Brazilian airline Azul’s reboot pays off with record stock rally

Even after shares in the Brazilian airline Azul SA leaped 34% year to date, many investors are still underestimating the company’s earnings potential as domestic demand rebounds and ticket prices increase, according to analysts at Itau BBA and Raymond James. Azul posted its best first half of a year since its initial public offering in 2018 amid lower fuel prices, a pickup in demand for its regional routes and a recent debt restructuring plan. The company was founded by David Neeleman, who has started several commercial airlines, including JetBlue Airways in the US. “Investors still don’t fully realize that Azul has become a different company in the last six months,” said Itau BBA analyst Gabriel Rezende. “The asymmetry of risk and return is much more favorable.” Within the sector, Azul stands out based on its ability to offer routes to smaller markets where it has little to no competition. At the same time, a debt restructuring finalized in the last month prompted Moody’s Investors Service Inc. to raise its credit grade one notch to Caa1, while revising its outlook to positive from negative. “Azul’s debt restructuring will lead the stock to return to radars of investors that, back in 2018 and 2019, stopped following because the perception of risk had grown substantially,” Rezende said. “We have now returned to a more normalized scenario.” What’s more, regional competitor Gol Linhas Aereas Inteligentes has been in free fall after it sold almost 2b of warrants in early August, triggering a downgrade from Citi.<br/>