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Azul believes Brazil-Buenos Aires service is unviable, partially driven by fifth freedom competition

Analysis

As the major US airlines sought improved access to Latin America in the 1990s, Brazil and Argentina were persuaded - with some reluctance - to agree to open skies bilateral conditions. One consequence of this liberal environment has indirectly been to open up fifth freedom access between the two countries.

Brazil's third largest airline Azul concludes now that it cannot profitably serve Buenos Aires, due in part at least to the participation of third country airlines. Buenos Aires is a market in high demand among its customers, but the abundant capacity, including from airlines operating fifth freedom services through Brazil to Argentina, puts this out of the question.

With Buenos Aires unviable for Azul in the short to medium term, it looks as if the airline will focus on more international expansion to the US until its Airbus A350s begin arriving in 2017.

Azul is also keen to strengthen its existing partnership with United and initiate a tie-up with JetBlue, which has a strong presence in Azul's US markets. Those aspirations likely exclude any consideration by Azul of examining a potential partnership with Gulf airlines.

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