Brazil’s Azul posts sharp Q1 loss despite revenue growth and rising passenger traffic

Brazilian airline Azul posted an adjusted net loss of R$1.816 billion (approximately US$353 million) in the March quarter, marking a 460.4% increase from the same period last year.

The carrier attributed the sharp rise in losses to elevated operating costs and the depreciation of the Brazilian real, despite stable passenger demand and revenue, according to local media outlet Info Money.

Without taking into account provisions, net income reached R$783.1 million (approx. US$152 million) in the quarter, compared to a loss of R$1.118 billion (approx. US$217 million) in the same period last year.

However, the adjusted number, intended to show the underlying health of Azul’s operations, illustrates the financial headaches it’s having as it ramps up operations.

Passenger demand and international expansion drive the top line

In 1Q25, operating revenue increased by 15.3% year on year to R$5.4 billion.

The increase was fueled by high passenger demand, substantial ancillary revenues, and the great execution of Azul’s “beyond the metal” business activities, which encompass logistics and loyalty program operations.

Passenger traffic, measured in revenue passenger kilometres (RPK), increased 19.4% year on year, outpacing capacity growth and raising the load factor to 81.5%, a 2.6 percentage point increase from 1Q24.

Azul transported over 8 million passengers in the quarter, representing a 9.8% growth over the same period the previous year.

The conventional measure of capacity, available seat kilometres (ASK), increased 15.6% overall, driven by a 39.2% increase in foreign operations.

Despite the capacity expansion, unit revenue (RASK) remained stable at 42.14 cents (about US$0.082), demonstrating the carrier’s price resiliency.

Cost pressures erode margins amid FX and fuel headwinds

While revenue and traffic metrics showed robust growth, cost pressures mounted. Operating expenses totalled R$4.8 billion (approx. US$932 million) in 1Q25, up 24.4% from 1Q24.

The increase was primarily due to higher capacity, the 18.0% depreciation of the Brazilian real against the US dollar, and a 3.0% rise in fuel prices.

Earnings before interest, taxes, depreciation, and amortisation (EBITDA) increased by 29.4% to R$1.385 billion (about US$269 million), indicating higher revenue and cost-cutting initiatives.

However, the adjusted EBITDA margin decreased to 25.7%, down 4.6 percentage points from a year ago, as inflation and external cost pressures outpaced efficiency gains.

Azul stated that it implemented productivity improvements and cost-cutting measures, but these were unable to adequately mitigate macroeconomic problems.

Leverage rises as net debt climbs over 50%

There has also been extreme pressure on the airline’s financial position. Net debt as of 31 March 2025 totalled R$31.350 billion (US$6.085bn), (50.3% less than the same date in 2024).

As a result, the ratio of net debt to adjusted EBITDA increased to 5.2 times.

Azul continues to struggle with capital structure management in the face of high costs and variable currency dynamics.

Azul’s first-quarter numbers paint a complicated picture, with high revenue and traffic growth juxtaposed with significant financial losses and debt.

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