Azul trims Q3 capacity, eyes Q4 growth after fuel shock

Brazilian airline Azul will trim capacity by roughly 4% in the third quarter, following an unprecedented 10.6% year-on-year cut in the second quarter, CEO John Rodgerson said on Thursday. The carrier expects to return to growth in the final quarter of the year.

The second-quarter capacity reduction, which included a 24.9% cut in international operations, came as the U.S.-Israeli war on Iran disrupted oil flows and drove jet fuel prices sharply higher. Fuel costs per liter surged 61.8% during the period.

"The peak of the fuel crisis occurred in the second quarter, and at the same time it is typically the weakest quarter of the year," Rodgerson said. "We did what we believed was right: cut capacity."

Despite the challenges, Azul reported record second-quarter operating revenue of 4.98 billion reais ($960 million), up 0.7% from a year earlier. Core earnings, however, slumped 55.4% to 510.1 million reais as higher fares only partially offset the fuel cost increase.

The company, which emerged from a nine-month Chapter 11 process in February, has shifted its focus from expansion to profitability and operational execution. Rodgerson noted that fuel costs increased by nearly 700 million reais during the quarter.

"Was it the end result we wanted? Of course not," he said. "But this was always going to be a transition quarter anyway."

Rodgerson remained optimistic about Brazil's aviation market, citing resilient demand. "The fundamentals in Brazil are very good at the moment, and we believe we're well positioned," he said. "Wars and crises don't last forever."