Aviation Festival: Azul CEO predicts further strong growth for the Brazilian LCC

posted on 7th September 2018 by Justin Burns
Aviation Festival: Azul CEO predicts further strong growth for the Brazilian LCC

Other Brazilian airlines have missed an opportunity by only focusing route network’s on the country’s big four cities in the view of Azul Airlines chief executive officer, John Rodgerson.

Speaking today at the Aviation Festival in London during a conversation with JLS Consulting’s John Strickland, he said the low-cost carrier (LCC) still has plenty of opportunity for further growth and has raised $1 billion of capital in the last 24 months.

Rapidly expanding now operates about 800 flights a day, utilising a fleet of 130 aircraft and serves over 100 cities in Brazil, about double compared to other airlines in the country that serve about 50 and expects to handle more than 25 million passengers in 2018.

Rodgerson says Azul has broken up the “duopoly” held by TAM and GOL through its low-cost strategy of targeting smaller cities and towns away from the big four cities including Sao Paulo and Rio de Janeiro.

“Our competition have missed a trick in Brazil as have focused on the big four cities but there are so many more with enormous potential in Brazil,” he said.

Brazil has population of more than 200 million Rodgerson said but currently only 100 million travel with 65 per cent of them flying for business purposes and Brazilians still travel less than Chileans, Argentinians and Colombians so there is still “a lot of opportunity to grow”.

The Brazilian market is a tough one to crack he said due to regular currency fluctuations in the value of the Brazilian real and it s politically volatile as it can also swing from left to right, while governments don’t understand the airline industry.

“There is also a lot of airports in Brazil that you cannot fly jets into yet. Brazilians want to travel, and not just from three or four main cities,” Rodgerson said.

He said Azul’s strategy as an LCC has been to operate a range of aircraft as Brazil’s extensive geographic landscape requires a mix, especially when serving cities of 100,000, explaining why the carrier operates Embraer’s, ATR’s, Airbus A320s and also has seven widebody aircraft.

Rodgerson believes success of Azul has been focusing on strict cost-control. “People think the highest costs for an airline is fuel, but it is actually an empty seat so you need to fly the right aircraft. Our load factors have been +80 per cent and we continue to upgauge using A320neos.”

“Over the next five years we are going to grow operationally by developing our fleet. There is not another airline that is going to cut their seat costs like Azul will,” he said. “If we can cut our cost structure down we are going to grow. You only deserve to grow if you are profitable,” he added.

Rodgerson said being an LCC is in the airline’s DNA and feels that an LCC would not be a success in Brazil if it was to operate like a Ryanair does in Europe with one type of aircraft, as this kind of model is simply not possible and the market is all about having connectivity.

“Knowing the numbers of the airline is key. If you do not keep your costs down you are going to die. We have to always look for opportunities and ways to grow,” he said.

Rodgerson believes another key to growth and success of Azul has been by having strong partners which significantly reduces the risks, especially on long-haul routes.

Azul has codeshare agreements and strong partners in the shape of JetBlue Airways, United Airlines, TAP Portugal, Ethiopian Airlines and others.

The LCC flies into Lisbon, its only European route, and Rodgerson predicts its partner TAP which has been restructured will be transformed over the next three to four years.

Azul’s route network is mainly within Brazil, but along with Lisbon it also flies four routes to Argentina, two to Uruguay, one to French Guiana, and two to the US in the shape of Fort Lauderdale and Orlando.