Azul has reached an agreement with Embraer this week to defer the delivery of 59 E2 jets. It’s a rapid about-face for the Brazilian airline that had increased its E195-E2 order by 50% earlier this year. Blaming disruption caused by the global pandemic and subsequent travel downturn, the airline is getting on the front foot to conserve cash.
According to a report in Reuters, the deal to push back delivery until 2024 was reached yesterday. The aircraft had been due to start flying for Azul this year.
A brash airline with a fondness for local aircraft
Azul has only been flying for 12 years. The brash airline was started up by Brazilian born David Neeleman, founder of JetBlue. Since then, Azul has grown sharply to capture around 17% of Brazil’s domestic aviation market, becoming the country’s third-largest local carrier.
The airline has always had an eye for homegrown aircraft. Azul started up with a handful of Embraers, gradually building up to 60 Embraers, comprising around 42% of the airline’s overall fleet.
Azul also has 71 Embraer 195-E2s on order. As reported in Simple Flying, Azul had originally only ordered twenty-one 195-E2s. In December 2018, the airline added another 30 aircraft to the order. In January this year, a further 24 of the type were tacked on, bring the total order for the 195-E2s to 75. Four of the aircraft have already been delivered to Azul.
The airline has a substantial fleet of earlier generation Embraer 195s. Purchasing the next generation E2s was driven by a need to swap out the older jets for more efficient modern jets.
“For the past 11 years, the E195 has been the foundation of Azul’s business model,” said John Rodgerson, CEO of Azul in January.
“The Embraer E2 has a trip cost that is 14% lower and a unit cost that is 26% lower compared to the E195, and it has 18 additional seats. This significant cost reduction is mostly driven by the E2s fuel efficiency, lower ownership cost, as well as reduced maintenance costs.”
Azul to lease older Embraers to LOT Polish Airlines
Those comments come about when Azul was announcing a deal to sublease 53 of its earlier generation Embraer 195s to LOT Polish Airlines.
It seemed like a canny move, getting in a steady stream of new aircraft while continuing to generate revenue from older aircraft minus responsibility for many of their operating costs. But in the space of four months, the aviation world has been upended.
Throughout 2019, Azul was buoyant about its future growth prospects. But as the effects of the pandemic began to bite earlier this year, Azul moved to reduce capacity in response to lower demand. In March, while deferring incremental deliveries, it was still swapping out its earlier generation Embraers for the E2s.
New E2 deliveries put on ice
But the airline has hit the pause button on further deliveries until 2024. In a statement, Azul says it’s part of adapting to the aviation environment in the pandemic era.
“Azul entered this crisis as one of the most profitable airlines in the world. The impact of the pandemic on the Brazilian and global economy has been unprecedented, and the timing of the recovery still remains uncertain. With the contribution of all of our stakeholders, we believe we will be able to come out of this crisis as an even stronger company,” Mr Rodgerson said in a statement just released.
“The agreement reached with Embraer to defer aircraft deliveries to 2024 is one important
component of our comprehensive plan that allows us to create the liquidity runway for this crisis. With this support, we are able to ensure that we have the liquidity and the resources required to optimize the airline for the future.”