Jetrader - Autumn 2016 - 40

John Rodgerson is the chief financial officer
of Azul Brazilian Airlines, where he oversees
financial planning, analysis, treasury and
accounting. He was part of Azul's original
planning team with founder David Neeleman.
Before coming to Azul, he worked for IBM
Global Services and then became director of
financial planning and analysis for JetBlue.
He holds a Bachelor of Science degree in
finance from Brigham Young University. He
spoke to Jetrader about forecasts for the
region, Azul's financial flexibility in a climate of economic turmoil and the growth
of low-cost carriers in the region.
Jetrader: The current FAA 20-year forecast predicted growth of 4.5 percent a
year through 2034 in the Latin American
market. What do you think about the
accuracy of this number? Do you think
that it will be higher, lower or around
the same?
John Rodgerson: First of all, we believe
Latin America should grow significantly
from where it is today. We are very bullish on Latin America even though Brazil's
going through a tough spot right now.
What troubles me with forecasts like this
is it assumes that everything will stay
the same for the next 20 years, and that's
not how real life is in this business. As
an airline, we typically look at our yearout forecast, two years-out forecast and
a five-year forecast. Once you finish a
five-year forecast, it's not worth the paper

it's written on because the environment
changes so quickly.
So, I honestly don't have a view on
that 20-year forecast for Latin America.
But when you take a look at where Latin
America is today and the number of travelers in the region, it is growing because
incomes are rising in Latin America. People
are starting to travel a lot more because it's
accessible to many more people.
It's been driven by the Azul business
model. We fly to roughly 50 cities in Brazil
that are our competitors don't even fly to,
so we've opened up air service. If you look
at what's happened in terms of passenger
growth in Brazil in the last five years, it's
significantly higher. It has been down over
the last six months because there's a deep
recession here right now. There are carriers in Latin America that are opening up
the market.
JT: How much of a challenge has the
Brazilian recession been for Azul?
JR: I came to Brazil eight years ago at
the peak of Brazil's growth and we had a
wild run. Our number one customer was
always Petrobras, which is the largest state
oil company in Brazil. So fuel prices went
from $100 a barrel to $40 per barrel. We are
very bullish on the long-term in Brazil and
Latin America, but it's been a tough ride.
We were buying our fuel when it was
still on a dollar-based price. Everybody in
the world saw this huge decrease in fuel

40 The official publication of the International Society of Transport Aircraft Trading

prices, but I was buying my fuel currency in
a hefty value of 100 percent, so that really
impacted us. They're cleaning up corruption
in Brazil for the first time. You're seeing big
businesses with their CEOs in prison - that
never happened in Latin America previously. I think it's good for long-term confidence in the country. There's obviously
a change in the air.
In order to level the playing field, business must be fair for everybody. And we are
excited about what that means in the longterm. Nobody likes to suffer through this
kind of the tough economic environment.
JT: How have these issues affected the
way that you've done business in Brazil
and Latin America?
JR: Because the macro situation changed
so quickly, we've had to react very quickly.
I'm very proud of how quickly Azul reacted
to the negative macro environment. It was
not a year ago that we raised $100 million
from United Airlines, which took a 5 percent stake. We also raised $450 million
from [China's] HNA Group. While everyone
talks about the downside of our currency,
the upside is we raised money with United
and HNA.
We've moved up lease returns and sold
some aircraft outright. In the last six
months, we've removed 25 aircraft from
our fleet. If you talk to other airlines in
the world, nobody has moved this many
aircraft as quickly as we have.

Jetrader - Autumn 2016

Table of Contents for the Digital Edition of Jetrader - Autumn 2016