After several months of service hiatus, Taos, N.M.-based Taos Air will be resuming flights to their previously served destinations in…
The Story of Webjet, Brazil’s Last Low Cost/Low Fare Carrier — Part 2
2006-2007: Humble Investments, Small Growth
Webjet remained grounded, with no perspectives for the future, but not for too long. On January 18, 2006, the public learned that a group of investors had bought the struggling company, with only one of the startup investors keeping a share at the airline. The two new partners were Grupo Águia, a group of specialized tourism, and Jacob Barata Filho, known in Rio de Janeiro as the “bus king,” owner of multiple bus companies in the region.
It was another road transportation mogul having a go at the airline industry. Previous examples cited EXAME at the time, included Wagner Canhedo, who bought VASP in 1990, and the Constantino family, which founded GOL in 2000. To lead the executive team of the airline, Paulo Enrique Coco was hired. He had previously led Rio-Sul and Transbrasil.
In this second phase, the airline tried to build a better relationship with travel agencies. Their first flight was a charter to Porto Alegre, carrying 130 agents on a press trip to the tourist city of Gramado. At the time, it was said the better-capitalized airline intended to end 2006 with four aircraft, operating both charter and regular flights.
“Webjet’s strategy from the beginning was working with the tourism trade, with travel agents and operators, besides the other normal channels of direct sales,” says Gilson Novo, then-Commercial Director of the company, told AirlineGeeks. “This was one of the strongest basis of the new administration,” adding that between the new shareholders, there were travel agencies. “This immediately generated a really positive image in the market and among the customers.”
While a single 737-300 would help restart the operations, Webjet’s owners had big plans in mind. They even considered taking part in the auction that eventually sold the “healthy” part of the near-bankrupt VARIG in that same year.
After four months of charter operations, May 16 saw Webjet restart its regular flights, initially connecting Rio (Galeão) to Porto Alegre. Eventually, Curitiba was also connected to both cities.
“By the first announcement of operations restart, competition reacted immediately, reducing their fares, and led operations in sectors in Rio, Porto Alegre and Curitiba to an unreal competition for an entrant,” Novo recalls, adding that “they also started a strong pressure with travel agents from Rio de Janeiro, Paraná and Rio Grande do Sul [states where such cities are located] so they would not offer Webjet’s product.”
He added the while the market “naturally favored the larger capacity of established companies, but Webjet, only in its second month of operations, already achieved good load-factors, especially in the tags Rio (GIG)-Porto Alegre and Porto Alegre-Rio (GIG).”
Despite a seemingly good start, little developments were made by November, when a second 737-300, PT-SSK, finally joined the fleet. By then, Salvador had been included in the network. The second aircraft allowed frequencies of existent routes to be added; additionally, the airline started operations to Belo Horizonte.
The first year under the new management ended with 118,000 passengers transported, a load factor of 59%, and twice the fleet it started with in 2006. However, the company was far from profitable. According to data from ANAC, the Civil Aviation authority in Brazil, Webjet would only break even if 92% of the seats were occupied, meaning that further adjustments needed to be made.
These adjustments should have come via economies of scale, with four aircraft expected to arrive in 2007. However, Webjet’s owners seemed to be unsatisfied with the unexpectedly-slow growth the airline was having. To EXAME magazine, Wagner Abrahão, owner of Grupo Águia, said that “everything takes longer and is more bureaucratic than we imagined.”
Gilson Novo confirmed these reports. “We presented to the shareholders the weight of planning, execution, investment, bureaucracy, legislation, cost, systems needed to evolve the fleet and difficulty to import aircraft and parts, certainly changing their vision on what was between reality and perspectives of both, in their personal businesses.”
The ex-director added that “without a shadow of a doubt, the low investments on fleet limited its [Webjet’s] future operations.”
Such an uncomfortably stagnant position lack in investment did not last long, however. At the end of June 2007, Webjet was sold once again. This time, the new owner had finally the will — and the means — to project the airline to an important position in the national market.
Asked on whether Webjet would survive without the entry of another investor, Gilson Novo gave a personal yet incisive opinion: “without financial inputs, fleet growth and a larger involvement of shareholders, [Webjet] would have reached insolvency. We had a fleet of two old aircraft, against a competition that added new airplanes, with another technological level and with an approach of not permitting new entrants.”
Therefore, the sale to GJP Investimentos, led by Guilherme Paulus, was the best possible outcome, and it would prove fruitful in the years after that.
2007-2009: With the Help of GJP, the Airline Starts Gaining Momentum
CVC was founded in 1972 as a single travel agency store in the São Paulo metro area. Under the management of its founder Guilherme Paulus — likewise, owner of GJP Investimentos — it massively grew to become the largest tourism company in Latin America. In an interview with ISTOÉ Dinheiro, Paulus recalled the process of buying Webjet in 2007.
At the time of the takeover, TAM was the largest carrier of CVC customers, but due to a mismatch on the airline’s ability to fulfill the travel company demand, TAM’s CEO himself suggested Paulus take a look at Webjet.
“[TAM’s CEO Marco Antonio] Bologna said, ‘look, Guilherme, it’s better indeed if you open an airline, because it will work.’ And he said, ‘I have a tip to give you: there’s a company in Rio de Janeiro that has an exceptional name, that is Webjet […] I think it’s a start for you.’ So we started negotiations and I ended up buying Webjet,” Paulus said
The airline finally gained true momentum after the takeover. The airline’s third 737-300 arrived in November, which allowed it to further expand its network. Overall, Webjet’s first full year of operations saw steady growth over previous years. The airline carried 314,000 passengers with a 63% load factor. There was still a long way to go, however; the break-even point was just over 87%.
2008 was the first year of huge, consistent growth for Webjet. Under the protection and with the capital of a large corporation, eight 737-300s joined the airline, taking the fleet to eleven aircraft. With more scale, the company was able to start even more routes, increase service in trunk routes and operate more charter services, especially for CVC tourists. According to Paulus in a report to ISTOÉ Dinheiro at the time, 25 percent of CVC’s customers flew with Webjet.
A year after its latest takeover, Webjet had grown from 7th largest domestic airline in Brazil, with 0.46% of market share, to the fourth largest, owning 2.02% of the market; counting the “new” VARIG as a part of GOL, this would put Webjet as the third player.
Starting from October, Webjet also settled in Brazil’s biggest market, São Paulo/Guarulhos Airport, at first with daily flights to Brasília, Porto Alegre and Salvador. Previously, it only operated weekly flights to Fortaleza and Natal, in the Northeast.
The year of 2008 ended, then, on a very positive note for Webjet, the airline seemingly having finally found its place as a potentially competitive carrier. Webjet ended the year serving 15 destinations. It had carried 887,000 passengers at a 67% load factor.
Fuel prices also helped the airline: after peaking at $140 in July (which largely harmed 2008’s financial results), oil prices started 2009 at $45. This was key for the airline’s results since the inefficient 737-300 was much more sensitive to fuel prices than the competition’s modern 737NGs and A320s.
This doesn’t mean it would be an easy task to turn the airline into a profit: in December 2008, the well-capitalized Azul had just entered the market with an ambitious growth plan, promising to stir up competition in the domestic market.
This story will continue with part three. Once published, click here for part three (July 22).
On the heels of Colombian tourism expo Anato 2021, the District Tourism Institute (IDT) and local carrier LATAM Colombia announced…
This week Mexican Low-Cost Carriers (LCC's) Volaris and VivaAerobus officially announced the expansion of their international operations to Colombia and…