In an investor update for the month of September, Gol Linhas Aereas Inteligentes GOL stated that it expanded capacity to 270 flights a day, on average, during last month, representing a 42% increase from the comparable figure in August. The company saw a 36% improvement in demand in the period from the August reading. The uptick in air-travel demand resulted in the carrier operating 360 flights daily in September on peak days.
The Latin American airline’s gross sales in September exceeded R$800 million, up 60% month-over-month. Additionally, gross revenues surged 65% to R$474 million in September from August-levels. Average load factor (% of seats filled with passengers) was 80% in the month of September, up 0.6 percentage points from August tally. In September, there was a 60% month-over-month increase in sales across all sales channels. Moreover, in September, Gol Linhas’ total fleet size was 129 planes, of which 58 were grounded. Total liquidity at the end of the month was R$2.2 billion.
Anticipating the increase in travel demand to continue, Gol Linhas further boosted its capacity October and is operating roughly 400 flights a day. It expects to end the month by operating 500 flights a day. This will bring the carrier’s October 2020 capacity at 60% of the levels achieved in October 2019. The carrier, currently carrying a Zacks Rank #3 (Hold), plans to operate 93 aircraft in the network and reopen three additional bases in the ongoing period.
The above updates apart, Gol Linhas provided an encouraging forecast for the third quarter of 2020, detailed results of which will be available on Oct 30. The company expects earnings before interest, taxes, depreciation and amortization (EBITDA) margin for the September quarter in the 21-23% band. EBIT margin is expected in the 4-6% range. Average fuel per liter is anticipated within R$2.3-R$2.36. Despite the recent improvements, air-travel demand is way below the year-ago levels. Consequently, passenger unit revenues are expected to be down roughly 16% from the levels reached in third-quarter 2019.
Non-fuel unit costs are anticipated to increase 9% year over year, mainly due to the 70% capacity cut and the 35% depreciation of the Brazilian real versus US dollar. However, owing to the 16% decrease in average fuel price, unit costs including fuel are expected to fall roughly 14%. Moreover, total demand, measured in revenue passenger kilometers, in the September quarter is expected by the company to be 72% below the third-quarter 2019 level. With air-travel demand still lagging the year-ago figure, the carrier expects to incur a loss (per American Depository share) of $1.15 in the September quarter.
Stocks to Consider
Investors interested in the broader Transportation sector may consider a few better-ranked stocks like J.B. Hunt Transport Services JBHT, FedEx Corporation FDX and Werner Enterprises WERN, each presently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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