Azul Linhas Aéreas Brasileiras Q4 2025 Earnings Call Summary

## Record Q4 Performance & Successful Restructuring

Azul delivered its strongest quarter in history while completing a comprehensive Chapter 11 restructuring in under 9 months. Q4 2025 results showed:
- Revenue: BRL 5 billion (+5% YoY), record RASK of BRL 0.46
- EBITDA: BRL 2.1 billion (36.9% margin)
- EBIT: BRL 1.4 billion
- Industry-leading profitability with lowest unit costs in the region

1. Transformational Restructuring Outcomes

The Chapter 11 process exceeded original targets:
- Debt reduction: $2.6 billion (including lease liabilities)
- Interest payments: Cut by >50%
- Lease payments: Reduced by ~33%
- Net leverage: Below 2.5x (vs. 4.9x in Q4 2024; original target was 3x)
- Recurring annual savings: BRL 2.2 billion
- New capital: $1.375 billion senior notes (7x oversubscribed) + $950 million equity

1. Beyond the Metal Success

High-margin business units grew from 15% (2019) to 21% of revenue (Q4 2025):
- Azul Fidelidade (loyalty program)
- Azul Cargo
- Azul Viagens (vacations)
- MRO and regional aviation businesses
- New elite tiers (Azul One and Unique) for premium customers

1. Fuel Crisis Response Strategy

With fuel representing 35% of cash expenses and prices surging due to Middle East conflict, Azul outlined 8 competitive advantages:

1. Low growth philosophy: Just 1% capacity growth planned for 2026
2. Wide-body fleet restructuring: Removed expensive aircraft, temporarily reduced international capacity
3. Network strength: 80% of routes have no nonstop competition
4. Hub dominance: 80% departure share in Campinas, Recife, and Belo Horizonte
5. Engine maintenance agreements: Provides cost visibility and planning certainty
6. Beyond the Metal businesses: High-yield customer base with premium credit cards
7. Reduced aircraft commitments: Only 4 E2s expected in 2026 (already financed)
8. Strengthened balance sheet: Lower leverage and interest expenses

1. Immediate Actions Taken

- Fare increases: Booked average fares up >20% in past 3 weeks (4-5 fare increases implemented)
- Capacity discipline: Already planned negative capacity in H1 2026; considering additional Q2 cuts
- Route optimization: Eliminating marginal routes that don’t cover fuel costs
- Fleet flexibility: Can swap aircraft types (A320↔E2, ATR↔E-Jet) to match demand
- Cost focus: Laser-focused on operating costs, CapEx, and investments

1. Fuel Pass-Through Expectations

Management expects to recapture 60-80% of fuel cost increases within 3-6 months, reaching full 8% unit revenue improvement by Q3-Q4 2026. Historical precedent: During 2022 Ukraine war, Azul achieved 12% unit revenue increases by Q3-Q4.

Demand dynamics: Corporate demand proving resilient; leisure demand showing wait-and-see approach. Azul’s network (energy, mining, infrastructure, agro sectors) provides more resilient demand base than pure leisure markets.

1. Relisting & Future

- ADR relisting targeted for ~April 20, 2026
- American Airlines warrant exercise pending CADE approval
- Company currently on plan with business projections
- Fuel impact primarily affects Q2 onwards (May+)

Azul emphasized its unique network exclusivity and fleet flexibility position it better than peers to navigate the high-fuel environment while maintaining profitability.