Azul Ramps Up Fleet Renewal Process To Boost Efficiency

Azul S.A. (NYSE:AZUL) has announced the acceleration of fleet renewal and modernization plan for 2019. To this end, the carrier intends to add 21 next-generation aircraft in its fleet this year, which indicates an increase of eight such aircraft from the previous announcement.

Apart from adding new planes, this Latin American carrier is replacing outdated ones as part of its fleet modernization efforts. To this end, the carrier aims to retire 15 Embraer E195 E1s from its fleet. According to the previous plan, the company announced the retirement of eight such planes.

In line with its fleet upgrade efforts, the company expects ASK (available seat kilometers: a measure of capacity) to increase 18% and departures to grow 5%. Notably, ASK grew 16% in 2018.

Azul’s fleet modernization plans are in sync with its goal of improved operational efficiency. Apart from boosting connectivity, the plan is likely to boost the company’s revenues and reduce cost per seat. Hence, the company is optimistic about the entrance of next-generation Embraer E2 aircraft, which are expected to reduce seat costs by 26% compared with the same of current airplanes operating in Azul.

Fleet Projections in 2019

Azul, the largest airline in Brazil, also unveiled an impressive fleet projection for 2019. The company plans to add 32 new aircraft in its A320neo family, 6 E2s aircraft, 48 E-Jets, 33 ATRs and 10 A330s in 2019.

Hence, it is estimated that the next generation aircraft will account for around 40% of the carrier’s total capacity by the end of 2019.

Shares of Azul have fared well in a year’s time. The stock has gained 10.2%, against the industry’s decline of 10.5%.

The accelerated fleet modernization plan is a further positive for the stock.

Zacks Rank & Other Stocks to Consider

Azul currently sports a Zacks Rank #1 (Strong Buy).

Investors interested in the broader Transportation Sector may also consider Air France-KLM SA (OTC:AFLYY) , SkyWest, Inc. (NASDAQ:SKYW) and Air Lease Corporation (NYSE:AL) , each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Air France have rallied 21.1% in the past six months. Meanwhile, SkyWest and Air Lease boast an impressive earnings history. SkyWest outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 16.9%. Air Lease outpaced the consensus mark in each of the trailing four quarters with an average beat of 22.8%.

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