How Azul Has Managed To Recover Despite Brazil’s COVID Crisis

The Brazilian airline Azul Linhas Aereas ended the first quarter with 109% of its domestic capacity than its pre-pandemic levels. While Azul still posted a net loss of US$509 million, the airline seems to be on track for a recovery, surpassing its domestic peers, GOL and LATAM Brazil. But, how has Azul achieved this bounceback? Let’s investigate further.

Azul Linhas Aereas
Azul has already bounced on its domestic capacity. Photo: Getty Images.

Azul’s unique route map

Azul is a point-to-point airline. It doesn’t have a true hub, like GOL or LATAM. These last two airlines mainly fly from Sao Paulo’s Guarulhos International Airport, the gateway of Brazil. Meanwhile, Azul flies out of everywhere.

For instance, in June, Azul will operate nearly 18,200 flights out of 83 Brazilian airports, according to the Cirium database. Its largest hub will be the Campinas International Airport (VCP), with 3,709 flights and over 500,000 seats offered. Compared to that, Guarulhos International will only have 518 flights and 83,020 seats.

GOL will have 11,152 flights out of 54 cities, and LATAM will have 9,092 domestic flights out of 46 airports.

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During its first-quarter investors’ call, Azul’s management said nearly 80% of its routes have no competition. Azul’s connectivity has no parallels in Brazil, as it is already serving 115 destinations and plans to increase to 135 within the next six months. John Rodgerson, Azul’s CEO, said,

“Our disciplined recovery strategy is focused on our strength, which is our main hubs. Thanks to our broad network, our demand base is diversified and less dependent on a single region. As a result, we are able to access and collect demand when others cannot, and create unique opportunities for network recovery.” 

Azul's route map for June
Azul’s domestic route map for June 2021. Photo: Cirium

Azul’s passenger numbers and fares

2020’s first quarter was a complicated one for the Brazilian airlines. The country suffered the second wave of COVID-19 infections, which led to new travel restrictions and a slowdown in travel demand recovery.

For instance, GOL Linhas Aereas carried 4.49 million passengers, a 46.1% decrease compared to 2020’s first quarter. LATAM Airlines Group has not yet provided its first-quarter results. Nevertheless, Brazil’s Civil Aviation Authority has. LATAM carried 3.9 million passengers between January and March, the lowest number among Brazil’s big three.

Meanwhile, Azul carried 5.2 million passengers, a 20.2% decrease compared to 2020’s first quarter.

Azul’s average fare dropped 24.6% between 2020 and 2021. The air ticket for Azul cost 304.3 reais (or US$54), which is the highest among the top three.

Azul and TAM Getty
Azul is surpassing the COVID-19 recovery from its peers, GOL and LATAM. Photo: Getty Images.

Financial results and cargo boost

During Azul’s first quarter, the airline posted a US$509 net loss, unlike 2020’s fourth quarter when it had a net income of US$104 million.

The airline ended the quarter with solid liquidity, with 3.3 billion reais in cash ($US632 million). Azul’s management also reduced the cost per available seat-kilometer (CASK) by 5% compared to December.

But maybe the best news for Azul was that its cargo division is soaring. John Rodgerson said,

“Azul Cargo continues growing and outperforming every quarter, with another 62.8% increase in revenue year-over-year, in spite of 23% less capacity in our network. Our unique door-to-door logistics capabilities combined with the broadest network give us the ability to transform logistics in Brazil like no one else.”

What do you think of Azul’s performance so far? Let us know in the comments.

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