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Azul's (AZUL) Q3 Loss Wider Than Expected, Revenues Lag

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Azul (AZUL - Free Report) incurred a loss (excluding a penny from non-recurring items) of $1.99 per share in the third quarter of 2020, wider than the Zacks Consensus Estimate of a loss of $1.05. In the year-ago period, the company had reported adjusted earnings of 92 cents per share. The third-quarter results were affected by coronavirus-induced drop in demand and depreciation of the Brazilian real.

Moreover, total revenues of $149.8 million missed the Zacks Consensus Estimate of $165 million. The top line also declined more than 70% year over year with passenger revenues (accounted for 77.5% of the top line) plunging 78.4% due to the coronavirus-led weak air-travel demand. Cargo and other revenues surged 26.6% year over year primarily due to strong e-commerce growth.

AZUL SA Price, Consensus and EPS Surprise

 

AZUL SA Price, Consensus and EPS Surprise

AZUL SA price-consensus-eps-surprise-chart | AZUL SA Quote

Operational Statistics

Consolidated revenue passenger kilometers (“RPK”), measuring revenues generated per kilometer per passenger, fell 69% year over year. The metric declined 62.3% domestically and 89.6% internationally.

Consolidated available seat kilometers (“ASK”), measuring an airline's passenger-carrying capacity, decreased 66.6% year over year. While domestic capacity dropped 60.1%, international capacity contracted 88%.

With traffic declining more than the amount of capacity contraction, consolidated load factor (percentage of seats filled with passengers) deteriorated 590 basis points to 78.4%.

While total revenues per ASK, or RASK, decreased 20.3%, passenger revenues per ASK, or PRASK, fell 35.2%. Meanwhile, cost per ASK (“CASK”) soared 78.6% on 35.4% depreciation in the Brazilian real. Jet fuel prices declined 12.6% year over year. CASK, excluding fuel, augmented more than 100%. Average fare decreased 33% from the year-ago quarter’s figure.

Azul exited the third quarter with total passenger operating fleet of 139 aircraft. The average age of the fleet was 6 years. Contractual fleet size was 165.

Liquidity

Azul, carrying a Zacks Rank #4 (Sell), exited the third quarter with total liquidity of R$6.95 billion, up 4.6% year over year. Additionally, total debt decreased 4.8% to R$18 billion from the June-end figure due to 7.5% reduction in lease liabilities.

Outlook

With air-travel demand steadily recovering in Brazil, Azul expects its domestic capacity to be more than 80% of the 2019 level in December. Meanwhile total capacity is anticipated to be approximately 70% of the 2019 level in the same month. This compares with a capacity of around 60% of the year-ago level estimated previously. By the end of 2020, the airline plans to operate in 113 destinations, thus resuming services on 97% of its network.

The company forecasts average daily cash burn to be R$1.5 million in the fourth quarter of 2020. Previously it expected the same to be R$2.5 million.

Performance of Other Airline Stocks

Spirit Airlines Inc. (SAVE - Free Report) , carrying a Zacks Rank #3 (Hold), incurred a loss of $2.32 per share (excluding $1.25 from non-recurring items) in the June quarter, narrower than the Zacks Consensus Estimate of a loss of $2.63. Meanwhile, operating revenues of $401.9 million beat the Zacks Consensus Estimate of $384.7 million. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Southwest Airlines Co. (LUV - Free Report) , carrying a Zacks Rank #3, incurred a loss of $1.99 per share (excluding 3 cents from non-recurring items) in the third quarter of 2020, narrower than the Zacks Consensus Estimate of a loss of $2.44. Moreover, operating revenues of $1,793 million surpassed the Zacks Consensus Estimate of $1,678.2 million.

SkyWest Inc (SKYW - Free Report) , carrying a Zacks Rank #4, reported earnings of 66 cents per share, surpassing the Zacks Consensus Estimate of 9 cents. Quarterly revenues of $457.5 million surpassed the Zacks Consensus Estimate of $426.8 million.

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