Azul S.A. American Depositary Shares, each representing two (2) Common Shares (NYSEAMERICAN:AZUL) reported record second-quarter operating revenue of BRL 5 billion, as the Brazilian airline used capacity reductions and higher fares to offset part of a sharp increase in fuel costs.
Chief Executive Officer John Rodgerson said the company’s second-quarter 2026 performance reflected its efforts to protect liquidity and profitability amid higher fuel prices. Azul reduced capacity by 10.6% from a year earlier during the quarter, while operating revenue increased 0.7% and revenue per available seat kilometer, or RASK, rose 12.7% to BRL 0.4341.
Revenue and operating performance
Chief Financial Officer Antonio Carlos Garcia said adjusted EBITDA totaled BRL 510 million, representing a 10.2% margin, during what the company described as Brazil’s seasonally weakest quarter. Fuel costs per liter increased 61.8% year over year, contributing to a 26% rise in unit costs, or CASK, to BRL 0.4480.
Garcia said fuel represented an approximately BRL 749 million year-over-year EBITDA headwind. Through capacity management and pricing actions, Azul recaptured about 60% of that impact, or approximately BRL 448 million, according to the company.
Average fares increased 9.5% from a year earlier, while premium revenue rose 12%. Garcia said Azul’s business units, including Azul Fidelidade, Azul Viagens, Azul Cargo, Azul Conecta, Azul TecOps and Azul Media, contributed more than 20% of RASK in the second quarter.
Azul did not provide full-year 2026 guidance, citing continued volatility in fuel prices and the broader macroeconomic environment. Garcia said the company expects “much higher EBITDA levels” in the second half of the year, while Rodgerson said Azul felt positive about the third quarter but did not believe guidance would be useful while fuel prices continued to fluctuate.
Reliability and premium strategy
Rodgerson said Azul posted an 87.7% on-time performance rate in July, making it the most on-time airline in Latin America that month. The company also said it was Brazil’s most on-time airline in April, June and July. Its net promoter score increased 26 points from December 2025, according to management.
The airline’s co-branded credit card program surpassed 1 million cardholders during the quarter. Management said reliability, onboard products and network connectivity support its efforts to attract higher-yield corporate and premium travelers.
President Abhi Shah said the company was seeing resilient corporate demand and improving leisure demand through its direct channels after customers initially took a wait-and-see approach when fares increased during March and April. He said more than 50% of Azul’s revenue is booked within 21 days of travel.
Shah also said Azul’s network includes more than 200 nonstop routes, with only 18 that he characterized as highly competitive among all three major airlines. The company’s capacity posture allows it to be more selective about the demand it accepts, he said.
- Azul said its Embraer E2 fleet was fully operational.
- The company said its A320 aircraft fleet was expected to have zero aircraft out of service within 15 to 30 days.
- Management expects international operations to recover as it replaces wide-body aircraft and reduces reliance on ACMI operations.
Cash flow, liquidity and debt
Azul ended the quarter with BRL 3.7 billion in immediate liquidity, which the company said was equivalent to 60.6% of its last 12 months of revenue. Total debt declined by approximately BRL 13 billion from a year earlier to BRL 21.4 billion following the company’s restructuring, Garcia said.
The company said recurring free cash flow was nearly breakeven in the quarter, despite lower capacity, higher fuel prices and BRL 794 million in non-recurring restructuring-related payments and deferred-obligation normalization. In response to an analyst question, Garcia said approximately two-thirds of those payments had been made during the first and second quarters, with the remaining one-third expected to be paid in the third and fourth quarters. He said the company should be “very clean from 2027 onwards.”
Garcia said Azul has no material debt maturities before 2031, aside from a significant remaining exit-financing obligation concentrated in that year. He also said the restructuring permanently reduced interest payments by more than 50%.
Azul recently received approval for FGTS and FNAC financing facilities that together could provide up to BRL 4.6 billion in long-term Brazilian-real funding at what management described as attractive rates. The company expects to assess those lines during the third or fourth quarter of 2026.
Capacity outlook
Management said second-quarter capacity marked the low point of its current reduction cycle. Shah said third-quarter capacity should remain down year over year but decline less than in the second quarter, with capacity approaching flat year-over-year levels in the fourth quarter. Azul expects low- to mid-single-digit capacity growth in 2027.
The company expects to receive three additional E2 aircraft in 2026 and five in 2027. It is also replacing wide-body aircraft and expects to have 12 wide-body aircraft by the end of 2026. Rodgerson said Azul plans to remain cautious on deployment even as fleet availability improves.
Looking further ahead, Azul said it is targeting leverage below 1.5 times and a 150% increase in market capitalization by 2029, contingent on sustained profitable growth, free cash flow generation, disciplined investment and continued deleveraging.
About Azul S.A. American Depositary Shares, each representing two (2) Common Shares (NYSEAMERICAN:AZUL)
Azul SA is a Brazilian airline company that operates a broad passenger air transportation network across Brazil. The company provides scheduled passenger service, connecting major metropolitan areas as well as regional destinations through a mix of high-density and smaller-market routes.
In addition to passenger transportation, Azul offers cargo and related aviation services. Its business is built around serving domestic travel demand in Brazil, with an emphasis on expanding connectivity to cities that may be underserved by larger carriers.
Azul was founded in 2008 and has grown into one of the major airlines in Brazil.
