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Why Shares in Brazilian Airline Azul Rose 5% Today

What happened

Shares in Brazilian airline Azul (NYSE: AZUL) were up more than 5% at 1 p.m. EDT. The move comes from positive sentiment on the airline sector in general and a recognition that Azul is one of the best-positioned airlines to benefit from a multiyear recovery in commercial aviation.

Jet fuel is a crucial component of airline costs, and now that the price of oil per barrel has dropped below $100 from around $125 a couple of weeks ago, investors are feeling a bit more optimistic about the profit outlook for the sector. Moreover, a host of leading airlines gave more positive outlooks at an industry conference this week.

If that wasn't enough, a major manufacturer of aircraft engines, General Electric (GE), recently forecast that strong growth in commercial air travel would lead to a 25% increase in shop visits for aircraft in 2022. GE's management believes the narrow-body market will return to 2019 levels by early 2023 and the wide-body market by early 2024. The disparity partly comes down to an earlier recovery in domestic travel, which tends to use narrow-body aircraft.

Image source: Getty Images.

So what

All of the above is a positive for Azul. The airline is primarily a domestic carrier, and its latest traffic figures show the airline has already surpassed pre-pandemic levels. In February, total retail passenger traffic was up 20% on a year-over-year basis for Azul.

Now what

A multiyear recovery is in place, and Azul's domestic exposure stands it in good stead to benefit. Hopefully, the positive trends can continue, but investors need to be aware that the situation is dynamic, and sentiment can swing on a day-to-day basis.

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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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