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Azul's May Traffic & Load Factor Up Despite Domestic Weakness

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Azul S.A. (AZUL - Free Report) reported impressive traffic numbers for May. Consolidated traffic, measured in revenue passenger kilometers (RPK), increased 14% to 1.84 billion mainly owing to a 71.4% rise on the international front. Meanwhile, domestic traffic was up only 1.5%.

On a year-over-year basis, consolidated capacity (or available seat kilometers/ASKs) expanded 13.5% to 2.29 billion, primarily owing to 71.5% growth in international capacity. On the domestic front, capacity increased 2.6%.

Consolidated load factor (% of seats filled by passengers) at this Brazilian carrier was up 0.3 percentage points to 80.1% in May as traffic growth outweighed capacity expansion. Domestically, load factor decreased to 77.1% from 78% a year ago. This downturn can be attributed to capacity growth outpacing the increase in traffic for the month. Weakness on the domestic front was due to the truck drivers’ strike in Brazil.  Consequently, many reservations were cancelled resulting in below-par traffic. Load factor was almost flat at 89.5% on the international front.

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We note that the truckers of Brazil started a strike on May 21, protesting against high diesel prices. The situation began to ease on May 27, following an agreement between representatives of the trucking industry and the government. Also, the president of Brazil gave some concessions like no diesel tax for the next two months and minimized toll tax for trucks.

We remind investors that May traffic results of another Brazilian carrier, Gol Linhas Aereas Inteligentes S.A. (GOL - Free Report) , were also affected due to the strike.

Zacks Rank & Stocks to Consider

Azul carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader Transportation sector are SkyWest, Inc. (SKYW - Free Report) and Expeditors International of Washington, Inc. (EXPD - Free Report) . While SkyWest carries a Zacks Rank #2 (Buy), Expeditors sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of SkyWest and Expeditors have rallied more than 51% and 37%, respectively, in a year.

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