Splitting the lines to create an array is probably what I would have done. However, if you want to work directly with a multiline string, here's one way to do it:

$ perl -Mstrict -Mwarnings -E '
    my $lines = "AZ\nSX\nAZ\nDC\nAB\nYZ\n";
    say $lines;
    $lines =~ s/(?>[^A].|.[^Z])\n//gm;
    say $lines;
'
AZ
SX
AZ
DC
AB
YZ

AZ
AZ
[download]

In my opinion, the multiline solution is a lot more cryptic than the array solution.