The Story of Webjet, Brazil’s Last Low Cost/Low Fare Carrier — Part 3 – AirlineGeeks.com

The Story of Webjet, Brazil’s Last Low Cost/Low Fare Carrier — Part 3

2009-2011: With Massive Growth, Webjet Has Its Golden Era

In January 2009, Webjet appointed Wagner Ferreira as its CEO, replacing Paulo Enrique Coco. Ferreira previously worked as head of sales at VASP and TAM. He took a huge repositioning of the airline image, and that would start with a brand new visual identity.

The green dot logo, which granted the airline the nickname “ervilhinha” (little pea) among enthusiasts, gave place to a stylized, at-sign-shaped “w”. It was then decided, per a Panrotas report, that the airline wanted to pass a sense of “technology, simplicity and modernity” along with the new slogan, “conecte-se” (connect yourself).

Besides the brand repositioning, 2009 saw an aggressive turn on cost-effectiveness and the “low-cost, low-fare” premise. Among the measures aiming at the flourishing C and D classes, who were discovering air travel, the airline even launched a system of pre-paid tickets, in a program named “Vai Voando.” The installments were made through payment booklets, a common system in Brazilian retail stores.

“Sometimes the person does not have a credit card.” Webjet’s then-Director of Planning, Marcelo Rodrigues, told G1. “And even if it has, the limit is low, and using it to buy a ticket will leave it without a spending option during the trip.”

Starting that November, Webjet started densifying its cabins, bringing the number of seats in the 737-300s to 148, up from 136. Seats had also begun to be standardized the year before. According to the Melhores Destinos travel blog, this was, at the time, the smallest seat pitch ever offered by any Brazilian airline.

Again, 2009 was a year of massive growth for Webjet, even though the Brazilian economy was weakened after the 2008 crisis. Nine 737-300s joined the fleet, bringing the airline’s total number up to 20. In April 2009, the government cleared the opening of Santos Dumont Airport in downtown Rio. Webjet subsequently started operations from Santos Dumont to Brasília. By May, it started the “Web-Ponte” to Guarulhos.

With more scale, the airline lost less than in 2008 — BRL61.5 million ($11.5 million). With revenue of BRL472.9 million, this was closer to the break-even point than ever before. The airline brought relative costs to a very competitive level. 2009 became the first year where the airline managed to have an Operational Cost divided by Available Seat Kilometers (CASK) lower than GOL’s, according to data by ANAC.

With a consolidated basis for a solid business model, Wagner Ferreira left the airline in February 2010, with Operations VP Julio Perotti taking his role.

Besides Perotti, a decisive person started visiting the headquarters in Rio more often to transform and perfect the airline into a true low-cost/low-fare carrier: Gustavo Paulus. Son of CVC owner and founder Guilherme Paulus, Gustavo took over the mission of finally turning actual profits, forming the airline’s board of directors, of which he became chairman. Alongside Guilherme and Gustavo, the board counted with the consulting of Daniel Mandelli, a former CEO of TAM, and Charlie Clifton, who worked at Ryanair and was a partner of low-cost carriers investment fund Irelandia. Clifton even moved to Rio to be closer to the airline’s operations.

From then on, Webjet started radicalizing its approach to costs and fares, just as its American and European counterparts, as much as the local legislation allowed. It soon became the norm to find super low fares, for as little as BRL59 ($11), 49 ($9.15), 39 ($7.28), and in some times, even BRL9 ($1.68). The airline even started branding itself as “Webjet Linhas Aéreas Econômicas” — Economical Airlines.

The founder of Melhores Destinos, Leonardo Marques, recalls those times with joy. “The sales they made during the 2010 [World] Cup were fantastic! The days when Brazil played it always had fares of BRL29, 39, 49… we had a lot of work in those days, but our readers loved and bought a lot.”

By these premises, the focus in 2010 was to grow organically, without adding new aircraft to the fleet, while extracting as much efficiency as possible from the current means. In June 2010, the airline changed its crew requirements from four flight attendants per flight to three, following a clearance by ANAC in the previous year.

The airline also started relying more on ancillary revenues by charging for seat selection, not only in exit rows — the first airline to do so in Brazil — and for food, following GOL’s example. A report by Melhores Destinos said the airline even planned to start charging for dispatched luggage in 2011 if the government allowed. This clearance would only happen in 2016, years after Webjet’s demise.

“Although there were no legal frameworks regarding [ancillaries], there were no big barriers, so this demanded some time for us to accommodate due regulations, with power not only from Webjet but from all the industry and chain of participants”, André Almeida, then Director of Sales and Marketing of the airline, explained to AirlineGeeks.

Such a clear sky in the airline’s path doesn’t mean it did not face any shortcomings in 2010. That September, Webjet faced its biggest crisis since its flight suspension in 2005. After a workforce shortage and a delay in new pilot hirings due to a simulator failure, dozens of flights were canceled for four consecutive days, even triggering a suspension of ticket sales by ANAC.

According to Almeida, after the huge backlash generated by this disruption, the airline tried to intensify its brand positioning towards a low-cost, low-fare model, in the sense of “democratizing the access of air services to the population in general.” Quickly, the positioning took effect, moving the airline away from the damaged image.

The month following the meltdown, the airline’s Vice President of Revenue and Markets, Fábio Godinho, took over as CEO.

Capacity increases in 2010 only came by December, when three new 737-300s joined the fleet. They were mostly used to start services to three destinations: Foz do Iguaçu, Navegantes and Ribeirão Preto, all secondary cities that, according to the airline, were unserved by other carriers.

Despite some lows, after so many news and innovations, Webjet finally achieved its first year of profits. While its market share stayed around 6%, operationally, its revenue reached BRL763.5 million, with operational costs of BRL705.7 million. For another year, its CASK was considerably lower than GOL’s.

However, dark clouds approached Webjet’s horizon — especially its older 737-300 fleet. Fuel prices began to rise again in 2010. Oil barrel prices oscillated between $70 and $80 until September when it started growing. By January 2011, they broke the $100 barrier. Prices peaked at around $125 by April, oscillating between this value and $100 throughout the year. This was too much for Webjet to take for an extended time.

Webjet’s expected growth, touted throughout 2010, came to a halt in January 2011. That month, the 24th and last 737-300, PR-WJX, was added to the airline’s fleet.

With fuel costs skyrocketing, the company searched for solutions. In February, it released a prospect for an IPO at São Paulo’s Stock Exchange. Webjet gave up on the sales of the stock in May, but another salvation was seemingly being prepared — the sale of the entire airline to an investor.

While this didn’t happen, revenues still had margin to improve, and that’s where the airline tried to focus after halting growth for 2011. Fábio Mader replaced André Almeida as the Director of Sales and Marketing, taking over the mission to aim at the corporate passenger — who often pays more for tickets. Previously, the airline was almost 100% focused on leisure customers, who focus more on getting the cheapest deals.

“In three months we managed to bring our corporate mix from 0 to 40%, serving medium to large companies, generally sales teams, operational teams and engineers — the high-profile executives did not travel with us,” recalls Mader. “I remember our commercial conditions gave an average discount of 20% to the companies that traveled with us.”

While the efforts largely paid off — according to ANAC, from 2010 to 2011, Webjet’s RASK growth outpaced by far both TAM and GOL’s, the largest airlines in the country – the numbers were still negative. In this sense, GJP/CVC’s airline adventure was over, and on the evening of July 8, a bombshell was dropped in the market as GOL announced it would be buying 100% of Webjet.

2011-2012: A Short Stint Under the Management of GOL

Through the agreement, GOL’s Webjet takeover would cost BRL96 million ($18 million), while GOL would take all of Webjet’s debt. The President and Founder of GOL, Constantino Junior, in a conference call with analysts right after the official announcement, said the Webjet brand would disappear if the anti-trust bodies gave the green light to the transaction.

However, later he conceded that he was precipitated by saying that, and admitted Webjet could even turn into an ultra-low-cost carrier in an interview with Estadão.

For some time, both airlines started to benefit from synergies, like a code-share/interlining agreement, where Webjet tickets could be bought on GOL’s website.

By December 2011, GOL started adding the 737-800 to Webjet’s fleet. All seven 737-800s Webjet took were from GOL’s fleet and were fully painted in Webjet’s green livery.

“We followed our strategies separately, with our own teams,” Mader recalled about that time. “In the first moment, GOL had the intention of maintaining the brand Webjet flying as an ultra-low-cost, and that was the reason for the fleet renovation.”

“But then came the crisis and they decided to maintain a single brand”.

With the arrival of 2012, a huge overcapacity hit the Brazilian aviation market, and while Azul kept its growth plans at full throttle, the two major airlines, GOL and TAM, started to cut capacity. At the time, GOL faced the worst financial year in its history.

It was only in October 2012 that Brazil’s anti-trust body, the Administrative Council for Economic Defense (CADE), cleared Webjet’s sale to GOL. The only restriction imposed was an obligation that GOL would comply with the slot timeframes in Rio de Janeiro/Santos Dumont Airport.

With the green light, on Nov. 23, 2012, a month after the clearance by CADE, GOL announced the immediate end of all Webjet operations, as well as the layoff of 850 of the airline’s 1500 workers, signaling an end of an airline that played an integral role in the popularization of air travel in Brazil at the turn of the century.

While all of Webjet’s 737-800s were returned to GOL, only half of its aging fleet of 737-300 found a space in other companies, with the other half never operating for any other airline again, according to Airfleets.

The largest loss, however, was the market’s. Brazil lost an important player that not only brought fares down but also had a business model that had never successfully been tried by any airline in Brazil — nor tried again after its demise.

Webjet’s Legacy

Despite being relatively short-lived, thousands of travelers still sigh when recalling Webjet’s ultra low-fares — since then, no airline got even close to emulating this model of systematically offering low fares.

“Webjet offered for at least two years really low fares; we are talking about BRL59, BRL39 and eventually even BRL9.90, and this, indeed, made a lot of people have its first air travel,” remembers Leonardo Marques, founder of Melhores Destinos.

Not only the airline innovated by charging ultra low-fares; it also adopted policies that are the norm years later, especially charging for ancillary products. “Today people are used to this kind of service and certainly it would be way more accepted.”

Marques also recalls that Melhores Destinos had immense traffic generated by the airline’s sales. “At that time Webjet was responsible for driving a large [amount of] traffic to the website, and not only because of its own sales. As they made huge sales, the other airlines needed to respond accordingly, and for Melhores Destinos, that ended up being great”.

Almost eight years after the airline was closed by GOL, still no airline has tried to copy its business model that, as attractive as it may be around the world, is especially difficult in Brazil, where costs are extremely high and local currency is devaluated. And while that may soon change, with Indigo Partners’ JetSMART closely watching the local post-COVID-19 market, many still miss the “ervilhinha”‘s incredibly low-fares, yet lean and ahead of its time product.