Brazilian airline stocks tumble
SAO PAULO, Brazil – Brazilian airline stocks fell sharply Wednesday as investors fretted that the nation’s worst air disaster, coupled with the South American country’s long-standing aviation woes, would keep passengers off planes.Shares in other Latin American airlines also slid, but none as sharply as two leading Brazilian carriers that came under heavy selling both on Wall Street and the Brazilian exchange.The sell-off was triggered by the crash Tuesday of a TAM Linhas Aereas SA jet that burst into flames after trying to land on a short, rain-slicked runway at Sao Paulo’s Congonhas airport. TAM’s chief executive Marco Antonio Bologna said none of the 186 people on board survived. The bodies of three people on the ground have been recovered. Authorities say the death toll could rise.TAM’s American depositary shares closed Wednesday down 9.0 percent to $32.59 in on the New York Stock Exchange. TAM suffered a similar slide on Sao Paulo’s Bovespa stock exchange.The U.S.-traded shares of low-cost Brazilian carrier GOL Linhas Aereas Inteligentes shed 2.4 percent to $29.69, also reflecting its Bovespa decline.Industry analysts said the crash would lead to heightened safety concerns among travelers in Brazil, particularly because the accident adds to a list of infrastructure problems that have hit Brazilian airlines in recent months.”We are concerned that last night’s accident could lead the leisure customer to avoid air travel for some time, leading to downward pressure on yields,” Citigroup analyst Stephen Trent wrote in a research report. The yield is the amount of revenue airlines collect for every mile a passenger travels.Trent downgraded both TAM and GOL to “hold” from “buy.”Calyon Securities analyst Ray Neidl put his TAM and GOL ratings and estimates under review, writing in a research report that the crash “will have a major effect on the aggressive growth plans of the two carriers going forward.”Bologna said TAM has insurance to cover all the immediate expenses arising from the crash, but declined to release the name of the insurer. He said TAM was not prepared to immediately discuss the financial impact of the crash on the company.In September, a GOL Boeing 737 and an executive jet collided over the Amazon rain forest, killing all 154 people aboard the GOL plane. Since then, congressional investigations have raised questions about the country’s underfunded air traffic control systems, deficient radar system and the airlines’ ability to cope with a surge in travelers.Post-crash investigations at Congonhas airport could lead the government to reduce the number of flights taking off and landing at the airport or to shut it down temporarily as officials review the safety of its runways, analysts said.”This alone is likely to cause considerable disruption and negatively affect both GOL and TAM,” Goldman Sachs said in a report.Other Latin American aviation stocks also felt the pressure Wednesday.The American depositary shares of Brazilian aircraft manufacturer Empresa Brasileira de Aeronautica SA, or Embraer, slipped 0.7 percent. Chile’s LAN Airlines SA fell 1.2 percent in U.S. trading, while Panama City, Panama-based COPA Holdings SA, the parent of COPA Airlines, shed 1.8 percent.Aeromexico, the only publicly traded Mexican airline, also eased. Its parent, Cintra SA, fell 1.7 percent on the Mexico City stock exchange.
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