Azul, Correios joint venture gets the green light

Brazil’s top regulatory authority, Administrative Council for Economic (Cade) has approved, without restrictions, the creation of an integrated logistics joint venture (JV) between Brazil-based airline Azul Cargo Express and the national postal service Correios.

The antitrust body assessed that the operation does not increase the likelihood of closing the air cargo market, due to both companies’ small market share in the regional cargo segment. First announced in December 2017, the JV between Azul and Correios, was expected to commence operations during the first half of 2018, but was held up by CADE. The joint venture will leverage Azul’s passenger network to replace much of the road feeder transportation currently required for domestic mail transport in Brazil, which poses a number of security, and transit-duration issues.

The JV may also reduce Correios’ need for lengthy bidding processes to award airmail contracts, which calls into question what will become of Correios’ partnerships with other airlines that the company formerly worked with on a contract basis. Earlier in the approval process, airlines with a presence in the Brazilian cargo market, including LATAM and Gol challenged the establishment of the joint venture on grounds that it would give Azul a monopoly in the handle of postal volumes. Third-parties will have 15 days to appeal to CADE before the decision is made final.

In parallel with the jv, Azul began leasing two 737-400Fs from Vx Capital Partners earlier this year. Initially, the freighters are being deployed to serve the general cargo market, but will later play a role in the Correios JV.