Back to top

Analyst Blog

Leading Latin American airline, GOL Linhas Aereas SA (GOL - Analyst Report) posted solid traffic results for Jan 2014. Net passenger revenue per available seat kilometer (PRASK) for the month increased 9% year over year on better load factor.

Revenue passenger kilometers or RPK – implying revenue generated per kilometer per passenger – for the month increased 16.9% from the year-ago month to 3,649.7 million. Both domestic and international RPK showed an improvement of 17.3% and 13.6%, respectively.

Available seat kilometers (ASK) – that measures an airline's passenger carrying capacity –increased 9.1% year over year to 4,689.5 million. Home ground capacity increased 10.2%, while on the international front, ASK improved marginally by 0.3%.

Domestic and international load factor increased 4.7% and 8.7%, respectively, while consolidated load factor increased 5.2% to 77.8%. The consolidated load factor for Jan was the highest in the last 10 years. In addition to strong load factor the company’s yield also grew 2% from the prior-year quarter, leading to the improved performance.

The biggest impediment to GOL’s 2014 growth is persistent weakness in Brazilian currency, which contributed to the 9% increase in fuel prices thus offsetting some of the positives of the quarter. Further, soft air travel demand and 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.

However, Brazil will host the 2014 football world cup and 2016 summer Olympics, two of the biggest sporting extravaganzas. The country is expected to get around 600,000 international visitors in addition to 3 million domestic fans this year, presenting a big opportunity for passenger carriers like GOL.

To tap that opportunity GOL recently announced an exclusive strategic partnership with European giant Air France-KLM SA, to expand its operations between Brazil and Europe. We believe that this would significantly improve its international performance.

GOL – which operates with other industry players such as LATAM Airlines Group S.A. (LFL - Snapshot Report) – has a Zacks Rank #3 (Hold). Better-ranked stocks within this sector include United Continental Holdings Inc. (UAL - Analyst Report) and American Airlines Group Inc. (AAL - Snapshot Report). Both carry a Zacks Rank #1 (Strong Buy).

Please login to Zacks.com or register to post a comment.