Azul reports higher Q4 earnings as it taps into new markets and keeps costs low

Brazil’s Azul increased fourth quarter revenue and profit in 2023, as it tapped into new markets while keeping costs in check.

Earnings before interest, tax, depreciation and amortization (EBITDA) at the Sao Paulo-based carrier climbed a third to reach R1.47 billion ($290 million) in the fourth quarter, the company said.

For the full year 2023, Azul EBITDA rose 61% to R5.2 billion – a figure that the company hopes to increase to “around R6.5 billion” in 2024.

“Azul continues to be unique,” says chief executive John Rodgerson. “Our broad network serves 160 destinations, roughly 100 more than anyone else, enabled by a flexible fleet which allows us to access demand that was never explored before. These structural competitive advantages have only grown over time as we stay true to our business model.”

Net profit during the fourth quarter jumped to R403 million, up almost 75% from 231 million in the same quarter in 2022.

For the full year 2023, the company halved its unadjusted net loss to R700 million as fuel prices fell and it earned less from derivative financial instruments than in 2022.

Revenue during the final quarter of the year rose 13% to R5 billion from R4.45 billion last year, as it saw “robust growth in passenger revenues” and supported by domestic cargo revenue and the airline’s vacation business Azul Viagens.

Operating expenses rose 5.6% to R4.15 billion during the last three months of 2023.

For the full year 2023, revenue rose 17% to R18.7 billion, outpacing expenses which were 6.6% higher at R15.8 billion.

At the end of 2023, Azul had a passenger operating fleet of 183 aircraft, which includes 11 Airbus widebodies, 55 Airbus narrowbodies, 57 Embraer E195s – of which 20 are of the new-generation E2, and 24 Cessna Caravans. That is an increase of six aircraft on a year ago.

According to Cirium fleets data, the company still has outstanding orders for 87 aircraft, 54 of which are Embraer’s new-generation E195-E2. With Boeing having delivery issues and Airbus operators dealing with a Pratt & Whitney GTF engine recall, Embraer is “better positioned to deliver aircraft on time”, says Rodgerson.

During 2023, Azul had 77,000 departures on its older E1s, “all of which we want to go to E2s as soon as we possibly can”, he says.

The airline also increased its 2024 results expectations. The carrier says capacity will climb by 11%, “mainly driven by the continued strong demand environment and the continuing implementation of our fleet transformation strategy”.

In addition, the carrier sees its EBITDA earnings to be “around R$6.5 billion”, driven by “robust demand environment in both domestic and international markets and the positive trend in fuel prices, together with the expected capacity growth and a higher number of fuel-efficient aircraft entering the fleet”.