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GOL Linhas Aéreas Inteligentes S.A. (GOL - Analyst Report) reported financial results for the first quarter of 2012 with a net loss of R$41.4 million (US$23.4 million). The reported results compare unfavorably with a net income of R$69.4 million (US$41.8 million) in the year-ago quarter.

The loss was due to rising operating costs, especially fuel, landing fees at Brazilian airports as well as currency depreciation and income taxes.

Revenue

For the reported quarter, consolidated net revenue was R$2166.1 million (US$1223.8 million), up 14.3% year over year. This increase reflected incorporation of Webjet’s operating revenue of R$319.1 million (US$ 156.8 million) during the quarter.

The load factor on GOL’s route network reached 66.6% in 1Q12, down from 71.0% reported in the year-ago comparable quarter and 64.3% in the prior quarter. GOL's domestic demand fell by 4.7% during the quarter resulting from slower economic growth in Brazil. International route network demand fell by 16.7% over the prior-year quarter, primarily due to the discontinuation of flights to Bogotá and winding up of international charter flights. Domestic supply, however, recorded a 3.6% upturn while international supply fell by 24.4% over the year-ago quarter.

Exiting the quarter, GOL Linhas had a total fleet of 124 B737-700 and 800 NG aircraft with an average age of 7 years and that of Webjet’s 24 B737-300s, with an average age of 19 years. Besides, under an operational leasing contract, the company took delivery of one aircraft.

Margins

Operating costs and expenses increased 22.6% year over year to R$2,158.8 million (US$1219.7 million) in the reported quarter. Operating income (EBIT) came in at R$7262.0 million (US$4102.8 million), down 94.6% year over year with a margin of 0.3%. EBIT margin compares unfavorably with 7.1% recorded in the prior-year period.

The company reported an EBITDA of R$126.2 million (US$71.3 million), down 44.0% year over year. EBITDA margin came in at 5.8%, down from 11.9% recorded in the first quarter of 2011.

Balance Sheet

Exiting the first quarter, GOL Linhas’ cash and cash equivalents decreased from R$1230.3 million (US$651.0 million) to R$1314.6 million (US$722.3 million) sequentially. Long-term debt increased sequentially from R$ 3439.0 million (US$1,819.6 million) to R$4404.2 million (US$2419.9 million) in the reported quarter.

Cash Flow

Net cash provided by operating activities came in at 231.3% year over year to settle at R$357.8 million (US$202.1 million). Payment for property, plant and equipment increased 40.1% year over year to R$169.4 million (US$95.7 million).

Further, GOL announced its new target for 2012, which involves reducing domestic supply by up to 2% over 2011 as well as future fleet plan of 138 in 2012, 136 in 2013 and 140 in 2014.

GOL Linhas, one of the most profitable low-cost airlines in the world, gives a tough competition to other industry players, such as Copa Holdings SA (CPA - Snapshot Report), LAN Airlines S.A (LFL - Snapshot Report), and TAM S.A (TAM - Snapshot Report).

We currently maintain a long-term Neutral recommendation on the stock. Also, GOL has a Zacks #3 Rank, which translates into a short-term (1-3 months) Hold rating.

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