Survivors of airline carnage, Brazil carriers are rebounding

Flights are returning to Brazilian skies, providing a lift for two of the carriers that survived a wave of bankruptcies that upended the Latin American airline industry. Gol Linhas Aereas Inteligentes and Azul -- which together had about three-fourths of the Brazilian domestic market share in July, according to Citigroup -- are seeing demand rebound more quickly than forecast, although it remains well below pre-pandemic levels. Investors are increasingly confident the low-cost carriers can survive a travel downturn that has forced three of the region’s largest airlines into bankruptcy. “The outlook is brighter as the recovery on domestic demand in Brazil has been faster than expected and the fact that Azul and Gol are focused on the local market,” said Josseline Jenssen, a credit analyst at Lucror Analytics. “Cash flow generation should improve with higher sales.” Bonds sold by Gol and Azul have returned 70% and 45%, respectively, since the end of March, compared to -6.5% for the Bloomberg Barclays High Yield Airlines Index. Shares in the companies, meanwhile, are up 53% and 31%, respectively, outperforming the Bloomberg World Airlines Index. Year to date, both stocks are still down at least 50%. Gol this week said it operated an average of 270 flights per day in September, up from around 40 flights per day in April. Azul said it expects to operate at roughly 55% of pre-Covid capacity in October, putting it ahead of its original guidance that it would be at 40% by the end of the year. “Once again we continue to see an improvement in domestic passenger demand as we approach the strongest travel season in Brazil,” Azul’s CEO John Rodgerson said.<br/>