During its 4Q24 earnings call, Azul presented a slide with a projection of the number of shares the company will have in the future. However, we think that this table can be perfected as the Brazilian airline didn’t include a few things, for example:

• The common shareholders are making a USD ~15m capital injection of common shares because the bylaws of the company don’t permit to have more preferred shares than common shares, and with all the new shares to be issued to bondholders, OEMs and lessors, the number of preferred shares got huge. We estimate they will get ~1.3 billion common shares that at a ratio of 1:75, represent ~17 million preferred shares-equivalent for economic purposes.
• It doesn’t include a future USD 200m equity issuance that could happen when shares are issued to the first 35% of the 2029 and 2030 bondholders and to OEMs and lessors on 30 April. At a price of BRL 3.58 per preferred shares, and a BRL/USD 5.70, this represents another ~320 million shares to be issued (See Table 1).

As such, from 501 million shares “today,” the share count could more than quintuple in the next 2-3 months. Even though tangible and concrete steps have been taken to address Azul’s liquidity and solvency situation, the share price hasn’t really picked up significantly. This could be due to the remaining uncertainty about how many shares will ultimately exist, and hopefully we have helped answer that with the table above.

Financial highlights for 4Q24

It could be difficult to pay close attention to Azul’s operations, as there is so much noise and uncertainty regarding the final share count. However, these unknowns will be much clearer in two months (after 30 April).

Azul reached its higher ASK both in the domestic market and overall in its history during 4Q24 and obviously also in 2024. At a consolidated level, ASK were 12.3 billion during 4Q24, up 11% YoY and for the domestic market 9.8 billion, up 13% YoY and this doesn’t account for the late deliveries of airbuses at the beginning of the year that affect the international segment and the flooding of 3Q24 affecting Porto Alegre (domestic market). This was done even with a smaller fleet (181 vs. 183 planes, although the mix was in favor of larger aircrafts).

In the Brazilian domestic market in particular, the total ASKs the company offered were 37.3 billion, up 8% YoY (from 34.3 billion) taking advantage of problems with peer Gol, whose ASKs for 2024 were 37.4 billion, down 4% YoY (from 38.8 billion). Given that Gol is still undergoing an in-court restructuring, we expect Azul to become the second-largest carrier in Brazil in 2025. Using data from ANAC, during January domestic ASKs were 3.7 billion for Gol and 3.6 billion for Azul, but for Gol that was only +0.3% YoY while for Azul was +13.9% (See Table 2).

On the cost side, the CASK ex-fuel was roughly flat at BRL 23.88 (only +0.7% YoY), while the CASK at BRL 34.93 was down 6.5% taking advantage of the decline in fuel prices. If we take the fuel cost out of the equation and compare the PRASK ex-fuel with the CASK ex-fuel, we see that both in BRL and in USD, with the exception of 2Q24, achieve better results in each quarter than in 2023 (See Figure 1 and 2).

EBITDA was BRL 1.95bn, up 33% YoY, mostly as a result of higher ASK (+11%), lower costs (CASK -6.5% YoY). The operations in Porto Alegre have resumed and are gradually resuming normality, which is coupled with having a full first quarter of a “full” Airbus fleet, should yield a better 1Q25 than 1Q24. In fact, during the call management said that they had a very good January and surprisingly also a very good February.

Adjusted free cash flow was USD 199m, down from USD 291m in the same period last year as lower interest expense was more than offset by a less positive working capital contribution (See Table 3).