Azul Linhas Aereas has set 2026 as the year its fleet will become 100% next-generation aircraft. The airline will use planes such as the Embraer E2, Airbus A320neos, and A321neos for commercial service, retiring and repurposing its older, costlier, Embraer E1 fleet. Let’s investigate further.
Azul’s fleet plans
In the last ten years, the number of domestic passengers in Brazil has doubled; Azul has been responsible for over half of market growth. The carrier, founded by David Neeleman, started operations in 2008 with two routes from Campinas to Salvador and Porto Alegre. Nowadays, Azul operates in 127 domestic and five international destinations. The airline flies to almost every state of Brazil, except for one (Acre).
Azul currently has a fleet of 179 aircraft, including several subleased units. It is a diverse fleet, as Azul operates Airbus widebodies, narrowbodies, Embraer E1 and E2 units, ATRs, and Cessnas.
Moreover, Azul is expecting 75 new aircraft in the future. According to ch-aviation, Azul will receive 54 Embraer E2 planes, 13 A320neo, five A321neo, and three A350-900. The new next-generation aircraft will allow the airline to reduce costs and have a significant margin expansion going forward. In the meantime, the airline will reduce its E1 fleet.
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Renewing the fleet
During an investors’ presentation held yesterday, Azul talked about the importance of renewing its fleet. Alex Malfitani, Azul’s CFO, said,
“Looking at our numbers, the cost of the E1 is much higher. So our reduction as we go from the old generation to the new generation will be bigger than the reduction that our competitors are going to go through. Everybody is going to go to the next generation, right? The difference is where are you starting from? And we are years ahead of the competition in terms of when we’re going to get to 100% next-gen.”
Azul is looking to have a fleet composed of 100% of next-generation aircraft by 2026, said Malfitani. The COVID-19 pandemic somewhat impacted that timeline since the original estimation of the carrier was 2024.
Azul will finish 2021 with a fleet of 140 aircraft (not counting the Cessnas and subleased units), including nine E2. In 2022, Azul will increase to 146 aircraft, thanks to the arrival of six new E2 and four A320neos (although it will retire four E1 units). Then, by 2023, the airline’s fleet will reduce to 140 again due to further reduction of the E1 family (from 42 to 31).
The cargo E1
So, what will happen with the E1? For Azul, it has been a marvelous aircraft. Nonetheless, it is much more expensive than the next-gen planes from Embraer and Airbus.
For instance, the E1 and the A320neo burn almost the same amount of fuel per engine, but the A320neo allows Azul to carry 47% more passengers. The E2 reduces by 18% the fuel consumption versus the E1 and allows 15% more seats. Cost per seat reduces by 26% with the E2, 29% with the A320neo, and 34% with the A321neo, compared to the E1. It’s a no-brainer for Azul.
Nonetheless, the E1 will not entirely abandon Azul’s fleet. The airline will relocate a part of its fleet to the cargo business.
Abhi Shah, Azul’s CRO, explained,
“We are reformulating our E1s, and we have an opportunity to do what we did with passengers 13 years ago. What we are doing is removing all the seats, and we are putting fire bag containers on the aircraft, doubling the payload. We are using the E1 trip cost. Azul grew using the E1’s trip cost; that’s how we built our hubs in Confins and Recife. And now, using the E1 trip cost, we can fly to secondary cities and provide dedicated e-commerce delivery services.”
Next year, Azul will use four E1 freighters starting in January, added Shah.
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