Panel SA: ‘We will have fewer flights with this increase in fuel prices’, says businessman

John Rodgerson, president of Azul, says that the company’s team has already begun to analyze the adjustments that will be necessary to adapt the area network to the new fuel price.

“There will be fewer flights. Instead of flying to a city seven days a week, maybe three days,” says Rodgerson.

Abear (an association of airlines that brings together Latam and Gol) said last week that the surge in oil mainly impacts regional market routes. As the Azul market is dispersed in Brazil, what has been the reflection for you? Every company has routes that are more or less profitable. And some who lose money. With the increase in fuel, some routes are not viable.

What will happen, at first, is to have to cut some flights, cut some frequencies. It has to adjust to the capacity of the market.

What is sad is that we are in a good moment of recovery in Brazil. And a high fuel spike impacts the airline network. So, there will be fewer flights.

Instead of flying to a city seven days a week, maybe three days a week. Perhaps some city that has three frequencies a day can be reduced to two. That’s what you need to manage right now.

Could some of the more distant destinations that Azul serves be harmed? Sure. We have to look at the price of fuel. Congress has been working on measures to reduce the impact. And we are looking every day. The good thing is that you have some time to prepare. We are not paying that price today. We will pay next month.

What our team is currently doing is adjusting the mesh according to the new fuel price.

Before the pandemic, Azul had been expanding the international flight market, but then it stopped. At a time when the consequences of the war are expected to hit the international flight segment the hardest, is it better to stay out of it? We have more than 800 domestic flights every day and less than ten outside the country. At a time like this, the cost of fuel increases with the flight time.

Imagine a flight to Europe. It’s pretty expensive now because of the fuel. So we’re happy that we’ve focused a lot on home mesh.

We have 30 more cities served today than in 2019. What we did was change our focus, with less international and much more domestic. This has helped in this time of crisis, of high dollar and fuel.

Did you have any intention of expanding internationally again at some point?And if they still had, is this project for later? We want to continue focusing on Portugal and Florida. While it is still necessary to do a Covid test and with the dollar where it is, I think it will be more timid in the short term.

But for sure, if you look at the coming years, we will return to these markets with a little more strength, but at the moment we are focusing much more on Brazil. Which I think is good for the country as well.

In the debate on measures to alleviate the pressure caused by the war on the cost of fuel, there was a discussion about a single ICMS rate for aviation kerosene. This measure, which was not approved in the case of jet fuel, did not have consensus among the different Brazilian airlines. Would it make the deal unfeasible for Azul?We serve many very small communities. We serve a hundred more cities than our competitors. And many, in several states, are served because the governor reduces the ICMS in the state to have more flights. This is beneficial. It’s not like building a factory in São Paulo or Minas. In aviation, you can be in all states at the same time.

That’s what Azul does in Rio Grande do Sul, Paraná, Pernambuco, Amazonas, Minas, everywhere. For us, there are other measures. if they did it [unificação do ICMS] would reduce the country’s regional network. It wouldn’t be bad for our competitors, but it would be bad for a lot of cities and a lot of people in the country.

Costs in Brazil are already high. So, that would increase costs and take more services out of Brazil. Sit back and think, nobody wants that. And Congress understood.

I am not against leveling ICMS. I’m against leveling up in this industry because that would take flights.

I’m happy with the bill that passed Thursday in Congress, because it helps states not have a tax war. But in our industry it’s different, because our assets, our factories, literally fly.

How did the idea for that action by Azul to create a fictional flight to send resources to Ukraine come about?We were in a meeting and everybody was worried about what’s going on in the world. Our employees wanted to do something. Our team had this idea and we talked to the Red Cross.

People can buy a ticket [nesse voo fictício] paying from R$10 to R$250, and the resource is sent as a donation. We did it with our sales system, which accumulates points in the Tudo Azul program.

Years from now, they will be able to tell their grandchildren that they took a flight to help in some way.

X-ray

CEO of Azul, he was vice president of finance and investor relations and worked on the original business plan to create the company. He was one of the founding members of the team. Previously, he worked at JetBlue Airways and IBM Global Services. He holds a degree in finance from Brigham Young University

Joana Cunhawith Andressa Motterand Ana Paula Branco