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Azul Posts Solid May Traffic Data on High Domestic Demand

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Azul S.A. (AZUL - Free Report) released strong traffic numbers for May 2019. Load factor (percentage of seats filled by passengers) improved a commendable 420 basis points (bps) as traffic growth outpaced capacity expansion.

Consolidated traffic (measured in revenue passenger kilometers or RPKs) increased 26.7% year over year to 2.33 billion owing to 32.8% growth on the domestic front and a 10.1% rise, internationally. On a year-over-year basis, consolidated capacity (or available seat kilometers/ASKs) expanded 20.4% to 2.76 billion, driven by a 23% rise in domestic capacity and 12.3% growth in international capacity.

The 420-bps increase in total load factor was due to 620 bps jump in domestic load factor. On the international front, this key metric contracted 170 bps.

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On a year-to-date basis, the carrier registered RPK of 11.3 billion (up 17.7%) and ASK of 13.64 billion (up 16%). Consequently, load factor increased to 82.9% from 81.7% in the year-ago period.

The company is actively engaging in a fleet transformation plan to add Rodger Jets next-generation aircraft, which will reduce costs significantly and thus, aid in margin expansion while generating higher revenues. This February, the company announced the acceleration of fleet renewal and modernization plan for 2019 whereby it expects to increase the number of next-generation aircraft to 21, representing a rise of 8 in the fleet count.

Zacks Rank & Key Picks

Azul carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Transportation sector are SkyWest, Inc. (SKYW - Free Report) , GATX Corporation (GATX - Free Report) and Fly Leasing Limited (FLY - Free Report) . While Fly Leasing sports a Zacks Rank #1 (Strong Buy), SkyWest and GATX carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of SkyWest and Fly Leasing have surged more than 34% and 52%, respectively, so far this year. Meanwhile, GATX flaunts a stellar earnings history, having surpassed the Zacks Consensus Estimate in each of the preceding four quarters, the average being 16%.

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