Azul Airlines Relying on Innovation to Soar Through Brazil’s Turbulent Economy

As a pioneer in many aspects of Brazilian commercial aviation, Azul Airlines is now following in the steps of other Brazilian airlines by spinning off its customer loyalty program.

azul airlines

Over the last eight years, a focus on innovation and investments in technology have helped position Brazil’s Azul Airlines as the third largest airline in the country. Today, the company is betting on that innovation to help navigate it through Brazil’s turbulent economic headwinds.

The low-cost airline, founded by David Neeleman, who also founded the U.S. airline Jetblue, is following in the steps of other Brazilian airlines by spinning off its customer loyalty program, TudoAzul. Other similar initial public offerings (IPOs) of miles programs include Multiplus from Latam, and Smiles from Gol Linhas Aéreas, both of which have been hugely successful strategies.

Brazilian Pioneer

Founded in December 2008, Azul has a fleet of 134 aircraft, serves 104 destinations and controls 30% of the airline sector in Brazil. This year, Azul began serving two new international flights: one to Lisbon and another to Montevideo. In the domestic market, the company began operating new destinations to Varginha (in the state of Minas Gerais), Sorriso (Mato Grosso), and Lages (Santa Catarina). Azul also launched a flight between Cayenne in French Guiana and Fortaleza in the northeast of Brazil, bringing many tourists to that area.

The company has been a pioneer in Brazil, this year introducing the SkySofa to A330 cabins, offering a full length bed equal to four seats on international flights to Orlando, Fort Lauderdale (Miami) and Lisbon (Portugal) from Sao Paulo airports. “Technology is inherent to our work and it is present in several of Azul’s areas and processes,” said Azul’s CEO in Brazil, Antonoaldo Neves.

Technological Focus

Antonoaldo Neves
Antonoaldo Neves: “The adjustments we’ve had to make have already shown a positive effect on Azul’s efficiency, and I believe we will emerge stronger from the crisis.”

Azul’s pioneer reputation also extends to technology, as it was the first airline in Latin America to offer Live TV programming via satellite on its flights. Investment in technology includes the tools employed in the Azul corporate university (UniAzul), such as pilot training flight simulators. Apart from that, Azul has focused on apps and mobile platforms to attend customers, making check-in and information services easier.

In some airports, totems allow customers to weigh and tag luggage themselves before they check in their bags. “We are looking at customer expectations to provide better services. We have an extensive air network, with over 100 domestic destinations, a fleet of modern and comfortable aircraft, recognized on-board services and entertainment, as well as offering a range of snacks and beverage options,” said Neves.

The company has its own IT team focused on strategic and operational decisions. In addition, the company also works with service and technology outsourcing firms in the development of collaborative projects with some partners.

In the case of its call center, the structure is composed entirely of Azul employees. “This brings a lot of benefits to the company,” said Neves. “The training of these people follows the quality standard for all areas that have a direct interface with our customers. Moreover, our call center agents are involved with Azul culture, close to the overall structure of the company, which makes them feel part of the company.”

Code-Sharing Partnerships

The acquisition of Portuguese airline TAP, in March of this year, by the Gateway consortium, which has David Neeleman among its shareholders, allowed the Brazilian airline to sign a code-share alliance with TAP and expand trade agreements, as well as offer global career opportunities for its crew. “There are huge possibilities of synergy between Azul and TAP and they are constantly being studied,” said Neves.

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The arrival of new shareholders, United Airlines (which took a 5% stake in Azul) and the Chinese group HNA (which acquired a 23.7% stake), will contribute to the expansion of airline routes, loyalty programs, and codeshare agreements. “In the coming months, Azul will begin to serve Ponta Grossa (in the state of Parana) and Barra do Garças (in the state of Mato Grosso), besides launching a direct flight from Recife, in the Northeast of Brazil, to Orlando, Florida, which will probably begin operating in December,” says Neves.

Navigating Economic Headwinds

The economic crisis in Brazil affected the demand for domestic flights and led Azul Airlines to cut about 7% of its seats, removing some aircraft from the fleet. “We realize that these adjustments have already shown a positive effect on the company’s efficiency,” said Neves. “I believe Azul will emerge stronger from the crisis.” Nevertheless, Azul registered a loss of 754.6 million reals in 2015 and domestic passenger demand for Brazilian flights declined 6.6% this year, according to the National Civil Aviation Agency (Anac).

The volatility of the exchange rate also affected the company’s results, since most of the airline’s costs are in dollars. After the devaluation of the real in 2015, currency appreciation this year has contributed to the increase in demand for international flights. “We are optimistic about the recovery in demand for the coming years,” says Neves.

The 2016 Olympic Games helped the airline a little, increasing the demand for domestic and international flights in Brazil in August. A few months before, Azul Airlines provided more than 100 additional flights to Rio de Janeiro and, according to Neves, was pleased with the outcome.

While there is still no date for the definitive separation of TudoAzul, Neves says that the company wants to be ready when the opportunity arises, hopefully using the spin-off to fly through these difficult market conditions with ease.

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