What happened

On Friday, Delta Air Lines told the markets that international travel demand is coming back strong. Airlines based in Brazil, one of the countries Delta spotlighted, are gaining altitude as a result, with shares of both Azul (NYSE:AZUL) and Gol Linhas Aereas Inteligentes (NYSE:GOL) up as much as 11% on Friday.

So what

Airlines all over the world were hit hard by the pandemic, and Latin American carriers suffered more than most. Azul and Gol both avoided bankruptcy filings but others, including one-time giant Latam Airlines Group, ended up in Chapter 11.

The South American airlines were hit disproportionally hard in part because their businesses are heavily dependent on crossborder flights.

A ground worker guides a plane to the tarmac.

Image source: Getty Images.

But key markets, including the United States, are beginning to open up. On Friday, Delta said that it saw a 450% jump in international bookings in the six weeks since the U.S. announced plans to reopen select international borders. Brazil is among the countries that the U.S. is opening up to for fully vaccinated passengers.

The initial news that the U.S. was liberalizing travel from Brazil was good news for Azul and Gol, but this further development showing that there is pent up demand for international travel from Brazil is even better. Delta said it expects many of the 139 international flights it will operate on Nov. 8, the first day under the new guidelines, to be at 100% capacity.

Now what

Brazil is obviously a separate market from the United States, but with the Brazilian airlines trading on the New York exchange investor sentiment about U.S. airlines often moves Brazilian carriers as well. On a good day for stocks in general and airline stocks in particular, it is no surprise the Brazilian carriers are going along for the ride.

Investors should be choosy when considering Brazilian stocks, and mindful that the country is recovering at its own pace. Though Azul and Gol both were able to avoid bankruptcy Azul is the much healthier of the two, and if the airline is successful in its rumored bid to buy all or part of Latam out of bankruptcy it will establish itself as a powerhouse in the region.

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