The Brazilian carrier Azul Linhas Aéreas (AD) reached an all-time revenue record for the second consecutive quarter, totaling 4.4 billion reais in 2022’s third quarter (about $825 million). This number was 44.4% above 2019 levels, prior to the COVID-19 pandemic. Nonetheless, the carrier still posted a net loss for the quarter.

Azul’s results in the third quarter of 2022

On Thursday, Azul released its quarterly results for the period between July and September. During this period, the airline logged an income of 4.4 billion reais, mostly from passenger revenues (91% of all the gains). John Rodgerson, the airline’s CEO, said that this performance was a direct result of the robust demand environment, which Azul expects to continue, given the positive trends for economic activity and employment in Brazil.

“Also, Brazilians seem to be benefiting from more flexible work arrangements, enabling a higher number of leisure trips. Leisure demand has been higher than 2019 levels for 14 consecutive months, demonstrating endurance and complementing the continued recovery in corporate demand.”

According to Brazil’s civil aviation authority, Azul carried 20.31 million passengers between January and September 2022. It holds a 29.28% market share. Compared to 2019 levels, prior to the COVID-19 pandemic, Azul has increased its traffic numbers by 3% and its market share by nearly seven percentage points.

An Azul Embraer E195-E1

Photo: Azul.

Why did Azul post a net loss in the quarter?

Despite Azul flying well over its pre-pandemic traffic and revenue levels, the airline still posted a 1.64 billion reais net loss ($308 million). This loss was fueled by an increase in operating expenses, depreciation of the Brazilian real, and a fuel hedge loss.

In the third quarter of 2022, Azul recorded operating expenses of 4 billion reais ($750 million), compared to 2.6 billion reais ($490 million) one year ago. That’s a 53.9% increase year-to-year, mainly driven by an 85.3% increase in fuel prices in addition to the airline’s capacity increase of 19.5%. This rise in fuel prices was partially offset by lower fuel burn, higher employee productivity, and cost reduction initiatives, according to the airline. Aircraft fuel alone cost the airline 1.9 billion reais ($356 million).

Additionally, Azul recorded a non-cash foreign currency loss of 727.9 million reais ($136 million) due to the 3.2% end-of-period depreciation of the Brazilian reais against the US dollar. This depreciation resulted in an increase in lease liabilities and loans.

An Azul Embraer E195-E1

Photo: Azul.

What about the airline’s fleet?

Azul closed the year with a passenger operating fleet of 168 aircraft. It had 11 Airbus widebodies (Azul received a new Airbus A330-900 this week, and it is pink!), 50 Airbus narrowbodies, nine Embraer E2 jets, 43 Embraer E1, 34 ATRs, and 21 Cessna Caravans employed by its regional branch, Azul Conecta (the airline also received a new Cessna recently).

The Brazilian carrier ended the quarter with approximately 70% of its capacity coming from next-generation aircraft, far higher than any competitor in the region, it said.

What do you think about the results for Azul Linhas Aéreas in the third quarter? Let us know in the comments below.


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