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BTG cuts recommendation for Azul and Gol despite post-pandemic growth in 2023

Even in the Post-Pandemic Era, Airlines Still Face Routine Problems

Air travel during winter is more favorable due to cleaning and better weather conditions.

The formation of a high-pressure zone pushes clouds away from the sky, improving visibility and facilitating takeoff.

However, airlines Azul (AZUL4) and Gol (GOLL4) are not among BTG Pactual’s favorites due to debt concerns and the scenario of high interest rates in the post-pandemic period.

BTG Pactual revised its buy recommendation to neutral for these two companies, even though it highlighted specific improvements in the post-pandemic period.

Conversely, the bank upgraded the recommendation from neutral to buy for Despensa Airlines and Latam, which are its preferred airlines.

Volaris, a Mexican company also covered by the bank, maintained its buy recommendation. It is important to note that none of these three companies have stocks listed on B3.

In-Depth Study of Airlines

In a report released on Thursday, BTG Pactual highlights that the airline sector was one of the most affected by the COVID-19 pandemic. Border closures resulted in significant losses for companies.

According to BTG, Azul and Gol went through more intense debt restructurings, resulting in some level of equity dilution.

On the other hand, Latam entered a process of judicial recovery, from which it recovered in November of the past year.

On the flip side, Despensa was the airline that fared better during the pandemic period due to its history of austerity and lower indebtedness. Volaris also benefited from the consolidation trend in the Mexican market.

So, what’s the issue with Azul and Gol?

Temporary Change in Airline Preferences!

According to the bank, the change in recommendation is only temporary. Azul and Gol lagged behind in terms of international route volume following rapid domestic traffic growth during the first months after the pandemic.

Market instability and high interest rates are also significant factors affecting the airlines.

Furthermore, recent government interventions in airfares were not well-received by analysts.

Volatility in fuel prices, high costs, and economic slowdown, which can reduce travel demand, could further worsen the situation for Azul and Gol.

Despite BTG’s downgrade, airline stocks are rising on B3. Around 3:15 PM, AZUL4 shares recorded a 7% increase and GOLL4 rose by 3.5%.

The relaxation of future interest rate curve (DIs) and the fall in oil barrel prices are contributing to this rise.

It’s also important to highlight a 17.26% drop in airfare expenditure, according to the IPCA-15 of May, which helps make air travel more affordable for more people.

Gol Linhas Aéreas Inteligentes, simply known as Gol, is a Brazilian airline founded in 2001.

It is the largest low-cost and low-fare airline in Latin America, operating domestic and international flights to various destinations.

Gol’s main operating base is São Paulo International Airport (GRU) in Guarulhos, and it has an extensive network covering over 100 destinations in various countries in South America, the Caribbean, and the United States.

The company is known for its innovative business approach, offering competitively priced airfares, simplified services, and an onboard entertainment system called Gol Online, allowing passengers to access content through personal devices.

Additionally, Gol has a diverse fleet of aircraft, primarily composed of Boeing models such as the Boeing 737.

The company also operates Gollog, a business unit dedicated to cargo transportation.

Over the years, Gol has faced challenges and gone through different phases of expansion and adaptation in the aviation market.

The company has sought to enhance its services, expand its international presence, and provide an increasingly better travel experience to its customers.

However, it’s important to note that specific information about Gol’s current financial performance, such as profit in a given year, should be obtained from reliable sources, such as the company’s financial reports and official communications.

Azul Linhas Aéreas Brasileiras, known as Azul, is a Brazilian airline founded in 2008.

It is the third-largest airline in Brazil in terms of passengers transported and aircraft fleet.

Azul is known for its proposition of offering affordable yet quality flights, serving both domestic and international destinations.

The company has an extensive network, connecting over 100 destinations throughout Brazil, as well as flights to other South American countries, the United States, and Portugal.

The airline is recognized for its blue-painted aircraft and friendly, helpful customer service staff.

Azul offers different service categories, including Azul Mais, Azul Conforto, and TudoAzul, a loyalty program that offers benefits to frequent flyers.

In addition to passenger flights, Azul also operates Azul Cargo Express, a business unit dedicated to cargo transportation, and Azul Viagens, a tourism subsidiary offering complete travel packages.

The company has invested in innovation and technology, aiming to improve passengers’ travel experience.

Azul was the first airline in Latin America to offer in-flight Wi-Fi on its flights.

Azul’s fleet consists mainly of Embraer aircraft, such as the E195 model, known for its efficiency and comfort.

The company also operates Airbus A320neo aircraft in its fleet.

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