If you’ve ever wondered what JetBlue might have looked like had David Neeleman not been forced out in 2008, you can just look south. When Neeleman was fired from JetBlue, he went and founded Azul in his other home country of Brazil. (He was born there.) Azul has been growing like crazy, and now it is planning on buying widebodies to fly to the US. Talk about massive growth.
The parallels between JetBlue and Azul are striking. Even the names are basically the same (Azul means blue in Portuguese.) Neeleman found an underused airport outside of the largest city and made that the starting point. In the US, JFK wasn’t much of a domestic hub back in the 1990s, so Neeleman snagged slots and built it up. In Brazil, Viracopos-Campinas was the former international airport for Sao Paulo, 60 miles northwest of town. When Guarulhos opened, Viracopos faded, but it’s in a rich area. The catchment is strong, and Neeleman saw opportunity.
Both JetBlue and Azul focused on building strong cultures with superior onboard products. Both offered Live TV onboard and both flew the Embraer 190 airplane (though JetBlue started with the larger A320). And both grew fast, one of David Neeleman’s signatures.
That’s what was happening at JetBlue until the airline’s operation melted down in a snowstorm in February 2007. The Board of Directors reacted quickly, and Neeleman got the boot. When I spoke with him back in 2010, he was still bitter. But as JetBlue slowed its growth, Neeleman headed south to Brazil and has had the accelerator on the floor since the airline launched in 2008.
Azul grew quickly into different areas. It ordered ATR 42 turboprops to fly to small cities, and then Azul grew further when it bought TRIP, a regional airline in Brazil. This quickly brought Azul into smaller airports using turboprop aircraft, and it gave Azul more than 15 percent of the total Brazilian market, still well behind Gol and TAM.
To get a sense of how incredible the growth has been, how many cities do you think Azul serves in Brazil? It’s more than 100. That’s well above JetBlue’s destination count. I challenge you to even name 50 airports in Brazil. And unlike the mature US market, Brazil is underdeveloped and has been growing quickly. Or I should say HAD been growing quickly. There has been a big economic slowdown and demand has teetered. But over time, Brazil will continue to grow, and Azul is ready.
In fact, Azul isn’t waiting. It’s leasing 5 A330-200s starting next year and then A350s will come in 2017. The airplanes are going to be used to fly from Brazil to Florida and New York.
Is this going to work? It might, depending upon the routes we see, but as always I’m pretty skeptical. On the positive side for the airline, service between the US and Brazil is restricted due to silly bilateral rules limiting operations. [Correction: Late next year open skies goes into effect, but that won’t make access into Sao Paulo easier due to facility constraints.] It took US Airways years to even get one flight into Sao Paulo. But Sao Paulo fares aren’t that insanely high especially in coach. Even up front, they aren’t that lofty when you consider low fare connecting options on Aerolineas Argentinas, Copa, and Avianca. So where’s the opportunity?
For travel from Brazil to the rest of the world, it’s still very common for all roads to connect through Sao Paulo or, to a lesser extent, Rio. If you live in the north of the country, it’s normal to fly south for a couple hours before then heading back north. Sure there are some limited options from places like Recife and Salvador to the US, but they are very limited. If Azul can start getting people from these airports to the big cities in the US (Florida and New York make perfect sense), then it could open up the market tremendously. But I have to wonder if it can even fill an A330 on a route like that. More likely is that we’ll see the airline start down at Viracopos, near Sao Paulo. I’m just not sure about that one. Then again, I wouldn’t be the first person to doubt Neeleman.
We don’t really know all the details yet, so we’ll have to wait and see. But it’s clear that Azul is moving fast and is not interested in putting the brakes on growth. Whether that’s a good idea or not will be best analyzed in the future.
