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Why Shares of Azul Rocketed Over 14% Higher on Tuesday

By Eric Volkman – Jun 2, 2020 at 5:15PM

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Brazil's big city is reopening for business, and tourists will come.

What happened

Shares of Brazil-based budget carrier Azul (AZUL -9.35%) climbed steeply on Tuesday. This seems to be tied to developments in the reopening of the struggling Brazilian economy, plus perhaps some good news with a corporate sibling.

An Azul plane in flight.

Image source: Azul.

So what

On Tuesday, the massive city's "non-essential" businesses were allowed to reopen, which will have a dramatic effect on the national economy. Rio is also an immensely popular tourist destination, and now that more retailers have their lights on, the attraction for outsiders to visit is that much stronger. 

A restoration of previous demand, at least, is essential for the survival of the country's airlines. That's looking dicey at the moment -- Latin America's No. 1 airline LATAM Airlines Group filed for bankruptcy in the U.S. last week. Meanwhile, a long-developing government bailout of the industry still hasn't occurred.

Azul is also likely benefiting from a positive development with a relative. TAP Air Portugal will resume flights to and from the U.S. this Wednesday, beginning with Newark Liberty Airport that feeds New York City. TAP is 45% owned by Azul's founder David Neeleman, and the two are establishing a joint venture to partner on European flights.

Now what

There are worries that Rio's partial reopening could backfire. The city is still a hotbed for the SARS-CoV-2 coronavirus, with high numbers of cases and deaths. Though the latest news for Azul is good, the airline is still far from escaping its current turbulence.

 

Eric Volkman 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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