São Paulo – While many companies place new projects on hold or reduce the rhythm of activities due to the global crisis, Azul Linhas Aéreas (Blue Airlines), the newest airline in Brazil, started flying on December 15th 2008, even before scheduled. In the beginning the company registered average occupation of 45% in its flights operated from Viracopos Airport, in Campinas, São Paulo, with growth to 70% in February and 120,000 passengers transported in two months.
"This shows excellent acceptance, the recognition of the public to a good product. And it also shows, different from what the ‘market owners’ say, that there is space for a third company that may have a different product," said yesterday (12) to ANBA company president Pedro Janot. Today, domestic aviation in Brazil is practically dominated by two airlines: Tam and Gol.
Confidence in the business is such that the board at the company believes that Azul should start running in the black in the second half of this year. Initial investment was US$ 200 million. "The series of historic figures for the last 10 years shows that the Brazilian aviation market grows at a rate of 4 to 1 when compared to the GDP. Therefore, we know that despite the crisis, the sector should grow at least 10% – if the crisis is very hard," pointed out the executive.
According to him, the business was planned "beyond the crisis", having as its horizon the expected market growth in the long run. "It is a market that doubles easily if there is service [available]," he said.
Apart from that, according to Janot, if international turbulence has made the economic scenery uncertain, it has also made the price of the barrel of oil drop from almost US$ 150 per barrel to less than US$ 40 in less than six months, and fuel is one of the most important factors in the cost of an airline.
To the executive, although the crisis is "aggressive", Brazil is a country of continental dimensions and needs more air connections. He added that aviation has not accompanied the economic development in the country in recent years and said that there is repressed demand.
In this respect, one of the differentials of Azul when compared to other companies, according to him, is the proposal of offering direct flights between different destinations, though they may be separated by long distances. Nowadays commercial aviation in Brazil uses three main centres for transit: Brasília, São Paulo and Rio de Janeiro. When you want to go to another region and another country it is necessary to stop at one of these "hubs", and sometimes you stop at more than one.
Base
Azul initially planned to have its base at Santos Dumont Airport, in Rio, but the expectation that a new terminal would be opened for flights other than those on the shuttle service between Rio and São Paulo has not yet been confirmed, so the company had to base its operations in Campinas, in the interior of São Paulo, a very populous region with high buying power, but little explored by airlines.
According to Janot, when Azul started flying there were just 19 passenger flights per day in Viracopos. Just to give an idea, while little over 1 million passengers walked the aisles of Campinas Airport in 2008, the movement at Guarulhos International Airport, the busiest in Brazil, also in São Paulo, was 20.4 million people, according to figures supplied by the Brazilian Airport Infrastructure Company (Infraero).
In Janot’s evaluation, up to now airlines only thought of their convenience, obliging passengers from that region to travel to Guarulhos or Congonhas, in São Paulo, to take a flight. Azul is doing the opposite, offering road transport for passengers from the city of São Paulo who may be interested in taking one of its flights in Campinas, after all, both cities are just 96 kilometres away from each other, less than a one hour trip.
Today, according to the executive, between 30% and 40% of the Azul passengers come from the metropolitan region of São Paulo. But, even if the company did not have this public as its main target, the potential of Campinas would justify the more intense use of Viracopos. What is taking place, according to him, is that the residents of the region still "don’t have the habit" of flying in their own city, which should require time and investment in marketing to change.
National aviation
Other differentials offered by the company, according to Janot, are the larger seats in leather, the existence of rows with just two seats – a study by Jet Blue in the United States showed that the centre seat is one of the things most hated by passengers –, the ground and air service and the aircraft operated. Azul is the first company to use Embraer 170/190 family jets in Brazil. Despite being produced in Brazil and being very successful abroad, these aircraft did not yet fly commercially here.
"The national aircraft. This has been of great repercussion among our clients, who were surprised with the aeroplanes," said Janot. The company now operates with seven aircraft of the Embraer 190 and 195 models that may transport between 106 and 118 passengers. The jets were initially designed for regional aviation, as they transport fewer people than the Airbus and Boeings, used by Tam and Gol, supposedly being more recommended for operation in routes with greater demand. The executive said, however, that Embraer aircraft have 35% lower operating cost and the company strategy, of creating point-to-point flights between cities that are currently not serviced by direct routes, should "generate the demand".
Azul has another 36 aircraft ordered to Embraer and 40 purchase options that may be converted into firm orders. Although the company is new, its founder, the North American David Neeleman, has great experience with this aircraft. He is also the creator of the North American Jet Blue, a large client for the Brazilian aircraft manufacturer for many years.
Brazilian legislation does not permit foreigners to have over 30% of an airline, but Neeleman had no problem with this, as he was born in Brazil and lived here with his family up to the age of seven, being a Brazilian citizen. The businessman is the chairman of the Board of Governors at the company and one of the shareholders, alongside Gávea Investimentos, headed by former Central Bank president Armínio Fraga, Cia. Bozano, which belongs to billionaire Júlio Bozano, and other investors.
Today, apart from Campinas, Azul also flies to Curitiba, Vitória, Porto Alegre and Salvador, on the 18th the company should start flying to Recife and in March, to Fortaleza, Manaus, Navegantes (Santa Catarina) and Rio de Janeiro. The original idea was to fly to 28 cities by 2011, but, according to Janot, this figure may vary according to market conditions. The priority is currently to develop the national grid, but nothing stops the company from operating international flights in future. The aircraft have autonomy to reach almost any point in South America.
Azul employs 830 passengers and works "within a low-cost and low-tariff philosophy, but with added value." The greater the period between purchase and flight, the cheaper the ticket. "It is a sleek company," finished off the executive.
*Translated by Mark Ament
