• Joe Breitfeller

Azul Reports First Quarter Loss of R$ 975.3 Million on Revenues of R$ 2.8 Billion

Azul S.A. reported on Thursday an adjusted first quarter net loss of R$ 975.3 million (USD $167.6 million) on revenues of R$ 2.8 billion (USD $481.2 million). First quarter operating income was R$ 173.6 million (USD $29.8 million), representing a 6.2 percent margin.


Azul Airbus A320neo - Courtesy Airbus

Yesterday (May 14, 2020), Azul S.A. (NYSE: Azul), reported a first quarter adjusted net loss of $167.6 million or ($0.49) per share on revenues of $481.2 million. Operating income for the first quarter was $29.8 million, representing a 6.2 percent margin. The carrier’s first quarter net loss of $167.6 million is largely a result of a $106.2 million fair value adjustment due to the airline’s participation in TAP Air Portugal and fuel hedge losses. Revenue per available seat kilometer (RASK) declined 1.5% on a year-over-year capacity increase of 12%, while cost per available seat kilometer (CASK) increased 7% over Q1 2019, mostly attributable to an 18% average depreciation of the Brazilian real. In Thursday’s announcement, Azul’s CEO, John Rodgerson said in part,


“As you know, with the implementation of travel restrictions and social distancing measures started in the second half of March, the Brazilian economy came to a standstill leading to a precipitous decline in passenger demand. Also, by the end of the quarter, the Brazilian real depreciated 33% compared to the same period last year further pressuring results. Still, revenues grew 10% year-over-year driven by stronger passenger demand in January and February and a 12% capacity expansion prior to the crisis. Growth in other revenues was mainly driven by our cargo business unit, which grew 41% in 1Q20 and 26% in March alone compared to the same period in 2019. This follows Azul Cargo Express’s strong track record of revenue growth of 41% and 61% year-over-year during the first quarter of 2018 and 2019 respectively. Since the onset of the pandemic, we reacted quickly to adjust our network by reducing the number of daily flights by 50% in the second half of March and by 90% in April year-over-year. In May we intend to operate around 115 daily flights with approximately 20 aircraft to 38 destinations. We expect to gradually expand our network over the coming months as the Brazilian economy reopens.”


Mr. Rodgerson continued to explain that Azul benefits from having the most flexible fleet in Brazil with aircraft that can seat from nine to 214 guests. Additionally, the carrier is working with aircraft manufacturers and lessors to adjust the size of their fleet. Yesterday (May 14, 2020), Azul announced an agreement with Embraer to postpone 59 deliveries between 2020-2023 to 2024 and beyond. Azul will also retire 51 aircraft from their fleet by 2023.


As of March 31, 2020, Azul had total cash and investments of R$3.1 billion ($533.2 million). When deposits and unencumbered assets are included, the carrier has a total liquidity position of R$6.7 billion ($1.15 billion). Azul expects to have a daily cash burn rate of between R$3-4 million ($512K to 1.03M) in May and June and based on projections, the company believes it can withstand the current demand environment for over a year. At the close of the quarter, Azul’s commercial fleet totaled 138 aircraft, including 49 next generation aircraft. In trading Friday afternoon, shares in Azul S.A. (NYSE: AZUL) were down 1.52% at $5.82/share (12:45 PM EDT).


Source: Azul S.A.

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