As noted in the title of this report, AZUL's IPO was delayed, originally expected to price on April 7. But, the day before the IPO was expected to launch, news broke that Brazil's securities watchdog -- known as CVM -- suspended the deal for up to 30 days. The agency said that AZUL provided some investors with information that was not provided in the prospectus. The suspension of the IPO would be revoked if AZUL cleared up the series of irregularities, which, apparently it did in short order. Investors also don't seem overly concerned about the misstep, illustrated by the fact that the company was able to increase the deal size by 4.5 million ADS.
For some background on the company, Azul (AZUL) is the largest airline in Brazil with 784 daily departures serving 102 destinations. AZUL was founded in 2008 by entrepreneur CEO David Neeleman, founder of JetBlue (JBLU), as his fourth successful airline venture, to capture the market opportunities created by the expansion of the Brazilian aviation market. As the sole airline on 70% of its routes, Azul is the leading airline in 66 Brazilian cities. It also flies to select international destinations, including Fort Lauderdale, Orlando, and Lisbon. Its loyalty program, TudoAzul, has approximately 7 million members. TudoAzul has been the fastest growing loyalty program in terms of members in Brazil for the past three years.
It operates a young, fuel-efficient fleet that is better tailored for the Brazilian market than those of AZUL’s main competitors as it allows the airline to serve cities with different demographics, ranging from large capitals to smaller cities. Its operating fleet of 123 aircraft is comprised of 74 Embraer E-Jets, 39 ATR aircraft, five next-generation Airbus A320neos, and five Airbus A330s. Its fleet has an average age of 4.8 years, which is significantly younger than AZUL’s main competitors.
The company intends to grow by adding new destinations, larger aircraft and increasing flight frequencies. It says its ATR aircraft gives it a significant strategic advantage in terms of entering new cities and accessing previously untapped demand. This is the case because these aircraft only have 70 seats and, therefore, require fewer passengers for the flight to become profitable.
Taking a quick look at the financials, the company is not currently profitable on a GAAP basis, however, it generates positive adjusted EBITDA and EBITDAR. Its adjusted EBITDAR margin in 2016 came in 27.1%. AZUL posted 2016 revenue of US$2.05 bln.