Saturday, May 22, 2010

David Neeleman's Azul Airlines Targets Rapid Growth In Brazil

Low-Cost carriers

Aviation Daily May 21 , 2010 , p. 16
Neelam Mathews

Azul Brazilian Airlines, which operates a fleet of 15 Embraer 190/195s, is set to receive six more this year of the 78 aircraft ordered at the end of 2008, when it launched operations.

"Aviation in Brazil has grown at a two-digit rate last year and this year, and revenues are expected to grow 18-24%," says Marketing Director Gianfranco Beting.

There has been a dramatic decrease in yields brought about by the arrival of Azul in markets where the carrier competes with established carriers, such as TAM and Ocean Air, says Beting. "Azul has national ambitions. We plan to grow internally and add four to five domestic destinations this year."

Choice of an all-Embraer fleet was justified because smaller aircraft can take off without paying penalties, unlike the Boeing 737 and Airbus A320, which cannot fly without payload constraints. "Embraers give us flexibility, and we are able to fly to less robust markets. Also, the E-190 is well-suited for longer range," says Beting.

"Our model is based on return of investment. In some cases, the destinations we start with have limited competition. Azul doesn't enter any market in a nimble way. We have three to four flights a day to make others miserable," says Beting. [Founder and owner] David [Neeleman] is not here on vacation. He didn't leave the U.S to check if the waters are balmy here."

Like India, Brazil has a regulated market. Also, like many Indian carriers, Azul is using a hybrid business model of budget seats in economy and business classes; it operates to five cities from its hub in Campinas near Sao Paulo. In November last year, Azul's aircraft were cleared to receve Live TV, which is costly, but offers immense benefits for customers.

Fifteen percent of Azul's customers are first-time air travelers. According to the National Civil Aviation Agency of Brazil, Azul captured 3.8% of the domestic market share in 2009, its inaugural year. By April this year, its share was up to 5.7%. Azul also achieved the highest load factor at 79.7% and became the first airline in the world to transport 2 million customers during its first year of operation.

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