Similar to the carriers in other parts of the globe, airlines in Latin America were hard hit by shrinking air-travel demand in 2020. Consequently, air traffic declined 51.9%, 43.1% and 72.7% in 2020 on a year-over-year basis at the respective Latin American airlines, namely Gol Linhas Aereas Inteligentes (GOL Quick QuoteGOL ) , Azul (AZUL Quick QuoteAZUL ) and Copa Holdings (CPA Quick QuoteCPA ) . Another case in point is LATAM Airlines, which went bankrupt last year due to dwindling demand that induced a revenue loss.
However, mainly owing to ramped-up vaccination, economic activities are slowly picking up the pace, buoying consumer confidence. As an evidence, people are increasingly opting for air travel nowadays as fears of contracting the coronavirus receded with widespread vaccination programs in places like Brazil. This, in turn, led to an above 100% year-over-year surge in second-quarter 2021 total revenues at carriers like Gol Linhas and Azul.
Again, in the light of the improved demand scenario, carriers in the region have been reporting healthy traffic data over the past few months. Let’s delve deep to unearth the details.
Yesterday, Gol Linhas in its August traffic report announced that demand for its flights surged 85% (on the domestic front) from the August 2020 levels. With the rise in air-travel demand or traffic outstripping capacity growth or supply in the month, load factor (percentage of seats filled with passengers) improved to 80.2% in the month from 79.4% a year ago.
Gol Linhas’ total monthly departures skyrocketed 93.5% while seats surged 95.9% from its respective year-ago figures. The airline, which did not operate regular international flights during the month, transported 1.5 million passengers in August (up 87% on a year-over-year basis).
In fact, the carrier’s traffic has been improving over the past few months, reflecting the betterment in air-travel demand, courtesy of the spurt in vaccination drives. While its June traffic was 20.8% higher than its May reading, traffic in July registered a 53.4% month-over-month increase.
The air-travel demand scenario is also bright for another Brazilian carrier, Azul. The airline’s traffic increased 18.2% and 30.4% month over month in June and July, respectively. Traffic at the Panama City, Panama-based Copa Holdings rose 19% in July from the June levels. This currently Zacks Rank #3 (Hold) carrier’s June traffic jumped 26.8% in May month over month.
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Apart from the widespread vaccination programs in the Latin American countries like Brazil, a controlled spread of the Delta variant of the coronavirus in the same belt compared to places like the United States may also have contributed to the uptick in traffic.
We remind investors that U.S. carriers like Southwest Airlines (LUV Quick QuoteLUV ) , Frontier Airlines, Alaska Air Group (ALK Quick QuoteALK ) and American Airlines (AAL Quick QuoteAAL ) already warned of revenues being depressed by weak bookings and higher cancellations.
On the flip side, Gol Linhas’ outlook seems rosy. The Brazilian carrier expects net operating revenues for the September quarter to be approximately R$1.8 billion, much higher than the third-quarter 2020 reported figure of R$0.97 billion. Second-half 2021 net revenues are estimated to be R$5.4 billion.
Reflecting the improving COVID-19 scenario, primarily owing to the accelerated vaccination drives in Latin America, Spain recently announced that vaccinated travelers from six countries including South American nations, Brazil, Argentina, Bolivia and Colombia will no longer have to quarantine upon arrival.
Expecting air travel to Latin America to gain further momentum in the winter, the U.S. airline heavyweight United Airlines (UAL Quick QuoteUAL ) intends to add flights to destinations in Latin America and the Caribbean.