Listen in as Aviation Week Network's Karen Walker sits down with Azul CEO John Rodgerson to discuss the carrier's codeshare with Gol Linhas Aéreas, fleet strategy and the Brazilian domestic market.
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Rush Transcript
Karen Walker:
Hello everyone, and welcome to Window Seat, our Aviation Week Network Air Transport podcast. I'm Air Transport World and Group Air Transport Editor-in-Chief, Karen Walker. Welcome on board. Now, today I'm absolutely delighted to be joined by John Rodgerson, who is CEO at Brazilian carrier Azul. It's a very interesting carrier in a very interesting market. It's quite a new airline. John, thank you so much for joining me. I'm actually going to start by asking, you are the best man to tell us a little bit about who Azul is, how it got there, and what are its key principles?
John Rodgerson:
Thanks Karen, for the opportunity. First of all, it’s an enormous pleasure to be here. So, we came to Brazil 15 years ago to start a new airline. A bunch of us were ex-JetBlue colleagues, and we had a dream to start a brand new airline in Brazil connecting cities that had never been connected before. And over the last 15 years, we've built this airline, and today we fly to 160 destinations inside of Brazil.
Our next closest competitor is about 60, so there's 100 cities that only Azul serves in Brazil. And so we fly to the main cities, of course, but we fly regional aircraft, ATRs, E-Jets, A320s, and we also fly internationally because when you're the only carrier in 100 cities, there’s people in those 100 cities that want to connect and flow through to Fort Lauderdale, Orlando, Lisbon, Paris. And so we do that as well. And so we've got an airline that's just under 200 aircraft—will end this year with 200 total aircraft—about 16,000 crew members throughout the whole airline and very much focused on being a people company. I often say, “We're not an airline, we're a people business,” and that's our main focus. And as long as we care for each other and our customers, we're going to do all right.
Karen Walker:
Excellent. Brazil—it’s a huge country and an important country. It’s a country that actually makes aircraft—the Embraers—but it's still really an emerging market in many respects on the air transport side. I wonder if you can just talk to me a little bit about the importance of that market and the importance of having something like Azul for Brazilians.
John Rodgerson:
It's funny, when I tell people I live in Brazil, oftentimes they say, “Do you speak Spanish?” I said, “No, I speak Portuguese because Brazil is a Portuguese-speaking country,” and it's the size of the continental United States. There’s 220 million people in Brazil—[it] has the largest city in the Western Hemisphere, which is Sao Paulo, which is 20 million people. Rio has 13 million people. It’s also the breadbasket of the world. It has the largest reserves of fresh water. It actually has three crops a year of soybeans, one of the largest exporters to China. So, Brazil is a fascinating country. It has some of the most beautiful beaches in the world, has the Amazon region where you can go fishing in the Amazon; you could see all of the wildlife, and it's a very big country. I often say, Karen, my family will come and visit, and they'll say, “I'd like to go see three or four things,” and they have their bucket list for Brazil.
I said, “You realize that's like going from New York down to Florida, then to San Francisco, then to Chicago, and then to Texas right?” And people forget just how large Brazil really is. But as you said, Brazil’s just starting its aviation journey. And so Brazilians today travel less than Colombians, less than Chileans, less than Mexicans, and certainly a lot less than Europeans and people from the United States. There's reasons for that. Brazil has its own challenges. It has the highest jet fuel prices in the world, has other challenges, like it’s a very litigious society. But I think when you look past those challenges, there's a tremendous amount of opportunity in Brazil.
Karen Walker:
And here's the thing, the infrastructure isn't really there for people to get around those vast spaces, as you say. It is not as easy as just get on a bus even or drive. Aviation for many people is the only solution. And it wasn't there to that scale and connectivity points that you've provided. Is that correct? People can fly for the first time.
John Rodgerson:
Absolutely. I mean, oftentimes you take an Azul flight or a four-day boat ride when you're in the Amazon region. Put that in perspective. And so I think something that is a three-hour flight for us many times could be a 26-hour bus ride. And people need to understand that Brazil doesn't have a rail system and the roads are not as developed as you would see in Europe or the United States. And so aviation is critical. It's critical for healthcare; it's critical for connecting. It's critical for e-commerce. I think in today's day and age, everybody's like, “Oh, I'm just going to buy something online. It's going to show up in my house.” Well, that happens because there's infrastructure all throughout Europe, United States, and Asia. That's not the case in countries in South America. And so that's a benefit that we have in our business is that we truly connect Brazil. And there's so many advantages to doing that.
Karen Walker:
And as we both know, that brings about wealth and prosperity for people at an individual level and a corporate level, yes?
John Rodgerson:
Absolutely. I think a lot of people are so focused on ESG [environmental, social, governance] and the environmental piece of things and SAF and all of those things. And those are all important, don’t get me wrong. But I think what I'm really focused on is having a sustainable business. A sustainable business provides jobs, provides healthcare, provides a retirement plan, and so many people want to save the Amazon, but yet you have to connect to [the] Amazon first. Why are people burning the forest down? For economic prosperity.
And so if I can provide jobs and opportunity for people and producers that you can produce anywhere in Brazil and sell the goods outside because Azul takes them on our airplanes, I think ESG is much more than just about the environmental piece. And I think as we look at it, providing high-paying jobs and, when Azul flies to a city, the economy develops. When Azul buys an aircraft, we're buying from a Brazilian-made manufacturer. That’s a pretty remarkable thing when you think about it with the two giants Airbus and Boeing being in Europe and the United States. Brazil has one of the best manufacturers in the world for aircraft, and it’s important. It’s really, really important. And we're the largest purchaser of Embraer E2s in the world, and we're proud to do that.
Karen Walker:
Very good points to make. May I ask you, just because of the region that you're in, and because you're a relatively new airline, where things stand with you in that market in terms of recovery from COVID and how air traffic demand is looking for the market?
John Rodgerson:
First of all, Latin America did not get any support for the airlines from a government perspective. And so if you look at it starting at Mexico and going all the way down to all the countries in Latin America, there's no government aid. And so think of what the US and Europe would've looked like, how many carriers would've failed had it not been for government aid. And so Azul was able to get through that. It was a very, very tough period of time. But I think one of the things I'm probably most proud of, Karen, is that during the height of COVID we had 13,500 crew members and 11,716 of them took an unpaid leave of absence to help the company, which is quite a contrast to what you've seen elsewhere where everybody else was paid, but that was the only way to save a company because there was no revenue coming in.
We still had to pay leases. And so I went to our crew members and said, we need your help. We didn't cause this pandemic, but if we don't work together here, we won't be able to save the airline. And so the actual employees of Azul saved Azul during the darkest of times. And on the backside of that, we came back and are much larger today, we're about 40% larger in terms of ASKs than we were pre-pandemic, and we're almost double in revenue because our people came back and they came back with a vengeance and said, “We're going to run a great airline together.” And on the backside of that, in 2023, we were the most on-time airline in the world, and we're very proud of that. Why? Because it's a people business, as I said, and our people know how important the airline was to them, and they don't want to go through that again. Nobody liked going months on end without getting a salary. And so they came back more determined to run an even better airline.
Karen Walker:
That's really remarkable to hear. And do people want to travel again now in Brazil?
John Rodgerson:
Yeah, I think the travel demand came back very, very quickly. I think everybody was like, “Oh, this is pent-up demand. This is pent-up demand,” but that was like 2021, 2020. We're now in 2024, and that demand still exists. And so I think Brazil is a country that likes to connect, right? There's a famous tradição the Brazilians will understand that is to hug one another and to really … you can't show up in a meeting in Brazil without hugging somebody or giving them a kiss before the meeting starts. And I think that that's Brazil as a country that likes to connect and likes to engage on a personal level. And so I don't think the remote work really took off in Brazil, if you will.
Karen Walker:
Good to hear. Especially as there was so much cynicism about international travel predominantly. And yes, as you say, this is a good example of the opposite happening. You mentioned the fleet that you have. Again, you're a young airline, young fleet, you have A320 and A321neos, ATRs, and of course you mentioned the Embraer aircraft, E2s and E195s. Are you comfortable with where you are with your fleet? What do you think is what you’re going to need in the next five to 10 years? And are you being affected by some of the supply chain issues that we're hearing about all the time?
John Rodgerson:
Yeah, thanks, Karen. First of all, it's just everybody thinks I'm totally crazy. We also have wide-bodies, and then we have 330neos. But there's a reason, there's a method to the madness. And so you can't have a city of 20 million people and 13 million people like Rio, Sao Paulo, and fly the same aircraft type that you fly to a 100,000-habitant city. And so Brazil is so large and so diverse, and one of the reasons why we're able to serve 100 cities that nobody else serves is because we have a diversified fleet. And many times people think the most expensive cost for an airline is fuel. The real most expensive cost that an airline has is an empty seat. And so if you fly the wrong gauged aircraft into a market and fly it empty or you lower prices to try to fill that, it can be very destructive for you overall.
And so we feel very good about the fleet we have today. A lot of people say, “Oh, would you like to get rid of any fleet type?” No, I think we're very happy with what we have, but we're struggling with engines, and I think we're struggling … the entire industry is struggling. And so I think something that used to take up 5-10% of my time is more than 50% of my time right now is just dealing with OEMs and supply chain issues. And I think the industry as a whole is suffering. And if you're not on top of it, it's very possible the OEM is going to give the attention to somebody else.
Karen Walker:
So, it's something you really are working hard at the moment, by the sound of it, with your suppliers. May I ask you one other thing? You have a number of codeshare partners. I'm thinking Ethiopian Airlines, United Airlines are quite big. You also have a relatively new codeshare with another Brazilian carrier, GOL, and there's a lot of rumors out there about how that might deepen into something different. Can you make any comment?
John Rodgerson:
Yeah. First of all, we're really excited about it. We have great codeshare partners like you mentioned. A couple more that I would add are TAP, JetBlue, and others, but we now have one with GOL and this will be the largest codeshare I think in the world, right? When you talk about two domestic partners codesharing, I think that's something that's really exciting for us, and we think that's great for our customers. I keep saying on this podcast, 100 cities that nobody else serves. Well, GOL has a whole clientele that can now flow into 100 cities. And so I think from a consumer perspective and for your loyalty program, I think it's really positive. And we've been pretty vocal that consolidation is something we're looking at and we've been engaged in some conversations. But for right now, it's just a codeshare and we'll see what the future brings. But yeah, I think it would be fantastic for the Brazilian market.
Karen Walker:
So, I take that as ‘watch this space, keep your eye on what Brazil is doing.’ Yes? It was also my pleasure, John, just a couple of days ago here in Dubai where we are actually for the IATA AGM to present you and Azul with the Airline Market Leader Award of the Year on behalf of Air Transport World, and it was truly deserved. And just hearing what you've just said now speaks to why you won that award. So I can give my personal congratulations for that. And thank you also for joining us today.
John Rodgerson:
Oh, we were honored to be there, and the company that was there and Delta Air Lines and Doug Parker was there, and Air Canada, and to just be in that list of winners this year, we're just honored and a humbling experience for us.
Karen Walker:
Well, it was truly deserving and an absolute delight to meet you. So thank you again for joining us. Thank you also to our producers, Cory Hitt and Guy Ferneyhough, and of course, a big thank you to our listeners. As always, please make sure you don't miss our weekly recordings by signing up to Apple Podcasts or wherever you like to listen. So until next time, this is Karen Walker disembarking from Window Seat.
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