Brazil’s Azul Reports All-Time Record $260 Million Revenue In Q3

Azul Linhas Aéreas Brasileiras (Azul) has presented record-breaking quarterly results, with the airline pointing out that its Q3 operating revenue and earnings before interest, taxes, depreciation, and amortization (EBITDA) were an all-time record.

Profitable quarter

Azul ended the three-month period with total operating revenue of R$5.1 billion ($879.9 million) and operating expenses totaling R$4.1 billion ($707.3 million), giving the Brazilian airline an operating margin of 20%.

Its EBITDA, which the carrier described as an all-time record number, was R$1.6 billion ($276 million), with an EBITDA margin of 32.2%. Its quarterly net profit was R$360.3 million ($62.1 million).

However, when adjusted, the profit swung to a loss of R$203.1 million ($35 million), underpinned by unrealized derivative results and foreign currency. During the first nine months of 2024, Azul’s loss was R$4.6 billion ($793.6 million).

Azul detailed that its derivative financial instruments loss during the quarter was R$122.1 million ($21.05 million), while net financial expenses were R$1.1 billion ($189.6 million), which was offset by foreign currency exchange gains of R$649.7 million ($112 million).

According to John Rodgerson, the chief executive officer (CEO) of Azul, these figures represented a significant recovery compared to Q2, which is not only seasonally weaker but was also impacted by the devastating floods in Rio Grande do Sul.

“More importantly, it demonstrates the sustainability and profitability of our growth strategy.”

Healthy demand

Speaking about its revenues, the Brazilian carrier detailed that its total operating revenues increased by 22.9% quarter-on-quarter (QoQ) and 4.3% year-on-year (YoY) due to healthy demand and robust ancillary revenues.

Rational capacity deployment and sustainable competitive advantage have also allowed Azul’s passenger revenue per available seat kilometer (PRASK) to grow 0.3% YoY, while revenue per ASK (RASK) increased 0.6% YoY.

Rodgerson emphasized that the airline’s business units were key drivers of its growth, including its loyalty program, Azul Fidelidade, which had almost 18 million members as of September 30.

The CEO also noted that Azul has continued to manage its costs closely, with cost per ASK (CASK) being flat, while CASK, excluding fuel (ex-CASK), was down 2.8% YoY.

“We are laser-focused on our efforts to drive further margin expansion. While a key driver of CASK reduction will come from our next-generation fleet, we are also pursuing several additional efficiency initiatives. For example, just quarter over quarter, we were able to reduce full-time equivalent employees by 1.5%, even with the airline growing 10% […].”

Liquidity measures

Together with its Q3 results, Azul also published an update on its liquidity and the various negotiations it has with its creditors.

“[…] Azul continues to collaboratively negotiate with its lessors, original equipment manufacturers (“OEMs”) and vendors for additional mutually-beneficial cash flow improvements, building upon the commercial agreements reached with lessors and OEMs announced on October 7, 2024.”

In addition, the Brazilian airline has planned further transactions that should result in an additional $500 million in liquidity, $400 million of which would be provided before the end of the year, agreements to improve cash flow by reducing lessors and OEMs’ obligations over the next 18 months, a collaborative effort to search for additional cash flow improvements from lessors, OEMs, and vendors, and potentially converting $806.5 million of notes obligations into equity by issuing new notes with the same conditions, except with mandatory equitization.

While Azul was rumored to file for Chapter 11 bankruptcy, following in the footsteps of its main competitors in Brazil, GOL and LATAM Airlines, the carrier has managed to avoid the process by striking various deals with its creditors.

This included an agreement with its bondholders for an additional $500 million in funding, which the carrier announced on October 28.

Rodgerson concluded that the airline had made incredible progress over the past few months yet warned that there was still a lot of work to do.

“I could not be more excited about the steps we have taken and the support we have received from all our stakeholders, and I would like to once again thank them for their continued confidence in our company.”

The CEO noted that with a unique business model, growing profitability, and cash generation, the airline was being set up for long-term success.