Azul’s IPO prospects during 2014 will be challenged by tenuous market conditions

Brazil's third largest airline Azul begins 2014 armed with the final regulatory approval of its merger integration with Brazilian regional carrier TRIP and the possibility of undertaking a public offering after shelving plans for an IPO during 2013.

Even as Azul continues to chart a steady course of growth, it does face some headwinds in 2014 as its recent declaration to cap fares for the upcoming Jun-2014 World Cup will result in a revenue hit of BRL20 million (USD8.4 million). The projected loss occurs as Brazil's economy remains weak, which has resulted in depressed demand in the country's domestic market during the past year.

Similar to Mexico, hopes are high that Brazil's economy will undergo a rebound during 2014. But that does not necessarily translate into a rebound in demand as some cost conscious travellers may choose to hold onto their discretionary income until they conclude an economic recovery is well underway. Those dynamics will certainly play a role in Azul's evaluation of whether to access public markets for a capital injection.