SAO PAULO Brazilian airline Azul on Tuesday reduced its forecast for core earnings this year due to slower capacity growth and higher jet fuel price volatility but raised its view on 2024, lifting its Sao Paulo-traded shares.

Azul, which also reported better-than-expected third quarter results in the day, cut its forecast for 2023 earnings before interest, taxes, depreciation and amortization (EBITDA) to about 5.2 billion reais ($1.06 billion) from some 5.5 billion.

The company said in a securities filing the move was related to a fresh projection of available seats per kilometer (ASK) - a measure of capacity - expanding by 11% in 2023, down from an earlier forecast of 14%.

Longer term outlook, however, was brighter from Brazil's largest carrier by number of flights and cities served, helping its shares jump more than 6% in the day - among the top gainers on Brazil's Bovespa stock index, which rose 2%.

Azul said it now expects about 6.3 billion reais in 2024 EBITDA, up from a previous outlook of "more than 6 billion", due to continued demand strength and an accelerated fleet renewal process.

"We remain encouraged by the industry environment," CEO John Rodgerson said in a statement, "with robust demand, strong tariff dynamics and disciplined capacity addition, especially during the upcoming high season."

Goldman Sachs analysts led by Bruno Amorim, who have Azul as their top-pick name among Latin American airlines, said the fresh guidance was mostly in line with their expectations.

"The company should maintain pricing power as the whole industry remains rational and focused on rebuilding profitability," they said. "That should allow cost pass-through to tariffs and open room for margin expansion."

In the three months ended Sept. 30, Azul beat expectations with a record third-quarter EBITDA of 1.55 billion reais, up 67.7% from a year earlier and above the 1.34 billion forecast by analysts polled by LSEG.

Net revenue, meanwhile, rose 12.3% to a record high 4.91 billion reais, slightly short of the 4.99 billion forecast by analysts.

Ativa Investimentos analyst Ilan Arbetman said the quarterly figures were positive as Azul managed to pass on prices and counted on a drop in jet fuel costs, but noted he still takes the future with a grain of salt.

"We remain 'neutral' because exogenous factors such as foreign exchange rates, Petrobras' jet fuel prices and the current domestic macroeconomic scenario may continue to pressure shares in the sector over the next few months."

($1 = 4.8973 reais)

(Reporting by Gabriel Araujo; editing by Steven Grattan and Jason Neely)