Azul S.A. (AZUL) incurred a loss of 32 cents per share in the third quarter of 2024, wider than the Zacks Consensus Estimate of a loss of 10 cents.

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Total revenues of $925.1 million lagged the Zacks Consensus Estimate of $953.2 million. AZUL’s third-quarter 2024 revenues benefit from a healthy demand environment and robust ancillary revenues.

With more people taking to the skies, Azul’s passenger revenues, contributing 92.8% to the top line, grew 4% year over year. Cargo revenue and other grew 8.8% year over year owing to improved performance of AZUL’s ancillary revenues and solid domestic demand for its cargo solutions and exclusive network, and the partial recovery of its international operation. These were, however, partially offset by the reduction in AZUL’s domestic capacity in RioGrande do Sul state.

Other Q3 Details

Consolidated traffic, measured in revenue passenger kilometers (RPKs), rose 4.3% (up 8.4% domestic but down 8.4% on the international front) year over year. Consolidated available seat kilometers (ASK), measuring an airline's passenger-carrying capacity, increased 3.7% from the year-ago quarter, with a 6.8% rise in domestic capacity and a 7% decline in international capacity. Since traffic outpaced the capacity expansion, load factor (percentage of seats filled with passengers) grew 0.5 percentage points to 82.6%. Our estimate is pegged at 82.8%.

Azul’s total revenues per ASK or RASK were R$42.87 cents, up 12.2% sequentially and 0.6% year over year. Passenger revenues per ASK or PRASK increased 12.6% sequentially and 0.3% year over year on the back of AZUL’s rational capacity deployment and the sustainable competitive advantages of its business model. 

Fuel cost per liter grew 8.6% year over year. Cost per ASK (CASK) stayed almost flat with the third-quarter 2023 reported figure. CASK, excluding fuel, fell 2.8% year over year. Average fare grew 0.2% from third-quarter 2023 figure.

Operating expenses of R$4.1 billion grew 3.8% year over year owing to the 3.7% increase in total capacity, 13.6% depreciation of the Brazilian real against the US dollar and an 8.6% increase in fuel price, offset by higher productivity and cost-reduction initiatives.

Azul exited the third quarter with total liquidity of R$6.27 billion compared with R$6.37 billion at the end of prior quarter. Gross debt decreased to R$27.9 billion from R$28.1 billion at the end of prior quarter.

AZUL's Guidance

For 2024, Azul expects capacity to increase by almost 6% (prior view: up 7%) from 2023. The change in expectation of capacity growth is due to the reduction in AZUL’s domestic capacity as a result of the devastating floods in Rio Grande do Sul, the temporary reduction in AZUL’s international capacity in the first half of the year and manufacturers’ new aircraft delivery delays.

For 2024, Azul continues to anticipate EBITDA to be around R$6.0 billion, as a result of the robust demand environment in both domestic and international markets, the positive trend in fuel prices and a higher number of fuel-efficient aircraft entering the fleet.

For 2025, AZUL anticipates EBITDA to be R$7.4 billion, owing to strong travel demand, a rational competitive environment, and robust growth in its business units. Additionally, the restructured financing plan (aimed at improving liquidity and cash generation and reducing leverage) is likely to enable Azul to achieve its target for 2025. Capex is expected to be around R$1.7 billion.Free cash flow to firm is expected to be around R$1.1 billion.

AZUL's Zacks Rank

Currently, Azul carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performances of Other Transportation Companies

Delta Air Lines DALreported third-quarter 2024 earnings (excluding 47 cents from non-recurring items) of $1.50 per share, which fell short of the Zacks Consensus Estimate of $1.56. Earnings decreased 26.11% on a year-over-year basis due to high labor costs.

DAL’s revenues of $15.68 billion surpassed the Zacks Consensus Estimate of $15.37 billion and increased 1.2% on a year-over-year basis, driven by strong air travel demand. Adjusted operating revenues (excluding third-party refinery sales) totaled $14.59 billion, flat year over year.

J.B. Hunt Transport Services, Inc.’sJBHT third-quarter 2024 earnings of $1.49 per share outpaced the Zacks Consensus Estimate of $1.42 but declined 17.2% year over year.

JBHT’s total operating revenues of $3.07 billionsurpassed the Zacks Consensus Estimate of $3.04 billion but fell 3% year over year. The downfall was caused by 5% and 6% decreases in gross revenue per load in Intermodal (JBI) and Truckload, respectively; declines in load volume of 10% and 6% in Integrated Capacity Solutions (ICS) and Dedicated Contract Services, respectively; and 6% fewer stops in Final Mile Services. These were partially offset by JBI load growth of 5%, which included growth in the transcontinental and eastern networks and a 3% increase in revenue per load in ICS. JBHT’s total operating revenues, excluding fuel surcharge revenues, decreased less than 1% from the year-ago quarter.

United Airlines Holdings, Inc. UAL posted third-quarter 2024 EPS (excluding 43 cents from non-recurring items) of $3.33, which surpassed the Zacks Consensus Estimate of $3.10. Earnings decreased 8.8% on a year-over-year basis.

UAL’s operating revenues of $14.84 billion beat the Zacks Consensus Estimate of $14.76 billion. The top line increased 2.5% year over year due to upbeat air travel demand. This was driven by a 1.6% rise in passenger revenues (accounting for 91.3% of the top line) to $13.56 billion. Almost 45,559 passengers traveled on UAL flights in the third quarter, up 2.7% year over year.

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