A complex quarter for Brazilian airlines

Azul Linhas Aéreas, GOL Linhas Aéreas, and LATAM had a difficult first half of the year, fueled by a complex quarter for the Brazilian airlines due to rising costs, currency volatility, and economic uncertainty. Nonetheless, they also found hope in the strong domestic recovery and the seemingly returning business traveler. The quarterly and half results The three main Brazilian airlines have posted their financial results. Between them, they had a US$1.4 billion net loss in the first half of the year; only Azul had a net profit, a minimal US$6 million. Quick disclaimer: in this total, we are taking into account the net loss of the whole LATAM Airlines Group company (US$905 million), including its subsidiaries in other South American countries such as Chile, Colombia, Ecuador, and Peru. The three airlines were deeply impacted by rising fuel costs, which, according to GOL’s Chief Financial Officer, Richard Lark, increased 81% over the same period. These expenses increase led the overall Brazilian airline industry to have net losses in the first half of the year, despite demand recovering throughout the country. On a continental level, we see the same for other countries and carriers (check out our article on the collective losses by Mexican airlines here). So, let’s take a look at Azul, GOL, and LATAM’s financial results so far: Airline Operating revenue Passengers (vs. 2019) Operating expenses Net income (loss) Azul US$1.4 billion 13.18 million (2%) US$1.35 billion US$6 million GOL US$1.26 billion 12.5 million (-28.5%) US$1.28 billion US$541 million LATAM US$4.18 billion 28.3 million (-19.2%) US$4.50 billion US$905 million What are the airlines saying? The economic performance of these airlines had its ups and downs due to the uncertainty worldwide. Nonetheless, they are confident about their business models. During the airline's investors' call, John Rodgerson, Azul’s CEO, said, “The second quarter proved once again the strength of our business. Our top line revenue more than doubled compared to the same period last year, reaching BRL3.9 billion, all-time record revenue for any quarter in our history. Even more impressive is that revenue was up 50%, compared to pre-pandemic levels, in what is seasonally the weakest quarter of the year. This achievement was a direct result of the strong demand environment in our network. During the airline's investors' call, Celso Ferrer, GOL’s CEO, said, “The second quarter represents a milestone in the recovery of the demand for air travel. We had a resumption of corporate travel, stimulated by new forms of hybrid working in companies and stability in the leisure market. The combination of the high percentage of the Brazilian population vaccinated, and our future booking curves make us believe that demand will continue to increase in the coming months in a consistent and sustainable way.” The LATAM management team did not have an investors’ call. This is what they wrote about the current environment in their second quarter results release, “Despite the solid recovery path that has led the group to operations of 72.6% (measured in ASKs) of 2019 levels in the second quarter, significant challenges have arisen in the last months, namely related to a considerable increase in and volatility of fuel price and a challenging macroeconomic context driven by inflationary pressures, the depreciation of emerging market currencies and a reduction of worldwide economic activity.”

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The quarterly and half results

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The quarterly and half results

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