What happened

A new estimate of the scale of financial losses facing the global airline industry reveals the heavy toll on South American airline stocks, with shares of Brazil's Azul (NYSE:AZUL) airline falling as much as 11.1% today and Sao Paulo's Gol Linhas Aereas Inteligentes (NYSE:GOL) tumbling 13.1%.

Both airlines were back up off their lows as of 12:40 p.m. EDT, with Azul down only 5.5% and Gol off 3.6%. Meanwhile, their Chilean rival, LATAM Airlines (NYSE: LTM), was actually up 4.1% after swinging wildly between an 8.3% loss and a 20% profit earlier in the day.

What gives?

Red arrow swoops up and blue arrow swoops down.

Image source: Getty Images.

So what

The declines are easier to explain than the big leap at LATAM, so let's begin with that story.

Earlier today, the International Air Transport Association (IATA) warned that the global airline industry is probably going to lose $84 billion this year, making 2020 "the worst year in the history of aviation." Belying reports that demand for air travel is picking up speed fast enough to quickly reverse those losses, IATI estimates that the industry as a whole will lose money again in 2021 -- nearly $16 billion.  

On a more positive note, Gol reported that it's burning cash at the rate of about $2.05 million a day during the coronavirus crisis, which sounds bad but is at least better than its previous estimate of nearly $2.5 billion in daily cash-burn. This helps to explain why Gol stock pared its losses so much today.  

Now what

And now for the tougher question: If we just heard confirmation that airlines as a whole are losing money, and Gol and Azul are both airlines, then it makes sense that those two stocks are going down. But why is LATAM stock going up?

It's an airline that has already admitted that it is bankrupt and filing for Chapter 11 protection from its creditors.

With more than $9 billion in net debt on its books and a market capitalization of just $1.2 billion today, chances are that by the time LATAM is done restructuring, its stock is going to end up worthless, and its shareholders will receive nothing. But then again, over at bankrupt American car renter Hertz, investors have just witnessed the case of another bankrupt stock soaring six times in value in a matter of days.

Maybe there's no good reason for Hertz being up so much. But the fact that it is going up may be giving investors hope that LATAM stock could surge similarly.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.