JetBlue Founder Taking Azul Public

Neeleman's Brazilian venture has a promising flight path

   

Starting an airline in late 2008 might seem like a textbook example of terrible timing.

But it worked for Brazilian operator Azul Brazilian Airlines.

The company’s founder, JetBlue (JBLU) mastermind David Neeleman, not only got Azul off the ground, but has been met with enormous success. Now, he’s taking his company public in the U.S. and in Brazil.

Neeleman has wasted little time since launching Azul. The airline currently provides service to 103 destinations across 232 routes across roughly 800 departures per day.

The strategy has taken much from the JetBlue playbook. Azul is a low-cost operator focused mostly on underserved markets; it is, in fact, the sole airline on more than 70% of its routes.

Its fleet of 118 aircraft is fairly young and includes 68 Embraer E-Jets (118 seats) and 50 ATRs (70), which are both ideal for frequent nonstop service. The interiors boast plenty of legroom (30-plus inches) as well as free LiveTV.

To pull all this off, Neeleman has raised substantial amounts of capital from investors like Weston Presidio, TPG Growth, Gávea Investimentos, Grupo Bozano and Grupo Águia Branca. He also has assembled a top-notch management team that has extensive experience in both the airline industry and emerging marks.

A key to Azul has been the recent acquisition of Trip Linhas Aereas, which not only added service to 46 cities, but should lead to large cost synergies — the forecast is for up to $300 million this year and $400 million in 2014.

The company’s financials look good. From 2011 to 2012, revenues went from 1.72 billion reals ($815 million) to 4.13 billion reals ($2 billion), though EBITDA declined from 83.1 million reals ($39 million) to 35.3 million reals ($16 million) as the company continued to invest heavily to induce growth.

Short-term catalysts include next year’s FIFA World Cup and the 2016 Summer Olympics. To get ready, the Brazilian government has been investing heavily in aviation infrastructure; over the next decade, the number of airports in the country is expected to improve from 129 to 207.

The long-term prospects for Azul look bright, too. Brazil is similar in size to the U.S., it’s the No. 2 fastest-growing domestic market in the world, and it’s forecast to become the world’s third-largest market by 2016, according to IATA.

As for the IPO, Azul plans to list on the New York Stock Exchange and the Brazilian exchange. Lead underwriters include Morgan Stanley (MS), Itau BBA (ITUB), Goldman Sachs (GS), Santander (SAN) and Banco do Brasil (BDORY).

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO StrategiesAll About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, http://investorplace.com/ipo-playbook/jetblue-founder-taking-azul-public/.

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