Better Nov Traffic for GOL

Zacks

Leading Latin American airline, GOL Linhas Aereas Inteligentes S.A. (GOL) posted improved traffic results for Nov 2013. Net passenger revenue per available seat kilometer (:PRASK) for the month increased 22% year over year, achieving PRASK growth for the 12th time in the last one year.

Revenue passenger kilometers or RPK – implying revenue generated per kilometer per passenger – for the month decreased 10.3% from the year-ago month to 3,008.3 million. Both domestic and international RPK showed an improvement of 7.4% and 46.9%, respectively.

Available seat kilometers (:ASK) – that measures an airline's passenger carrying capacity – inched up 1.2% year over year to 3,995.8 million. Home ground capacity slipped 1.6%, while on the international front, ASK increased 32.3%.

Domestic and international load factor decreased 6.4% and 6.7%, respectively, while the consolidated load factor declined 6.2%.

Attractiveness to high value corporate customers led to the company’s impressive performance in Nov 2013. Reduction of fuel prices in the international market has also aided in the improved showing. Introduction of frequent flights to Miami, Orlando and Santo Domingo late last year is delivering impressive results for the company now. Additionally, the Sao Paolo based carrier also overhauled its website to simplify online ticket purchase.  

However, it has been a tough couple of years for the Brazilian low-fare airline owing to soft air travel demand and the subsequent fall in profitability. It seems now that the scenario could remain the same next year.

The biggest impediment to GOL’s 2014 growth is persistent weakness in Brazil’s economy. Further, significant long-term debt of R$5,054.7 million (approximately $2,395.4 million) at the end of the third quarter, remains a concern.  

Although GOL predicts stable demand within Brazil, it has warned of reducing network next year if the situation warrants. The company is preparing for asset sales, layoffs and other cutbacks to return to profitability and strengthen its balance sheet.

However, Brazil will host the 2014 football world cup, which is one of the biggest sporting extravaganzas. The country is expected to get around 600,000 international visitors in addition to 3 million domestic fans during the event, presenting a big opportunity for passenger carriers like GOL.  

GOL – which operates with other industry players such as LATAM Airlines Group S.A. (LFL) has a Zacks Rank #3 (Hold). Better-ranked stocks within this sector are Hawaiian Holdings Inc. (HA) and Alaska Air Group Inc. (ALK). HA currently carries a Zacks Rank #1 (Strong Buy) while ALK holds a Zacks Rank #2 (Buy).

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