By Gabriel Araujo
SAO PAULO, May 8 (Reuters) – Brazilian airline Azul expects a hit of about 1 billion reais ($204.15 million) from higher jet fuel prices this year, but believes it is better positioned than peers to absorb the impact after a recent restructuring, CFO Antonio Carlos Garcia told Reuters.
Garcia, who joined Azul in April from planemaker Embraer just as the carrier exited Chapter 11 bankruptcy proceedings, noted that fuel accounts for roughly 30% of the firm’s costs, with the sharp rise in oil prices feeding through quickly.
Global airlines are contending with surging prices since the Iran war disrupted traffic through the Strait of Hormuz, in the industry’s worst crisis since the COVID-19 pandemic. The disruption is Azul’s first big post-restructuring test.
Rival LATAM Airlines, which has a fleet of more than 350 planes versus Azul’s fleet of just over 150, estimated a $40 million hit to first-quarter results and additional fuel expenses of more than $700 million in the second quarter.
Garcia said Azul could offset about half of the hit over the year due to adjusted capacity and continued revenue growth. The carrier had already been cutting capacity as part of its restructuring – a move now seen across the industry amid higher costs.
AZUL’S MITIGATION STRATEGY
“It will have an impact, of course, but I think we may suffer less,” Garcia said in an interview on Friday, adding that Azul also faces lighter aircraft delivery commitments than some peers.
It expects delivery of four Embraer E2 jets this year and seven Airbus widebodies, which Garcia said would come at more favorable prices than previous twin-aisle contracts.
The airline emerged in February from Chapter 11 protection following a sweeping restructuring that cut obligations by $2.5 billion and included an investment from United Airlines. It also included an investment commitment from American Airlines, currently under review by antitrust watchdog CADE.
NEW CFO’S FOCUS ON DISCIPLINE
The company plans to relaunch its American Depositary Receipts (ADR) program by late May or early June, Garcia said.
The executive said his main focus at Azul would be on stricter cost discipline and improving cash generation.
His appointment to replace longtime predecessor Alex Malfitani was welcomed by analysts after he helped Embraer recover from the COVID-19 crisis and a failed commercial aviation deal with Boeing. Embraer shares jumped more than fourfold during his tenure as CFO.
($1 = 4.8984 reais)
(Reporting by Gabriel Araujo in Sao Paulo; Editing by Matthew Lewis)
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