Azul Linhas Aéreas Brasileiras (AD, Sao Paulo Viracopos) has announced that it has entered into agreements to sublease all of its fifty-three E195s to each of LOT Polish Airlines (LO, Warsaw Chopin) and Breeze Airways (MX, Salt Lake City) as it accelerates the renewal of its regional jet fleet with newer E195-E2s.

The Brazilian carrier said in a statement that it plans to phase out all of its E195s by the end of 2022 and sublease them at least until the end of the original operating lease term.

Thus far, LOT has signed a Letter of Intent (LOI) for the sublease of eighteen E195s with options for a further 14. The Polish flag carrier already operates fifteen aircraft of the type, including seven taken over from Azul (all of them owned by Nordic Aviation Capital). The transaction remains subject to LOT corporate approvals.

"The E195 jets are the core of our short-haul fleet. Beloved by our passengers, they have already proved their reliability and cost efficiency over the past few years and this is what we aim for while developing the flight network from our bases in Warsaw Chopin and Budapest," LOT Chief Executive Rafał Milczarski said.

For its part, Breeze Aviation, a start-up airline backed by Azul's founder David Neeleman and previously known as Moxy Airways, will sublease up to twenty-eight E195s, subject to Azul shareholders’ approval, as determined by the company's by-laws.

Azul clarified that while Breeze Aviation can sublease up to 28 aircraft, LOT has the priority on its options. If the Polish carrier exercises all 14 options, Breeze Aviation would only receive a maximum of twenty-one E195s.

As recently reported, the start-up plans to deploy the E195s in either August or September 2020 to run charter flights before its A220-300s start delivering in 2021.

"The ability of the E195 to perform well with low-utilization and shorter-haul flying makes it a perfect complement to the A220-300, which will perform well in higher-utilization and longer-haul flights. We believe there is significant charter potential and peak season demand in the United States for an airplane of this seat count and cost structure," Breeze Aviation Chief Commercial Officer Lukas Johnson said.

Azul underlined that the related-party transaction with Breeze Aviation was conducted "at arm's length and its commercial terms provide substantially comparable economic benefits when compared to the LOT sublease contract." The terms of the transaction were independently verified by aircraft lessor Azorra Aviation.

Azul's shareholders will meet on March 2 to approve the Breeze Aviation sublease.

According to the ch-aviation fleets advanced module, Azul currently operates fifty E195s with an average age of 7.1 years. A further three aircraft are in long-term storage. It leases all of these regional jets from a variety of lessors and owns a further two aircraft which are currently subleased to Portugália Airlines (NI, Lisbon).

The E195s have 4.7 years before their current leases expire, on average.

Azul already operates four E195-E2s and plans to add a further 53 units to replace both the E195s and six E190s. The company estimates that the operating cost per seat of the newer generation aircraft is lower by 26% than E1 aircraft thanks to lower fuel consumption, higher utilisation rate, bigger capacity, and lower maintenance costs.

"The replacement of Azul's entire E195 fleet is expected to generate BRL4.8 billion reals (USD1.1 billion) of incremental EBITDA between 2020 and 2027 or approximately BRL16 million (USD3.8 million) per E195 replaced on an annualized basis," the Brazilian airline said.