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There are few people in the airline industry with the entrepreneurial record of David Neeleman. He founded Morris Air in 1984 and JetBlue in 1998 — the former ended up being acquired by Southwest in 1988, and the latter is today one of the biggest airlines in the US. In 2008, after moving to Brazil, he successfully launched another airline, Azul. Now, he’s setting his sights on a new challenge: Making Portugal into an air travel gateway between the Americas and Europe.
Neeleman has turned Azul into one of the largest carriers in Latin America, with more than 22 million passengers carried last year. Azul has also been expanding its international footprint, including long-haul destinations such as Orlando (MCO), Fort Lauderdale (FLL) and Lisbon, Portugal, (LIS), from its base at Campinas – Viracopos (VCP), some 60 miles from Sao Paulo.
More recently Neeleman has become a major investor in Portuguese flag carrier TAP Air Portugal, as part of a consortium with a 45% stake together with China’s HNA and a local partner. He’s also purchased 32% of French airline Aigle Azur.
Neeleman’s vision for TAP, a Star Alliance carrier, is to turn it into an attractive option to Europe for US-based flyers, adding to TAP’s traditional core markets in Brazil and Africa. And when someone with a track record like Neeleman’s makes a move in the air transport industry, people listen.
His strategy for Portugal is based on the arrival of a new airplane, the Airbus A321neoLR. TAP has ordered 14 of this single-aisle jet that is expected to become a major player in the transatlantic market and open smaller cities to long-haul traffic — at around 200 seats, it’s smaller and cheaper to fly than the jets plying the Atlantic today. But how is he going to grow traffic at TAP, a legacy airline, in the face of competition by the emerging long-haul low cost carriers?
We had the chance to ask Neeleman in person when we managed to catch him in one of his rare spare moments.
One of your stated goals when you invested in TAP was to make of Lisbon a major transatlantic gateway and to draw more traffic from North America. How is this strategy working so far?
We have Lisbon’s geographical position, it is the closest point in mainland Europe to both North America and Brazil, and that is very good for making connections: right on the coast, and you can go to Africa, to Europe, lots of people are coming from the US, from Latin America…it’s working really great.
You launched the Portugal Stopover program making it easier for connecting passengers to add a few days in Portugal when transiting through Lisbon. How is it working for you so far?
The Portugal Stopover product is also working really great. Last year we had, I think, over 100,000 people using it. The really nice thing about the Stopover program is that there are all those people that always wondered about Portugal but did not really have a chance to visit and now many of them say, well…why I don’t come back and spend some time in Portugal? All kinds of people are using it.
Tell me a bit about your fleet plans and how you are going to use all those new planes that are joining TAP’s fleet in the near future: A320neos, A330neos, and A321LRs.
The neos, both A320s and A321s, are going to replace the current A320s and also A319s, including some domestic routes. [Lisbon] is getting close to being a restricted airport, not so many slots available, so those new planes allow us to up-gauge. We are going to get more throughput.
Then we are getting some A321LRs that are going to allow us to fly to the Northeastern United States, Brazil, Africa…they will give us more flexibility throughout the seasons, particularly in those destinations where we now pull out during the wintertime. And it is also going to allow us to increase the number of cities we serve to North and South America, as well as frequencies.
And then we have the A330-900s…we are going to replace the A340s and also some A330-300s that we have on short term leases and our older A330-200s. So, we are going to be replacing about 17 airplanes over the next 15 months. It is going to be quite impressive.
Are the A321LRs going to complement the A330s in some way?
The A321LR allows us to serve thinner markets as well as develop new ones. The 170 seats of the A321LR give us a much lower trip cost and a competitive seat cost compared to the much larger A330-900neo. They can also complement the A330s counter-seasonally between northern and southern hemisphere routings. There will be cases where we are going to be able to swap the A330s and A321LRs…we can swap them when demand goes down.
The Chinese group HNA, that has recently been in the news because of its debt, has equity stakes in some of the airlines you are involved in. Has this affected in some way your projects?
No, absolutely not. They are minority shareholders, what you have read in the press is not having any effect on us whatsoever.
What can you tell us about your investment into French airline Aigle Azur? What is the rationale behind this investment? Is this the seed for another TAP-like project?
Well, they have been around for a long time. Now they are going to Brazil, to Campinas (VCP). And Azul is participating into this, buying some of the seats. They [Aigle Azur] are very professional and are doing a great job, so, we are obviously pushing this with TAP as well. This gives us a chance to extend our reach into France and have more market presence there. That’s pretty much it.
There have been some reports about Aigle Azur having plans to double in size over the coming years.
Well, they are getting new airplanes, A330-200s, they are going into Brazil…so this doubling needs to be put in context, it’s a small operation, after all.
We are seeing quite a lot of activity in the long-haul, low cost segment. What is your view on this? How do you see the transatlantic market 10 years from now?
The market size is being increased and this is an improvement, but I think the big question is: Are these flights sustainable? Can you go beyond the, let’s say, Paris to New York? Once you move into medium-sized markets and then keep going to smaller ones, can they sustain themselves without a proper feed? You know, it’s an interesting experiment. We are seeing Norwegian struggling to make a profit. But certainly they are generating a lot of new passengers, so will see how this turns out.
Featured image of David Neeleman at Azul headquarters in Sao Paulo by Paulo Fridman/Corbis via Getty Images
TAP has ordered 14, not 10, Airbus A321neoLR jets. This story has been updated with the correct number.
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