Brazil’s new Azul airline inks $1B services deal with GE

Azul, the new low-cost carrier that David Neeleman, founder and former-CEO of JetBlue just launched last year in Brazil, has signed a 15-year, $1 billion deal with GE Aviation to service the engines on its fleet of regional planes. Azul’s execs say the move frees them to focus all of their attention on operations, customers and growth — which is explosive at the moment. As The Wall Street Journal notes in its recent story on the emergence of new carriers in Brazil, “smaller airlines have raised their collective market share of Brazil’s $6.5 billion domestic aviation market to 14% from 8% over the past year.”

GE’s service samba: Services will be performed at GE’s Celma facility, located in Petrópolis, Brazil — a small town near Rio de Janeiro — that provides engine services to airline customers in Latin America, the US and Europe. GE initially invested in Celma as a minority shareholder and subsequently purchased the company, making it an integral member of GE’s global aircraft engine maintenance, repair and overhaul system. In the photo above, GE Celma technicians are working on GE’s line of CF6 engines.

The deal with GE covers the GE Aviation-made CF34-10E engines — which are assembled at GE’s Durham, North Carolina facility and power Azul’s fleet of Embraer 190/195 planes. The company, formally known in Brazil as Azul Linhas Aéreas Brasileiras, has orders for 76 jets, with 36 firm orders, plus 20 options and 20 purchase rights. Azul expects to have 14 planes in service by year-end with seven additional ones scheduled for delivery in 2010

Brazil is ranked as the fifth largest aviation segment in the world with more than 190 million potential passengers, but only five percent of the population travels by plane. The country has about one commercial jet for every one million people, while the US has about one jet aircraft for every 50,000 people. Azul has entered the market at a critical time. Brazil’s domestic aviation segment grew more than 25 percent in July compared to the previous year and domestic revenue passenger kilometers has seen a compounded annual growth rate of 14 percent in the past five years.

GE’s services will be delivered by its OnPoint solutions group, which customizes service agreements to meet the specific needs of each airline — no mater how big their fleet is. The agreements are designed to help lower an airline’s cost of ownership and maximize the use of their planes. Backed by GE’s global support network, OnPoint services may include overhaul, on wing support, new and used-serviceable parts, component repair, technology upgrades, engine leasing, integrated systems support and diagnostics. In emergency situations, GE’s On-Wing service specialists can be dispatched on short notice anywhere around the world to repair an engine while it’s still mounted on a jet’s wing.

Blue skies: As The Journal noted in its story on Azul, “Many Brazilians travel hours, or even days, on long-distance buses from the big urban centers to visit homes in smaller cities or rural areas, while people in second- and third-tier cities use airlines little because of the lack of reasonably priced flights. Azul and other small airlines are targeting these potential passengers.”

* Read today’s announcement
* Read “Brazil’s Budget Airlines Gain Share” in The Wall Street Journal (subscription required)
* Read about the best practices GE has instituted at it Celma facility
* Read Azul founder David Neeleman’s advice on business in Business Management Daily
* Read “Mubadala to service the GEnx under new partnership” on GE Reports
* Read “Etihad Airways inks GE contracts worth over $4.5B” on GE Reports
* Watch our video series on how the new GEnx engine was developed
* Watch videos shot at the Oshkosh Air Show
* Read “GE lands $8 billion in orders at Paris Air Show”