Brazil’s Air Transportation Infrastructure and Its Implications For Azul
All airliners in Brazil face challenges in their domestic airports and air-traffic control infrastructures which need improvement. To improve Azul’s profitability and long term rate of return, Brazil is going to have to eventually upgrade these structures. Azul can form a coalition with other Brazilian airliners to help subsidize and push the government to improve Brazilian airports and air-traffic control infrastructure. This coalition needs to lobby hard for improvements, because it has a direct effect on all of their operations. For all Brazilian airliners, it will help raise margins, lower costs, and more importantly, improve safety. Because Azul seeks to compete with bus routes in smaller and mid-size towns, it is critical that small and localized airports have the appropriate infrastructure to accommodate Azul’s jets. For towns which were previously mainly accessed by buses and cars, a substantial amount of resources must be invested in the airports.

Mimic Southwest’s Best Practices
There are also other ways that Azul can access Blue Oceans like Southwest does. It can make sure it sticks to Southwest’s point-to-point routing throughout Brazil, and avoid using hubs. Neeleman can establish a brand personality. This can be done in a way that’s appropriate to Brazilian culture, but friendliness like Southwest’s is universal and would likely be a “hit.” It can keep costs down with a no- frills feature and service approach. Also, and less obvious to customers, is to “hawkishly” maintain low operational cost. This is absolutely vital margin maintenance.

Why Azul Will Succeed
Although we are in difficult economic times in the U.S. and Brazil, Azul has overcome financial and logistic challenges to begin operations. It has a solid business model and value proposition for its customers. But what is most compelling about Azul and David Neeleman is the fundamental Blue Ocean marketspaces which they seeking to create in the domestic Brazilian travel market. Just the creation alone should be enough for them to prosper; couple this with better macro-factors in the future, with even merely competent management, and Azul will be able to ride out this initial turbulence to become a leading Brazilian airliner.