AZUL3

Azul S.A. is a Brazilian airline founded on January 3, 2008 by entrepreneur David Neeleman, beginning operations on December 15 of the same year. From the outset, the company adopted a strategy of investing in a scalable operating platform and a young fleet, supported by initial capital of approximately R$ 400.7 million. In less than six months of operation, in May 2009, it became the third-largest airline in the country in terms of domestic market share, according to ANAC. A key milestone in its trajectory was the acquisition of TRIP in August 2012, then the largest regional carrier in South America in number of destinations, whose operational integration was completed in 2014 and consolidated Azul as one of the leading companies in the regional aviation segment in Brazil. Azul’s shares, under the ticker AZUL3, are traded on B3, placing it within the universe of publicly held companies in the passenger and cargo air transportation sector in the Brazilian capital markets.

Azul’s business model is structured primarily around passenger air transport, complemented by cargo and logistics, tourism and loyalty services. The company’s corporate purpose includes equity interests in companies engaged in passenger, cargo and mail air transport activities, with Azul Linhas Aéreas Brasileiras S.A. (ALAB) as its main operating subsidiary. The company pursues a value proposition based on broad reach and connectivity, operating a diversified fleet composed of Embraer E-Jets, ATR, Airbus narrowbody and widebody aircraft, as well as Cessna Caravan aircraft in its regional subsidiary Azul Conecta. As of December 31, 2024, the operating passenger fleet totaled 179 aircraft, with an average age of 8.5 years (excluding Cessna), allowing capacity to be adjusted to demand in markets of different sizes. This diversity of aircraft types is central to its strategy of achieving a low average cost per flight and serving both large hubs and smaller cities.

Azul’s core activities are concentrated in regular passenger air transport, which accounted for approximately 98.7% of net revenue in the fiscal year ended December 31, 2024, including related ancillary revenues such as the sale of points from the Azul Fidelidade program, baggage allowances, cancellation fees, no-show fees and ticket change fees. The company also explores adjacent businesses through Azul Cargo, its logistics solutions unit responsible for cargo transport, and Azul Viagens, its tour operator. Azul Cargo provides services to approximately 7,000 cities and communities in Brazil, with more than 17,000 routes served within up to 48 hours and around 350 service locations, supported both by belly capacity on passenger flights and by dedicated freighter aircraft such as converted Airbus A321 and E-Jets. Azul Viagens sells packages that combine airfare, accommodation and ground transportation through its own stores and thousands of partner agencies, leveraging fleet flexibility and a diversified route network to expand margins during periods of lower corporate utilization, especially on weekends.

Azul’s route network is one of the company’s main competitive advantages. As of December 31, 2024, the company offered approximately 980 daily flights serving 169 domestic and international destinations, resulting in more than 400 direct routes, with leading position in 134 Brazilian cities in terms of departures, according to ANAC. In the domestic market, the company served 160 destinations in Brazil, almost twice as many as its main competitors GOL and LATAM, and was the only operator in 94 of these destinations. The network is structured around three main hubs: Viracopos (Campinas), its primary connection center and leader in daily domestic flights; Belo Horizonte, with a strong presence in Minas Gerais; and Recife, which strengthens connectivity in the Northeast. In addition to these hubs, Azul maintains relevance at strategic airports such as Guarulhos, Congonhas, Santos Dumont, Galeão, Porto Alegre, Cuiabá, Belém and Manaus. The subsidiary Azul Conecta, acquired through the purchase of TwoFlex in 2020, further enhances this reach by serving more than 570 destinations in Brazil with Cessna Caravan aircraft and operating slots on the auxiliary runway at Congonhas airport in São Paulo.

The demand profile served by Azul combines higher-yield corporate passengers with more price-sensitive leisure travelers. The company holds a significant share in the corporate segment, with around 31.5% of corporate travel agency revenue in Brazil in 2024, according to ABRACORP, supported by network connectivity and its presence as the only option in several regional markets. In leisure travel, Azul operates a segmented pricing model, offering more attractive fares for advance purchases, as well as exclusive nonstop leisure routes often used on weekends through Azul Viagens. There is no significant revenue concentration in any single customer, and the company reports having no customers accounting for more than 10% of total net revenue, a typical characteristic of regular air transport companies with a highly fragmented base of end consumers and travel intermediaries.

Azul’s activities are not limited to passenger and cargo transportation; the company has also developed important complementary assets, notably the Azul Fidelidade loyalty program and its partnerships and codeshare agreements strategy. As of December 31, 2024, Azul Fidelidade had more than 18 million members, with around 1.1 million active members per month, generating revenue both from the issuance of points on tickets and from the sale of points to partners, including financial institutions. This program is reinforced by financial products such as co-branded credit cards and is considered a strategic tool for customer retention and the generation of recurring revenue. In the field of international partnerships, Azul maintains codeshare agreements with airlines such as United and TAP, providing access to hundreds of additional destinations around the world and integrating its domestic network into global passenger flows. In innovative segments, a highlight is the agreement announced in 2021 with Lilium to develop an eVTOL network in Brazil, linked to the company’s strategy of seeking air mobility solutions with lower carbon emissions, subject to certifications and regulatory approvals.

Azul’s shares (AZUL3) traded on B3 represent a company operating in an environment that is heavily regulated by Brazilian civil aviation legislation and specific government bodies. The company is subject to the Brazilian Aeronautical Code and to rules issued by entities such as the National Civil Aviation Agency (ANAC), responsible for regulating, authorizing and overseeing air services, certifying operators and setting operational safety rules; the National Civil Aviation Secretariat, linked to the Ministry of Ports and Airports, responsible for sector policy and planning; and the Airspace Control Department (DECEA), which manages airspace and air traffic control. Azul’s activities are also linked to decisions and guidelines of the Civil Aviation Council (CONAC), INFRAERO, in the airports it administers, and the National Commission of Airport Authorities (CONAERO), as well as international conventions ratified by Brazil, such as Warsaw, Chicago, Geneva and Montreal, which regulate liability, safety and operating standards in international air transport.

From the standpoint of environmental, social and governance practices, Azul has set out initiatives related to innovation and sustainability in its fleet and air mobility strategy. The alliance with Lilium, which provides for the future introduction of 100% electric, zero-carbon-emission eVTOL aircraft, illustrates the company’s interest in transportation solutions with a lower environmental impact, still subject to technical certifications and regulatory authorizations. On the social and customer service front, the company invests in intensive crew training, emphasizing operational safety and service quality, and monitors satisfaction indicators such as Net Promoter Score, which reached 42.7 points in 2024. In governance terms, Azul has a concentrated ownership structure, with founder David Neeleman as controlling shareholder, holding a significant portion of voting capital, and maintains a board of directors composed of members with business backgrounds and sector experience, reflecting a configuration typical of capital-intensive companies in the commercial aviation segment.