Shares in Brazilian airline Azul (AZUL -6.83%) rose 9.4% in late trading on Monday, peaking right at the closing bell. It's a strong performance that leads its performance on the month, and therefore 2022, to almost 23%.
The reason for today's surge? In a nutshell, it was a strong day for aviation stocks in general, led by the news of a significant order for Boeing from Qatar Airways for up to 100 aircraft. According to Boeing, Qatar Airways agreed to order up to 50 widebody 777-8 freighters. Furthermore, the airline signed a memorandum of understanding for up to 50 737 MAX aircraft.
The latter is a sign of confidence in commercial aviation's future and a timely reminder that it's set for a multi-year recovery from the lows of 2020. That's excellent news for the industry and also for airlines like Azul.
Azul is the largest airline in Brazil, giving it a privileged position as a leading player in a vast country with a rapidly emerging economy. That matters because domestic flights are leading the recovery, and Azul is ideally placed to take advantage in Brazil.
In fact, according to Azul's December traffic data, its domestic passenger traffic in December was up 21% compared to the more normal year of 2019. However, its international passenger traffic was down 61% compared to December 2019.
The pattern is clear. Azul's domestic flight departures are doing fine, but the airline needs an improvement in international traffic. While the Qatar Airways/Boeing 737 MAX deal is no guarantee of anything, it is a sign of confidence that a major airline believes international air travel is coming back.
Investors in Azul are hoping to see a limited impact on domestic air travel from the omicron variant in Brazil and, hopefully, an opening of international traffic through 2022. The signs look good.