Jetrader - Autumn 2016 - 42

Transferring aircraft to TAP Portugal was
a great blessing because it is a sister company, so we were able to do a quick deal
with them. They also needed to refleet
themselves relatively quickly and so we
were able to help. We also returned aircraft
and worked with manufacturers to shift
around some of our positions. We have
great relationships with our manufacturing
partners, who have been very helpful in this
process. We've adjusted our capacity for the
new norm that we're living in. When I take
about 25 aircraft out of the fleet in a short

period of time, we're not seeing a huge cut
in capacity because I'm fully utilizing the
assets I have.
JT: What effects in the credit market
has Azul felt because of the economic
and political upheaval in Brazil?
JR: Brazilian banks stopped lending over
the last 12 months, but the fact that we
were able to raise equity and show them
that our balance sheet is much stronger
than our competition has been a big help,
and they've opened up and are starting

JT: There's been a lot of growth of lowcost carriers in Latin America. What do
you think is driving this growth?
JR: One of the reasons why LCCs are thriving in Latin America today is a lot of people
want to travel. If you purchase a ticket
seven or 30 days out, the fare is essentially
the same. LCCs have been a great success in
Mexico and other places, and I think that's
fantastic. They're creating new demand. A
lot of these guys are not necessarily stealing demand from the legacy guys; they are
creating a new pocket of demand that didn't
exist before. Anytime you do that - and
that's what we've done here in Brazil - you
have a very sustainable business model.
Azul created a hub at [Sao Paulo's]
Viracopos/Campinas International Airport.
Prior to Azul's arrival, I think there were
14 flights a day. Now there are 200 flights
a day and we have 195 of them. So a lot of
people think that Azul is stealing customers
from the other airlines, but we've created
our own market. We're doing something
different in the space, so we've created a
lot of value with our business model.

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JT: When do you think stability is
going to return to Brazil and the Latin
American region?
JR: Interim President [Michel Temer]
doesn't have the same power that the permanent president does. Plus we need to see
if there's any chance of [President Dilma
Vana Rousseff] coming back before there
can be some stability. There are some difficult measures that Brazil needs to address,
including the labor laws and things like that.
The interim president probably has the best
economic team, but it's been a challenge
politically to get things done.

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joe@contrail.com to discuss options for your CFM56/V2500
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42 The official publication of the International Society of Transport Aircraft Trading
08/08/16

826611_Contrail.indd 1

to lend to us again. In Brazil, you rely
on working capital loans from the banks.
The way tickets are sold in Brazil, customers can buy them in six installments. So
they may fly tomorrow, but the cash flow
happens over a six-month period. So it's
important for Brazilian carriers to manage
working capital, because I certainly can't
pay my fuel bill in six installments and
I can't pay for my other resources in six
installments. It hasn't been easy or fun.
But I can guarantee you that nobody moved
as quickly as we have in raising capital and
shedding capacity. I think that brings us
a lot of credibility back with the banks.

1:34 pm

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Jetrader - Autumn 2016

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