Azul S.A. (BVMF:AZUL3)
Brazil · Delayed Price · Currency is BRL 31.85
+3.80 (13.55%)
Last updated: Apr 30, 2026, 5:00 PM GMT-3
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Investor Day 2019
Oct 14, 2019
It's great to see so many familiar faces. My name is Andrea Bottcher. I'm the Head of IR at Azul. On behalf of the Azul team, I would like to welcome you all to our university center, our home here, Uni Azul. It's great to have you here.
For those of you that are joining us via webcast, it's great to have you here as well. We hope that today will be informative and help you as you continue to make your investment decision on our Zoom. Today's slides are available in our IR website. I also wanted to go over you our agenda today. John Rogerson, our CEO, will kick off the presentations, talk about our investment thesis.
Then we'll have Abhi Shah, our Chief Revenue Officer, who'll talk about revenue and product. And then Alex Malfitani, CFO, will talk about business units, Azul Cargo to Azul and then financial highlights. And then we also have here with us Jason Ward, our VP of People and Customers, who talk about Azul's culture and why it's so important to Azul. After the presentation, we'll have Q and A, so there'll be plenty of time for questions. And for those of you who are staying with us to go to VCP and to see the E2, we have buses leaving upfront right after the event.
So please go upfront once we are done. With that, I would like to invite John to the stage.
Thanks, Andre. It's a pleasure to have so many of you here with us. And I just want to this is a big week for David Neeleman. He's turning 60 years old. And so it's very difficult for him to turn 60 years old, and I'm glad this is being webcast because he's I think he's finally understanding that he's mortal.
And so his family is having a big party for him, and that's why he's not here today with us. But it's a pleasure to have all of you here at our university. As Andreas said, I've talked to many of you, but the culture of Azul is very strong here in this building. There's roughly 800 people a day that pass through this building. And so I encourage you when you're sick of hearing our slides and want to step out, walk around the building, pop into a few classrooms, all the classrooms are open, stop in there, talk to our people, talk to the professors, our house is your house today.
And so get a feel for what we're all about because I think the culture is a really, really important part of what we're doing. And every single time we invite a new crew member to join our team, Their first day is here in this room and our entire leadership team receives them in this room and because they're now part of our And they're the ones that are responsible for delivering over 900 flights a day and delivering an unbelievable culture and experience. And so hopefully, you'll feel that. And it'll be great to spend a lot of time with you today at the airport, seeing the new E2, and we're around all day to meet with any of you as you see fit. Many of you know Azul, but we want to give you a very in-depth look at what we're building and what we're building what we've built over the last decade and what we're building over the next 3, 5, 10 years because I've said it often and I'll continue to repeat it, Azul is just at the beginning.
We're just getting started. And that's why we're so excited. And so we have a very unique network. Abhi will talk about that. We're growing the business and expanding margins at the same time, which is very unique in this business and so we're excited about it.
I talked a lot about the culture. We have the strongest balance sheet. We have a lot of assets that many of you don't give us credit for. And hopefully, today, as we spend a lot of time on these hidden assets, you'll be able to give us full credit for the assets that we have. But I want to start why we're in Brazil.
Obviously, we've got a bunch of Americans that are down here mixed with a great Brazilian team. But the reason why we're in Brazil is because Brazil has an unbelievable amount of untapped potential. If you take a look at where it was in 2,008, there were roughly 50,000,000 employments a year in 2,008. Last year, it was just under 100,000,000, okay? But I guarantee you that every single person in this room has been to Miami and New York and to Paris, but you haven't seen many of you haven't seen Foz de Guassu, Fernando Neronia, the Amazon and much of the Northeast because Brazilians don't travel enough and we need to change that and we are changing that.
If you take a look at Brazilians travel less than Colombians, less than Mexicans, less than Chileans, and certainly less than the U. S. And the rest of the developed world. And as you look at this and you pick on Abi for his high fares, you'll see that we've been able to stimulate traffic in what I would call a lost decade in Brazil. The last decade has been very difficult.
The last 5 or 6 years, we've had really no GDP growth in Brazil, and we've done it with higher fares. But we are so excited to see what happens now when we have fuel efficient aircraft coming in, when we have the ability to get some GDP help in Brazil. The opportunity is absolutely tremendous. Just getting to where Colombia is, you need 50% more aircraft in the country. And that's a huge opportunity for us, and we're doing that every single day.
And so if you take a look at this year, the unique business model of Azul is the pie is expanding. So we did not need to steal customers from our competitors to grow our business. This airport out here in Viracopos was an empty airport prior to Azul coming, had roughly 10 flights a day. Now it has close to 200 flights a day because we're growing the pie. And that means that our competitors can also grow the pie as well.
So if you take a look at all airports in Brazil have grown in traffic since Azul started traveling since Azul started flying. That means what we do is very unique, it's different, but we need to do a lot more. So Brazilians need to travel a lot more, and we're going to show you how we're going to make that happen. I think it's important to understand that this company is led by a founding team. We are not executives that have been giving the keys to run somebody else's business.
Every single person that you're going to talk to today is a founder of this company. Many of our original shareholders are private equity investors, including some of them that are in this room today, are still shareholders of Azul. That matters. Many of you thought, oh, once this company goes public, these guys are all going to pick up and leave and go back to the United States. None of us have left.
In fact, we've gotten people back that have left. Why? Because we believe that the future is going to be way better than the past, and we believe we're just getting started. A founding team that we are, we're united as a founding team, and we clearly know the mission that we're executing to, and that's really, really important. We don't agree all the time, but we certainly agree that we want to grow this company and we want the best for our shareholders.
And that's really, really important. And every single one of these people are shareholders in this company. And it really matters. This is our baby and we would never turn our baby over to somebody that we don't believe could take care of it as much as care about as much as we do. This is pretty amazing, those of you that kind of saw the screens out there, what we were in 2,009 and what we are or 2,008 and what we are in 2019.
We have a track record for growing this business, and we're growing it in a responsible way, and we're growing it in a way that every day we get stronger. Every time we add a new dot to the map and Abhi will talk about that, the network strengthens. And every single city on the map gets stronger because of the network advantage. And so we know how to grow this business. When I said we're just getting started, a lot of it has to do with the business plan.
When we sat down across the table from many of you, when we went public, we said we were going to expand margins by 5 margin points by 2020. And we did that when the real was at 3.12, and everybody thought that there was going to be great GDP growth in Brazil. What's happened in the last 2 years 4 months since we went public is the real went from 312 to 412, and we've had no GDP growth. And yet, we still committed to our promise and are delivering upon that. And the reason why we're so excited is that it's just getting started.
The next generation aircraft coming in, we're only 40% of the way there. So we've been expanding margins even with the macro headwinds that you've seen from a currency standpoint and from a lack of GDP growth standpoint. The business units are delivering, that being to Azul, Azul Cargo, our investment in TAP as well, all of those are delivering, our non ticket revenue, the ability now to charge for bags, that's about 50% of the way there. And as you can see, we've really had no macro benefit as of yet. And so that's why we're so excited as to what this airline looks like in another 1 year, 3 years, 5 years.
Alex often says we shouldn't have committed to 5 margin points of expansion. We should have committed to doubling our EBITDAR And that's what we did. When you take a look at this, it's one thing to expand margins by 5 margin points, what we committed to the market, but top line has grown substantially since 2016, right? I mean, our revenues are up almost 80% and expanding margins. And you're going to see that growth continue as we move into 2020 and into 2021 and beyond because there's a lot more opportunity.
Kind of referencing back to that slide of Brazilians don't travel enough. And so take a look at what we've done from a profitability standpoint. Every year, we've expanded our bottom line profit, which is really important. But this is the key. We're still only at 42% of our ASKs are our next generation aircraft.
And that makes a big difference because we have a lot of aircraft to replace. I'm going to walk you through that now. A lot of people I get this question often. Well, why doesn't a new airline just come up and start in Brazil? Why does it can anybody just repeat what you guys have done?
Anybody would now can start an airline in Brazil because there's 100% foreign capital. Okay, I want to talk through the steps to build Azul. So we raised $250,000,000 of startup capital. We're the most capitalized startup in the history of Aviation. So $250,000,000 of startup capital.
We acquired Tripp, okay. We have Jose Amadeo Caprioli here with us today. They had about $150,000,000 of invested capital in that company. We took $100,000,000 investment from United Airlines. We took $450,000,000 from H and A pre IPO and then we took $400,000,000 from you when we went public.
There's $1,300,000,000 of equity that went in to build this company. So this is not somebody that's going to show with $50,000,000 and say, hey, I'm going to go fly around Brazil. There's $1,300,000,000 over a decade of work and we took with David Neeleman, who is the most successful airline entrepreneur in the world and a team that's been dedicated on the ground for over a decade that built this. Big difference thinking that somebody can just show up in Brazil and replicate what we've done. To build out more than 100 and 5 cities in the country, 114 all throughout the world, it's very, very difficult to replicate what we've done.
And we've been working at this 24 hours a day over the last decade. Just quickly, the investment thesis, which is our hub significant hubs that Abhi has talked about are our network connectivity, the diversified fleet. We're doing something that's very different than our competitors are doing in Brazil. This is what we call our Fortress Hub in Campinas. Those of you that flew in there today, I encourage you to look at a FID screen, okay?
And so when we were going to go public, one of our competitors said they're going to double their flights in the Campinas airport. They're going to go from 1 to 2, right? It's not it's the hub that works for us and it's the Fortress hub that we have all of this connectivity in and out, and Abi will walk you through that. I like to talk a lot about the triangle, and I like to make fun of the Leblanc Mafia and the people in Fudia Lima. And Brazil has historically thought of Brazil in the triangle, which is Rio, Sao Paulo, Brasilia.
Our competitors, 92% of their flights hit the triangle. And the triangle has historically been well served by aviation. It's historically been well served by Aviation. Azul, we fly in the Triangle, but we fly a lot outside of the Triangle. Look at what we do just in Cuyahaba.
Look at what we do in Confins. Look at what we do in the interior of Sao Paulo. Look at what we do in the Northeast, a significant difference in strategy from our network because the triangle was already stimulated. There are plenty of people on Fotiadolima that go back and forth to Rio every single day, okay? And so you're not bringing anything new to the table.
But prior to Azul flying in Brazil, there was no direct service between Belo Horizonte, the 4th largest city, and Port Alegre, the 3rd largest city. You had to stop in the triangle to make that connection. And so when you think about the triangle and think about the Azul proposition of what we're doing, think about what it looks like in the context of e commerce and how Brazil is changing and what is the value of our network throughout all of Brazil. Who can deliver a package in more than 100 cities in Brazil in one day? Only our network can do that.
When 92% of our competitors' flights hit the triangle, the triangle doesn't need e commerce help. There's plenty of roads and trucks that can deliver those packages. And so I encourage you today to take off your Fadia Lima Goggles and your Leblanc Goggles and look at the immense size of Brazil. Look at where Brazil is growing. Look what's happening in the Northeast in Recife, the hub that we've created.
Look what's happening with the agribusiness in Brazil. So there's a significant amount of opportunity to grow Brazil when you look at it through different eyes. You could see that here in the number of cities that we serve relative to our competitors. And all of those blue dots is where Azul is number 1. We serve many more dots than just those blue dots on that map, but that's where Azul is number 1, we'll continue to add service in and out of there.
How do we do it? We're the only ones that have a diversified fleet. So we fly the ATRs to ATR Cities, which is roughly 400 kilometers. We fly the E Jets. It's our workhorse for the airline in and out of business cities in the Southeast of Brazil.
And then we fly the A320s on our trunk routes. And so that diversified network is really, really important. If you take the most profitable airline in the world, which is Delta Airlines, and you take away their regional feed, they'd go bankrupt in 6 months. They need that regional feed. And so how come in the most developed country in the world for aviation, the U.
S, they need regional feed, yet Brazil didn't have regional feed. And that's one of the reasons why Brazil is still well below where it should be in terms of passengers per capita because there wasn't that regional feed. And so what's happened is we by diversifying our fleet, we've brought in many different types of aircraft that's an absolute necessity. Is there an incremental cost to having additional aircraft? Absolutely.
There's more pilot training. There's more parts, okay? And oftentimes, our competitors will try and compare our unit cost of an ATR compared to a 7 37 or an A320. It's apples and oranges. But I will guarantee you is that our A320neos have the lowest unit cost.
And so when you're comparing an apples to apple comparison, we certainly are more efficient than our competitors are. And I think that that allows us to grow the business over time. One of the reasons why Avianca Brazil doesn't exist today is because they just tried to fly in the triangle and tried to do what everybody else was doing and they never diversified their fleet and they grew themselves to death, okay? But we have a very different business model with a lot of capital behind us will allow us to continue to grow the business. The most exciting thing about Azul today is that we have a significant amount of our departures on old generation aircraft, okay?
And so new generation aircraft have been built. And take a look at this. We fly the Embraer 195, which has 118 seats. Every time we take off now in an E2, it's going to have 18 more seats and 26% lower cost per seat. So think about this, an aircraft that's producing roughly 10% more revenue and has 26% lower cost per seat.
And on an absolute basis, it's got 14% lower cost per trip. That's Nirvana in for an airline, okay, producing 10% more revenue because you have 18 more seats per aircraft and 14% less total cost. And a lot of times the question comes up, well, can you fill it? That's the same question you asked us when we went public, and we've shown you every single quarter since we've gone public that we've actually increased our traffic with the addition of larger aircraft. And so these aircraft are really, really important to us.
And look at what happens with the A320neo. And so you've been hearing a lot about the A320neo story from us over the last couple of years, but now it's all about the E2. And the E2 is very exciting because the E2, it's plug and play with our pilots. It's literally just a 2.5 day training course difference to fly the E-two versus the E-one. And so that pain that we've had over the years of taking the A320neos in and having to transition all of our pilots, that does not happen on this next fleet type.
But take a look at what happens here. We have 900 flights a day, but 510 of those flights, more than 50% of our flights today is on old generation aircraft. Now just think about what Azul looks like in 3 years when those 500 flights a day are now replaced by aircraft that produce 10% more revenue and has 14% lower trip cost. It's pretty phenomenal the margin expansion that will result from these aircraft coming in. And when you have 26% lower seat cost, you can actually lower fares and increase profitability going forward.
But I don't want to mislead any of you. Fares are not driven by the aircraft type. Fares are driven by the economy and market dynamics. But what I want to show you is that we have the ability to actually lower fares and stimulate demand because of the economics of these new aircraft. And so when I close my eyes and think of what happens in 3 years, having 510 flights a day on next generation aircraft, it's a pretty phenomenal change to the business.
This is the fleet plan going forward. Our job as a management team is to do all we can to accelerate the next generation aircraft, okay? And so we'll talk about that today when we get to questions and answers. But I will tell you that the E-one market has been tough. It's been tough to move aircraft.
However, we're starting to finally get some traction. And so there's some possibilities out there. And so we believe we will be able to accelerate the fleet plan and be able to move more E2s into the fleet sooner. Embraer has the capacity to do that and we believe that we can finally place some E1s in the market to accelerate that fleet transformation. The brand, many of you flew in on Azul today.
The brand is strong. I think it's important. When you fly Azul, it needs to be an experience. And when you compare ourselves to Amazon, Netflix, the Azul brand is really important. I think that's why our competitors went crazy when we were trying to enter into the Poncha area because they know that our brand is a significant presence.
People enjoy flying us and it matters. And I think as you took a look at it, this is we measure it by every single aspect of the flight. We know what our customers think of our pilots, what they think of our flight attendants, what they think of our call center, what they think of our snacks, and we measure that. And we believe that if our NPS is strong, our net promoter store is strong, margins will follow. We need to continue taking care of our customers.
And so we don't believe that taking care of your customers hurts profitability. We think the opposite. We think believing in our customer giving a great experience to our customers delivers an unbelievable experience and they pay more for that. And we've proven that. If you take a look at our unit revenue, our RASK that Avi delivers on a monthly basis, our unit revenue is higher than our competitors.
And a lot of it's driven by the great customer service that we deliver at the airline. With that, I'll turn the time over to Avi.
Thanks, John. All right. Thanks, guys, for coming. And I'm sure there's going to be a lot of questions about network, a lot of questions about RASK and revenue. So I'm going to try and cover some of the anticipated questions already, because I know they're going to come, but of course, feel free to throw whatever you feel like at the end.
So first of all, our network. As John said, we're incredibly proud of this network. It's a differentiated network, as you know, very low overlap with our competition by design. We want to explore new parts of the country, new sources of traffic. 104 cities in Brazil, over 900 daily flights, over 2 30 routes.
So really trying to explore different parts of the country that really have never had service at this level. If you look at Campinas, where we are right now, Belo Horizonte, Recife, they've never had this level of service in the history of Brazil. Recife is going to be approaching 80 departures a day. Bella Risante, 100 departures a day to something like 40 destinations. That is a level of service that they've never had before, including Buenos Aires, Orlando, Fort Lauderdale.
So really, we've built out a network that has I was giving this talk to Embraer last week and today somebody from Vittoria do Conquista can go to Rio and come back on the same day. That was not possible. And that's what David always says, when you make it convenient, when you provide these types of services, they will fly more often, and that's what's happening. In terms of our leadership position, and I want to focus a lot on this in the next slide, We continue to be very, very strong where we fly. I know many of you have raised concerns about our growth in Guarulhos the last 6 months and things like that, and I'll get into that.
But the overall strategy has not changed. That's the key message here. If I leave you with anything today, it's that our strategy has not changed. We continue to be very, very focused in our network, what makes us strong and improving the connectivity of our network. That's the key and will continue to be our focus for the years to come.
So 72% of our routes, we are alone, that number has not changed significantly. It's gone up actually over the years and continues to have very low overlap with our competition. And that is something that we've focused on in our growth. We will finish this year with something like 36, 38 A320s. And many of you raised concerns with this growth, are you going to enter more competitive markets?
It hasn't happened. We continue to be very, very strong where we fly and that's our strategy going forward. And this slide really highlights that. If you compare to 2015 before the A320s entered the fleet to this year with some of the Avianca Brazil cancellations and what we project going forward. 2015, we were 62% of our routes, we were alone.
We expect next year, 71% of our routes. So getting better, getting even more stronger as we are growing the airline. Many people say, well, as you grow, you won't have enough places to fly. Well, that simply is not true. We've shown over the last 4, 5 years that our network has the ability to generate the traffic to create the demand that allows us to grow within our network itself.
And so we've actually gotten stronger as we've grown. We've gotten more dominant in our network as we've grown. And these numbers include some of the capacity that we've put in light of the Avianca Brazil bankruptcy. So I'll talk a little bit about that. I'll pause here for a second.
If you look at our growth in GRU, where many of you have questions, is we've added Avianca had 60 departures a day, a weekly average, per day 60 departures because they wouldn't cancel on weekends. We've gone from we are now we've added 20 departures a day, onethree of their capacity is all. We've entered 5 new routes that just account for 10 departures a day, 20 flights out of 9 10. And we've really, really focused on dimensioning our growth in GRU for some very specific motivations. Number 1 was to fly local markets, corporate markets.
We don't really have interest in flying to all the places in the Northeast, for example. We did that from Viracopos right here. We wanted to have some presence in Sao Paulo for the big corporate local markets like Port Alegre, Curitiba, Rio, things like that. We wanted to really be relevant for the international connecting partners. And as you look at the movements with Delta and LatAm, there was a good move.
You want to be able to provide that connectivity to long haul carriers. We fly long haul wide bodies and we know the importance of having this domestic connectivity or onward connectivity. So we've perfectly, I think, very efficiently dimensioned GRU to perform these objectives, big local markets, more corporate markets, lot of connectivity to international partners like United, like American, like TAP, like Turkish, like all our codeshare partners. And that's our goal with GRU. It's still today, after this growth, is number 4 for us in terms of departures, after Viracopas, after Confins, after Recife and then Guarulhos.
So we've invested just the right amount to serve our purposes. And I think we're basically done. There's not a lot more that we want to do there because it is serving the purposes that we want, which is to have some important presence in Sao Paulo, have the local markets and really be a relevant connecting partner for international long haul carriers. And I think that's going to be very, very important as we go ahead. At the end of the day, after all that after that, we continue to be just as dominant in our network, more dominant in our network after our growth.
The E2s are starting. We're going to go visit 1 today. Starts flying on Thursday. We're very, very excited. And that's, as John said, 500 departures a day that are in our markets, in Campinas, in Bello Horizonte, in Recife, these are all Embraer E1 markets today.
All of them are going to be E2. So our focus over the next 2 years with the E2 is our network because that's where the airplanes are flying today. So hopefully that makes you feel a little bit more comfortable about what we've done this year, but the bottom line is our strategy has not changed. We continue to focus on our network, where we are strong, and we see lots of growth potential in our network as we go forward. I talked about our hubs.
Each of them progressing very, very nicely. These are average weekly numbers. The peak day numbers are much higher. And the important part of our multiple hub strategy is they each serve different geographies. I stress this a lot with our route planning team.
The hubs have to do something different. If they're doing if they're all doing the same thing, we're just stealing revenue from ourselves. We're not growing the pie. So if you look at Recife, its job is to serve the Northeast, all the capitals in Northeast and to really grow the market there. Belo Horizonte is the middle of the country, a little bit shorter distance to the north and northeast, lot of cities in the MENUS area.
All of these have great connectivity to Belo Horizonte. And of course, Campinas Sao Paulo is our south southeast hub, all of the big cities flowing into there. So each one of them has a very different purpose. I talked about GRU as well. It's a local market for us.
It's not a hub. It's not meant to be a hub. It's just meant to get some local demand out of the Sao Paulo and SP1 region that we call it. So each hub is doing something very, very different and that's what allows us to create the platform for future growth. So we just announced Belo Horizonte to Fort Lauderdale.
The reason it will not steal from our VCP flight is because it has a different set of connecting cities than VCP does and that each and every hub is doing something very different and is able to grow and access a different set of markets and different set of demand. So this broad platform is what allows us the ability to grow very, very healthily in the future. Our destinations, I talked about 51 in Campinas, 40 in Belo Horizonte, 26 in Recife and really leading the way in all of these cities that we fly. More convenient connections, more flexible schedules really allows customers travel options that they never had before. And this really is one of the ways that we're growing the market in all these different geographies.
We've seen this graph before, but it just shows the power of the network and how difficult it is for somebody to enter into our markets. So we have an example like Jibero Apreto, pretty close by here, flying into VCP, connecting to all of the different cities in the VCP network, in the Compenis network. If one of our competitors enters one of these routes, they only get a small piece of the traffic, unless you want to build out an entire hub network or enter all of these cities. So it really allows us to be very, very resilient and very robust. When different types of demand are strong or weak, we're able to turn on connections, turn off connections and really be able to generate traffic that way.
So it makes our network very resilient, very robust and actually very difficult to attack because any one piece that you try and attack, you're only getting a small piece of the pie. And it's very difficult, as John said, over the last 10 years, the investment that we made in the network to replicate the entire thing. This is a great example of showing the power of the network and how up gauging for us has been so powerful. This is why we've been able to grow the last 2 years, increase load factors and increase most importantly, increase unit revenues. We have not had to lower fares as we've grown capacity, and that's something that really speaks to the power of the network.
So in this example, we have a flight convenience to Recife. It's a hub to hub flight for us. And we have all these dots on one side of Compenis and all the other dots on the other side of Recife. They all want to connect to each other. And what was happening before is we did not have enough seats from Campinas to Recife.
Now you could say, well, just add 20 flights a day. Yes, but they have to connect. So if you add 20 flights a day, they're all not going to connect to the destinations on either side. So in this type of scenario, you actually want to have larger aircraft that are flying into your banks and flying into your hubs and delivering maximum amount of seats and passengers in the most efficient way possible. So in this example, we increased capacity by 72% actually and our load factor went up by 3 points because we created generated 94% more connecting traffic.
This is how we've been able to maintain our traffic and our unit revenue. We have not been forced. We haven't had to lower fares. Our fares have actually gone up as we've increased capacity. Now we'd like to lower fares in the future with efficient aircraft, but I will always take the demand, I'll always take the fare when I get it.
So our network is what stimulated the traffic and this is a very, very unique proposition. Nobody in Brazil has this type of connected network. And this is what allows us to be very, very confident as we now transition into the E2 program over the next couple of years that the traffic is there because the network is what's creating and generating this demand. It's not coming through lower fares. Our strategy remains the same.
As I've said before, we want to continue focus on up gauging. We want to focus in our network. And if you look at how we're going to deploy the aircraft over the next couple of years now as we go into the E-2s, the vast majority is up gauging as it has been with the 320s. Frequencies in current markets will improve the schedule. One thing we've seen with the Embraer is because of the low trip cost compared to a 737 or A320, you're able to have 7, 8, 9 flights a day in a market, whereas our competitor can only have 2, 3, 4 flights a day in a market.
And that really gives you a lot of relevance with the corporate customer. New markets, new markets, I think the E2 especially because of the 14% lower trip cost, is going to open up a set of markets for us that the A320 is too big for and the E1 was not efficient enough. And so there are a lot of point to point markets in our network we could potentially open up where we see lots of connecting traffic, a little bit longer, a little bit thinner, all domestic, where perhaps a $320,000,000 is too big, but we can have nonstop service from Campinas, for example, to some place in the North, in the Northeast, where the A320 is too big, but the E-two is just the right size with 136 aircraft. So some opportunities to open connect dots in our own network that perhaps the A320 is too big for. But none of this envisions anything that changes the competitive dynamics of the industry.
We're not really thinking about there's no need for us to enter in any competitive markets. Our network is big enough. Our network is broad enough. And our network has enough potential and needs actually this aircraft that all of these E2s over the coming years, there's enough space for them to grow in our network. So that's a really, really important message as we look for the next few years is our network has the space, has the potential to capture these aircraft, and I'm very confident about the traffic that's been generated.
I talked about our fares going up, and we've done very, very well in the corporate market. If you look at our passenger share in Brazil overall, it's 22%, 23%, but our corporate revenue share is 33%. And so we're significantly overachieving our fair share in the corporate market. Our fares have gone up. We had a higher base than our competitors, and of course, they've benefited significantly more than we have because of the Avianca Brazil.
But even then, even with the higher base and even with our growth, we've been able to keep pushing fares up, and we continue to have some of the highest fares in Brazil. That's something that we'd maybe like to change in the future, but again, as demand is strong, as we're seeing demand in our network, we'll take demand as it comes. So we've done very, very well in the corporate market, and I don't really expect this to change. I think with the E2s, this will only make us stronger. Talking a little bit about international.
Of course, I talked about flying long haul widebodies. Flying long haul widebodies, you have to give yourself every chance to be successful. So for example, we have no head to head competition, airport to airport competition where we fly long haul wide body. We have great connecting partners on the other side, whether it's in Fort Lauderdale, in Orlando, in Lisbon, in Porto, we have sufficient connecting capacity with our partners. These are the things that you need to give yourself every chance to be successful when you're flying long haul wide bodies.
So our strategy is pretty conservative actually. We fly from where we are strong, our hubs, our 3 hubs to where our partners are very strong. So it's Orlando, Fort Lauderdale in the U. S. Or Portugal in Europe.
And what we do well, and there's a video and I'll talk about product, is that we're doing really, really well with the long haul high leisure market. I talked a little bit about GRU and the importance of connecting traffic with international partners. We have 7 co chairs today and 27 interline agreements. There's one very interesting thing happening with distribution today. Historically, Co chairs were much more relevant than interlines because of the way GDS screens used to work and display the flights and things like that.
But today, if you go to United's website and you type in Chicago to Curitiba, you will not know on the results which is a codeshare and which is an interline. The experience for the customer is actually the same. It's not as relevant anymore. So interline agreements can generate just as much traffic as codeshare agreements. And so it's equally important to have interline or codeshare.
And it really opens up a lot of possibilities for us using our network, primarily in GRU to be a relevant connecting partner. Today, Azul and United is a very, very relevant partner in GRU. I think we're number 2 or number 3 in terms of all connecting passengers in GRU. So United, I think, is very happy with how we've been able to provide them with connections. And now with our sort of improved schedule, we're really going to be important, I think, for future partners flying into GRU.
And I think we sort of anticipated that movement, and I think it's going to serve us well going forward. So this is great for the domestic network, and I think very, very, very important for airlines flying into Brazil long haul. Non ticket revenue growth has done very, very well over the last couple of years. Some big movements like, of course, charging for baggage, seat assignments. We've unbundled the domestic and the international product at the same time and actually quietly and efficiently.
So we charge for baggage domestically and internationally. We charge for seat assignments domestically and internationally, including long haul widebody. And this is in addition to extra legroom and economy extra and the sky sofa and all those kinds of things. So this, in addition to, of course, the growth we've seen in Azul Cargo, has given us a very, very nice boost in our non ticket revenue per packs. For us, the relevant metric is per passenger because on a percentage basis, our passenger revenue itself is also growing 25%, 30%.
So on a percentage of revenue, you will not see that much of an increase in non ticket because our passenger revenue is growing so fast. But on a per passenger basis, that's where you're seeing the impact of the ancillary unbundling opportunities as well, of course, Azul Cargo that Alex will talk a little bit more about. This is sort of a pet project of mine that I'm very proud of. It's sort of making the customer more self-service here in Brazil. Brazil, as you know, is very, very the traveler is very well connected.
And so we've been able to improve a lot in our mobile experience and a huge increase in the number of self check ins that we have. I can tell you that more than twothree of our customers do check ins by themselves today, and that's driving efficiency in all of our customer checkpoints touch points basically. So they gave us a great rating on the App Store, which is very nice. We're happy about that. And we're continuously providing innovations and services on the app.
But really, in terms of efficiency, in terms of self-service, it's what the customer wants anyway. It's easier for them, and they've really taken to it very strongly over the years. And I think we have a video now to talk a little bit about our show you our international product. So apologize for that shameless marketing, but it is a pretty cool video, so I wanted to show you. But basically, the idea is, look, you want to give yourself every chance to be successful.
So we focus on international product where it matters, a good business class, a solid business class. We don't have the most expensive whiskey. We don't have the most expensive vodka, but we have a great seat and we have good food. We don't have lounges in Fort Lauderdale, some of the flu. We don't have a business class lounge.
It costs money. It's not what our customers are asking for. What they're asking for is great onboard product, a great seat and most of all amazing crew members, which is what we have. So we've really been very disciplined. I know there's a lot of people that say low cost, long haul, it doesn't work, it doesn't work.
But if you stay very disciplined and true to what you're trying to do, I think we've shown that it can work. Our domestic product, we focus on free live TV, snacks and drinks. And sort of the experience, the example that I give when talking to our crew members is it always amazes me, if somebody walks into an Apple store, they walk out 5 minutes later, they pay $1200 for a phone and they're happier when they left than when they got in. And they paid over $1,000 for a phone. It's crazy.
So for me, why can't Azul be that aspirational? Azul has the highest fares in Brazil. But if we can make our customers leave the airplane happier than when they get in, I have no doubt that they'll come back week over week, week after week, week after week, and they will continue to be very loyal and fly to Azul fly with Azul. So we have live TV, we have free snacks and drinks. And again, as Jason will talk about, what really I think sets us apart is our amazing crew members and the difference that they bring.
Extra legroom products, domestically and internationally, it's great ancillary revenue, and of course, our customers upsell in a very meaningful way. Our business class, we talked about that. The focus is on the seat, being able to sleep, lie flat experience and kind of very simple, but cool. That I'll turn over to Alex.
So I'm going to talk a little bit about our business units. I know cargo is something that a lot of people have been asking us about and something that we're very, very excited about. But I think in general, just to take a step back, the way to think about our business units and just to think about the Azul opportunity overall is the power of the network. It all kind of boils down to the power of the network and the great experience and the great operation that we run on it. But the way that we have this geographic dominance will allow us to continue generating new ways of extracting profitability from it, right?
Once we realize that we own this network, it made total sense for us to start flying internationally. It was never the original plan for us to start to fly internationally, but we can make money flying internationally because of all the connectivity that we have, right? And when we promised you a 5 point margin expansion before we went public, obviously, we thought about Azul Cargo as one of the possible drivers of profitability, but we completely missed just how powerful it could be, right? And that's again I think an indication of how over time we will be able to look at our network and realize that there are new and exciting ways for us to extract profitability from it. I think there are ways that 5 years from now we'll be extracting profitability from our network that we don't even know about today, right?
But the network is our platform, right? We own our geography and we will want to serve the customers in that geography and provide to them everything that we can provide and that will allow us to continue generating more and more profitability going forward. In terms of Azul Cargo specifically, what a lot of people I think don't know is that with Azul Cargo, it's not just the 115 cities that we fly to. Through our Azul Cargo franchisees, we already serve 3,700 cities door to door, right? Obviously, the asset the CapEx part of Azul is just the aircraft flying from the cargo terminal to another cargo terminal, but we have a network of partners that allow us to go door to door to 3,700 cities in Brazil.
And the same way that we're the only airline that can fly to all these destinations with passenger aircraft, we're also the only airline that will able to fly cargo in the bellies of these passenger aircraft, right? The same way that it doesn't make sense for somebody as Abhi demonstrated to come into our network to serve the passengers, it won't make sense for them to come into our network to fly cargo, right? So that is a sustainable exclusive competitive advantage that we have and that we will develop going forward because 93% of the cargo that we're flying is flying in the bellies of our aircraft, right? And so nobody else can somebody buy cargo aircraft and fly in the high density routes of Brazil? Yes, but that's the same thing as the triangle that John talked about, right?
Can somebody fly an A320 between Sao Paulo and Brasilia? Sure, anybody can, right? And can somebody fly a cargo aircraft between Sao Paulo and Manaus? Sure. But the power of the network and the ability to fly cargo in the belly of passenger aircraft, only Azul can do that.
And this is very similar for all of our business units. Our business units get the benefit of kind of piggybacking off of the airline and selling the surplus capacity that we have. If we can fly 1 kilo of cargo between cargo terminal and another cargo terminal, the margin on this business is almost 100% because the marginal cost of flying extra kilo of cargo in the bellies of a passenger aircraft is very, very low, right? And even if the yield is lower than the public fare, the public yield that we offer, the profitability is higher, right? Because the marginal cost is so low.
So as we continue expanding revenues from Azul Cargo and from TudoAzul and from Azul Viagings, all of those businesses have higher margins than the consolidated airline. And so they will help expand margins going forward as they've been doing up to this point. A lot of people ask us, but how much growth is there, right? How much can you grow? We're only cargo only occupies 25% of our bellies today, right?
And 50% of our bellies are empty. So cargo could essentially if we could fill every flight on every route, cargo could triple in volume until we get to capacity, right? But the fleet is also growing. So essentially there's a lot of headroom and that headroom just keeps getting higher and higher. So there's a lot of ability for us to continue growing our cargo business.
And essentially what we see as a vision for Azul Cargo is for us to offer a complete end to end logistics solution because we're the only ones that have this portion of the service. Nobody can replicate this. If you believe our business model as it relates to the customers, as it relates to the passenger, you have to believe our business model as it relates to cargo because this is the we're the only ones that are going to have this link in 75%, 80% of the routes that we fly, right? And so obviously, we don't do this and we don't do this, but a lot of people do and we can partner with them. Our franchisees do and there are a lot of very cool businesses popping up, a lot of it technology driven that we can partner with and some of them we already partner with that we can use to provide this end to end logistics solution.
And today, like I said, we already do that to 3,700 cities, 3,700 destinations of where we do end to end. But with more focus, with more energy, with more resources thrown into us, we can increase the technology, increase the functionality, increase the partnerships and provide that end to end logistics solution and essentially be the provider to all of these players, be the manufacturers, be them retailers, be them online players who need to transport cargo throughout Brazil, right? And the beauty of this is growing significantly. Azul Cargo is about BRL0.5 billion in revenue this year, which is 50% higher than last year. And there's no reason why Zocal Cargo shouldn't continue growing at 40%, 50% rates for the next 2, 3 years or even further, right?
Like I said, there's a lot of capacity available and Azul Cargo benefits from the growth in the fleet as well. So this growth should continue like this. And so if you just do the math, obviously, if you're growing 40%, 50% a year, you're going to double the size of this business in less than 3 years. And that's a and again, this is higher margin than the airline, so it dramatically helps us continue expanding margins. And we just started with e commerce.
Obviously, e commerce is growing off of a lower base, but it grew 142% over the last few years. So it's a lot of potential, a lot of opportunity. And obviously, you guys know that we don't care about market share, but this is just to illustrate that this is already a very relevant business. We're the 2nd largest cargo airline in Brazil already. We're never going to pursue being number 1, but I think this illustrates if some of you are saying, well, but is there really a lot of cargo going to Alta Floresta or to Pato Branco?
This shows that we already have a significant share of volume in Brazil and we're only getting started, right? And the beauty of this and why we're so excited about this and why we're more excited about this than when we first started talking about Azul Cargo when we went public is that this is a huge tailwind for e commerce, right? And this is what e commerce needs. Obviously, everybody that's in Sao Paulo or Rio, we're spoiled, right? First of all, we have a lot of retail options, right?
We have a lot of physical brick and mortar places where you can go and buy stuff, right? But if you start getting outside of Sao Paulo, outside of Rio, those options go down. You don't have as many malls, as many cool retailers, brick and mortar retailers as you have here in the big cities. Plus when you start grading away from the Southeast, the time to delivery when you buy online goes up dramatically as well, right? In Brazil, on average, it still takes about 5 to 7 days for you to deliver something, for you to receive something that you buy online.
But if you look at just the Northeast, for example, it can be more than 10 days, right? So as you but and consequently, the penetration of online commerce in Brazil is not that high. But if you're able to compress the delivery times, obviously, this is what happened in the U. S, this is what happened in China. If you compress delivery times, that will stimulate e commerce, right?
E commerce has always been cheaper than brick and mortar. It's always been more convenient. You've always had more availability. The Achilles' heel has always been the time to delivery and continues to be that, but we've only started scratching the opportunity here of being able to provide something. Our average delivery time to the north of Brazil is 2.8 days, right?
So it's a lot less than this, right? And we're going to work on it to make it even less and less as we go forward. We'll be able to compress the delivery time and this is going to be nirvana for our partners like MercadoLibri who what they want is to be able to deliver something that's bottom line as quickly as possible because that's going to stimulate their own growth, that's going to stimulate their own profitability. And then when we talked about business units, when we went public, when we talked about our margin expansion, we also talked about ancillary revenues, right? And I think here, there's been a lot of progress and I think it's been one of the reasons why we've been able to deliver on our IPO promise.
But there's still more to extract, right? This is, I think, more mature than the rest, but Azul Cargo is only beginning and TudoAzul which I'm going to talk next is also still has a lot of headroom, a lot of potential to go forward, right? But obviously, charging for bags was important, was a milestone, but there are still a lot of things in Brazil that we don't charge for and that other countries like the U. S. Or Europe have already started charging for.
So there's more for us to explore here. And talking about TudoAzul, you guys are probably familiar with the business, but just for those of you that maybe are more used to the U. S. Kind of style of loyalty, this is really a very important channel because a lot of people buy surplus seats through points, right? This is a way that we use to kind of segment our capacity and to be able to offer surplus seats for an average fare that's lower than maybe what's available publicly, right?
So a lot of the banks, for example, banks buy BRL 1,000,000,000 in tickets every year and the loyalty programs are one of the ways that they access these seats, right? A lot of it is from retail as well. And one thing that the industry has developed recently over the last 2, 3 years is also a big B2C business, right? So B2C us selling points directly to the customer either when they need complete the number of points they need to buy a ticket or through the subscription program that we call Kluby. These are real very relevant businesses that are just bringing a lot of revenue into the company.
And again, the same concept of marginal cost applies here, right? If we can direct all of our tourism traffic to surplus seats, the margin in this business is again almost 100%, right? The marginal cost of an empty seat or filling an empty seat is very low. And as we continue growing the revenue in TudoAzul and bringing in that revenue at a higher average margin than the rest of the company, we'll continue expanding margins for the company overall. Since we started running Turozoo as a separate business unit, we had essentially 8% revenue share.
We don't have the numbers anymore for our competitors once because one of them has been kind of brought back into the fold, but we estimate that we are at about 20% revenue share today, right? So the way we run this business is as an independent business unit. So we have a lot of agility, we have a lot of focus, we have a lot of resources, but we have no intention of spinning off this program because spinning off the program, as our competitors have demonstrated, is just very inefficient, right? It creates conflicts of interest and it creates tax inefficiency, right? So our plan is to always own 100% of this business.
And it's important, it's one of the hidden assets that John talked about. We don't believe we get credit for the fact that we own 100% of our loyalty program when our competitor owns much less than that, right? So there should be an adjustment for that because this is a high growth, high margin business that we own 100% of and that we don't need to spend any money to be able to extract all the profitability and keep all of the earnings that we get from this business. And a lot of upside as well because even though we took it from 8% to 20%, Azul has about 30% revenue share. So there's still more space for Turozul to continue growing.
It's growing at about 30% annually and it should continue growing more than the airline going forward. We're very happy about the co branded card. I mean, this is something that we used to not focus a lot on, but we redesigned the value proposition of the co branded card recently and it's today the best by far the best platinum card in the business. We don't have a black card yet, but that's certainly a possibility. And but right now just from the platinum card, this volume is growing significantly and this used to be kind of the 10th largest source of revenue for Turozul.
Today, it's the 4th largest revenue source for TudoAzul, just the co branded card alone, right? And that's from all the growth that's coming from that business. And again, B2B, it's the biggest part of the business, us selling points to banks, us selling points to retailers, but it continues growing even though it's very big already. It's still growing at 30% plus rates and the B2C portion also growing kind of in the high 30s. And a lot of cool things, this is where we kind of this is sort of our lab.
This is where we create new products and kind of throw new things at the wall to see what sticks. So a lot of cool things kind of coming down the pipeline. We launched 20,000 clubs. So the club is a subscription program where customers pay a monthly subscription every month. We launched the 20,000 club and then we were quickly imitated by our competitors, but it's a very good way of segmenting our customers and just a lot of partnerships, a lot of cool things.
Magazine Luiza is a recent partner. When you buy on Magazine Luisa, you can get to those points. It's a way for Magazine Luisa to stimulate traffic on their own website. So things going very well here overall. So I'm going to turn it over to Jason.
Thanks, Alex. It gives me great pleasure to be here. I know a few of you, others I'm just knowing today, but take care of the people and customers at Azul and everything that's been talked about. I just want to share a few slides with you about how we can make that happen here with our culture. To start, we have another video to show you.
It was our 10 year anniversary video that was produced by our crew members. Sorry, Portuguese. I listened to the video in Portugal. So I think how do we create this value and we've always had this idea that if we can take care of our crew members, if they feel like really we are there to support them, we give them the tools, the resources they need to take care of the customer, That's what's going to happen. So the customer isn't necessarily the most important, the crew members are most important.
They will take care of our customers. Even when there's problems, when there's irregular operations, we will take care of them. And most of our customers will see how we handle them in these situations that that will make them even more loyal than if they didn't have these problems passing through whether it's a canceled flight, delayed flights, weather delays. And these customers that are paying these fares that Abhi is talking about, they're doing that because of Azul, because of the way they're being treated, they'll create the value for the shareholders, for the investors. Just as a little culture, we have it's very simple.
We want to create the best airline in the world. We I'll show you a few awards that we've received that we're well on our way to do that. But how do we do that? What is the mission that we have? David said that in the video, John has said it today, but we want every one of us to be able to say this is the best place that I've worked for.
I've worked at 5 different company airlines in 3 different countries with David and I can say as I said in the video without questions the best job I've ever had. And it's because of our crew members, because they're focused on giving the customer the best flight that they've had, the experience that they've had. And it's all based on these values, the 6 values that you can see in the presentation. This is something that a lot of people can say, they can put it on the wall, they can teach it to people in classrooms. But how do we make sure that our crew members understand that this is the secret recipe that we have.
So that's not just something that's spoken. Andrea and the team went through and created how many hours does this do these people the executive team spend and we've spent over 100 hours with interacting with our frontline crew members, whether it's through these pocket sessions. John mentioned here every 15 days, every other week we stand right here on this in this room with our new crew members, introducing ourselves, talking about that. Jose Mario and John talk about the history of the company, the expectations that they have and that our high standards must be their high standards as well. The pocket sessions that you see here opening up, updating our crew members, we work with our financial planning analysis team to create the presentation that we will go out and share with our crew members, update them on what's happening at the company, why it's important, explaining the why that's important that we deliver on our promises, what it is that the 3 of them that have already spoken, what they're promising to you, how do we make sure that we deliver that and that we use our people.
The Chegga Maes program, which is very similar to like the leadership connection, every one of our managers, directors and our executive team, we are godfathers or godmothers, padrebinos, that we adopt a base or location. For example, I have Belo Horizonte. So we're not the fathers or mothers, but we're these godfathers that will take care of them. We take these presentations out, update them. And then the most critical piece is to interact with them, go out and talk to the customers, listen to them.
What are the challenges that we're having? I love the story with Hae Nae, who is our Director of Finance in the back there. He went to his city in Cuiaba and he found out as he was working with our crew members and talking to customers that we had a couple of processes that were very old, antiquated processes that we were asking our crew members to do. As he saw that, he quickly started sending WhatsApps to everybody saying, this is ridiculous, we got to stop doing this. This is take it's very inefficient.
Now how long would have that taken us to figure that out had it not been through our engagement with our crew members? Also John asked us last year to implement a skip level program. This is kind of we call it Portas Abertas, Open Door Policies. So as a Vice President, I have regular meetings with my managers to talk to them, to influence them, to ask them what's happening, but to hear them and what are the challenges that they're having at the manager level. And then celebration, I think it's always appropriate to pause a little bit and to celebrate the victories that we have.
We work very hard. Our people work diligently throughout their shifts. And we need to pause a moment and celebrate. And you'll see as we have in this room here today, we have very a lot of things to celebrate as well. Focusing on making sure, as I mentioned, it's very critical that you have the right tools and resources.
You set expectations for your team. You show them what it is that you need them to do. Make sure they understand that they have the right tools and resources, investments that we're making to ensure that we have the right tools for our crew members to perform their jobs. I think many of you are very critical about wanting to have metrics. This culture piece, it's very soft, but how do we measure that?
Our compensation for our executive team is very much performance based. Our managers, directors, VPs, all of this we have basically the operating margin is fundamental to our compensation. We have other goals whether they're crew member satisfaction or customer loyalty, the NPS, and then also obviously our operational performance. But all this is based on that profit sharing for our crew members based on these metrics as well. And then also the annual stock grants, the long term incentives are based upon our performance.
Our people, crew member satisfaction, I think one thing that's very critical that we preach to our people is that there's a difference between crew member satisfaction and your engagement. What we measure is crew member engagement. Satisfaction very much involves the day to day what's happening, but more of an engagement involves the mind, the heads of our people, what's in their heart, what is it they're doing. So how do we measure that? We do a crew member satisfaction survey each year and you'll see that as we've grown, we've been able to not only maintain but also increase our crew member engagement.
And it's through these programs. I think a lot of times it's very easy to say we're going to start to do this, but how do you create these programs, implement them and ensure that you have this development as of our culture. You see we spend time also with our talent development. Looking at how do we develop new leaders, prepare them for the future for this growth, critical path to ensure that we have the future leaders. We have over 700, we'll have close to 1,000 internal promotions this year and looking at this.
One thing a couple of years ago, John had asked us to look into this. We have a scholarship program, Voir, Association Voir. We are going to be having Jose Mari, who's here, David Neelman, all of the executives will be creating this association to look for our crew members that may not have the funds, the financial funds to become pilots, maintenance techs or flight attendants. We see that they have huge potential, but they don't have the financial means to do that. So through this program, we'll be able to provide scholarships for these future critical positions that we need and give them a place so that they can create a better future for themselves and for their families.
Talked about leadership development as well, the trading places or walk a mile in my shoes. It's a program to ensure that we understand what it's like. Some of the best flight attendants that we have started at the airport or at the call center. So they understand what it's like. We incentivize all of our leaders and all of our truly all of our crew members.
We have close to 14,000 crew members to do this program to participate at least once a year. We have we offer it 2 to 3 times a year, but to go walk a mile in someone else's shoes to truly understand that first and foremost we're Azul and then we have our individual positions as well. To ensure that we're bringing in the highest talent of the country, we started this year, we kicked off the new trainee program. Various other companies have had this, our board members have talked about this. Alex has asked for this for a couple of years now.
But we've kicked off, we will launch February 2020 will be our 1st program for the trainee program. We launched it last month on social media online and we've had we're looking for 6 positions or 6 spots to join us and we've had over I just confirmed with our Director of HR here this morning, we have over 31,000 people interested in this program. So huge, huge response for people and making sure that we get the best of the best as well. Again, John talked about our NPS scores. We measure this with our own internal crew members, excuse me, our own surveys that we send out to our customers.
So the net promoter scores based off of what we're doing, but we also use the metrics from a NAC and from the consumer rights websites to ensure that we accompany what it is that we're delivering to our customers, what our customers are saying to 3rd parties, whether it's a NAC or Heclama Aqui. These award winning service, you'll see the banners that are here as well, but our customers are giving us huge compliments. These awards that we share, I mean, it was a clean sweep, the top 10 airline in the world, low cost Latin America, best in Brazil, best in Latin America for economic class as well as for our business class and various other awards that we get for our Azul University. We do all of our training here in house, state of the art facility. Hopefully, you've taken a tour.
If not, you're welcome to take tours afterwards as well. But we have the capacity of 800 people here with our 21 classrooms, with our simulators that are here, we're getting another simulator preparing for that. And we have a great John had a great vision. We started saying every other week we're here doing these Ben Vinto aboard or the welcome. And after that, we go through the building, we sit down and we talk with our crew members, pilots, flight attendants, maintenance techs, cargo, airport, talk to them about what's happening and interacting with them.
Hopefully, you saw that. It's very, very hard to miss, but we are building one of the largest and most modern hangars in Latin America. Here, we're going to have over 90,000, 93,000 square feet. So it gives a huge advantage to be able to in source a lot of our heavy checks, a lot of our wheels and brakes are here as well. We're going to be able to put A320s in this or 2 of our A330s in here.
So great opportunity, it's going to investment of over $150,000,000 that will be ready Q1 of 2020. And I think probably to sum it up, I just talked about this strong culture. We launched a program called So Azul, I am Azul. And just to give you guys a little bit about it's hard to imitate this culture. I just wanted to share a story about John because I think it starts at the top.
It's not something we can just talk about. We have to demonstrate. Every other week we're here doing this. Last week, last Monday, a week ago, John was not able to be here. He was in Rio.
He's meeting with customers all day long, up early, flew over there, met with a bunch of customers, spent time with crew members at Sun Tzu's Des Moines and then he flew back in here. I happened to be here at 5:30 when he landed and then also he comes back over here to go up and talk to our pilots, talk to our flight attendants, spend a couple of hours talking with that. It's very hard to duplicate because stuff has to come from the heart. It cannot be something that just says, okay, this is what we're going to do. When we fly, we make a speech.
We introduce ourselves whether we're the Vice Presidents, Directors or John himself doing this, let me go through the aisle and talk to customers, listen to them, what are they saying, what feedback do they have for us. Again, very hard, very hard to duplicate. You can say you're going to do it, take a picture, put on Instagram, but to actually do it and listen to your customers, again, something that's very, very critical. And it comes from the heart. It's something we want to do, we'd love to do.
We get excited about the future and our customers absolutely love that as well. So thank you. And with that, I'm going to kick it back over to Alex.
Thanks, Jason. So to kind of just wrap it up, what does this all mean in terms of the investment opportunity for Azul? I think one thing that we're very excited about and that we're very upfront about, we have a lot to improve upon, a lot, right? The training costs that we talked about, we spend a lot in training to bring people from an Embraer E1 onto an A320neo, right? There's a lot of cost.
The fact that we're growing this much, the fact that we've been growing 15% every year for the last 3 years, is it 100% efficient? Absolutely not, right? There's a lot of inefficiency in our numbers, but we have the best margins in the business, right? And we can get at this inefficiency. We are getting at it, but there's a lot of opportunity here, right?
We can be more efficient. We can be more productive, right? We're not going to we're going to rest on our laurels and say, hey, we already have the best margin in the region, why try to expand it? No, there's a lot of opportunity. We know there is, right?
And that's why we're so excited. That's why we're so aligned with all of you who are investors because we know that this company can be even better than it already is, right? One of the things that we already talked about, but I think it's this chart is important to illustrate. We don't have an E-two flying yet, right? And this aircraft is going to be transformational.
There we have a few A320neos, still less than half of what we're going to have, but look at the numbers for the E1. Obviously, the trip cost from the E1 to the E2 goes down and that's what we've been talking about all the time, right, that the E2 is going to be a much more efficient aircraft, the trip cost is going to be lower even though the aircraft is bigger, has more seats and obviously the cost per seat of the E1 versus the E2, the E2 is a lot lower than the E1. But one thing that we don't talk enough about and it's a huge source of upside going forward, look at the seat cost difference between an E-two and an A320neo. It almost doesn't exist, right? That's why this aircraft is going to be so powerful for us because we can explore new markets.
Abi talked about this. We can send the E-two to develop new markets at a very, very low risk because it has a significantly lower trip cost, but we don't pay a big penalty in seat cost. Normally that's the trade off, right? You can get a lower trip cost with a smaller aircraft, but normally you pay for it in higher seat costs. With the E-two, we're paying for it but very, very little, right?
And that's what makes this aircraft so exciting. And if you like these numbers, there is 0 ASKs from the E2 in these numbers, right? And so once the E2 starts coming into the network and starts replacing the E1s, this number should only go up. And the other thing, John mentioned this, but I think it's worth talking about it in a little bit more detail, right? When you look at our average task, you're looking at a blend of an A320neo, an E1 and an ATR, right?
And our competitors love comparing that blend with the CASK for a 737, right? But that makes no sense because there's nowhere in Brazil where an ATR competes with a 737, right? The 737 competes with the A320neo. And I think it goes without saying that obviously the CASK on our A320neo is much lower than the CASK on the 737NG or an A320neo, right? And you don't need to even do math to prove that.
But the CASK on our A320neo is going to be lower is lower than the CASK on a 737 MAX or the competitors A320neo. Why? Because we just have a more efficient cost structure. We have fewer employees per aircraft and we fly the aircraft more hours per day. And this is all public data.
UBS puts out a report where they track all the A320s and the 737s tail number by tail number. And you can see that we fly the A320neo. We already have 30 plus aircraft in the fleet and we fly that aircraft more hours per day than the competitors and pretty much more than everybody else in the world except I think one airline. So there's a lot of efficiency here, which shows that our cost advantage is sustainable, right? And even though we are ahead of the curve in terms of our fleet transformation, right, we're transforming the fleet much faster than the competitor and somebody says, well, at some point, your competitor is going to catch up and they're going to have next generation aircraft as well.
Yes, but it's going to take a lot longer than us. And even when they get there, our CASK on the NEO is going to be lower than the CASK on their next gen aircraft. And again, there's a lot of cost in the numbers. We're proud of our numbers, but one cost that's there and that we've talked about is that training a pilot to go from the E1 to the NIO is very expensive. A pilot that's fully productive on the E1, it takes them as long as 4 months to be fully productive on an A320neo, to be flying alone without an instructor, to be fully productive.
It's 4 months of training. From the E1 to the E2, we still haven't gotten a lot of those pilots trained, but it's 2.5 days. It's completely different story, right? Our numbers have the bad side of the story, the fact that we're spending a lot to train our pilots. Going forward, we won't spend nearly as much to train our pilots.
So again, if you like our numbers today, wait till you see what's coming. And like I said in the video, right, we want to have a company that's going to last forever, that's sustainable. So obviously, starting with high margins is very important. Having the highest margins in the region already puts it at an advantage that if something happens to the real, something happens to GDP, something happens to oil, we're starting off from a position of strength, right? But besides that, we also always want to have more liquidity than everybody else, less leverage than everybody else.
Because again, Brazil can throw anything it wants at us. And we have if we have the highest liquidity, if we have the lowest leverage, we'll always be in a position of strength, right? We always said that if the real went to 4, 1 of the Brazilian airlines was going to go bankrupt, right? And the real went to 4 and 1 of the Brazilian airlines went bankrupt. And nobody ever worried about Azul because we have this risk mitigation strategy where we carry a lot of cash, where we keep our leverage low, where we keep our exposure to currency low, right?
Some of the E2s, as many as we can, are going to be financed in reais. That's a beautiful competitive advantage that only Azul has, right? The fact that we can finance our aircraft in reais, puts us in a much stronger, more puts us in a much stronger, more defensible position than our competitors. When the crisis hit and we had surplus aircraft, we had Embraer aircraft that we had financed in Reais. And it was beautiful because it was natural hedge.
The aircraft is priced in dollars. We had surplus aircraft to sell. We sold an asset that was priced in dollars, so its value had appreciated. And the debt that we had on the balance sheet to finance that asset was flat. It didn't go up because it was pegged to the real, right?
So it's a natural hedge and a competitive advantage that only Azul has in Brazil. And also as you guys know, we don't like dollar denominated debt. That's some that's a place where we differentiate radically from our competitors, right? Our competitors accept dollar exposure. We don't like dollar exposure.
We think we have enough, right? So when we issued our unsecured debt in 2017, we hedged it, right? We used the call spread structure, which actually puts it as an all in cost of 99% risk of the CDI. Obviously, there's some a lot of it was skill, but some of it was luck as well. But the fact is that the unsecured debt that we issued is protected and our competitors have a lot of dollar denominated debt that has no protection on their balance sheet, right?
So the fact that we have a stronger balance sheet and we have higher margins allows us to be comfortable about the sustainability of this business. A lot of people ask us about our hedging policy. Obviously, we are very cognizant of the fact that we're exposed to currency or exposed to FX. We do have a hedging policy. We have all the details here on the presentation of what we can do, what we do do.
But one important thing as you're doing your model, right? And if you're doing a stress analysis of what happens if the real goes to $450,000,000 one thing you need to ask is what's going to happen to oil, right? Because there's a very strong negative correlation between FX and oil. So first, you need to decide whether that correlation is going to hold or not. If you just you can obviously model a worst case scenario where the real depreciates and oil stays flat, but that's an unlikely scenario, right?
The most likely scenario is for the negative correlation to hold. And then the next thing you need to keep in mind is that we have a high rate of revenue recapture when we get external shocks, right? John mentioned that when we went public, the real was at 3.12, right? When we started this company 11 years ago, the real was at 1.58, right? And I think a lot of people that thought, hey, if they had a crystal ball and they said, I know the real is going to go from 158 to more than 4, a lot of people would have bet against us, right?
A lot of people would have said, these guys have more than 50% of their expenses denominated in dollars. I know the dollar is going to go from $158,000,000 to $4,000,000 So it's going to be very hard for them to be profitable, right? But we're more profitable today with the real at 4 than we were back then, even though we were when we went public and the real was at 3. Now we talked a little bit about this, but I think again also worth noting, right? We have some unique assets that I'm absolutely sure that the market does not give us full credit for, right?
But they will generate profitability or cash over time, right? So over time, I won't we won't have to convince the market that there's value here. The value is going to show up, right? The value in TudoAzul is showing up. It's 100% owned by us.
We have no intention of selling it, but every year it's bringing in 100 of 1,000,000 of reais in additional revenue at a higher margin than our than the consolidated company, right? And we own 100% of it. So over time, you will see our profitability going up because we own 100% of this business. Now I think that we should be priced and valued differently from companies that don't own 100 percent of their loyalty program, right? But also, if our competitors are successful in bringing in that program back into the fold, they're going to have to burn a lot of cash to do it, right?
So the value is going to show up, right? The value will be reflected in the numbers. We have a lot of prepaid maintenance expenses, right? How does this work? In the beginning of Azul, when we didn't have established credit, our lessors required us to prepay our maintenance expense.
So there's a lot of money on the balance sheet, a lot of money that has already left the company and that you don't consider cash, but it's related to maintenance expenses that will happen in the future. And the new leases that we're signing because we have a lot better credit now than we had in the past, they do not require maintenance reserves, right? So this balance of maintenance reserves is going to decrease over time because the money has already left the company, right? And the new maintenance events, the money will not leave the company until the event actually happens, right? So this cash balance, this asset, right, in our balance sheet, as it goes down, it essentially represents an inflow of cash, right?
A cash outflow that has already happened and that we're not getting credit for. And the TEP investment, we're very happy with the TEP investment. I'm going to talk a little bit more about But I'm also by talking to many investors as we do, we on the road in Brazil, in the U. S, in Europe, we see that the vast majority of investors give us 0 credit for the TAP investment, right? And obviously, I'd love to convince you.
I think there's a lot of arguments for you to give us a lot of value for the TAP investment. But over time, that value will surface, right? This will become cash. At some point, we will monetize our investment in TEP. It can be as early as next year.
Obviously, it depends on a lot of things outside of our control. But once that happens, you will see that cash position on our balance sheet and then the market will have no alternative than to give us full credit for that investment, right? And like I said, Tepp is doing really well. We bought our investment for €90,000,000 when the company was valued at about $250,000,000 roughly. Today, the equity value of TAP in our books, the way we're marking it to market is about $650,000,000 $650,000,000 But like I said, we've talked to a lot of you and the vast majority of investors don't give
us
credit for that investment. But we own 47% of that company once we convert economic interest. This is the largest company, the largest airline between Brazil and Europe And the management team that's there running the company has done a lot of very remarkable things, has had a lot of advancement, which have definitely improved and increased the value of the company. And then we're going to show a quick video here to illustrate that. Abhi says this video is a little angrier than we're used to.
That's not really our style. But again, the point is there's been a lot of accomplishment, a lot of improvement in TAP. And I think it's not hard to see that, right? It was a state owned airline in Europe. So you can imagine sort of how efficiently or not it was being run, right?
It used to have the oldest fleet in Europe, right? Now it has the youngest fleet, obviously, because the government had didn't have the resources to keep investing into the fleet as a private operator does, right? There's been a whole new redesign of the network that is starting to attract a lot of attention from even strategic players, right? The Lisbon hub has a very strategic geographical position, which is making it very competitive for flights to North America and South America. So that's all very positive.
The fact that this location here in the sort of easternmost part of Europe allows TAP to fly to destinations that other competitors cannot fly with lower cost aircraft. And this is going to be very exciting and the U. S. Network is doing very, very well. Obviously, it has a lot of exposure to Brazil, right?
It's the largest carrier between Brazil and Europe. And as the real weakens, the demand for international travel gets affected. But other than that, and this is obviously something that is cyclical, sometimes the real is strong, sometimes it's weak. Right now, I think it's easy to prove that it's weak. And as the real appreciates, this is an additional source of profitability for TEP.
And as part of being a sustainable company, obviously, we're focusing a lot on ESG. There are a lot of initiatives that we're already pursuing in the company. So now what we're doing is just compiling all that information into a sustainability report using GRI and SaaS standards. This is something that we're very excited to be working on and we're very excited to show it to you once it's ready in the beginning of next year. And like I said, there are a lot of initiatives that we're already pursuing and obviously other initiatives that we want to start pursuing, but there's just a lot about Azul that shows that it is a sustainable company.
Obviously, the fleet transformation that we're going through, it's reducing our CASK significantly, but obviously it's reducing our fuel burn significantly because most of the benefit of the next generation aircraft is in fuel burn. Flavio mentioned this on the video. We have a social effect to our network, right? The fact that we fly to 105 destinations in Brazil and we're the only airline in 50 plus cities in Brazil, we connect these cities to the rest of the world, right? And without Azul, these cities would be effectively disconnected, right?
There are places in the Amazon where we fly to that the alternative to an Azul flight is a multi day boat ride, right? So these cities, these communities depend on Azul to be connected to the rest of the world, right? We have a vast majority we have a very good percentage of our leaders that are women, right? Still not enough in our opinion, but we compare very positively. And just the fact that we generated all these jobs, there's just a lot of things that we're very excited about.
And so we're very happy to kind of compile all this information into our report. And again, John mentioned this, and I think we still feel very strongly about the investment thesis in Azul. We are very proud of what we've built. We're very proud of our numbers, but there's still a lot of upside going forward, right? A lot of you ask us, okay, so you said, you promised a 5 point margin expansion when you went public, but we are delivering on that in spite of all the headwinds that we had from weak GDP and weakening currency.
Obviously, we had some help from Avianca Brazil, but that was recent, right? We were already on our way to deliver on our promise even before Avianca Brazil went away. And some of you asked us what are you going to do once you get that 5 point margin expansion, right? We're not going to continue promising or can we get to 25% margins? I think that's not really the question.
I think the question is look at all the growth. Like John mentioned, we promised a 5 point margin expansion, but we didn't talk about the 70% increase in the revenue base. When you put those 2 together, the revenue increase plus the margin expansion, that shows how much value there really was in our business plan. And we're only halfway done roughly with the margin expansion drivers. And cargo is only beginning.
Cargo is less than 50%, right? And that's what we're most excited about today is the cargo opportunity. So is there a space for more continuing margin expansion? Absolutely. Is it going to be sort of a linear kind of gradual path from here to there?
No, right? But I think all of you have learned that and we've all together have kind of grown accustomed to the dynamics here is that you have to look at the long term, right? Over the long term, we're going to continue expanding margins. The real can go to $4.50 the real can go to 3.50 dollars Oil can we've seen oil all over the place from $25 to $150 a barrel. We've seen the real at $158 we've seen it at $4.20 but we've continued generating profitability, expanding margins and growing the company.
I think that's where we need to keep our sight on, right? And we're very excited about the fact that over time, we will continue expanding margins. And there may be some noise, but you have to kind of separate the signal from the noise. And then it's very easy to see that this is a very resilient, very profitable business that has a lot of potential going forward. I think that's it.
I'll turn it over to Andrea.
Thank you, guys. This was great. We are now ready for Q and A. I would like to invite John, Abi and Jason to the stage, please.
Hey, guys. It's Savi from Raymond James. Just a question on related to the fleet transformation and the transformation is not necessarily tied to growth. So I was wondering if you could talk a little bit about how you see the growth continuing over the next few years, especially as the base is bigger now? And also kind of the second part of that is in part of the growth and you're getting a lot of cost benefit from the transformation.
But Alex, as you talked about the inefficiencies, could you talk about like how much of a drag that is today from a margin point or something like that? And how long it will take to address some of those?
Yes, Savi. I think we'll have Avi answer the first part. But just every aircraft that we're taking is densified, right? So every E-two has 18 more seats, every 320neo has 56 more seats. And so even if we kept and we were metal neutral, there's going to be growth in the network, right.
And I think that's really important to understand is that there's going to be natural growth just because of the densification of the same time.
Yes. In terms of the growth, it's very efficient because it's capacity growth without departure growth, which is obviously much more efficient. I would say that last year, we did 16%. This year, we're going to be 21 ish. Next year, you should expect to be in the teens, mid teens, I would say maybe a little bit higher on the higher side of the mid teens.
And then probably in the teens area in the next couple of years, coming slowly down towards low double digits as the base gets bigger. But again, it's all very efficient growth, primarily up gauging and very, very little departure growth?
Yes, I'm going to talk about the cast. But I think one thing that's important while we're in the topic, right? We're like Abhi said, we're growing kind of in the teens. If you take out the Avianca effect, right? We've been growing in the teens for the last 3 years and we're going to be growing in the teens for the next 3 years, right?
And that's purely from up gauging, right? It's not driven by GDP. We're doing this as quickly as we can. If you tell us that GDP growth next year is going to be 0, that's how much we need to grow. If you tell us it's going to be 3%, that's how much we can grow, right?
We can maybe adjust a little bit of utilization, but the bulk of the growth is driven by, like John said, our focus on getting rid of E1s, right, and accelerating the E2s. That's the pacing item today. But as we grow in the teens, and we're 20% of the ASKs in the market, Brazil should grow 3% a year, all else equal, right? 0% GDP growth means ASKs in Brazil should grow 3%, because that's our fleet transformation. It's not driven by GDP.
And when you add the 1% GDP growth that we do have and you put like a 2x multiplier, which I think most people are comfortable with, that's another 2% growth. So Brazil should be growing roughly 5% a year, that's equivalent to 1% GDP growth. And if we have 0 growth this year, that's effectively a decrease, right? So I think it's important for everybody to notice, I think some people ask, wait a minute, we're going to be back to the same ASK capacity that we had before Avianca went away. That doesn't mean that Avianca capacity has been replaced, right?
There's a base growth of ASKs in Brazil of roughly 4% to 5% just based on GDP and our fleet transformation. But it's not predatory, it doesn't increase competitive dynamics, it doesn't it's purely based off of the economics of the fleet transformation that are so powerful.
I think, Toussavi, these are investments in the future. If you take a look at what Azul looks like 1 year from now, 3 years from now, 5 years from now, this year alone, there are 29 new aircraft entering the fleet. There are 2,000 new crew members coming into Azul today. And certainly, we have aircraft exiting, but there's 2,000 people that have joined the Azul family that are getting trained, that are getting ready to produce, the investments we made recently in Garulhos with the lower ICMS, all of that, it's an investment in the future. We know where we want to be 3 years from now, 5 years from now.
And so, yeah, there's pains of growth. Certainly, there's incremental costs that you carry with that growth. But I think as you see, it's phenomenal growth over the next couple of years. But when that flattens out, there's additional margin expansion that we've talked about of 1 to 2 margin points, when you're no longer cycling through as many people through the system as we have today. But it's hard to talk about our people as cost, but there is a lot of costs associated with hiring people.
But we believe it's investment in the future, because those people will be trained and they will be contributing with us for the long term.
Yes, I think that's exactly right. It's the 1 to 2 margin points that we talked about. It's one point essentially of training and I believe there's at least another point of margin of just the fact that when you grow this quickly, there are opportunities in creating better processes and better automation that in the short term we haven't explored, but we certainly explore over time.
Good morning. Thanks. Dan McKenzie from Buckingham. Thanks for the presentation today. Very helpful.
I'm wondering if you could maybe help give us a road map on the RASK, CASK ex fuel side of the business. And I think the worry I mean, at least when I came into 2019, I was almost certain we were going to enter with the Brazilian hail at $3.50 or lower. And so the macroeconomic backdrop has been a little bit of a surprise for investors. So, as you kind of think about the current volatility, if we straight line this forward, how do we think about growing margins from the RAS CASK ex field dynamic? RAS, in the back of your mind, down 2 to 3 CASK ex field down more because of the cost savings.
I don't know what you can share, but some kind of road map would be helpful there.
Hey, Dan. So let me first explain describe a little bit how the fleet mix affects RASK, and then I'll kind of tell you what I'm thinking is going to happen for RASK in terms of this year and next couple of years. So if you look at how the aircraft fleet mix changes how our ASKs are made of. So as John showed on one of the slides, our 320s fly 1500 kilometers on average stage length. Our Embraer's fly 700.
So they fly double the stage length, and the aircraft is 50% bigger, right? Last year to this year, they rep how much ASKs A320s represent in our domestic network has almost doubled. So when you have an aircraft type that's flying double the stage length of the Embraer and is 50% bigger, the RASK of that aircraft naturally is smaller, right? So is the CASK, of course. So what's happening is that a smaller RASK number now represents more and more of ASKs every year.
That's just the math of the weighted average of the ASKs, that's all that is. If you compute this number, it's about 6 to 7 RASK headwind per year just from the mix of the aircraft. And we're actually delivering a positive year over year RASK this year. So not only are we making up for that, but we're going even beyond. And that shows how the network has been able to respond in terms of not just load factor, which you guys know I'm not a huge fan of, but in terms of unit RASP, we're making up for that just a mathematical headwind and we're able to increase year over year.
So last year, we increased RAS 1.6%, 1.7% on 16% growth. This year, we're going to do better than that in terms of year over year RASK on more growth. When you look at 3Q and 4Q, I expect RASK to be very close to 0, slightly positive, slightly negative. Okay. And that's on 20 plus ASK growth, including the effect of the fleet mix.
So the network is actually responding very, very well to the capacity that we're throwing at it, it's able to generate demand. Looking ahead to next year, yes, I expect a small RAS decline. I can't say whether it's 2 to 3, 1 to 2, but I'm very what I know for sure is I think given the strength of the network, we're going to be able to protect the revenue so that the RASK decline is significantly less than the CASK decline. And that's going to be where the margin expansion is coming from. But just remember the fact about the change in aircraft mix and how that just mathematically generates a RASK headwind.
And we're right now overcoming that and doing even better because it's going to be positive.
Yes. And then on CASK, I think what's important, given our fleet transformation and everything that Abhi talked about, the when you look at CASK ex fuel, you're trying to control for fluctuation in fuel prices, which in Brazil is important not just because of price of oil, but because of currency as well. But you can't look at CASK ex fuel in the case of Azul because a lot of the benefit from the fleet transformation is lower fuel burn. And when you look at CASK ex fuel, you're throwing away the volatility in fuel prices, but you're also throwing away the benefit from better fuel burn, right? So you cannot look at CASK ex fuel, you have to look at what we call normalized CASK, right?
So CASK controlling for oil prices and currency, and then it's very easy to see that CASK has been coming down, right? And it's purely the economics of the fleet transformation. It's as you go from an E1 to a Neo, CASK should go down dramatically, kind of in the 20s, right, 20% or more. And RASK should go down maybe 5% or as Abhi said, right, which gives you the margin expansion. But all else equal, normally you should see small reduction in RASK, big reduction in CASK And then everything else is noise because the real has been devaluing, fuel has been very volatile, but that's why you need to look at normalized CASK.
And going forward, I think that's what Abhi said, you should see very small decrease in RASK, bigger decrease in CASK, normalized for fuel and FX.
Understood. Thanks for the comprehensive answer. That's great. Follow-up question, Abhi, I guess if I could go to you, the fares, of course, you've unbundled the product. But is there another step potentially to drive revenue in the form of cabin segmentation?
I don't know, the last 12 seats of the aircraft, for example. Is that an opportunity? I mean, it doesn't feel like it's a competitive pressure today. It doesn't seem like it's necessary. But is that something that could help drive revenue at some point as you just further segmentation?
As Alex, I think, showed on his unbundling slide, there is we're not all the way there yet to a basic economy, right? I mean, close, but we're not all the way to basic economy where you would charge for check-in at the airport or having to call a call center and things like that. I think that, that is an opportunity to further come down the unbundling path and stimulate even more traffic, especially in regions of the country that have never had before. I would say that, yes, it's going to happen. And I think one thing that we've done well here in Brazil different from the U.
S. Is we've unbundled the product pretty efficiently and not like a big bang, let's call it basic economy and let's draw all this attention to it. We should have done it over step by step and pretty much the same effect has happened. So I think there are more ways to go. I suit I do see a base economy type product coming into the market.
It will take a little bit of time, but yes, I think it can come and I think it can help further stimulate at a price point that makes sense for us and for the customer as well.
And then one thing I think that we still see a lot of upside, Dan, is we essentially sell all of our tickets online, right? There's very little kind of physical purchase of tickets. But that means that we only sell tickets today to someone that has a credit card with a high enough limit to pay for the ticket, right? But there's a huge mass of people in Brazil that have the purchase power to buy a ticket, but they don't necessarily have the method of payment to buy that ticket online, right? So that's something that with the revolution that's happening in the industry of payment methods, I think that's another source of upside that there are a lot of startup companies, a lot of fintechs that are coming up with ways of selling e commerce without you having to use a credit card, right?
Somebody told me before the meeting that 40% of Uber payments in Brazil are done in cash, right? It's basically in the world something that works primarily with credit cards, but in Brazil it needs to work with cash, otherwise you don't get to serve a huge chunk of the Brazilian population. And the aviation industry in Brazil today doesn't serve that population very well because most of the sales are done online and that requires a credit card with a pretty decent credit limit. So that's another source of upside. It will be on passenger revenue, on ticketed revenue, but there's a huge part of the population that we're not serving today collectively.
Hi, guys. Roger Araujo from UBS. Thanks for the opportunity. I have a couple of questions, I think, to Abi. First, there has been indirect competition now in some of the routes that Azul used to fly alone from MAP Pasareto in Congolence.
Also, the states with these ICMS benefits stimulating a little more regional flights. So my question is what is Azul's strategy in those routes and how relevant they are? And also on Azul's routes in Guarulhos, I think Abi already gave an idea on the relevance. But on those routes specifically, how competitive is Azul versus the other major players in terms of costs, if you could give us any kind of number? And also on the revenue on the ticket fares on these routes, Do we charge more or less the same as the players?
That's it.
So in terms of some of the new regional routes, we of course, we have Pasedredo Maps starting in Congonhas. We had GOL announce earlier in the year about 3 or 4 of our cities that they're flying to GRU. So it's overall, it's pretty small exposure to us. It's between 1% 2% of our ASKs. It's not something that I'm worried about.
It's not something that we're thinking about every day as what should we do, what should we do, what should we do. One thing I will say is that we will be competitive. We will be competitive in areas where we have competition and we will extract premiums where we dominate the market. So in terms of what's our strategy, our strategy is to use our fleet flexibility. And I think that when you compare the trip cost of an ATR to a 730seven-seven 100 or even an Embraer, we have a significant trip cost advantage due to our fleet flexibility.
So we're able to still provide a much better level of service to these cities using the fact that we can fly 4 ATRs a day instead of 1, 737,700. And that gives the customer a lot more options to go and come back the same day, a lot more connecting options, a lot more flexibility. So it's not something I'm thinking about on a daily basis. We will be competitive for sure, but it's not something that I think is going to affect our numbers on a global scale, on a macro scale. But we will do what needs to be done in terms of being competitive.
And of course, we have the great advantage, which is our fleet flexibility. In terms of GRU, Alex said it, our A320neos today have the lowest CASK in Brazil, certainly lower than a 737NG or an A320ceo. And we are the furthest along in terms of the fleet transformation. So we have A320neos flying in GRU to some of the longer haul destinations like Recife, like Fortaleza, like Salvador, like even Puerto Alegre. So they are the most efficient aircraft and that gives us a competitive advantage in terms of these highly competitive markets.
As I said, it's number 4 for us in terms of departures. It's not a hub for us. We do it for the local demand. And we will be competitive. Again, it's a competitive market.
We will be competitive. So but if you look at some of the sort of the travel agency data, we've still been able to maintain the fact that we have the highest fares and higher fares in Brazil, even though we have these competitive markets. So there's this pricing and then there's yield management. Don't want to get into too specific, but in short, A320neos are by far the most efficient aircraft today flying in Brazil domestically. We have them flying in GRU that gives us a competitive advantage.
And we will be competitive in competitive markets, and the customer will choose us based on our product, experience, on time performance, all those things.
Just Abhi shared this slide, I think it's really important. The Hip around to Campinas example, and our competitor is flying now Hip around into Congonhas, probably good market, but our customers aren't going to Sao Paulo. This proves they're not going to Sao Paulo, 94% of them are connecting throughout the entire network. And so do we lose maybe 1 to 2 customers on a flight based on what they're doing? Probably, but it's so insignificant when you think about Azul is carrying 100,000 passengers a day now.
I mean, it's very, very small in the big scheme of things. And you're talking about an airline that's
been in and out of bankruptcy several times and it's just really, really, really, really, really, really, really, really, really, really, really, really, really, really, really, really, really, really, really,
really, really, really, really, really, really, really, really I don't know if you cobble them both together, whether they have 10 aircraft or not. I don't know if you cobble them both together, whether they have 10 aircraft or not. And you're talking about 10 ATRs and trying to fly this stuff. And so they don't have the network effect to kind of connect the network. I mean, just look at what we do out of Cuiaba and what we do out of Hisifian, all that regional traffic in and out of those cities makes a big difference to the network that makes it work.
And it's not just flying in and out of a city. You need to have that network effect that makes it work.
Very quick question on the routes that Azul flies alone. I think you mentioned 70% in terms of routes. So in terms of ask, do you have that today and also at the time of the IPO?
I think in terms of ASKs, it's 83%, Andrea, in terms of dominant. The number has only gone up actually because if you look over the history since IPO, where we've gotten more dominant over the last couple of years is Belo Horizonte. We've increased our dominance in Belo Horizonte. At Recife, we've increased our dominance. So I believe it's 83% right now.
And I don't know twenty 15, but the number was lower. So we've actually gotten more dominant over the last couple of years, thanks to the network, thanks to the strength of the network and the efficiency of the A320 just makes it very hard to compete.
Yes, it's essentially fluctuates between high 70s, low 80s, regardless of whether you look at it as percentage of routes, percentage of ASKs or percentage of revenue.
Thank you.
Hi, Renata from Itau. We saw both Copa and JetBlue announced an impairment of their fleet of ejets. Can you do you plan to do something similar? And can you talk a little bit about how difficult it is to sell the E-1s?
I'll kick it off and pass it to that. The problem is when you're trying to sell an aircraft, you can't talk bad about aircraft, Tanata. That's one of the challenges that we have. I think, first of all, 80% of our aircraft are leased, okay, are E1s. And so the problem goes away naturally over the next 4 years.
And what we're trying to do is try to accelerate that and have it happen over the next 24 months. And so certainly, I'll let Alex talk to the accounting aspect of it. But to the extent that we can do that, there's JetBlue has done it, Cope has done it. We have a larger fleet. Our number would probably be bigger, obviously.
But the return, the payback is in less than 12 months, if you did that. And so we're actively we're aggressively looking to place those aircraft so that we can kind of get significant uptick in margins as a result.
Yes. So in terms of economics, the first important part is the E1 doesn't work for us, right? A lot of it is because fuel prices in Brazil are very high. We pay 50% more per liter of jet fuel than American Airlines, American carriers or European carriers. And so we can't have an E-one that's cheap enough for us to want it, but there are carriers in the Northern Hemisphere for whom if you get it cheap enough, the aircraft makes sense, right?
And that's the opportunity that we're finding. Last year, you saw that we sold roughly half a dozen of E-1s, and that's the type of opportunity that we continue to explore. The difference now is so let me talk about the cash basis first. On a cash basis, if we have an owned aircraft, right, we normally sell the aircraft for more than we have debt on the books for, right? So when we get rid of the E-one, we actually raise cash.
And then going forward, if we can replace that E-one with an E-two, the profitability of the E-two is much higher than the profitability of the E-one, right? With the leased aircraft, like John said, the aircraft has a date in which it goes away naturally. We're trying to accelerate it. That normally means we need somebody to sublease it to, right? And we can't obviously get the same lease as the rent that we pay on it, but we don't need to, right?
If we just get a fraction of that rent, it's already enough for us to be indifferent between keeping the E1 or getting rid of the E1 and accelerating the E2, right? So either way you cut it, you cut out it, even if it's an owned aircraft or if it's a leased aircraft. Once we decide to get rid of the aircraft that means that it's economically beneficial to us. So you can be you can rest assured that we will generate cash and it will increase profitability. Now with IFRS 16, every aircraft is treated as an owned aircraft, every aircraft is on the balance sheet.
And on a book basis, right, when you look at the book value of the aircraft, the aircraft today is trading at lower than what we have it in the books for, but that's essentially relevant. It's what already happened last year, right? Last year, when we sold the E1s in Q2 of 'eighteen, I think, we generated cash because we sold it for more than the debt, but we had to take a book loss on the aircraft and that's probably the way the economics work going forward as well.
But we're pretty impatient, we want to flip this fleet as quickly as possible. I mean, once you you'll see the E2 today, it's a pretty amazing aircraft. The economics are so great that, man, the faster we could do it, the better.
So if any of you want to burn your annual bonus on an E-one, we can You worked
for Itau, they paid well.
So good morning, everyone. Thiago Cassepe from Credit Suisse. Just a quick question from my side on international flights. I would like to know if you could please tell how you decide between using doing an international flight by yourselves and doing a codeshare agreement, an interline agreement and so on?
So yes, I mean, for us, international most of our international is long haul widebody, right? We have very, very little international in South America, just 2.5 flights a day to Buenos Aires basically. And so for us, first of all, if we think it's going to be important to our network, it adds value to our network. And that's where places like Campinas to Lisbon or Campinas to Orlando, of course, add a huge amount of network value to our network. Can we make money on the route?
Is the route going to be profitable? So we launched our Compinas to Porto, which I think is going to make money. It is making money. It's a good route. So there's not it's pretty conservative in that way.
Do we have connectivity with a partner beyond or is there a big enough local demand? For example, New York has been on the list ever since we started in 2015, right? I mean, there's a reason we're not flying to New York today. We easily could start flying to New York if we wanted to. But the timing has to be right.
And so far, I haven't felt like the market really has been there for us supporting New York flag. Maybe it will in the future, but so we've been pretty conservative in terms of our long haul flying. It's again, as I said, give us every chance to be successful. So a lot of connectivity with partners beyond when you get there, high utilization of aircraft. Another reason that New York is difficult is because you have to use 2 airplanes.
They usually only fly at night. When we fly to Orlando, we go and come back with the same airplane. Lisbon, we go and come back with the same airplane. So you want to have high utilization to make it as efficient as possible. And also markets that we do well, Azul International does very well on the high end leisure side, second homes, Disney vacations, all that kind of stuff.
And so it just kind of has to fit into our network and have every chance to be successful. So it's a pretty low risk strategy. The interline codeshares that we have today are long haul carriers already flying to Brazil, and they need connectivity in Brazil to Curitiba, Porto Alegre, Goania, Vitoria, all those kinds of places that we do primarily in GRU. So but in terms of our long haul strategy, one reason we haven't expanded so much in South America is there's a lot of capacity already and it's very volatile. And now you have the low cost guys like Sky and JetSmart kind of pouring capacity into Santiago to Brazil or Argentina to Brazil.
So I actually think it was a good decision for us to be pretty conservative in that sense. So it has to make sense for our network, it has to make money most of all. And overall, it's pretty low risk, we try.
Josh? Great. Thank you guys very much for the event today. Josh Milberg from Morgan Stanley. I also had a question on the international side.
It seems a key message today has really been that, well, one, you've highlighted the resilience of your business model and with respect to capacity that you're very much taking the long view on the domestic side. And I just wanted to ask to what degree that also applies to international if at this level of BRL that could mean some cutbacks in your plans to grow next year? Just some color around that.
Yes, it is a long view. We've been very conservative, for example, in the timing of our A330neo deliveries. Just the second one now is going to come at the end of the year. And so we've tried to space those out as much as possible. We haven't opened a new destination, but Porto was this year and that was it.
Not really looking at more than one new destination, if that, per year. Very low exposure to Argentina and South America, which I think is going to be very tough over the next couple of years. So yes, it's a low risk conservative strategy. We'll do what makes sense, but I'm not really I don't want anybody at Azul to over rotate over let's launch this international market because we have to because it's so important, it's so strategic. I don't see that.
If it's going to make money, if I think it's going to do well, the timing is right, I think we'll do it. Where what we have today, which is Campinas, Confins and Recife to the U. S, Orlando and Fort Lauderdale, I think is a good franchise. And we have Campinas to Portugal, which allows us access into all of Europe. So I think what we have today is a pretty good franchise, and we'll sort of take it as it comes.
And we adjust utilization and things like that. So Fort Lauderdale, we used to fly double daily. Now we've dropped that down to 9 times a week, for example. So we'll make those adjustments as needed. Lisbon in the winter will come down because the winter season, things like that.
So that's the idea. But overall, the message the focus for me is domestic. There's no question about that. And international, we'll just take the opportunities as they come.
Hey, Josh, just to kind of add to that. I mean, I'm from Connecticut. Avi lives in New York. Jason lives in Connecticut and David Neeleman lives in Connecticut, right? And so the pressure for New York, you would imagine, is has been very high.
But I think it shows the discipline as a management team to not do that before it's ready. And I think that we've pulled back when we need to pull back. We'll add capacity when we need to add capacity. And I think that the strategy that we have to fly confines to the U. S.
And Recife to the U. S, it's not sexy to fly to those from those destinations, but it works because it's from where we're strong and we have connectivity to where our partners are strong and to where they have connectivity. And it's really, really important. It's the connectivity that makes it work.
Thank you.
Yes. Good morning. Thanks. Dan here with a follow-up. Can you talk about how you're working with Avianca at this point and just kind of address the relationship, the business agreement, how that's developing?
Is that an opportunity or not? Just elaborate a little bit there.
Yes. To clarify, the Avianca, but it's Avianca, Colombia, not Avianca, Brazil. Yes, so we just announced a coach here with Avianca Colombia, hoping to get good traffic from those guys flying from Bogota to GRU basically. So that's sort of just a basic co chair commercial agreement. In terms of a broader of course, there's news out there about JV3, right, which is United, Copa and Avianca.
And initially, in JV3, there was no Brazil and because there are no Brazilian airlines. So the opportunity really is for to add Brazil to that network, and that would be Azul, right? So we are in conversations about JV4, so imaginatively, as we call it. And these things, joint ventures, are all actually about they're about running a business together, right? You're not merging anything, but you're running a business together.
And there's a lot of discussions that have to happen in what is each airline's role in running that business together. You share in the risk and you also share in the upside, hopefully, upside. And most joint ventures have shown over time that they do work and they do work very well. But each sort of player has to decide for themselves whether the participation in that joint business fits with their strategy, either the long haul or short haul or whatever strategy that they have. And you kind of have to project out 10 years what you think Azul will be and whether that fits into what this joint business, whether that's capacity, whether that's commercial, pricing, whatever it is.
So we're in those discussions right now. I think it takes some time to figure it out. It certainly is a possibility. It could not happen. It could happen.
It depends how the conditions are on our entry into this joint venture, whether Copa, United and Avianca are okay with it, whether they like it, they don't like it. So kind of each player has to make up their mind. But in general, you're looking for benefit to the consumer and benefit of running sort of U. S, South America as a joint business. So we're in discussions.
I don't really have a time line on that, and we'll kind of see if it fits. But for right now, it's codeshare, and then we'll kind of see how these discussions progress.
I think one thing we always talk about is the huge opportunity, to be very transparent, is between Brazil and the U. S, right? It's with us and United. And I think we have primarily an audience of Brazilians here, so I'd like to try something out. Raise your hand if you've ever been to Miami.
Raise your hand if you've ever been to Bogota. Yes, so for those of you on the webcast, it's a 10:one ratio of Brazilians have been to Miami, Brazilians have been to Bogota. Mean, there's upside, of course, and every little bit of revenue and demand counts. But I think what we're most excited about is the opportunity between Brazil and U. S, Brazil and Europe.
That's where the vast majority of traffic is.
Good morning, everyone. This is Lucas from Morgan Stanley. Thanks for taking my question. Abi mentioned in his speech about flat unitary revenue for 3rd and 4th quarter this year. I just wanted to hear there's a mix effect on that, so I wanted to hear your thoughts on how you're seeing the same route basis or a route that you don't have an up gauging effect, what you're seeing in terms of unitary revenue?
Yes, it's a good question because the mix effect is for the airline as a whole, right? And so the average ticket for 320 is much higher than Embraer. When you look at route to route markets, so VCP Salvador or VCP Hasifi that used to be Embraer is now at 320. When we first went on the road on the IPO roadshow, before we even really started flying the 320s, we said, we think that on a route on a same route basis, the 320 RAS could be down as much as 15%, while the CASK is down 29%. What we've seen really operating the airplane and especially with the way the connectivity has worked out in the network is we're probably doing better than 15%.
I would say high single digits or very low double digits. And that's been the extra source of unit revenue that we've been able to show last year as well as this year. The A320 has performed better in terms of unit revenue on a route like for like route basis. So we thought it was going to be around 15% when you first went on the road. It's probably closer to 10%.
And a lot of that's just because of the connecting demand that comes in, right? I mean, the local demand, the fares have stayed the same, if not, they've gone higher. But there's a lot more connecting traffic that we are able to flow through the entire system with the 320s that we now have.
Sorry, this is Bruno Mori here from Goldman Sachs. So I have a follow-up question for John. You have commented on the reasons why you think your model is hard to replicate all the investment that has been made. On the other side of the story, we have margins which are quite high in the Brazilian domestic market. Some progress has been made on the regulatory front.
So do you think in 3 years, we are going to see only 3 relevant players in the Brazilian market? Or do you see a new player entering the market, maybe not necessarily in your routes because your model is harder to replicate than of the other 2 relevant players. But curious to hear your thoughts on the upcoming years given the improvements that have been made, even though the challenges are still there?
Bruno, I think you're going to have 3 relevant carriers in Brazil, 3 years from now, 4 years from now, 5 years from now. I think it's very difficult. You need a lot of capital to come to Brazil, but there's a lot of laws that need to change. And you and I have talked about this in the past, but for example, Censa Simon closes on a pretty regular basis. And when Censa de Mon closes because the man upstairs decided to close Censor de Mon for whatever reason, the airline is responsible for the food, the transportation, the hotel and access to Internet.
And so thinking that you can have a low cost guy show up and say, hey, I'm going to now skim and try to fly in this market, the first time that an airport closes or they have a maintenance event, that airline gets themselves into significant amount of trouble. Brazil is still a very litigious society, okay? And so our partner, United Airlines, has 3% of their flights in Brazil, but it's 80% of their claims their civil claims. And so I think the only way that it really changes is if those laws change in the future. And so there's significant barriers to entry in Brazil today.
The fact that fuel cost is so high is a barrier to entry. The fact that there's no secondary airports is a barrier to entry because you have to come and compete where everybody else is competing. It's not like Europe where you can fly to a secondary airport and get no landing fees. And even still, landing fees here are such an insignificant part of the total cost equation, because when you throw fuel as being so high, and then you throw all of the other charges that you have from a cost perspective, where a ULCC could be more efficient, it's a very, very thin margin. The other thing I would say is I would challenge you and the airline analysts in the room to find me a country where a ULCC had success when the product was already unbundled, okay.
And so you can take a look what happened with Ryanair and Easyjet in Europe, the product wasn't unbundled, you can take a look what happened in the U. S. With Spirit before the product was unbundled at all the U. S. Carriers, but what's happened to Spirit and Frontier once the other products were unbundled, it really limited their ability to grow.
Volaris, really great airline early on and great success, but once everything was unbundled, a lot more difficult. And so Brazil has a lot of unique challenges. And I think that if you take a look at and it's an extremely competitive market. I think you need to separate kind of what the government is saying versus what kind of some of the reality is, is what's the 3rd largest airline in Germany? You can't name it.
What's the 3rd largest airline in the UK? You can't name it. What is the 3rd largest airline in Colombia? There's high concentration in these countries. And if you take a look at the US, there's 4 airlines in the US today, that's what 90% of the ASKs, over 80% in the United States, which is a market that's 10x what it is in Brazil today.
And so if somebody wants to show up in Brazil with over certainly, it's possible. But a certainly it's possible. But a lot needs to happen Bruno for that to take place. The laws need to change. A lot of capital needs to come into place.
And I just don't see it in the short term. It doesn't mean somebody won't try. I'm sure somebody can raise $50,000,000 get a few aircraft and try to make a run at things. But it's very, very difficult here in Brazil. And take a look at us.
I mean, we fought for 10 years to make it work. And Azul, over our history, has lost more money than we've made, And so we've just started making money after a decade after putting this entire network together. And so and then and you also have a Congress in place in Brazil today that says, hey, you can charge for bags, maybe you can't charge for bags, you can charge for bags, maybe you can't charge for bags, right? And so you're talking about taking a 15 year view on making a capital commitment. And there's this new industry in Brazil today, which is if your flight gets canceled, I'll give you a $1,000 right off the bat and then I'll sue the airline.
There's a lot of things in Brazil that make it difficult, but that's okay because that creates barriers of entry for our business going forward. But I think it's very difficult for all the reasons that I mentioned.
Savi with a follow-up, just maybe Alex to your point about not getting credit for the TAP. I understand the argument for it having built a nice strategic area that some other competitors might actually want to own or invest in. But beyond that, what we saw in the video was almost like a growth to profitability. So could you just talk about what really is the strategy there and if the profitability is improving?
Sure. So I think a lot of the story is similar to Azul, but with the added benefit that they are starting from a position of, I think, even more upside than we are. I think Azul is an airline with above average margins already, and the fleet transformation is going to allow us to expand margins even further. TEP is starting from a much lower margin position with a higher cost structure, with a network that was not built for profitability, but on top of that, they will also have the fleet transformation that we have. Also, they have a competitive advantage within Europe because their costs are much lower than other kind of network carriers in Europe.
The cost of living and labor costs in Portugal in general are much cheaper, much lower than anywhere else in sort of places like Germany or the UK or France. And so they also have a competitive advantage on the cost side. So I think it's a lot of it's the geographical position, it's the cost structure, it's the fleet transformation, and it's the airline being run and being taken from an airline that was kind of below average. If you just believe that it will get to average levels of profitability, it's a huge amount of value that's created, but then there's all the other things on top of that as well.
And just to be clear, it's a 74 year old company and they have 100 airplanes, right. And so when talking about 53 new aircraft, most of that is replacement aircraft. And so they're taking out 3 19s and putting in 3 21s, a lot of growth associated with that. But the fuel burn on the 3 21 is the same as the 3 19. And that's what's happening.
They're getting rid of 340s. They were flying 340s to Sao Paulo, now they have 330neos. And so it's a lot of that type of transformation, and it's a very strategic location. I just want to remind you, a third of all seats to Brazil and to South America are on a TAP aircraft today. And if you're in the U.
S. And you want to go to Italy, you can connect over London, you can connect over Spain, you can connect over a lot of places, why not Lisbon, right? And so as Alex said, if they have a lower cost structure than the other carriers, it's a strategic advantage for them. And if you take kind of looking forward to like what Delta is doing and maybe the model in 5, 10 years is mega airline model, they have a very strategic position in the South Atlantic and in Africa that's very enviable for a lot of people in Europe.
And we have one question from Mike Linenberg from DB. He is wondering how the ramp up of the average is going so far and also asking if we plan to fly the A220 NEOs there?
So of course, I wouldn't publicly comment on the AirBridge revenue because I'm sure my friends are listening. So what I will say is the important part about the shuttle for us is we have a lot of customers flying Azul for the first time, right? I mean, Azul does not did not really have a strong presence in Sao Paulo, certainly not in Congonhas. So we're able to access a lot of customers for the first time. It's going well.
I think that they're liking the service. We've already seen repeat traffic on the route. And what I'm really hoping for is that the route itself is going to do well. I'm very, very confident of that. But more than that, I really hope it becomes a gateway for us to access some of these customers, whether it's in our loyalty program or our flights out of GRU or even I'm sure these Airbridge customers go to Miami a couple of times a year or Orlando or Portugal.
And I really would hope that now we're in their universe and that helps us attract them to VCP to fly nonstop to the U. S. Or Portugal. So the route is going to be fine. I'm not really worried about that.
But more exciting for us is being in this sort of historic route and really having customers fly Azul for the very first time brings them into our ecosystem, whether it's loyalty or international or other domestic routes, I think that's really what the benefit is going to be.
And I think the very public fight in the press actually helped us. There's a lot of people that know about Azul today because of the fight that happened in the press over the last few months and it's been kind of top of mind, a lot of people want to try us. And so I think that actually benefited us going forward.
Last question over here.
So, hi. It's Paula Tanasak from Bradesco BBI. And I just have a question regarding the Correios. So it makes sense for us to participate in a consortium to acquire Cohallos?
No. No, I think the joint venture that we looked at with the Cohoes was to take their air business and kind of join it with some of the assets that they have, but I think there's a lot of other exciting models out there to kind of add to our Azul Cargo business that we can kind of be a plug and play for any e commerce player. I think their market share continues to go down every single day. And so there's new solutions in the market to replace what they're doing today. And so in the short term, no, it'll be interesting to see what happens to them to see who takes it over.
If it does get sold, then maybe there's a possibility to partner with them in some cities. They are the only company that serves all cities in Brazil today. So there is they do have some strategic importance. But as far as us acquiring the Correios, it's something we've never even thought of.
Okay. Thank you, everyone. I think we need to leave now to go to Via Capos Airport. You can take a quick bathroom break, and then the buses are already upfront. Thanks a lot for coming.
And those of you who are going to Sao Paulo, please talk to us. We'll find out a way to take you back there. Thank you.