Troubled Brazil airlines hit with losses on currency, climate woes

Brazilian airlines, already struggling with high interest rates and volatile fuel costs, are being hit with more losses as currency woes and climate challenges test the sector’s operational resilience. Azul SA and Gol Linhas Aereas Inteligentes SA, two of the nation’s largest carriers, reported setbacks in the second quarter as a weakening Brazilian real and the closing of a key airport following torrential rains in country’s south dragged their earnings, quarterly reports showed this week. The real’s slide in particular — around 11% this year — has weighed on the carriers, which have grappled with rising fuel costs and high interest payments on their heavy debt loads. The weaker currency further raised fuel costs tied to the greenback and dollar-denominated lease payments last quarter. Catastrophic floods in May compounded the difficulties, paralyzing the state of Rio Grande do Sul’s main airport in Porto Alegre, which remains closed. “The exchange rate and operational disruptions in Porto Alegre affected the costs and flight supply of both Gol and Azul, leading to a negative impact on their operational performance in the quarter,” said Carolina Chimenti, an analyst at Moody’s Ratings. Gol shares fell as much as 7.8% in Sao Paulo Thursday, the most since May, after the company reported a net loss of 3.91b reais ($713m), reversing a profit seen in the same period of last year. The airline said the exchange rate variation made its gross debt swell by 2.7b reais, and cited the impact of a decline in passenger demand and capacity amid the closure of Porto Alegre’s Salgado Filho airport.<br/>