Latest Merger To Create Third Largest Airline in Brazil
An ostensible change of heart on the part of the chairman of Campinas, Brazil-based low-fare regional airline Azul will allow for the creation of the country’s third largest carrier, pending antitrust authorities’ approval of a plan to merge Azul and fellow Brazilian regional airline Trip. The May 28 announcement came only weeks after Azul chairman David Neeleman dismissed any need for his airline to join Brazil’s wave of integration, according to a report from the Center for Asia Pacific Aviation (CAPA). The airlines have created a new parent company, named Azul Trip SA, to oversee their integration under the chairmanship of Neeleman. Trip CEO Jose Mario Caprioli will preside over a special integration committee created to decide on details of the transition.
The proposed all-stock transaction would leave Azul shareholders with two-thirds of the combined company and Trip shareholders the remainder. Neeleman, the founder of New York-based JetBlue, holds some 90 percent of Azul’s shares.
Meanwhile, St. George, Utah-based SkyWest announced that it would sell its 26-percent holding in Trip for $42 million to Trip Investimentos, a Brazilian limited-liability company affiliated with Trip Airlines. Under the terms of that deal, SkyWest holds a call option to acquire 15.38 percent of Trip Investimentos.
If the airlines merged today, their combined fleet would total 112 aircraft, operating 837 daily flights on 316 routes to 96 cities. It would control some 15 percent of the domestic Brazilian market in terms of revenue passenger miles and operate 29 percent of all domestic departures. Combined, the two companies now employ 8,700 people.
Now serving 48 Brazilian destinations, Azul flies thirty-two 118-seat E195s, ten 106-seat E190s, seven 70-seat ATR 72-600s and five 70-seat ATR 72-200s. Its delivery schedule with ATR calls for it to receive 23 more 600-series ATR 72s. It also holds an order for 11 more E195s, first delivery of which it expects next year.
Trip, meanwhile, flies eleven 110-seat E190s, nine 86-seat E175s, five new 68-seat ATR 72-600s, 15 ATR 72-500s, nine 48-seat ATR 42-500s, eight ATR 42-300s and a single ATR 72-200. It awaits delivery of another four E190s and 13 more ATR 72-600s.
Although both Azul and Trip similarly concentrate on secondary markets largely unserved by Brazil’s dominant majors, Gol and TAM, both have managed to expand quickly without encroaching much on each other’s territory, making the merger particularly appealing, said the CAPA report. Only one route—Campinas-Belo Horizonte—ranks among the top 10 routes for both carriers, said CAPA, while the carriers’ fleet commonality would allow for an exceptionally smooth integration of equipment.