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Why Shares in Azul Flew Higher Today

What happened

Shares in Brazilian airline Azul (NYSE: AZUL) rose more than 5% in early trading on Tuesday. As of 12:41 p.m. ET, they were up 4.87%. The move comes after the release of its traffic figures for December 2021. The figures not only confirmed that Brazil's domestic flights (Azul's primary market) are on a recovery track but also served to demonstrate that the airline's operating metrics are making a solid recovery.

For reference, airlines report traffic data in terms of revenue passenger kilometers (RPK) or the number of kilometers flown by paying passengers. Airlines also report available seat kilometers (ASK), or kilometers available for paying passengers. The third number, and arguably the most critical metric for airlines, is the load factor, simply the RSK divided by ASK. So, a higher load factor is better.

Image source: Getty Images.

The good news from Azul's December traffic data is that domestic RPK rose 2.8% in 2019 -- when the industry had a more typical year. More importantly, the load factor of 82.3% was the same as in December 2019. That's an excellent sign for the airline, and the first time its load factor hasn't declined in the monthly data versus the same month in 2019.

So what

Before getting too triumphant, it's worth noting that CEO John Rodgerson said in the data release that "it is early to determine the exact impact of the omicron variant in Brazil."

Moreover, Azul's total RPK was down 1.9% in December, compared with the same period in 2019. Also, its load factor was 82.9% compared with 83.5% in December 2019 due to weakness in its international flights, so the uneven recovery will continue in 2022.

Now what

Aerospace investors will closely watch the departure data and hope that load factors continue to recover at Azul and other airlines. There are some signs of confidence in the industry already in 2022, and some aviation-related stocks are looking to be an excellent value, but don't buy in if you can't handle the likely ups and downs of the news flow in 2022.

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Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.


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