5.6% uptick in operating expenses to BRL4.1 billion ($808 million). Operating income for the quarter was BRL883.2 million ($174 million), up by 68.3% over Q4 2022. For the full year 2023, operating revenues jumped 17.2% to BRL18.7 billion ($3.7 billion), on 6.6% higher expenses. Its 2023 operating income reached BRL2.9 billion ($571 million), an increase of BRL1.8 billion ($355 million) over 2022.

“Gross bookings are increasing 50% year-over-year as we take advantage of strong leisure demand and opportunities to increase aircraft utilization with unique nonstop flights,” noted Rodgerson. Demand for Azul, he said, “has never been stronger.”

Azul’s world-class customer service and operational excellence connects Brazil like never before and sets it apart from its peers in a fast-growing, important market.