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Azul's (AZUL) September Traffic Rises on High Travel Demand

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Azul S.A. (AZUL - Free Report) delivered decent traffic figures for September 2018. Consolidated traffic (measured in revenue passenger kilometers or RPKs) increased 16% to 1.9 billion on the back of 32.1% rise on the international front and 11.7% growth on the domestic front.

On a year-over-year basis, consolidated capacity (or available seat kilometers/ASKs) expanded 16.1% to 2.3 billion, owing to 38.4% growth in international capacity and 10.6% rise in domestic capacity.

Consolidated load factor (percentage of seats filled by passengers) were flat at 83.2% in September. Domestically, load factor increased to 82.6% from 81.8% in the year-ago period. Load factor on the international front declined to 85% from 89.1% in the year-ago period.

At the end of the first nine months of 2018, RPK was up 17% and ASK grew 16.7%. Also, load factor registered a rise of 0.3 percentage points (pp) to 82.1% on a year-over-year basis as traffic growth outpaced capacity expansion

AZUL SA Price

 

AZUL SA Price | AZUL SA Quote

In spite of decent traffic figures, the Brazilian carrier suffers from certain headwinds like high fuel costs and depreciation in the currency. For 2018, the company estimates an increase in costs of R$800 million and R$900 million for currency fluctuation and fuel price, respectively. In fact, these concerns have compelled Azul to trim guidance for current-year operating margin. Operating margin is anticipated in the range of 9-11% compared with the previous guidance of 11-13%.

Zacks Rank & Key Picks

Azul carries a Zacks Rank #4 (Sell). A few better-ranked stocks in the broader Transportation Sector are Old Dominion Freight Line, Inc. (ODFL - Free Report) , ArcBest Corporation (ARCB - Free Report) and Matson, Inc. (MATX - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Old Dominion, ArcBest and Matson have gained 5.7%, 30% and 40.6%, respectively, in the past six months.

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