SAO PAULO, May 9 (Reuters) – Higher operational costs weighed on Brazil’s No. 3 airline, Azul SA, sending profits in the first quarter down 20% to 137.7 million reais ($35.06 million), despite significantly higher revenue compared to the same period last year.
While revenue grew 16% to 2.5 billion reais, personnel costs surged 37% amid continued expansion at the company.
Fuel costs also increased significantly, while other undisclosed costs jumped 34% to 224 million reais in the period.
Azul and its Brazilian competitors have faced higher costs in recent quarters due to the continued depreciation of the local currency, the real. While passengers buy their tickets in reais, many of the airline’s expenses, such as fuel, are denominated in the stronger U.S. dollar.
Earlier this year, Azul signed a tentative deal that ultimately fell through to take over a set of coveted domestic routes that were to be auctioned off by its rival Avianca Brasil, which is going through a bankruptcy protection process.
The routes were then set to go to its two larger competitors, Gol Linhas Aereas Inteligentes and LATAM Airlines Group, dealing a blow to Azul as it had hoped to break into the lucrative Sao Paulo-Rio de Janeiro route.
That route is currently dominated by Gol and LATAM and is considered to be among the most profitable in the country.
At the last minute, a judge indefinitely suspended Avianca’s auction which was due earlier this week.
($1 = 3.9273 reais) (Reporting by Marcelo Rochabrun; Editing by Bernadette Baum)
