By Gabriel Araujo

SAO PAULO (Reuters) -Brazilian airline Azul SA on Monday saw its share price soar by more than half its value, after it announced a new deal on aircraft leases and predicted bluer skies ahead, even though it deepened a quarterly loss.

As investors welcomed both Azul’s quarterly results and the deal, its shares surged as much as 58% during morning trading, setting them on track for their best day ever and making them the top gainer on Brazil’s Bovespa stock index.

Other travel-related companies in Latin America’s largest economy also soared, with shares in fellow carrier Gol Linhas Aereas Inteligentes SA and travel agency CVC Brasil rising 23% and 16%, respectively.

Analysts at J.P. Morgan said Azul’s margins had beaten their forecasts for the fourth quarter, “but more importantly, the company announced a commercial agreement with leasing companies”.

The carrier revealed the deal late on Sunday, saying lessors responsible for 90% of its obligations had agreed to receive equity and tradeable debt in exchange for lower payments.

“We believe credit risk has been a key theme for the airlines sector,” added analysts at Goldman Sachs, saying they would seek further details on the agreement’s conditions but noted that it “should be positive for the company.”

In a securities filing, Azul said the deal should allow its cash flow to be positive in 2024 and beyond, and forecast a “measurable reduction” in capital expenditure in the period.

The company also scrapped its forecast for roughly 3 billion reais cash burn in 2023.

Chief Executive John Rodgerson said in a statement he was encouraged by the “strong demand environment” and important network milestones in 2023, pointing to recently added routes to Paris and Curacao and plans to increase flights to the United States.

Azul expects to generate record revenue of 20 billion reais ($3.84 billion) this year and record earnings before interest, taxes, depreciation, and amortization (EBITDA) of more than 5 billion reais, roughly 40% above 2019 pre-pandemic levels, Rodgerson said.

For the fourth quarter, however, the carrier reported an adjusted net loss of 610.5 million reais, a deeper loss than the 436 million-real loss seen a year earlier and also larger than the 562.81 million forecast by analysts polled by Refinitiv.

Non-adjusted figures, nonetheless, showed a positive bottom line of 231.2 million reais, reversing the previous year’s loss.

Total operating revenue rose 19.4% to 4.45 billion reais in the period, slightly below analysts’ forecasts, while EBITDA matched expectations at 1.1 billion, up 6.9%.

($1 = 5.1729 reais)

(Reporting by Gabriel Araujo; Editing by Jon Boyle, Sharon Singleton and Jan Harvey and Aurora Ellis)

---