Azul Cargo Express’ initial freighter operations just the beginning?

In late December last year, Brazil-based Azul Brazilian Airlines issued a joint press release with Correios (the country’s postal service), announcing their plan to form “an integrated logistics solutions company.” Shortly after, the company announced its intention to lease two 737-400Fs, which lead to the false assumption by many, that the two deals were connected. Azul  Cargo Express recently told Cargo Facts, however, that the decision to acquire the 737-400Fs was undertaken well before the jv was formed, and that the freighters are being added to accommodate increasing demand from Azul’s own cargo customers.

What does this mean then for the jv’s source of airlift, and the deployment of the 737-400Fs?

Once operational, the joint venture company will handle logistics for all of Correios’ postal transport needs; mail requiring air transport will be handled by Azul, predominantly in the belly holds of its 800 daily passenger flights. As it transitions to reliance on Azul for airlift, Correios will reduce the need for the lengthy bidding process that was previously in place to award all airmail contracts. This shift will significantly broaden the scale of Brazil’s postal air network, which is currently limited to about 21 mostly “capital-to-capital” routes that connect just a few major cities. Cargo requiring onward transport to cities outside the postal agency’s current airfreight network is then trucked, which poses a number of security, and transit-duration issues.

Once the joint venture is operational, Corrieos will be able to fly mail directly to 100+ airports via Azul’s passenger network. The use of direct flights is expected to replace much of road feeder transportation that is currently required after mail is flown, so that only final-mile delivery remains after mail is offloaded from an aircraft.

Looking ahead, Azul Express Cargo is optimistic that the postal jv will justify the expansion of its freighter network. For the time being, however, the focus remains on launching the new company. In the absence of any regulatory hurdles, Azul expects the company to commence operations beginning gradually in 4Q18, with the bulk of operations getting off the ground by mid-2019.

Turning now to the carrier’s incoming 737-400Fs, Azul Cargo Express tells Cargo Facts that its appetite for narrowbody freighters has long been justified through the utilization of bellyspace on its sister carrier’s A330-200 passenger flights. Most of the widebodies are used on long-haul flights between the United States and Brazil. Due to strong demand for cargo transport, Azul has also been using the A330s for domestic flights to cities like Manaus and Recife from Campinas. Without robust industrial demand for airfreight, these routes certainly would not warrant the use of widebody aircraft.

In the coming months, the A330s will be put into an international rotation, and the lost capacity will be replaced by the 737-400Fs. Beyond Manaus and Recife, Azul Cargo says its initial plans for the freighters include flights to cities like Fortaleza and Salvador as well.

Regarding redelivery of the freighters, the first of two 737-400Fs (28198) on-lease from Vx Capital is expected in mid-July. The second unit (28053), is already undergoing conversion in Tampa, and is said to be just one month behind the first. Both units are PEMCO-converted ex-Miami Air International aircraft. If customary regulatory processes go well, both freighters could be flying by October.

Although no additional freighters are currently on order, the airline is hopeful that robust demand for general cargo and mail could warrant an expanded freighter fleet, which could include additional narrowbody freighters, and perhaps turboprops as well. Azul already operates a few ATR 72-500s in QC combination with daily cargo-configured flights to cities like Puerto Alegre and Recife. For the time being, Azul says the QCs are sufficient – but depending on how the jv with Correios develops, dedicated freighters may be added.

As is the case in many markets, e-commerce is another huge driver of demand for air lift in Brazil. As the need for parcel transport grows, it has also become increasingly common for e-tailers to approach carriers directly. Although Azul doubts e-tailers currently active in the Brazilian market are ready to launch dedicated freighter operations – particularly because of the regulatory hurdles of doing so – the carrier says it is investing in new technologies to better accommodate the requirement of e-tailers for enhanced track-and-trace capabilities throughout the shipment process. There have also been rumblings that Amazon and Azul are in talks to partner, but Azul says that while it is hopeful there will be opportunities to cooperate, there are no concrete plans at this time.