Latin American airline shares soar on US-Iran deal

Shares in Latin American airlines rose this Monday (15), after the fall in oil prices following news of a peace agreement between the United States and Iran, which eased concerns about fuel costs.

LATAM Airlines rose 4%, while Copa Holdings appreciated by around 2.5%. Azul advanced almost 6%. Airlines based in Mexico, Grupo Aeromexico and Volaris rose 3% and 5%, respectively.

In a note, J.P. Morgan said the drop in fuel prices could benefit airlines in the short term, although it expects oil prices to remain relatively high in the medium term.

The bank highlighted LATAM Airlines and Copa Holdings as its top picks, citing attractive valuations, stronger balance sheets and more consistent cash flow. In Mexico, Aeromexico was preferred due to its good financial growth and pricing power.

J.P. maintained a more cautious stance toward Mexico's Azul and Volaris, citing factors specific to each company, including potential selling pressure at Azul and near-term operational challenges at Volaris.

J.P. Morgan estimates that a 10% change in jet fuel prices translates into an approximately 8% change in airline EBITDAR, on average.

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Source: CNN