Brazil’s Azul Eyes Loyalty Partnership to Deepen Ties With JetBlue

Brazilian airline Azul could forge deeper ties with partner JetBlue Airways, CEO John Rodgerson hinted at Thursday.

“We have opportunity to do other things with other airlines, more specifically JetBlue in Fort Lauderdale,” he said during Azul’s third-quarter earnings call.

The two airlines, both founded by entrepreneur David Neeleman, already cooperate. “Today, we have a codeshare, a large codeshare with them,” Azul Chief Revenue Officer Abhi Shah said. “Frequent flyer hopefully is on the table as well there. We have a good base of customers in South Florida. They obviously have a huge base of customers in South Florida. So that would be interesting as well. But we’re looking to evolve those conversations and strengthen our partnership.”

Shah also mentioned JetBlue’s pending merger with Florida-based Spirit Airlines, which would make it an even more attractive partner. “We’re excited about what they can do with Spirit as well in the future.” Azul currently serves two cities in the U.S. — Fort Lauderdale and Orlando. Both are major markets for JetBlue and Spirit.

The current codeshare Shah mentioned covers more than 25 U.S. cities and another six in the Caribbean, including the recent addition of Nassau in the Bahamas. Codesharing makes it easier for travelers to book a connecting journey involving two different airlines. An example would be someone flying from Brazil to Fort Lauderdale on Azul, connecting to a JetBlue flight to say, Nassau. The “code” in codeshare refers to the two-letter airline IATA codes used in flight reservation systems; Azul’s is AD and JetBlue’s is B6.

For Azul, United Airlines represents a potential complication to deeper ties with JetBlue. The Chicago-based carrier is an Azul shareholder, and at one time limited the Brazilian carrier’s ability to work with other airlines. The original United commercial contract with Azul has since expired, however. Rodgerson said his airline still has a “very friendly relationship” with United, and the two continue codeshare with each other. “So we’re talking to them, but there’s no urgency to do something at this time … when we did that original agreement, we didn’t even fly internationally, right?”

Azul’s international footprint is small. It serves just six non-Brazilian cities this quarter, only three of which are outside of South America — Fort Lauderdale, Lisbon, and Orlando — Diio by Cirium schedules show. That’s despite flying ten widebody aircraft, including nine Airbus A330s and one A350-900, according to Cirium’s Fleets Analyzer. Though predominantly a domestic airline, Azul has shown inclinations to expand internationally. Just prior to the pandemic, for example, it planned on flying to New York. It retains a financial interest in TAP Air Portugal.

The Brazilian domestic market, however, accounts for the lion’s share of Azul’s business. During the third quarter, the company rode extremely strong revenue trends to a 9 percent operating margin, overcoming significant cost challenges. This 9 percent figure marks a steep drop from the nearly 19 percent it managed in the same quarter of 2019. That year, however, was an unusually profitable one for Azul, as well as for rivals Latam Airlines Group and Gol, thanks to the demise of a fourth competitor, Avianca Brazil.

Azul took the subtraction lesson to heart. Having seen the benefits of a four-airline market become a three-airline market, Azul attempted to make it a two-airline market by plotting to merge with Latam after its parent filed for bankruptcy. The effort fizzled, but consolidation likely remains top of mind. (Rodgerson will be among the speakers at next week’s Skift Aviation Forum in Dallas. There, he’ll join a panel moderated by former British Airways CEO Alex Cruz.)

Besides its potential to work more closely with JetBlue, Azul hopes to boost earnings by modernizing its fleet, taking advantage of secondary Brazilian markets that its rivals do not serve, and growing three key auxiliary businesses, specifically its tour and cargo operations, and its 15-million-member loyalty program. All three, Neeleman said during the third-quarter call, are “key contributors to our industry-leading margins.” Corporate fares in Brazil are at record highs. And Brazilians are traveling more thanks to more flexible work arrangements.  

Capacity growth will be “disciplined,” especially in light of high fuel prices that Azul says are about $1 dollar per gallon more expensive in Brazil than they are in the U.S. due to high taxes. It will, however, expand significantly from Sao Paulo’s downtown Congonhas airport starting in March, after the government awarded it more slots. “We’ll go from 20 departures a day to about 42 departures a day,” said Shah.

Securing more Congonhas slots was a key motivator for Azul’s attempt to buy Avianca Brazil before it failed. The fact that it failed, Rodgerson said, was “actually been a blessing in disguise … It actually ended up working out much better for Azul in the long run than had we acquired those slots via purchase of that airline.”