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Azul's Traffic Rises But Load Factor Declines in November

Zacks Equity Research

Azul’s AZUL reported mixed traffic report for November. While consolidated traffic (measured in revenue passenger kilometers or RPKs) increased, load factor (% of seats filled with passengers) declined as capacity expansion outweighed traffic growth. Load factor was primarily hurt by weakness in international market.

Traffic Report in Details

Strong demand for air travel prompted a 30.6% year over year increase in consolidated traffic to 2.46 billion. Notably, RPKs increased 30.4% and 31.4% in domestic and international markets, respectively. Consolidated capacity, measured in available seat miles (ASMs), expanded 32.5% to 2.98 billion on a year-over-year basis. The increase in domestic capacity was 30.9%. On the international front, capacity rose 38.3%.

Consolidated load factor decreased 1.2 percentage points to 82.4%. Domestic load factor decreased 0.3 points to 82.2%. On the international front, the metric decreased 4.4 percentage points to 83.3%.

In the first 11 months of 2019, Azul registered consolidated RPMs of 26.98 billion (up 23.6%) and ASMs of 32.32 billion (up 21.7%). As a result, load factor improved 1.3 percentage points to 83.5% in the January-November period.

Azul, which competes with the likes of Copa Holdings CPA, LATAM Airlines LTM and GOL Linhas GOL in the Latin American aviation space, carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

So far this year, shares of Azul have outperformed its industry, courtesy of upbeat travel demand. The stock has appreciated 41.4% compared with its industry’s 11.2% growth.

Notably, passenger revenues, which account for the bulk of the top line at Azul, increased 23.4% in the first nine months of 2019. The uptrend is likely to continue going forward owing to upbeat demand for air travel.

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