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…

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 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 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.

Source : Simple Flying More   

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Allegiant Air Is Not Concerned About Breeze Airways

Highly-anticipated startup Breeze Airways has revealed few details about its anticipated operations. However, when it finally launches operations,…

Allegiant Air Is Not Concerned About Breeze Airways

Highly-anticipated startup Breeze Airways has revealed few details about its anticipated operations. However, when it finally launches operations, Allegiant Air’s executives are not concerned about the added competition from the carrier. Instead, the airline is focused on its expansion plans and emboldened by a strong balance sheet.

Allegiant is not concerned about the impending entry of Breeze Airways in the marketplace. Photo: Vincenzo Pace | Simple Flying

Allegiant Air is not worried about the competition

On Allegiant’s first-quarter earnings call, CEO Maurice Gallagher was asked about the growth of low-cost competition in the US. In his comments, he specifically spoke about Breeze Airways:

“While we’re certainly going to pay attention to people, that’s not [the] first thing we look at this point in time. With the Breeze side of the house, they have an ambitious growth schedule, but with their airplane size and some things, I’m not terribly concerned about flying against a 110-seat airplane, which they’ll start with. The A220 is a good airplane, but they claim to be interested in longer-haul thinner markets. So, we’ll just have to wait and see.”

John Redmon, President of Allegiant, followed up with his own thoughts on branding:

“I think when you look at it, we’ve never been afraid of competition. But, financially, where we stood some time ago versus where we stand now, Maury stated in his comments, we all kind of alluded to it, but we’ve never been stronger with a stronger balance sheet in history of the company, frankly. So we’re well-positioned to take on anyone. When you look at the start-ups, they – literally – don’t have a brand. No one knows that brand in the marketplace. So, they’re coming in as a brand that no one’s ever heard of, and as Maury points out, maybe with a plane type that’s not as cost effective as ours in some cases. So, I think we’re very comfortable with where we stand, going forward.”

Allegiant
Allegiant Air is planning another capacity increase this summer, which is when Breeze is targeting a launch. Photo: Getty Images

Breeze Airways versus Allegiant

Breeze Airways is the brainchild of David Neeleman, who is best known for setting up JetBlue. The airline plans to fly point-to-point using Embraer E190/E195s to start and then move toward the Airbus A220-300.

Breeze is looking at a plethora of routes and markets. It wants to focus on point-to-point, low-cost travel between secondary cities. Allegiant also flies a similar model, with a focus on connecting leisure passengers. As an ultra-low-cost carrier, Allegiant has focused on offering a no-frills product and selling ancillaries to its customers.

Breeze Airways has yet to detail its full model and slate of offerings. While it wants to be low-cost, that model comes in many different varieties.

Breeze Airwyas
Many of Breeze Airways’ planned summer routes have no nonstop competition. Photo: Breeze Airways

Allegiant and Breeze likely will not compete too much. According to Mr. Neeleman, 80% of Breeze’s routes will have no competition this summer. Of course, those routes have yet to be revealed, and plenty of airlines have made new route announcements since his statement.

Allegiant is focused on its low-frequency, low-utilization model that has helped it be successful. It sees plans to grow and is stepping on the gas in 2021 as most of the larger airlines in the US focus on repairing their balance sheets, rebuilding their schedules, and reactivating their aircraft.

Allegiant Airbus A319
Allegiant’s smallest aircraft is the Airbus A319, which seats 156 passengers. Photo: Vincenzo Pace | Simple Flying

The interesting play in the market

Mr. Gallagher’s airline is in a great place and has big plans moving forward. For him, the more interesting play is the big three US airlines, as he stated:

“I think the really interesting play is how do the Big Three react […] they’ve got a ton of debt. Their cost structure is twice what any of ours are. I just don’t know how those guys kind of come down the hill – not to say they won’t – but long term.”

He went even further, stating:

“I think you’re going to see the ULCC side able to really gain a lot of market share, potentially, over the next couple years. And that’s what we are so bullish on because we can really stand alone in what we do and how we’ve done it.”

Allegiant Getty
Allegiant Air is is expecting a fantastic 2021 and is planning more growth with used aircraft acquisitions. Photo: Getty Images

The big three in the US refer to American, Delta, and United. The three major network airlines have all taken on new debt since the crisis started to shore up liquidity, and they have a lot of work to do.

Allegiant does not traditionally compete heavily with these three airlines. However, as all airlines are mainly oriented toward capturing leisure travelers, there is more and more overlap between the airlines. Allegiant has so far held its own, and it believes it can hold its own moving forward.

Whether it be Breeze Airways or the big three US airlines, Allegiant Air is ready to face the competition, and it believes it will win.

What do you make of Allegiant’s view toward Breeze Airways and the big three US airlines? Do you think Breeze Airways is a threat to Allegiant? Let us know in the comments!

Source : Simple Flying More   

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