Azul Q3 Earnings Call Highlights

Key Points

• Azul’s third-quarter results improved: Revenue rose 13.2% sequentially to BRL 5.6 billion, EBITDA more than doubled to BRL 1.2 billion, and recurring free cash flow reached BRL 764 million. Record RASK and lower fuel costs lifted profitability.
• Liquidity strengthened to BRL 4.1 billion, or approximately BRL 4.6 billion pro forma including American Airlines’ investment. Gross debt was BRL 22.6 billion, and Azul declined to provide guidance because of fuel-price and currency volatility.
• Azul is prioritizing capacity discipline and stronger-yield markets: It shifted capacity away from fuel-intensive long-haul routes, while capacity fell 6.7% year over year in the first nine months of 2026. Management sees reduced capacity and stronger bookings as supportive for the summer season.

Azul NYSE: AZUL reported higher third-quarter revenue, earnings and liquidity as the Brazilian airline shifted capacity toward stronger markets and raised unit revenue, though executives declined to provide guidance amid volatile fuel prices and exchange rates.

Operating revenue rose 13.2% from the second quarter to BRL 5.6 billion, while earnings before interest, taxes, depreciation and amortization (EBITDA) more than doubled to BRL 1.2 billion. The airline generated BRL 764 million in recurring free cash flow and ended the quarter with BRL 4.1 billion in immediate liquidity, Chief Financial Officer Antonio Garcia said on the earnings call.

Chief Executive Officer John Rodgerson said the results reflected commitments made after Azul emerged from restructuring: controlling capacity, generating cash and strengthening liquidity. The company moved capacity away from fuel-intensive long-haul routes toward markets where its network was stronger, he said.

Unit revenue rises as costs ease

Revenue per available seat kilometer, or RASK, reached a record BRL 0.4723 in the third quarter, up 8.8% from the second quarter, even as capacity increased 4% sequentially. Garcia said Azul placed additional seats in markets with strong demand and yields.

EBITDA rose from BRL 510 million in the second quarter, with the margin reaching 21.4%. Garcia said fare recapture contributed approximately BRL 464 million to the sequential EBITDA improvement, while lower fuel prices contributed approximately BRL 201 million.

Cost per available seat kilometer fell 5.1% from the second quarter to BRL 0.4254, primarily reflecting a 9.9% reduction in fuel cost per liter. Excluding fuel, unit costs declined 2.1% to BRL 0.2712, helped by higher capacity and better absorption of fixed costs, Garcia said.

Rodgerson said Azul achieved an operating, or EBIT, margin of 9.9% despite fuel prices that were 40% higher than a year earlier.

Funding and restructuring payments

Azul’s immediate liquidity rose 11.8% from the second quarter. Including American Airlines’ $100 million equity investment, which was funded in early October, pro forma immediate liquidity was approximately BRL 4.6 billion, Garcia said.

Azul drew the first BRL 1.3 billion tranche of its FNAC financing facility in September and expects the remaining BRL 1.3 billion in December. It also secured approval for a Brazilian government-guaranteed fuel financing line of up to BRL 2 billion. Garcia said the line would fund domestic fuel payments in the fourth quarter of 2026 and the first quarter of 2027.

The airline paid approximately BRL 300 million in remaining Chapter 11-related obligations during the quarter. Garcia said BRL 230 million of restructuring payments remained for the fourth quarter; Rodgerson added that minimal payments to an aircraft equipment supplier would extend into 2027.

Gross debt ended the quarter at approximately BRL 22.6 billion, up BRL 1.2 billion from the second quarter. Garcia said leverage was 3.3 times, down 1.9 turns from a year earlier. He added that every BRL 0.10 increase in the dollar raises lease and loan liabilities by approximately BRL 240 million.

Despite management’s confidence in liquidity, Garcia said Azul was not issuing guidance because of continued volatility in fuel prices and exchange rates.

Capacity discipline and fare outlook

President Abhi Shah said capacity fell 6.7% year over year in the first nine months of 2026, compared with an initial full-year plan for 1% growth. Azul expects 32 new aircraft through 2030, while several aircraft will leave the fleet during that period, he said.

Shah said third-quarter RASK was 5.5% higher than a year earlier and had risen 22.6% since Azul deployed its optimized network in July of the prior year. He described fare increases across the industry as inconsistent, citing interruptions from the World Cup and elections, but said reduced capacity and stronger bookings were positive for the summer high season.

Azul intends to recover the full impact of higher fuel costs through revenue and maintain yields if fuel prices normalize, Shah said. He estimated the company had recovered roughly half of the increase so far, based on its unit revenue and fuel cost increases.

On the fleet, Shah said four of nine wide-body aircraft that exited during the year had been replaced and were in service. Five more were expected to enter service between the call and the end of January, with delays prompting Azul to extend some temporary aircraft leases. Most of those arrangements should end by late January, with a small portion continuing into March, he said.

About Azul (NYSE:AZUL)

Azul S.A. is a Brazilian airline that provides passenger air transportation on domestic and international routes. Its network connects cities across Brazil, including regional destinations, with services to select locations abroad. Founded in 2008, Azul has developed a broad domestic network and offers travel-related services alongside its flights. Its businesses include Azul Cargo Express, which provides air cargo and logistics services, and Azul Viagens, which sells travel packages.

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