What happened
Shares of Brazilian airline Gol Linhas Aereas Inteligentes (GOL 1.03%) gained 20% on Tuesday, as the city of Rio de Janeiro announced a partial end to its quarantine order. COVID-19 cases are still on the rise in Brazil, but Rio is beginning to reopen to tourists.
So what
Airline stocks have been hard hit by the pandemic, with demand falling to near zero and countries closing international borders to visitors. Brazil has the second highest number of COVID-19 cases globally -- more than 500,000 in total -- and the country has largely been locked down in recent weeks.
Image source: Getty Images.
Rio de Janeiro is beginning to change all of that, announcing that non-essential businesses including restaurants, shops, and establishments related to tourism will be allowed to reopen. It is phase one of a six step plan to get life back to normal in the famous tourism destination.
Shares of Gol were down nearly 90% year to date in late March as the pandemic's impact first hit the Americas, and even after Tuesday's surge are still off 68% for the year. Travel is likely going to take a long time to recover, but investors are celebrating what they hope is the beginning of a recovery with Rio reopening.
Now what
There's still a lot to worry about. Rio is reopening even as the number of cases continues to grow, and a sharp uptick could lead the city to reverse course at any moment. Even if the pandemic is behind us, the Brazilian and global economies are going to need some time to recover from the shutdown and travel demand could be muted for some time now.
We've seen a number of major South American airlines file for bankruptcy, and six weeks ago, Gol was priced as if it was prepared to join them. If the worst really is behind us then the stock is still oversold, but be warned it could take a long time for Gol shares to fully recover.
