3Q19 Institutional Presentation
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
3Q19 Institutional Presentation
Disclaimer
The information contained in this presentation is only a summary and does not purport to be complete. This presentation has been prepared solely for informational purposes and should not be construed
as financial, legal, tax, accounting, investment or other advice or a recommendation with respect to any investment. This presentation does not constitute or form part of any offer or invitation for sale or
subscription of or solicitation or invitation of any offer to buy or subscribe for any securities, nor shall it or any part of it form the basis of or be relied on in connection with any contract or commitment
whatsoever.
This presentation includes estimates and forward-looking statements within the meaning of the U.S. federal securities laws. These estimates and forward-looking statements are based mainly on our
current expectations and estimates of future events and trends that affect or may affect our business, financial condition, results of operations, cash flow, liquidity, prospects and the trading price of our
preferred shares, including in the form of ADSs. Although we believe that these estimates and forward-looking statements are based upon reasonable assumptions, they are subject to many significant
risks, uncertainties and assumptions and are made in light of information currently available to us.
These statements appear throughout this presentation and include statements regarding our intent, belief or current expectations in connection with: changes in market prices, customer demand and
preferences and competitive conditions; general economic, political and business conditions in Brazil, particularly in the geographic markets we serve as well as any other countries we currently serve
and may serve in the future; our ability to keep costs low; existing and future governmental regulations; increases in maintenance costs, fuel costs and insurance premiums; our ability to maintain landing
rights in the airports that we operate; air travel substitutes; labor disputes, employee strikes and other labor-related disruptions, including in connection with negotiations with unions; our ability to attract
and retain qualified personnel; our aircraft utilization rate; defects or mechanical problems with our aircraft; our ability to successfully implement our growth strategy, including our expected fleet growth,
passenger growth, our capital expenditure plans, our future joint venture and partnership plans, our ability to enter new airports (including certain international airports), that match our operating criteria;
management’s expectations and estimates concerning our future financial performance and financing plans and programs; our level of debt and other fixed obligations; our reliance on third parties,
including changes in the availability or increased cost of air transport infrastructure and airport facilities; inflation, appreciation, depreciation and devaluation of the real; our aircraft and engine suppliers;
and other factors or trends affecting our financial condition or results of operations, including those factors identified or discussed as set forth under “Risk Factors” in the prospectus included in our
registration statement on Form F-1 (No. 333-215908) filed with the Securities and Exchange Commission (the “Registration Statement”).
In addition, in this presentation, the words “believe,” “understand,” “may,” “will,” “aim,” “estimate,” “continue,” “anticipate,” “seek,” “intend,” “expect,” “should,” “could,” “forecast” and similar words are
intended to identify forward-looking statements. You should not place undue reliance on such statements, which speak only as of the date they were made. We do not undertake any obligation to update
publicly or to revise any forward-looking statements after we distribute this presentation because of new information, future events or other factors. Our independent public auditors have neither examined
nor compiled the forward-looking statements and, accordingly, do not provide any assurance with respect to such statements. In light of the risks and uncertainties described above, the future events and
circumstances discussed in this presentation might not occur and are not guarantees of future performance. Because of these uncertainties, you should not make any investment decision based upon
these estimates and forward looking statements.
In this presentation, we present EBITDA, which is a non-IFRS performance measure and is not a financial performance measure determined in accordance with IFRS and should not be considered in
isolation or as alternatives to operating income or net income or loss, or as indications of operating performance, or as alternatives to operating cash flows, or as indicators of liquidity, or as the basis for
the distribution of dividends. Accordingly, you are cautioned not to place undue reliance on this information.
2
2
AZUL AT A GLANCE
The fastest-growing, most profitable and best positioned airline in Brazil
in destinations served
#1 (100+)
in 84% of
#1 markets served
in domestic
#1 departures
in on-time performance and
#1 customer satisfaction
Profitability and balance
#1 sheet
3
BRAZILIAN AVIATION MARKET GROWTH OPPORTUNITY
Brazil Domestic Passengers by Year
Flights Per Capita
(in millions)
126 2.7
99
27
1.3
50
0.8 0.8
72
0.5
0.3
2008 2019E 2022E Brazil Brazil Colombia Mexico Chile USA
2007 2018 2018 2018 2018 2018
Source: Azul, ANAC, IATA, CE BR, ABE AR, IBGE and Bloomberg. Assumes 2019 domestic passeng er growth ex - Azul remains flat 4
COMPANY LED BY FOUNDERS
David Neeleman John Rodgerson José Mario Caprioli
Founder and Chairman Founder and CEO Founder of Trip Airlines and
Board Member
Alex Malfitani Abhi Shah Jason Ward Flávio Costa
Founder and CFO Founder and CRO Founder and VP People Founder and COO
5
AZUL BUSINESS MODEL FOUNDATION
Over US$1.3 billion of capital invested:
2008 2012 2015 2016 2017
Start-up capital Acquisition of United investment HNA investment IPO US$406
US$250 million Trip Airlines US$100 million US$450 million million
6
SUSTAINABLE, DEFENSIBLE BUSINESS MODEL
1. 2.
Largest Unparalleled
network with network
multiple hubs connectivity
3. 4.
Diversified fleet Renowned
Customer
Service
7
MARKET AND ROUTE LEADERSHIP
Domestic Cities Origin & Daily
Served Destinations Departures
104 2,812 910
780
751
57
1,404
46
1,107
Azul
Competitors
Azul Competitor 1 Competitor 2
Source: Azul, ANAC and Compani es. Consider s leadership by number of departures 8
LIMITED ROUTE OVERLAP WITH COMPETITORS
Azul Routes Leadership Route Overlap
86%
Only Carrier 72%
Most Frequencies 12%
Others 16%
Leadership Share 28%
% of routes 84% 21%
% revenues 83% Azul-Latam Azul-Gol Latam-Gol
9
STRATEGICALLY CONSISTENT GROWTH
Azul Route Leadership Position
01 02 03
Before Before & After Avianca Brasil 2020E
A320neos (2015) flight cancelations
72%
2Q19
16%
12%
24% 62% 71%
21%
14%
70%
4Q19 8%
18%
12%
Only carrier Frequency advantage Other 10LEADERSHIP Nonstop Destinations by Airport
POSITION IN TOP
AIRPORTS Azul Competitor 1 Competitor 2
51
Campinas 4
1
40
Belo Horizonte 8
7
26
Recife 6
3
17
Cuiabá 2
2
12
Rio (SDU) 7
5
12
São Paulo (GRU) 35
33
Source: Azul, ANAC and Compani es 11EXCLUSIVE PROVIDER ON KEY ROUTES
Spoke Example: Ribeirão Preto–Campinas
ARU
Araçatuba
BYO CMG
Bonito Corumbá Local
RVD DOU
Rio Verde Dourados Connection 6%
RAO VCP
Breakdown
TJL
94%
PGZ Connecting
Ponta Grossa Três Lagoas
Ribeirão
Preto MII +43
Marília
Exclusive destination Non-exclusive destination
12FORTRESS HUB
AT CAMPINAS
AIRPORT
13UNIQUE NETWORK WITH STRATEGIC HUB LOCATIONS
Competitors focus on Azul serves all of Brazil
São Paulo, Brasilia and Rio
Brasília
Rio de
São Paulo Janeiro
(GRU+CGH) (SDU+GIG)
More than 90% of competitors’ domestic ASKs
are from/to cities in the triangle compared to 37% for Azul
14STRONG CONNECTIVITY
AT MULTIPLE HUBS
Hubs Daily Cities Served Connecting
Flights (non-stop) Passengers
Campinas 62%
142 51
(São Paulo)
Belo Horizonte 90 40 59%
Hubs:
Recife 62 26 57% Campinas, Belo Horizonte & Recife
Focus cities:
Belem, Cuiabá, Curitiba, Porto Alegre, and
Goiânia
15AZUL OPERATING FLEET PROJECTION
170
165
160
151
143
6 32 41 46
20
123
38
20
52
7 9 61
70
Embraer E2 80
33
33 12
A320neo family 12
33 12
A330
33 12
63 57
ATRs 32
34 32
22
E-Jets 10
2018 2019 2020 2021 2022 2023
16Next Gen Aircraft % of Total ASKs
87%
81%
75%
FLEET
TRANSFORMATION 61%
PROGRESS
42%
Next generation
aircraft to further 26%
strengthen Azul’s 14%
margins going
forward
2017 2018 2019E 2020E 2021E 2022E 2023E
17AZUL’S FLEET TRANSFORMATION
The addition of next-generation aircraft is the cornerstone of Azul’s margin expansion strategy going forward
CASK Advantage Trip Cost vs CASK
-26% -29%
E195 E2 A320neo
118 seats 136 seats 174 seats
Trip Cost Advantage
+5%
-14%
seats
50 70 90 110 130 150 170
E195 E2 A320neo
118 seats 136 seats 174 seats CASK Trip cost
18APPROPRIATELY-SIZED AIRCRAFT FOR THE BRAZILIAN MARKET
Targeted Routes by Fleet Type
70 seats
ATR
Avg. Stage Length: 391 km
106-136 seats
E-Jets
Avg. Stage Length: 701 km
174 seats
A320neo
Avg. Stage Length: 1,475 km
19THE A320NEO EFFECT: STRENGTHENING THE NETWORK
Replacement of E-Jets for A320neos
Campinas–Recife example
Change
Number of seats/week +72%
Daily flights +33%
Load factor +3.0 p.p.
Local passengers +40%
A320neo (174 seats) Connecting passengers +94%
ATRs (70 seats)
E-Jets (118 seats) Non-A320neo flights load factor +3.4 p.p.
20Domestic ASK Growth 2020E
New markets
5%
Additional
frequencies in
19% current markets
STRATEGICALLY
CONSISTENT
GROWTH
Over 30 destinations
Upgauge in
to be added over next current markets 76%
five years
21MARKET SHARE IN CORPORATE MARKETS
RPK and Corporate Revenue Share (1H19) Average Corporate Ticket Price (roundtrip, R$)
26% 7%
13%
23%
33% 790
748 737
714
631
592
32%
26%
37%
37%
8% 4%
RPK Shares Corporate Competitor 1 Competitor 2 Azul
Revenue
Azul Competitor 1 Competitor 2 Others 1H18 1H19
Source: Abracorp (Associa tio n of Brazilian Corporate Agencies ) 22INTERNATIONAL
EXPANSION
THROUGH
PARTNERSHIPS
23HIGH QUALITY CUSTOMER EXPERIENCE Customer-oriented culture and innovative service providing an enjoyable customer experience New Cabin Interior (A330s)
STRONG BRAND RECOGNITION
Net Promoter Score
TOP 10 AIRLINE BEST LOW COST BEST AIRLINE
WORLDWIDE LATIN AMERICA BRAZIL
68% 62% 61% 60%
BEST BUSINESS CLASS BEST ECONOMY BEST AIRLINE
LATIN AMERICA CLASS LATIN AMERICA LATIN AMERICA
89% of customers would strongly recommend or
recommend Azul to a friend or relative
25AZUL CARGO
AT A GLANCE
Air-service to +115 destinations with 130
aircraft
240 stores nationwide serving 3,700 cities
93% of our ATK’s coming from belly space
at very low variable cost
26END-TO-END LOGISTICS SOLUTIONS
27HIGH GROWTH BUT STILL BELOW FAIR SHARE
TudoAzul Members
TudoAzul Growth Potential
(millions)
Gross Billings Market Airline Passenger
11.4 Share Revenue Share
10.8
9.0
29%
+36% 7.0
5.9 20%
4.5
3.1
2.2
1.8
1.2
0.7
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2Q19
Source: Azul, Smiles and Multiplus
28
*Gross billings ex-airlineAZUL CARGO AND TUDOAZUL GROWTH
• Cargo revenue up 42% YoY • Gross billings up 40% YoY
• Increase in volume share from 12% to 22% YoY
• Wholly-owned loyalty program TudoAzul with
• Partnership with Mercado Libre ~12 million members
• E-Commerce represented 19% of cargo revenue
• Fourth consecutive year of growth above 30%
Cargo Revenue Gross Billings Growth*
Net (R$ million)
40%
42%
3Q18 3Q19 3Q18 3Q19
* Gross billings ex- airlin e 29GROWING THE BUSINESS AND EXPANDING MARGINS
Operating Margin Growth Breakdown
Next-Generation Business Non-ticket Macro
Aircraft Units Revenue Environment
45% 40% 50% 0%
Pre-IPO 2020
Additional upside for equity story coming from e-commerce and TAP investment
30DELIVERING ON OUR IPO PROMISES
ASKs Net Revenue EBITDAR % ASKs
(billion) (R$ billion) (R$ billion) Next-Generation
54% 71% 99%
35.2 11.4 3.6 42
22.9
6.7
1.8
1
2016 2019E 2016 2019 2016 2019 2016 2019E
Consensus Consensus
Source: Azul and Bloomberg 31RASK SLA* CASK
Operating Margin
(R$ cents) (R$ cents)
+1.7%
-4.0%
3Q19 FINANCIAL 17.6% 18.5%
31.7 32.3 25.8 25.4 24.8
HIGHLIGHTS
3Q18 3Q19 3Q18 3Q19 3Q18 3Q19 3Q19 ex
payroll
• Net revenue growth of 25% YoY with a 0.8 p.p. increase in operating margin
• EBITDA of R$935.8 million, up 24.4% YoY
• Operating income of R$ 559.3 million, up 31% YoY
• 1.7% RASK increase YoY adjusted for stage length, with 26.1% growth in capacity
• CASK down 1.5%; adjusting for payroll tax, down 4.0%
• Net income, adjusted for foreign currency, increase of 57% to R$441 million
* Stage - lengt h adjusted RASK formula = RASK*(s tag e - l e ngt h / 1000 )^ 0. 5
Note: 3Q19 results exclude non - recurr e n t aircraft book loss of R$ 15.9 million
323Q19 LTM EBITDA MARGIN (IFRS 16) – AZUL VS. PEERS
29.6%
24.3% 24.2% 23.9%
20.7%
19.4%
16.3%
14.7%
3Q19 3Q19 3Q19 3Q19 3Q19 3Q19 3Q19 3Q19
Global Legacy
Airlines*
Source: Company public f ilings
E xcludes non - recur ri ng items and minority interest 33
Global Legacy Airlines calculated as average E BITDAR margin of American Airlines, United Airlines and Delta Air LinesSTRONG LIQUIDITY POSITION
Azul maintained a strong cash position while protecting all of its non-aircraft debt foreign currency exposure
Cash Balance Total Debt ²
(R$ million) (R$ billion)
Accounts receivables Capitalized Leases
41% of Loans and Financing
Cash¹
TTM
revenue
4,367
4,118
1,341 1,424 10,3
8,8
2,777 2,943
2,5 3,0
3Q18 3Q19 3Q18 3Q19
3.3x 3.3x
Leverage (Net Debt / EBITDA)
1 Includes cash and cash equivalents , short -term and long -term investm e nt s
2 Adjusted f or currency hedges
34Free Cash Flow
(R$ million)
951
279
672
FREE CASH
FLOW 484
GENERATION
187
Cash flow from Net CAPEX FCF Aircraft Rent Adj FCF
operations Payment
35STRONG LIQUIDITY POSITION
Debt Profile
Average Cost of Debt
R$ Million
Total Debt Working Capital Debt
U.S. Dollar Real
837
2,164 705
1,315 Lease Liabilities 8.6% -
10,280 177
9,282
Aircraft leases Senior notes
Other Loans 5.7% 5.8%
Other aircraft liabilities Debentures
Loans and financing Others
Debt Maturity Profile
Senior Notes BRL USD
4,367
1,446
420 533 1,315
94 312 196
394 444 259
8 86 26 90 53 7 189 16 116
Liquidity 4Q19 2020 2021 2022 2023 2024 and beyond
Note: Considers the ef f ect of currency hedges on debt 36AZUL UNIQUE ASSETS
R$ million
TAP Investment
(up to 47% of TAP equity value)
Pre-paid maintenance
expenses
100% owned loyalty
program
1,380
1,628
TudoAzul Security deposits TAP
and maintenance Investment
reserves
Besides higher margins and a stronger balance sheet, Azul also has valuable assets not found in other airlines
37TAP INVESTMENT
TAP’s convertible bond and network connectivity to further boost Azul’s results
TAP Investment
• Leader in traffic between Brazil and • € 90M strategic investment in TAP bonds
Europe (26%) convertible into up to 41.25% of
• Fleet of 93 aircraft economic interest
• Service to 10 cities in Brazil • 2025 maturity with 7.5% annual interest
• C-level suite formed by former Azul • Secured by TAP’s frequent flyer program
executives Victoria
• Acquired 6.1% economic stake in TAP for
US$ 25M
ASK Revenues EBIT TAP Economic Interest After Bond
(billion) (€ million) (€ million) Conversion
+13% Parpública
+10%
& Employees
47 3,245
93 21%
42 2,960
66
47% Azul
32%
Atlantic
2017 2018 2017 2018 2017 2018 Gateway (ex-Azul)
38SUCCESSFUL CONCLUSION OF AZUL’S IPO AND FOLLOW ON
Azul to further strengthen its balance sheet with its IPO proceeds
Azul IPO Summary
IPO total offer of R$2,021 million (US$644 million):
• R$1,288 million (US$406 million) of net proceeds to Azul
• R$21 per preferred share, US$20.06 per ADS*
Follow On total offer of R$ 1,250M (US$400 million)
• Significant increase in daily liquidity
HNA Follow On total offer of US$313 million
• US$ 16.15 per ADS*
Preferred
As of September 30th, 2019 Common Preferred Economic Interest
Equivalent**
David Neeleman 622,406,638 11,432,352 19,731,107 5.8%
Trip former shareholders 306,558,420 18,231,040 22,318,486 6.5%
United Airlines, Inc. (Calfinco) 26,995,316 26,995,316 7.9%
Others 272,410,921 272,410,921 79.7%
Treasury 290,091 290,091 0.1%
Total 928,965,058 329,359,720 341,745,921 100.0%
*E ach ADS corresponds to three preferred shares
39
**Assumi ng the conversio n of common shares to preferred shares at a 75:1 rationENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”) RESPONSIBILITY
1H19 1H18 %∆
GHG (Kg of CO2, million) 1,779.8 1,592.4 11.8%
Total fuel consumed per ASK (kg / ASK, million) 34.3 35.5 -3.4%
Environmental Average age of operating fleet 5.9 5.8 2.0%
Independent directors (%) 81.8 83.3 -1.8%
Percent of board members that are women 9.1 8.3 9.1%
Director average age 49.6 43.2 14.8%
Director meeting attendance (%) 85 95 -10.5%
Governance
Board size 11.0 12.0 -8.3%
Participation of woman in leadership positions (%) 39.4 39.8 -1.1%
Employee gender: (%) male 57 57 0.0%
(%) female 43 43 0.0%
Employee monthly turnover (%) 1.06 0.80 32.5%
Social Employees unionized (%) 100.0 100.0 0.0%
Volunteers 2,034 1,553 31.0%
40FY 2019 OUTLOOK
Previous Current
ASK growth 20% to 22% ~20%
Domestic 23% to 25% ~23%
International 10% to 15% ~12%
CASK 0% to 2% ~ -0.5%
Cask excluding non-recurrent items ~1.5%
Operating Margin excluding non-recurrent items 18% to 20% ~18%
41I N V E S T O R R E L AT I O N S
+55 11 4831 2880
invest@voeazul.com.brYou can also read
