GOL Posts Low April Traffic


South American prominent airline GOL Linhas Aereas Inteligentes S.A. (GOL) displayed disappointing traffic results for Apr 2013. However, net passenger revenue per available seat kilometer (:PRASK) for the month increased 8% year over year.

Revenue passenger kilometers or RPK – implying revenue generated per kilometer per passenger – for the month declined 10.6% from the year-ago month to 2,700.9 million. Although international RPK showed an improvement of 17.5%, domestic operation recorded lower revenues (down 12.7%).

Available seat kilometers (:ASK) – that measures an airline's passenger carrying capacity – fell 3.9% year over year to 4,051.4 million. Home ground capacity dropped 6.9%, while on the international front, ASK moved up 31.2%.

Load factor on the domestic arena as well as international field fell 450 basis points (bps) and 680 bps, respectively. On a consolidated basis, the load factor was 66.7%, down from 71.6% recorded in Apr 2012.

For the first four months of 2013, on a consolidated basis, GOL generated RPK of 10.99 billion (down 12.2% year over year) and ASK of 16.38 billion (down 10.0% year over year). Load factor was 67.1%, reflecting a decline of 170 bps from April last year.

The company’s poor performance was primarily due to the effects of the transfer of domestic capacity to overseas routes and the freeze of The Boeing Company’s (BA) 737-300 aircraft services, following the suspension of Webjet operation, last November. The company’s strategy to reduce supply – implemented in Apr 2012 – along with changes in pricing trends also influenced the results.

Moreover, various risk factors such as competitive threats from players such as Copa Holdings SA (CPA), international business risks, increased aircraft maintenance costs and lower demand remain major roadblocks for the company.

Nevertheless, we believe that management’s growth initiatives that include streamlining of supply, introduction of new routes, expansion of overseas operations and purchase of modern and superior jets will aid the company to register higher revenue and earnings in the coming months.

GOL – which entered into a codeshare agreement with Della Airlines (DAL) – holds a Zacks Rank #3 (Hold).

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