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Why Azul, Gol Linhas Aereas, and Grupo Aeroportuario del Pacifico Stocks All Popped 10% Today

By Rich Smith – Jun 12, 2020 at 7:52PM

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American Airlines' good news turns into good news for non-American airlines and airports, too.

What happened

Good news out of American Airlines (AAL -3.92%) this morning sparked a rally in airline stocks throughout U.S. stock markets and beyond.

In afternoon trading, not only did shares of companies such as Delta and United follow American higher, but also shares of Brazilian carriers Gol Linhas Aereas Inteligentes (GOL -9.48%) and Azul (AZUL -10.00%) ended the day with even stronger gains of 11.9% and 19.1%, respectively. Additionally, Mexican airport owner Grupo Aeroportuario del Pacifico (PAC -2.67%) closed up a strong 6.1%, as well.

Three colorful arrows racing straight up on a black background

Image source: Getty Images.

So what

What did American Airlines say that got air travel industry investors excited down south of the border? A few things, actually.

For one, "since the first week of May, [American Airlines'] net bookings have been consistently positive and have shown continued signs of improvement," such that the airline now sees signs "of improving passenger demand although at levels significantly below those experienced in the same period in 2019." Consequently, after cutting its flight capacity as much as 75% through May, American thinks it should be able to support 35% of its ordinary volume of (domestic) flights through the end of this month and reach 55% capacity by July. This would imply carrying perhaps close to 250,000 daily passengers by that point.

Additionally, American says it has made progress slowing its rate of cash burn, which reached $100 million per day in May, to perhaps as little as $40 million per day by the end of this month -- and hopefully, zero by the end of this year.

Now what

Is what's true for American Airlines also going to hold true for Gol and Azul? And does it mean that traffic flying through Aeroportuario del Pacifico's airports will soon pick up?

Perhaps. But I still have my doubts that today's rally in the Brazilian and Mexican shares will hold. After all, while American's domestic travel is picking back up, international flight capacity, says the company, which includes flights connecting through Mexico or Brazil, is still going to be only about 20% of normal this month.

In Gol's latest update, that airline confirmed that it, too, has reduced its cash burn rate -- to 10 million Brazilian reals per day (roughly $2 million). Flight capacity at Gol, however, is also only 20%. 

Azul says it's seeing "improvements in the demand environment," but it hasn't provided a recent update on cash burn rates. 

What about Grupo Aeroportuario del Pacifico? At last report, total passenger traffic through its terminals remains down anywhere from 81.1% to 99.8%! 

All of this suggests that even if there is a recovery afoot in North American air travel, South America hasn't yet turned the corner.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Grupo Aeroportuario del Pacifico. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Gol Linhas Aéreas Inteligentes S.A. Stock Quote
Gol Linhas Aéreas Inteligentes S.A.
$3.15 (-9.48%) $0.33
Grupo Aeroportuario del Pacifico, S.A.B. de C.V. Stock Quote
Grupo Aeroportuario del Pacifico, S.A.B. de C.V.
$131.71 (-2.67%) $-3.61
American Airlines Group Inc. Stock Quote
American Airlines Group Inc.
$12.25 (-3.92%) $0.50
Azul S.A. Stock Quote
Azul S.A.
$8.01 (-10.00%) $0.89

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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