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Azul's (AZUL) April Traffic Declines From its March Levels

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With Brazil reeling under a second wave of the deadly coronavirus pandemic, it was obvious that Azul S.A.‘s (AZUL - Free Report) April traffic report will be a disappointment compared with March numbers.

Notably, consolidated traffic, measured in revenue passenger kilometers, declined 9.1% month over month. With falling travel demand, the company reduced capacity significantly. Capacity measured in available seat kilometers contracted 16.5% in April from March levels. Since traffic decline was less than capacity contraction, load factor (% of seats filled by passengers) jumped to 77.5% in April from 71.2% in March.

However, on a year-over-year basis, with the coming of COVID-19 vaccine, the scenario was rosier with consolidated traffic surging 523.7%.  In the same time frame, capacity expanded 455.8%. Consequently, with traffic surge outweighing capacity expansion, load factor increased 8.5 percentage points (p.p).

In the domestic front, traffic and capacity increased 604% and 524.9%, respectively, from the year-ago period’s levels. Consequently, load factor increased 8.9 p.p to 79% in April.

Internationally, in the same time frame, traffic and capacity surged 105.5% and 126.8%, respectively, for Azul, which competes with the likes of Gol Linhas (GOL - Free Report) , Copa Holdings (CPA - Free Report) in the Latin American aviation space. However, with capacity surge outweighing traffic expansion, load factor plunged 6 p.p to 58%. Azul currently carry a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 (Strong-Buy) Rank stocks here.

Apart from April traffic results, Azul recently posted its first-quarter 2021 financials. The company had incurred a loss (excluded $2.44 from non-recurring items) of $1.78 per share, wider than the Zacks Consensus Estimate of a loss of $1.64. Total revenues of $334 million missed the Zacks Consensus Estimate of $341.3 million. The top line fell 47.2% on a year-over-year basis. Passenger revenues, contributing 87.5% to the top line, plunged 39.8% year over year owing to the second wave of coronavirus.  Notably, passenger revenue weakness was not unique to Azul. Other airline companies like Allegiant Travel Company (ALGT - Free Report) also reported significant year-over-year decline in passenger revenues in the March quarter.

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