The shares of Azul and GOL Linhas Aéreas have fallen sharply since the Ash Wednesday of Carnival, due to the record high of the dollar quotation (despite not being the historical maximum when we correct for the IPCA) and the effects of the Coronavirus, mainly in travel airlines.
While the crisis in the airline sector mainly affects European and Asian companies, in Brazil the coronavirus (and the rise in foreign currencies) is currently at its maximum, causing a considerable reduction in demand for international flights in the coming months.
However, LATAM Brasil already offers an option to the customer that should become temporarily standard in the coming months, the free rebooking of flights, mainly international ones.
The text below includes only companies listed on B3.
But the sharp drop in shares of local airlines has come as a surprise since Feb. 26.
Before Carnival, on February 21st, GOL's shares (GOLL4) closed at R$33,82, shortly after Carnival, on February 26th, the company's shares closed down, quoted at R$ 28,98, since then GOL's shares have reached a low of R$20,65, a devaluation of almost 39% since the 21st.
This Friday, GOL's shares closed with an increase of almost 2%, quoted at R$ 21,05, an extra boost for the company.
At Azul, the situation was equally accentuated. On the 21st of February, the shares of Azul (AZUL4) closed at R$55,65, shortly after Carnival, on the 26th of February, the company's shares closed with a similar drop, quoted at R$48,25 .38,25, since then Azul's shares have reached a low of R$31,26, a devaluation of 21% since the XNUMXst.
This Friday, Azul's shares closed with an increase of approximately 1,1%, quoted at R$ 38,68, minimally recovering the fall of the previous days.
The prospect of improvement on Friday (06) was caused by a drop in the price of barrels of oil, at the same time that the dollar exchange rate was showing signs that it would begin to stabilize.
It is worth mentioning here the volatility of the aviation market, mainly airlines to the dollar. An airline has a good part of its cost linked to the dollar exchange rate, and the same can vary absurdly from one month to another, as in this situation.
In the fleet of Brazilian airlines, most of the aircraft in operation are leased through contracts with foreign companies. Even aircraft manufactured in the country, such as the Embraer E-Jets, are sold in dollars, and the leasing is also negotiated in dollars.
Other costs, such as fuel (which may be 1/3 of the company's expenses) and the maintenance of its planes, are also linked to the dollar exchange rate.
In the end, the companies lost BRL 3,53 billion in market value, since the beginning of the coronavirus crisis.
Light at the end of the tunnel
While the coronavirus continues to scare companies, as many are temporarily closing offices and even shutting down production lines, we can also see that the crisis could only last a few months.
Investors are still fearful in the market due to the lack of evidence that the coronavirus has reached its peak, something that will only happen when the number of cases starts to fall, however, as it is a humanitarian (and health) crisis, the picture may stabilize by the end of 2020, if the fight against the spread of the virus is really effective in all countries.
The drop in stocks, and in market cap, is not unique to airlines at this point. Several companies are facing the same situation, however, the first step in this case of spread is a sudden retraction of travel between cities, as people avoid contagion by Covid-19 at all costs.
Like other companies, the aviation industry should recover soon after the outbreak es, in the coming months.
