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South American carriers are looking to engine maintenance agreements to help mitigate the impact of rising fuel costs and an uncertain demand outlook.
Brazilian carrier Azul, which emerged from Chapter 11 bankruptcy protection this year, has said it is aiming for lower growth this year, while adjusting its fleet to reduce costs. Chief Revenue Officer Abhi Shah discussed changes to the airline’s widebody fleet.
“We’ve removed our most expensive aircraft and have temporarily reduced international capacity over the next six months, reducing our exposure to the peak in fuel prices,” Shah said. “Most importantly, these higher-cost aircraft are being replaced with others that have lower ownership and engine maintenance costs.”
He also noted that Azul’s insistence on flight-hour-based maintenance contracts across its engine fleet gave it cost predictability and the flexibility to adjust schedules.
“We know how engine costs have impacted airlines around the world—the worst thing you can do right now is to fly in a high fuel environment, not generate as much cash as you thought and then have massive maintenance cost down the road,” Shah said. “Our engine maintenance agreements give us that future visibility, allowing us to plan and fly exactly what we want to.”
Abra Group, which owns Avianca and Gol, is also seeking to trim spending in response to rising fuel costs.
Manuel Irazábal, Abra’s CFO, said on a recent earnings call that expenditure on engines was under the microscope, adding that shop visits in Brazil would offer operational and financing benefits.
“We’re also looking at ways ... of using kind of local possibilities to be able to fix engines in Brazil, for example, which would give us also some kind of support in terms of being able to finance those,” Irazábal said.
This will probably include work at GE Celma in Rio De Janeiro, which is increasing its shop visit capacity from 600 to 1,000 engines per year at its Tres Rios facility, which specializes in CFM Leap-1A and -1B engines.
Once up to full capacity, this will make Tres Rios the largest Leap overhaul facility in the world.
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