In a day of great news in the Azul fleet, and in the operational area, the airline closed the day with shares at a high of 8,58%, closing at R$ 62,41.
The company announced early on that it was subleasing 53 Embraer E-Jet E1 aircraft to LOT Airlines and Breeze Aviation a start-up airline based in the US, with participation of David Neeleman.
The transfer of these aircraft will accelerate Azul's fleet renewal, which is replacing its E190-E1s with the new generation, the E195-E2s.
Azul estimated that the replacement of the entire E195 fleet should generate 4,8 billion reais of incremental Ebitda between 2020 and 2027, as subleasing allows covering the extra costs of “buying a new plane”.
Azul also released an updated fleet plan, where it confirms the order for 75 E195-E2 aircraft. Previously, the company should receive 51 aircraft of this model.
Rapid fleet replacement has a rationale
Azul conducted an extensive financial analysis on the benefits of replacing E195s with more fuel efficient new generation aircraft.
The Embraer E2 aircraft have a 14% lower cost per trip and a 26% lower unit cost compared to the E195, in addition to having 18 additional seats.
This significant cost savings is primarily driven by the E2's fuel efficiency, lower acquisition cost and reduced maintenance costs, as detailed in the table above.
As a result of the lower cost per seat of the E2, the Company expects to operate these aircraft with a utilization rate of approximately 13 hours per day, further increasing the profitability of this equipment.
Considering that the remaining term of the lease agreement for Azul's current E195 fleet is 4,7 years, the Company believes that accelerating the transformation of its fleet will generate an incremental operating cash flow of approximately R$2,9 billion between 2020 and 2027.
Specifically, the company expects that the improved performance of the E2s, combined with subleasing revenue, will more than offset the incremental cost of accelerating the replacement of all E195s through 2022.
Additionally, the replacement of Azul's entire E195 fleet is expected to generate R$4,8 billion of incremental EBITDA between 2020 and 2027, or approximately R$16 million per E195 aircraft replaced, on an annualized basis.
Due to the difference between the carrying amount of the current E195 leases and the estimated recoverable amount, the Company expects to recognize a non-cash charge of up to US$750 million, which will be reflected in the Company's fourth quarter results, as detailed below.
