Macro-Environmental Analysis of Azul Airlines (BUS 5093)

This report provides a detailed macro-environmental analysis of Azul Airlines, focusing on the Brazilian aviation market. It examines the airline's response to market challenges such as the COVID-19 pandemic, currency devaluation, and the competitive landscape. The analysis includes a market analysis, industry analysis, and competitor analysis, alongside a SWOT analysis and the application of Porter's Five Forces. The report highlights Azul's strategic decisions, including partnerships, network expansion, and customer-focused initiatives. It explores the airline's ability to adapt to the evolving market, its competitive advantages, and its strategies for sustainable growth. The analysis also considers the impact of government regulations, economic factors, and the airline's internal strengths and weaknesses. The report concludes with a summary of key findings and recommendations for Azul Airlines' future development.

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Running head: MACRO-ENVIROMENTAL ANALYSIS
2.3 BMP
Week 2
Guilherme Calache
BUS 5093
MKT 5093: Marketing Management
Dr. Daw Olson.
December 15, 2021

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MACRO-ENVIROMENTAL ANALYSIS
Macro-Environmental Analysis
Brazil is the largest economy in Latin America, and its continental size makes aviation
essential for the aggregation of territories, connecting small capitals with their cosmopolitan state
capitals. This has led the country to have the largest air transport market on the continent. As an
emerging economy, it recognizes that airport development is helpful in supporting the country’s
ambitions to expand tourism and global trade. According to a recent IATA report, “The Value of
Air Transport in Brazil,” the aviation sector contributes $ 18.8 billion to Brazil’s GDP and
creates 800,000 jobs. With demand doubling in the next 20 years, the airline’s economic
contribution to the Brazilian economy could increase to more than the US $ 8.8 billion a year,
with more than 1.4 million jobs.
The crisis is one of the most challenging things in airline history. However, there are
some issues specific to Brazil. For example, all carriers in the United States, Europe, and the
Asia Pacific received financial support but not government support. At the same time, there was
a significant devaluation of the local currency, a 25% to 30% devaluation, and the capital
markets closed. We soon realized that we had little money to cover. Azul has gone from about
1,000 flights a day to just 70 flights a day. There was negative cash flow. So, the companies had
to bring everyone together, from employees to fuel suppliers, lenders, and manufacturers.
Azul also takes partnerships and codeshares more seriously. The airlines that have the
right to exist will survive. Azul now serves more cities in September 2019 than in September
2019. The company found that a wider network works better for the market than a higher
frequency in a limited number of markets. Azul airlines want to bring more people into the flying
world. Creating this demand is very different from the competitors.
Market Analysis
With the pandemic, Brazil has been excluded from the United States, and it is not easy to
reach Europe either. International travel was affected, and in consequence, a big difference in the
number of demands for international flights has decreased during this time. However, domestic
travel benefited. Orlando and New York were effectively closed to Brazilians, so they explored
their own country. As a result, our national economy is booming. What needs to be addressed
now is the visa situation. There is a huge backlog of US visas. Even when the borders are
opened, there will be a slow recovery in travel to the United States because of this. And for the

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MACRO-ENVIROMENTAL ANALYSIS
Brazilians Airlines market, this is one of the main reasons why there was a slowdown in the
international flights to the US.
Industry Analysis
There will be more significant consolidation and a larger global partnership in the future.
This is good because the value in the airline has never been to the airlines. Azul can have more
partners as an industry among all partners, providing efficient services to customers, reducing
costs, and improving as an industry. It is an opportunity and a challenge ahead. The main goal of
Azul SA Pref’s technicians and leaders is to help the organization create a sustainable
competitive advantage and prevent competitive challenges from other players in the aviation
industry. To compete with these new players, local companies are betting on other benefits for
their customers. “The national trend is for current companies that aren’t low-cost to invest more
and more in loyalty to deal with this new wave” (Lima, 2019).
Porter’s five forces applied to the airline industry: 1. Azul SA Pref’s Bargaining Power
and the Transportation Industry: While buyers have strong bargaining power, they generally tend
to lower prices, limiting Azul SA Pref’s potential for long-lasting profits. 2 Threat of new
entrants in the airline industry, if there is a potent threat from new entrants in the airline industry,
current players will be willing to make lower profits to reduce threats from new entrants. 3
Bargaining power of suppliers in the airline industry: If suppliers have strong bargaining power,
they will extract more prices from Azul SA Pref. This will affect Azul SA Pref’s potential to
maintain above-average earnings in the airline industry. 4 Threat of substitute products and
services in the air transport sector: if the threat of substitution is high, Azul SA Pref must
continually invest in R&D or risk losing out to industry disruptors. 5 Rivalry between existing
players in the airline industry: If competition is intense, then it becomes difficult for existing
players, such as Azul SA Pref, to achieve sustainable profits.
Competitor Analysis
Brazil’s aviation market has changed significantly over the past year, demand growth has
weakened, unprecedented capacity regulation has taken hold, and the economy is stabilizing.
This industry has reached new heights. Faced with financial losses nationally, the two major
airlines have restructured their operations and adopted a number of new strategies. How are the
four leading players - Goal, Latam, Azul, and Avianca Brazil.

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MACRO-ENVIROMENTAL ANALYSIS
According to the author Chandrakanth in his article, he states that “Azul is the fastest-
growing airline in Brazil since it commenced operations in December 2008 and currently has the
largest network in the country in terms of cities served, with service to over 100 destinations.”.
(Chandrakanth, 2017). Azul has expanded its operations to select non-stop services in the United
States, Europe, and South America. Azul’s diverse business strategy, excellent customer
experience, and innovative branding are critical drivers for continued growth. Also, Azul was
able to grow so fast over its competitors first because the company developed a new hub at
Viracopos Airport in the city of Campinas, about 70 miles from Sao Paulo. Second, Azul has
avoided excessive overlap with GOL and TAM, focusing on regional markets and operating
smaller aircraft. Azul’s model is to drive demand by providing frequent and affordable air
service to under saved markets in Brazil. Because it operates smaller aircraft, it can serve cities
that its larger competitors cannot. These features have enabled it to attract both business traffic
and cost-conscious leisure travelers, create the largest airline network in Brazil in terms of
destinations.
SWOT Analysis
The SWOT analysis mainly consists of two dimensions, internal and external dimensions.
The internal dimension contains all the aspects that affect the organization, such as strengths and
weaknesses, while external factors include environmental factors that represent opportunities and
threats. To start with the strengths, Azul has a success of new product mixes. Azul offers its
customers a wide range of product mixing options. It helps the company serve different customer
segments in the aviation industry. Talent Management and Personnel Skill Development at Azul
Human resources are an integral part of Azul’s success in the aviation industry. Azul still has
higher profit margins than competitors despite downward pressure on profitability.
Some of the significant weaknesses are the high cost to replace existing professionals at
Azul. Few employees are responsible for Azul’s knowledge base, and it is currently very difficult
to replace them. -Low investment in Azul’s customer-oriented services-This gives competitors
an advantage in the near future. Azul needs to increase its investment in R&D, especially in
customer service-oriented applications. -High turnover rates for lower-level employees are also a
concern for Azul. You can generate high salaries to keep talent within the company.

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MACRO-ENVIROMENTAL ANALYSIS
The opportunities are: Increasing government regulations make it difficult for
unorganized players to operate in the aviation industry. This can give Azul the opportunity to
grow its customer base. - Lower inflation rate: the low inflation rate provides more stability to
the market and allows Azul clients to borrow at lower interest rates. This will increase the
consumption of blue products. - Growing customer base in lower segments: As customers have
to migrate from unorganized operators in the transportation industry to licensed players. It will
give Azul the opportunity to penetrate the entry-level market with a simple offer.
Threats are to develop the technical expertise of local players in the export market: the
biggest threat to Azul’s link with local players in the export market is the threat of losing IPR.
The intellectual property rights framework is not particularly strong in emerging markets,
especially in China. - Product sector commercialization: One of the biggest challenges for Azul
and other industry players in the increasing commercialization of products in the transportation
industry. - The trade relationship between the US and China could affect Azul’s growth plans,
leading to a full-scale trade war, hampering Azul’s ability to expand its operations in China.

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MACRO-ENVIROMENTAL ANALYSIS
Works Cited
Chandrakanth, R. (2017, June 22). Azul Airlines making Brazil proud. SP’s Aviation - Civil
Aviation. Retrieved December 16, 2021, from https://www.sps-aviation.com/story/?
id=2071
Lima, A. (2020, September 9). What changes in Brazil with the entry of low cost airlines. LABS
English. Retrieved December 16, 2021, from https://labsnews.com/en/articles/business/the-
end-of-the-semi-oligopoly-entry-of-low-cost-airlines-promises-to-reshape-the-sector-in-
brazil/
Malick , P. (2021, October 6). The impact of coronavirus on aviation sector in Brazil -. Flapper.
Retrieved December 16, 2021, from https://www.flyflapper.com/stories/the-impact-of-
coronavirus-outbreak-on-aviation-sector-in-brazil/
Rodgerson , J. (n.d.). Make Brazil a first-world aviation country. Airlines. Retrieved December 16,
2021, from https://airlines.iata.org/ceo-interviews/make-brazil-a-first-world-aviation-
country
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