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Yesterday, Azul and LATAM announced the end of their domestic codeshare agreement. The move will be effective on August 22, 2021, a little over a year since they initially launched it as a way to boost their traffic during the worst part of the COVID-19 pandemic.
Azul and LATAM’s codeshare agreement is over
LATAM Airlines Brazil decided to end the codeshare agreement. The airline stated that it is no longer necessary to have a codeshare with Azul, following the Brazilian market recovery. Plus, the codeshare has not been giving the expected results so far, said Jerome Cadier, LATAM Brazil’s CEO.
He added, “In May, we are operating 250 daily flights, and we expect to have over 400 daily flights by July. We are still confident about the reopening of the borders as the vaccine campaigns roll out both in the US and Europe.”
The codeshare agreement between Azul and LATAM was a direct response to the COVID-19 pandemic. Both companies needed a way to face the sales and route map reduction during the worst months of the lockdown last year.
But now, the recovery seems to be gaining speed once again in Brazil, following a painful slowdown in 2021’s first quarter. For instance, LATAM is currently operating at 49% of its pre-pandemic levels. It expects to get to a 90% domestic capacity by December, the airline said.
LATAM is already adjusting to the incoming demand and will hire 750 pilots by the end of the year. Plus, it is taking seven more A320 aircraft to strengthen its domestic route map. Additionally, LATAM Airlines Group recently announced it will expand its cargo fleet to 21 aircraft.
What does Azul have to say about this?
Azul also posted a statement following LATAM’s decision to end the domestic codeshare agreement between both companies. The airline believes that consolidation is an important part of the post-pandemic industry response, and Azul is in a solid position to drive that consolidation.
So far, Azul has had the best traffic and financial results among Brazil’s big three. Looking at Brazil’s Civil Aviation National Authority (ANAC) stats, Azul carried 14.2 million passengers between May 2020 and April 2021. It is the largest among the three: GOL has taken 13.3 million and LATAM 11.07 million. The market share between the three airlines is divided as follows: 36.4% goes to Azul, 34.2% to GOL, and 28.3% to LATAM. Azul is also leading the cargo market, carrying over 107,820 tons, a 23.2% increase compared to the previous year.
Coming back to the codeshare agreement, Azul was happy with the results. Abhi Manoj Shah, Azul’s CRO, said that on the airline’s first-quarter investors call. He praised the 50-50 sales balance between both companies and its access to new markets.
Incoming consolidation
Since LATAM has ended its domestic codeshare agreement with Azul, the latter company is going in new directions. Azul has hired advisors and is actively exploring industry consolidation opportunities in the region.
John Rodgerson, Azul’s CEO, said, “The codeshare with Latamwas a unique solution in our pandemic response. We also realized that industry consolidation would be important for the post-pandemic recovery, and Azul would be a key part of any such activity. At the end of the first quarter of 2021, we hired financial advisors and are actively exploring consolidation opportunities. We believe the cancelation of the codeshare by Latam is a reaction to that process. Azul is emerging from this crisis in a leadership position in terms of liquidity, network recovery, and competitive advantages. Our plans are unchanged, and I am confident that we are in the best position to pursue strategic alternatives at this point in time.”
