Azul pulls out of e-commerce joint venture with Correios

Brazilian passenger airline Azul has pulled out of a proposed joint venture with national postal service Correios to launch a logistics platform serving Brazil’s e-commerce sector.

Azul said that  its cargo business grew revenues by a record 57% in 2018, “significantly higher than originally projected when the company initiated its discussions with Correios”.

Added an Azul spokesperson: “As a result, the company believes it is in its best interest to have the flexibility to enter other more favourable commercial agreements and to participate in future competitive bidding processes of Correios for the distribution of domestic air mail.”

It said that the end of the non-binding commercial agreement has no impact on Azul’s 2019 financial projections.

Azul chief executive John Rodgerson said: “Although we could not reach a mutual commercial agreement with Correios, we are excited with the growth potential of our cargo division.

“Going forward, we expect to continue expanding our customer base, which already includes major e-commerce companies, retailers, and manufacturers in Brazil, such as Mercado Livre, Pague Menos, and Samsung, who value our reliable and far-reaching door-to-door logistic solution.

“With the addition of next-generation aircraft to our fleet that have a larger cargo compartment, we expect to see significant margin contribution coming from Azul’s cargo business for many years to come”.

Only two weeks ago, Azul signed a non-binding agreement with financially troubled Avianca Brasil to acquire its operating certificate, 70 pairs of slots and about 30 Airbus A320 aircraft.

Correios and Azul gained “without restriction” antitrust approval for the joint venture in December 2018, following a December 2017 Memorandum of Understanding (MoU) between the carrier’s Azul Cargo Express unit and Correios.

Activities were expected to begin in the first half of 2018, although the timeline lengthened. Azul, hubbed out of Viracopos airport, is the largest airline in Brazil by number of cities served, and offers 755 daily flights to 104 destinations with a fleet of 118 aircraft.

The new company would have seen Azul take a 50.01% ownership and 49.99% by Correios. Drawing on existing volumes from its joint owners, it was estimated in the MoU that the new company would handle around 100,000 tons of cargo per year.

At the time of the MoU, Gilberto Kassab, Brazil’s minister of science, technology and communication, said: “Azul is the only company with a broad aviation network, connecting the country with more than 100 destinations served.

“Correios are present in 5,570 Brazilian cities, with the biggest distribution capillarity from its network. Having a company exploring this synergy, more Brazilians will have access to integrated services, allowing them to be even more active in the development of our country.”

 

 

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