Individual and Consolidated Financial Statements 2023
Azul S.A.
Contents | |
Management report | 3 |
Declaration of the officers on the individual and consolidated financial statements | 12 |
Declaration of the officers on the independent auditor's report | 13 |
Summary report of the statutory audit committee | 14 |
Fiscal board's report | 17 |
Independent auditor report on the individual and consolidated financial statements | 18 |
Statements of financial position | 26 |
Statements of operations | 28 |
Statements of comprehensive income | 29 |
Statements of changes in equity | 30 |
Statements of cash flows | 31 |
Statements of value added | 32 |
Notes to the individual and consolidated financial statements | 33 |
Management
Report 2023
Management Comments
2023 was a year of many records for Azul: R$19 billion in revenue, a RASK of R$42.48 cents, up 5% from full-year 2022 even with a capacity increase of 11%, and an EBITDA of R$5.2 billion, an increase of R$2.0 billion year over year. In addition to this outstanding financial performance, we were the second most on-time airline in 2023 after reaching the number one spot in 2022. This is a true testament to our incredible crewmembers who delivered a world-class experience to our 30 million customers this year, each and every day. I want to thank them for their passion and dedication.
Azul continues to be unique. Our network strength: we serve 160 destinations, roughly 100 more than anyone else, enabled by flexible fleet which allows us to access and stimulate demand that was never explored before. These structural competitive advantages have only grown over time as we stay true to our business model. These advantages are only further strengthened by our non-ticket businesses: loyalty, vacations, cargo, ancillaries and charters, all of them fast- growing, high-margin ventures. With Brazil very much in our DNA we are extremely proud to partner with the Brazilian Olympic Committee to support team Brazil in the Paris 2024 Summer games.
For the fourth quarter we delivered an all-time record revenue of R$5.0 billion, an all-time record RASK of R$45.30 cents, a record fourth quarter EBIT margin of 17.6% and record fourth quarter EBITDA margin of 29.2%, one of the highest in the world. EBITDA margin improved 7.6 percentage points for the year and 4.5 percentage points for the quarter, clearly demonstrating our ability to continue increasing margins in spite of higher fuel and higher currency. This clearly demonstrates the strength of our business model and our sustainable competitive advantages.
Immediate liquidity remains solid at R$3.0 billion, representing 16.2% our annual revenues. Including long-term investments and receivables, security deposits and reserves, our total liquidity was R$6.1 billion even after paying down debt and making investments to prepare our operations for 2024 growth, as we continue to see a very positive demand environment in Brazil.
With overall revenue growth of 17.2% from 2022 to 2023, it is fair to say that demand for Azul's products and services has never been stronger. Our loyalty business Azul Fidelidade is larger than ever, now with 17 million members with record monthly active users, points redemptions, recurring revenue and credit card revenue. Our vacations business Azul Viagens continues its impressive growth trajectory and is now the second largest vacations business in Brazil. Gross bookings are increasing 50% year-over-year as we take advantage of strong leisure demand and opportunities to increase aircraft utilization with unique nonstop flights. Our cargo business grew in the fourth quarter, in the opposite direction of global trends, by expanding our diversified customer base with even more retailers, manufacturers, and e-commerce operators in Brazil who value our reliable, far-reaching logistic solutions.
In 2023 we continued our deleveraging process, reaching a leverage of 3.7x in 2023, a reduction of 2 full points in one year, and in line with our guidance. This achievement was reached after a successful, amicable capital optimization plan developed and negotiated swiftly in a manner to protect and maximize value to all of our stakeholders. We are confident we will continue reducing our leverage organically and estimate to end 2024 with a leverage of approximately 3x below our pre-pandemic levels. With the success of this plan, we now have a liquidity position and capital structure that matches our unique strategy and operational performance.
Our growth this year, we have made critical investments in our operation, our maintenance capabilities and our staffing. In addition, we have secured strategic partnerships with our OEM partners to ensure our fleet reliability and availability. We are aware that the global operating environment is challenging, and want to make sure that we are ahead of the curve.
We are more confident than ever in our ability to make Azul an even more efficient and profitable airline going forward, and with the strong momentum and encouraging demand environment we are witnessing, we updated our 2024 EBITDA guidance to R$6.5 billion. We are laser-focused on strengthening our business, driving growth and margins in all of our business units, and continuously generating more value to all of our stakeholders.
We thank all of our Crewmembers, partners and stakeholders for the confidence and support last year and look forward to even more successful and rewarding 2024.
John Rodgerson, CEO of Azul S.A.
____________________________________________________________________________ 3
Management
Report 2023
Azul in 2023
- Largest airline in Brazil in cities served and departures, with more than 1,000 peak daily flights to more than 160 destinations.
- Operating fleet with 183 aircraft with an average age of 7.4 years (excluding Cessna aircraft)
- 39% of domestic departures and 28% market share (RPK)
- The second most on-time airline in the world
Aviation market
2023 was, once again, a year of strong demand for Azul, with significant improvements in capacity, revenue and earnings compared to the previous year.
In 2023, international demand fully recovered to 2019 levels, in the domestic side, business travels also fully recovered and, the number of tourism travel remained growing.
As a result, operating revenue reached once again an all-time record, as travel demand remained strong. Total operating revenue reached R$18.7 billion, up 17.2% above 2023.
RASK were also at record levels, reaching R$42.48 cents, an increase of 5.4% compared to 2022.
During the year, Azul gradually rebuilt its network, ending the year with a capacity increase of 11.2% year-over-year, and a 12.2% increase in RPKs, resulting in a load factor of 80.4%.
Market Share¹ | Azul's Domestic Market¹ | ||||||||||
(Domestic RPK, | (RPK %) | ||||||||||
2023) | |||||||||||
Others | 28% | 34% | 29% | 28% | |||||||
1% | Azul | 23% | |||||||||
18% | |||||||||||
Competitor 2 | 28% | 13% | 17% | ||||||||
38% | 4% | 9% | |||||||||
Competitor 1 | |||||||||||
33% | |||||||||||
2009 | 2011 | 2013 | 2015 | 2017 | 2019 | 2020 | 2021 | 2022 | 2023 |
¹Source: Anac
____________________________________________________________________________ 4
Management
Report 2023
Consolidated Results
Income statement (R$ million)¹ | 2023 | |||
Operating Revenue | ||||
Passenger revenue | 17,362.9 | |||
Cargo revenue and other | 1,331.7 | |||
Total operating revenue | 18,694.6 | |||
Operating Expenses | ||||
Aircraft fuel | 5,890.5 | |||
Salaries and benefits | 2,397.3 | |||
Depreciation and amortization | 2,314.3 | |||
Airport fees | 1,056.9 | |||
Traffic and customer servicing | 807.6 | |||
Sales and marketing | 779.3 | |||
Maintenance and repairs | 686.2 | |||
Other | 1,862.7 | |||
Total Operating Expenses | 15,794.7 | |||
Operating Result | 2,899.9 | |||
Operating margin | 15.5% | |||
EBITDA | 5,214.2 | |||
EBITDA margin | 27.9% | |||
Financial Result | ||||
Financial income | 220.1 | |||
Financial expenses² | (5,363.5) | |||
Derivative financial instruments, net² | 19.9 | |||
Foreign currency exchange, net | 1,562.8 | |||
Result Before Income Taxes | (660.8) | |||
Income tax and social contribution | - | |||
Deferred income tax and social contribution | (39.5) | |||
Net Result² | (700.3) | |||
Net margin | -3.7% | |||
Adjusted Net Result² ³ | (2,421.0) | |||
Adjusted net margin² ³ | -13.0% | |||
Shares outstanding⁴ | 347.5 | |||
EPS | (2.02) | |||
EPS (US$) | (0.40) | |||
EPADR (US$) | (1.21) | |||
Adjusted EPS³ | (6.97) | |||
Adjusted EPS³ (US$) | (1.39) | |||
Adjusted EPADR³ (US$) | (4.18) | |||
2022 % ∆
14,595.6 19.0%
1,352.5 -1.5%
15,948.1 17.2%
6,561.3 -10.2%
1,954.6 22.6%
2,094.4 10.5%
911.2 16.0%
641.9 25.8%
699.0 11.5%
592.1 15.9%
1,357.8 37.2%
14,812.4 | 6.6% | |
1,135.7 | 155.3% | |
7.1% | +8.4 p.p. | |
3,230.1 | 61.4% | |
20.3% | +7.6 p.p. | |
277.3 -20.6%
(4,558.1) 17.7%
438.2 -95.5%
1,327.4 17.7%
(1,379.6) -52.1%
- n.a.
-
n.a.
(1,379.6) -49.2%
-8.7% | +4.9 p.p. | |
(2,667.6) | -9.2% | |
-16.7% | +3.8 p.p. |
347.7 0.0%
(3.97) -49.2%
(0.77) -47.5%
(2.31) -47.5%
(7.67) -9.2%
(1.49) -6.1%
(4.46) -6.1%
¹ Operating results were adjusted for non-recurring items.
² Excludes the conversion right related to the convertible debentures.
- Adjusted net result and EPS/EPADR were adjusted for unrealized derivative results and foreign currency. One ADR equals three preferred shares (PNs). ⁴ Shares outstanding do not include the dilution related to the convertible and equity instruments.
Operating Data¹20232022% ∆
____________________________________________________________________________ 5
Management
Report 2023
ASK (million)
Domestic
International
RPK (million)
Domestic
International
Load factor (%)
Domestic
International
Average fare (R$)
Passengers (thousands)
Block hours
Aircraft utilization (hours per day)² Departures
Average stage length (km)
End of period operating passenger aircraft Fuel consumption (thousands of liters) Fuel consumption per ASK Full-time-equivalent employees
End of period FTE per aircraft
Yield (R$ cents)
RASK (R$ cents)
PRASK (R$ cents)
CASK (R$ cents)
CASK ex-fuel (R$ cents)
Fuel cost per liter (R$)
Break-even load factor (%)
Average exchange rate (R$ per US$) End of period exchange rate Inflation (IPCA/LTM)
WTI (average per barrel, US$)
Heating oil (US$ per gallon)
44,006 | 39,579 | 11.2% | ||||
34,367 | 33,605 | 2.3% | ||||
9,639 | 5,974 | 61.3% | ||||
35,399 | 31,561 | 12.2% | ||||
27,180 | 26,517 | 2.5% | ||||
8,219 | 5,044 | 62.9% | ||||
80.4% | 79.7% | +0.7 p.p. | ||||
79.1% | 78.9% | +0.2 p.p. | ||||
85.3% | 84.4% | +0.8 p.p. | ||||
593.0 | 531.0 | 11.7% | ||||
29,278 | 27,485 | 6.5% | ||||
550,843 | 518,813 | 6.2% | ||||
10.0 | 9.2 | 8.6% | ||||
316,896 | 304,429 | 4.1% | ||||
1,159 | 1,105 | 4.8% | ||||
183 | 177 | 3.4% | ||||
1,291,297 | 1,206,925 | 7.0% | ||||
29.3 | 30.5 | -3.8% | ||||
15,248 | 13,543 | 12.6% | ||||
83 | 77 | 8.9% | ||||
49.05 | 46.25 | 6.1% | ||||
42.48 | 40.29 | 5.4% | ||||
39.46 | 36.88 | 7.0% | ||||
35.89 | 37.42 | -4.1% | ||||
22.51 | 20.85 | 8.0% | ||||
4.56 | 5.44 | -16.1% | ||||
68.0% | 74.1% | -6.1 p.p. | ||||
5.00 | 5.16 | -3.3% | ||||
4.90 | 5.22 | -6.1% | ||||
4.46% | 5.79% | -1.3 p.p. | ||||
77.66 | 93.72 | -17.1% | ||||
2.81 | 3.55 | -20.7% |
¹Operating results were adjusted for non-recurring items ²Excludes Cessna aircraft
Operating Revenue
In 2023, Azul´s total operating revenue increased R$2.7 billion or 17.2%, reaching a record of R$18.7 billion. Passenger revenue increased 19.0% on 11.2% more capacity compared to the same period last year, boosted by the full recovery of corporate and international passenger demand and the outstanding performance of our other businesses.
Cargo revenue and other reached R$1.3 billion in 2023, 1.5% lower than 2022, mainly due to the 40.4% reduction in international cargo operations.
RASK and PRASK reached all-time records of R$42.48 cents and R$39.46 cents, respectively, enabled by our rational capacity deployment and the sustainable competitive advantages of our business model. Compared to 2022, RASK and PRASK increased 5.4% and 7.0%, respectively.
____________________________________________________________________________ 6
Management
Report 2023
The table below sets forth the breakdown of our operating revenue and expenses per ASK basis for the periods indicated:
R$ cents¹
Operating revenue per ASK
Passenger revenue
Cargo revenue and other
Operating revenue (RASK)
Operating expenses per ASK
Aircraft fuel
Salaries and benefits
Depreciation and amortization
Airport fees
Traffic and customer servicing
Sales and marketing
Maintenance and repairs
Other operating expenses
Total operating expenses (CASK)
Operating income per ASK (RASK-CASK)
2023
39.46
3.03
42.48
13.39
5.45
5.26
2.40
1.84
1.77
1.56
4.23
35.89
6.59
2022 | % Δ | |
- 7.0%
- -11.4%
40.295.4%
- -19.3%
- 10.3%
5.29-0.6%
2.304.3%
1.62 13.2%
1.770.3%
1.504.2%
- 23.4%
- -4.1%
- 129.7%
¹Operating results were adjusted for non-recurring items.
Operating Expenses
In 2023, Azul recorded operating expenses of R$15.8 billion, compared to R$14.8 billion in 2022, representing an increase of 6.6%, mainly due to the capacity and revenue increase of 11.2% and 17.2%, respectively in addition to investments made in the fourth quarter to support 2024 growth and maximize fleet availability to benefit from the continued strong demand environment, offset by a 16.1% reduction in jet fuel price per liter and 3.3% average depreciation of the real against the dollar.
The breakdown of our main operating expenses compared to 2022 is as follows:
- Aircraft fuel decreased 10.2% to R$5,890.5 million, even with a 11.2% increase in total capacity, mostly due to a 16.1% reduction in fuel price per liter (excluding hedges) and a reduction in fuel burn per ASK as a result of our more efficient next-generation fleet.
- Salaries and benefits increased 22.6%, mainly driven by our capacity increase of 11.2% in 2023, a 5.5% union increase in salaries paid two months in advance as a result of collective bargaining agreements applicable to all airline employees in Brazil, insourcing of certain activities to reduce total costs, and hirings made in the quarter to support 2024 growth.
- Depreciation and amortization increased 10.5% or R$219.8 million, driven by the increase in the size of our fleet compared to 2022.
- Airport fees increased 16.0% or R$145.7 million, mostly driven by the 11.2% increase in total capacity, in particular our 61.3% growth in international capacity, which drives higher fees.
- Traffic and customer servicing expenses increased R$165.7 million, mostly due to the 6.5% increase in passengers, 4.1% increase in departures, in addition to 4.5% inflation in the period.
- Sales and marketing increased 11.5%, or R$80.3 million, mostly driven by a 19.0% increase in passenger revenue, offset by savings from the insourcing of marketing activities.
____________________________________________________________________________ 7
Management
Report 2023
- Maintenance and repairs increased R$94.1 million compared to 2022, mostly driven by a higher number of maintenance events to maximize aircraft availability and support 2024 growth, partially offset by a higher share of maintenance events insourced, 3.3% average depreciation of the real against the dollar and cost savings from the renegotiation of our engine maintenance agreements.
- Other increased R$504.9 million, mainly driven by the increase in judicial claims, 11.2% increase in passenger capacity and higher training expenses as we are preparing ourselves for 2024 growth, in addition to an increase of revenue-driven IT expenses, crewmembers accommodations, cargo last- mile operations, and flight contingencies
Liquidity and Financing
Azul ended the year with R$3.0 billion in immediate liquidity, including cash and cash equivalents, accounts receivable and short-term investments, R$478.8 million higher than the same period in 2022 even after paying more than R$8.1 billion in leases, loans, deferral repayments, maintenance reserves, interest and capital expenses. This immediate liquidity represents 16.2% of our LTM revenues.
Total liquidity including deposits, maintenance reserves, long-term investments and receivables was R$6.1 billion as of December 31, 2023. This does not include spare parts or other unencumbered assets, such as our business unit Azul Cargo.
Liquidity (R$ million)
Cash, cash equivalents and short-term investments Accounts receivable
Immediate liquidity
Cash as % of LTM revenue
Long-term investments and receivables Security deposits and maintenance reserves
Total Liquidity
2023
1,897.3
1,124.0
3,021.3
16.2%
796.5
2,293.5
6,111.4
2022
668.3
1,874.2
2,542.5
15.9%
838.9
2,539.6
5,921.0
% ∆
183.9% -40.0%
18.8%
+0.2 p.p.
-5.1%-9.7%
3.2%
Azul's debt amortization schedule as of December 31, 2023 is set out below. The chart converts our dollar-denominated debt to reais using the quarter-end foreign exchange rate of R$4.90.
Loans and financing debt amortization as of December 31st, 2023
(R$ million converted at R$4.90 reais per dollar)¹
¹ Excludes convertible debentures, equity instruments and OEMs' notes.
____________________________________________________________________________ 8
Management
Report 2023
Gross debt increased 6.3% or R$1,370.1 million compared to December 31, 2022, mostly due to a successful capital raise of R$3,831.0 million in the third quarter, the increase in present value of our lease liabilities from the reduction in discount rate from 21.3% to 16.5%, and the 6.1% end of period depreciation of the Brazilian real, partially offset by our continued deleveraging process with more than R$5.0 billion in payments of loans and leases during the year.
Loans and financing (R$ million)¹ | 2023 | 2022 | % ∆ | |||||
Lease liabilities | 11,805.1 | 13,771.3 | -14.3% | |||||
Lease notes | 1,030.8 | - | n.a. | |||||
Finance lease liabilities | 650.7 | 811.5 | -19.8% | |||||
Other aircraft loans and financing | 399.4 | 792.2 | -49.6% | |||||
Loans and financing | 9,299.5 | 6,440.5 | 44.4% | |||||
% of non-aircraft debt in local currency | 10% | 19% | -9.2 p.p. | |||||
% of total debt in local currency | 4% | 6% | -0.3 p.p. | |||||
Gross debt | 23,185.6 | 21,815.5 | 6.3% |
¹Considers the effect of hedges on debt, net of aircraft sublease receivables; excludes convertible debentures.
As of December 31, 2023, Azul's average debt maturity excluding lease liabilities and convertible debentures was 4.7 years, with an average interest rate of 11.0%. Average interest rate on local and dollar-denominated obligations were equivalent to CDI + 5% and 10.5%, respectively.
Azul's leverage ratio measured as net debt to LTM EBITDA decreased 2 full points year-over-year, from 5.7x to 3.7x, in line with our guidance. We are confident in our ability to continue reducing leverage organically and we forecast to end 2024 with leverage of approximately 3x.
Key financial ratios (R$ million)
Cash¹
Gross debt²
Net debt
Net debt / EBITDA (LTM)
2023
3,817.9
23,185.6
19,367.7
3.7x
2022
3,381.4
21,815.5
18,434.1
5.7x
% ∆
12.9%
6.3%
5.1%
-2.0x
¹Includes cash and cash equivalents, short-term and long-term investments, and receivables. ² Excludes convertible debentures.
____________________________________________________________________________ 9
Management
Report 2023
Fleet
As of December 31, 2023, Azul had a passenger operating fleet of 183 aircraft and a passenger contractual fleet of 189 aircraft, with an average aircraft age of 7.4 years excluding Cessna aircraft. At the end of 2023, the 6 aircraft not included in our operating passenger fleet consisted of (i) 3 Embraer E1s subleased to Breeze, and (iii) 1 ATR and 2 Embraer E1s being prepared to exit the fleet.
Azul ended the year with approximately 82% of its capacity coming from next-generation aircraft, far higher than any competitor in the region.
Passenger Contractual Fleet¹ | 2023 | |
Airbus widebody | 11 | |
Airbus narrowbody | 55 | |
Embraer E2 | 20 | |
Embraer E1 | 42 | |
ATR | 37 | |
Cessna | 24 | |
Total¹ | 189 | |
Aircraft under operating leases | 164 |
2022
14
52
14
49
41
24
194
168
-
∆
-21.4% 5.8% 42.9% -14.3%-9.8%
-
-2.6%-2.4%
- Includes 7 subleased aircraft.
Passenger Operating Fleet | 2023 | |
Airbus widebody | 11 | |
Airbus narrowbody | 55 | |
Embraer E2 | 20 | |
Embraer E1 | 37 | |
ATR | 36 | |
Cessna | 24 | |
Total | 183 | |
2022
11
51
13
43
37
22
177
% ∆
-
7.8%
53.8% -14.0%-2.7%
9.1%
3.4%
___________________________________________________________________________ 10
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Azul SA published this content on 12 April 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 13 April 2024 00:48:03 UTC.