Brazil’s Azul Remains Hopeful Of Operating Normal Schedule In July

As the COVID-19 crisis continues to vaporize demand worldwide, Brazilian operator Azul is attempting to strike an optimistic tone and hopes to operate close to a full schedule by July. 

Many countries in Latin America have shut down their domestic operations to combat the spread of COVID-19, including Argentina, Colombia and Panama, but Brazil has committed to maintaining a minimum level of air service within the country.

Azul has stated that between Mar. 25 and Apr. 30 it expects to operate 70 nonstop flights per day to 25 cities, which is a 90% reduction in its capacity compared to its original forecast. 

But Azul hopes to rebound quickly from the crisis. In a recent discussion with analysts and investors, company CEO John Rodgerson stated, “We believe this is a two- to three-month problem, and then we will get back to building demand and flying close to our full schedule by July.” 

Rodgerson acknowledged that Azul understands “this could be a six-month issue, but we are actually starting to see governments kind of change tune a bit and realize that you can’t have a full shutdown for too long because it would be disastrous to the economy.” 

Brazil is one of the few governments in Latin America that has offered airlines some relief in the form of allowing operators to postpone payments of air navigation and airport fees. 

Azul has also been in contact with Brazil’s development bank BNDES and the Bank of Brazil and Caixa, Rodgerson said. “They recognize there’s a need to support the industry at this moment. They’re seeing what’s done elsewhere in the world ... They’d like to give a great signal to the market that they’re supporting the Brazilian airlines.” 

Company CFO Alex Malfitani remarked that some nongovernment banks may be waiting to see what moves Brazil’s government and BNDES will make with respect to offering support to the country’s airlines. He concluded that nongovernment banks can provide additional cash, lines of credit or letters of credit. “We’ve been able to get support from a few,” Malfitani stated. 

Previously, Azul has stated that it has no pre-delivery deposits due on aircraft capex commitments in 2020 and no significant debt repayments for the year. Rodgerson has stated that while Azul remained confident in its long-term targets, he added, “In the meantime, we will remain focused on protecting and building up our cash position.”