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Brazil's Azul relies on an arsenal of resources to counter weak domestic demand

Analysis

Brazil's third largest domestic airline Azul has been forced to curb its once rapid growth as the country's economy will endure its second consecutive year of contraction during 2016. Similarly to all Brazilian airlines, Azul has been plagued by soft domestic demand and a sharp currency decline that creates challenges for expenses denominated in the USD - such as fuel and aircraft costs.

Although it will take some time for Brazil's economy to recover fully from its current recession, some encouraging trends are beginning to take effect. Recently the BRL has gained some ground against the USD, which is a welcome sign for Brazilian airlines.

Azul has used many tools to adapt to Brazil's current economic slump, including a new relationship with the European airline TAP and equity infusions from foreign investors. It has also show a willingness to lower fares in some markets, particularly to the US, to ensure that it retains a strong market presence once Brazil embarks on a steady path to economic recovery.

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