Today Brazil’s Azul announced an new service with six Airbus A330-200 (leased from ILFC ) and is planning to lease five Airbus A350-900 XWBs. This is a radical step for the airline. Up to now it has focused on Embraer 190s and regional services (80 Embraer and 56 ATR aircraft). With Airbus widebodies the airline can service overseas markets like North American and Europe. Azul expects to debut its first international flights by early 2015 with the US the first market. With less than six years of operations, Azul has already flown more than 85 million customers since its first flight on December 15, 2008.
We have been waiting to see which LCC steps into overseas markets. To date Air Asia (via Air Asia X) was the only LCC to hybrid its services like this. Consequently we expect this decision by Azul to lead to copy-cat orders. The airline industry remains competitive and a step such as the widebody order by Azul cannot go unanswered.
Azul is able to make the step by deploying the A330 – an aircraft that remains effective because Airbus can price it so aggressively. Having leased the A330, Azul will begin with Airbus wide bodies and continue once the A350 deliveries become available. In this way Airbus has been able to develop a strong demand for both their current A330 and their new A350 programs. The A330 is an excellent choice for market entry on long hauls and clearly the A350 is a logical successor.
We have no doubt that Boeing fought for this order; the 787 is every bit as effective as the Airbus but probably not priced at the same levels. As an LCC, Azul is going to focus on acquisition and operating costs more than most airlines. The decision to add longhaul services is a considerable risk. De-risking the venture is therefore crucial and the well proven A330 reduces risk.
It is logical for Azul to start international service to the US market, as their CEO, David Neeleman, who founded jetBlue, is well familiar with the US market. Could we see a strategic alliance for feed and code-sharing in the near future between Azul and jetBlue?
Azul, which began service in 2008, has grown to serve 104 destinations in Brazil with more than 880 daily flights with its fleet of 136 Embraer and ATR aircraft. Accounting for about 1/3rd of Brazil’s operations, the airline has grown rapidly, and its new international aspirations could change the competitive dynamics in the Brazil-North American market.
We contacted the airline for more color. The selection of the A350 was mostly on technical basis and is believed to be the right sized aircraft for Azul’s needs. Leasing was selected because of earlier delivery slots and more economic sense. All the aircraft are coming via ILFC. First markets to be served will be Florida and New York.