Brazilian airline Azul, founded by David Neeleman (JetBlue founder), has decided to merge with another Brazilian low cost, secondary market airline Trip. Neeleman describes the merger as adding 4 years of Azul growth at a stroke.

Both airlines are serving the same kinds of markets from the same hub using the same aircraft. Azul currently has Embraer E-190 and E-195 jets as well as ATR turboprops. Trip has E-175 and E-190 jets as well as ATR turboprops. In other words, fleets fit well together and route structures work well together.

This isn’t a complementary merger. Expect serious route harmonization with freed up assets deployed to new routes. Some routes will see increased frequencies or larger aircraft deployed to accommodate harmonized routes.

With this merger, the two airlines will become the third largest Brazilian airline and one that upon completion could give some serious competition to other Brazilian airlines such as TAM and GOL. With the strength that this new airline will have in secondary markets, one wonders just how long it will be before Azul contemplates purchase of new, larger aircraft such as the A320 or 737.

Growth after this merger is consummated will likely come from using larger aircraft and flying more routes to mainline cities. That will require a larger airliner and one that Brazil doesn’t make to date. Furthermore, the success of Azul makes one wonder when destinations outside of Brazil will be contemplated.

It’s a strong merger and one that makes complete sense even when considering Neeleman’s desire to grow organically and on his own terms.

Right

Filed under: Airline News by ajax