Azul CEO Mulls New Fleet Cuts in ‘Sick’ Brazil Airline Industry

  • Carrier may eliminate eight more planes as recession drags on
  • Air travel demand drops to lowest since 2012, trade group says

Azul Linhas Aereas Brasileiras SA, Brazil’s third-largest airline by passengers, is studying another reduction to its fleet as air-travel demand shrinks to the lowest in four years.

The carrier may eliminate eight planes in addition to the 20 it’s cut since November, Chief Executive Officer Antonoaldo Neves said in an interview. In addition, China’s HNA Group Co., Azul’s biggest shareholder, has agreed to take delivery of two Airbus Group SE A350 jetliners the Brazilian company had expected to receive in 2018.

Airlines including Latam Airlines Group SA and Gol Linhas Aereas Inteligentes SA have been cutting capacity in Brazil amid a two-year recession in Latin America’s largest economy. Air travel demand has tumbled to the lowest since 2012 after dropping for the ninth straight month in April, according to the Brazilian Airline Association trade group.

“The sector is sick,” Neves said at Azul headquarters in Barueri, Brazil.

Shrinking Fleets

The airline’s fleet currently stands at 123 aircraft. Since November, it has sent 17 planes to Portuguese carrier TAP, in which Azul is a minority shareholder. They included an Airbus A330, six ATR 72-600 turboprops and 11 Embraer SA 190 jets.

Azul also returned three planes to lessors after leasing contracts expired. It’s set to receive two Airbus A320neo jetliners this year, two A350 planes next year and another A350 in 2018.

Gol is cutting as many as 25 Boeing Co. 737 planes from its fleet. Latam is seeking to trim assets by $2 billion to $3 billion by 2018 by reducing aircraft-delivery commitments, selling some of its fleet and not renewing some rentals, it said May 11, without disclosing how many planes it might eliminate.

“The airline sector needs to see a return of demand and also regulatory changes to resume investments,” Neves said. “It’s shrinking and it’s not only because of the crisis.”

Baggage Fees

Brazil’s civil aviation regulator has proposed changes to allow airlines to charge for checked luggage while increasing the limit of carry-on bags. It also is proposing to exempt airlines from paying passengers’ expenses if a flight is canceled due to causes for which carriers aren’t responsible, such as weather conditions.

While consumer-rights groups oppose the changes, Neves says passengers will benefit by paying only for the services they want.

The current rules “actually penalize the consumer,” he said. “The ones who want to pay less can’t do it, because they are paying for the others, too.”

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