Tourism Under Pressure: Why Airline Profits Are Melting Despite Rising Demand

The Brazilian tourism sector faces a severe operational disconnect, where increased sales volume fails to translate into net profitability for airlines, highlighting structural fragility beyond seasonal demand. While passenger traffic remains strong, input costs linked to the dollar—which saw a slight 0.46% decline over the last 30 days to R$ 5.16—continue to aggressively compress operational margins. This phenomenon reflects a chronic inability to pass on costs like Aviation Kerosene (QAV), which remains dollar-denominated, to price-sensitive consumers. With the 12-month IPCA at 4.44% and persistent currency instability, airlines are trapped in a scissors effect: rising fixed operational costs versus price elasticity that prevents fare hikes. Unlike asset-light digital travel platforms, airlines are operating at the limit of financial survival. Given the negative market sentiment and high capital intensity, value investing principles suggest avoiding these firms until they demonstrate solid deleveraging. Looking ahead, the next 180 days will serve as a stress test focusing on debt refinancing capacity, with investors advised to avoid direct exposure to highly leveraged airline stocks.