GOL Linhas Aereas Inteligentes S.A. ( GOL - Analyst Report ) reported net loss of R$715.1 million (US$364.8 million) in the second quarter of 2012, much wider than the year-ago loss of R$358.7 million (US$225.6 million).

The wider loss in the quarter was due to a rise in fuel costs and landing fees at Brazilian airports. Currency depreciation and income taxes also added to the woes.

Revenue

Consolidated net revenue was up 16.9% year over year to R$1,830.7 million (US$1,223.8 million) in the reported quarter. This increase reflected a rise in consolidated demand as well as in load factor.

During June 2012, the company???s total load factor was recorded at 70.5%, up 5 percentage points from June 2011. GOL???s domestic supply dropped 6.7% from May 2011. Supply on GOL???s international route network decreased 3.7% year over year. Looking at the domestic demand side, GOL recorded a 1.4% year-over-year increase whereas, international demand declined 6.4% year over year. GOL???s net PRASK increased approximately 7% over the year-ago period.

Exiting the quarter, GOL Linhas had a total fleet of 124 B737-700 and 800 NG aircraft with an average age of 7.3 years, in addition to 23 B737-300s, with an average age of 20.0 years. Besides, under an operational leasing contract, the company took delivery of one aircraft and returned two aircrafts, including one of Webjet's 737-300s.

Margins

Operating costs and expenses increased 19% year over year to R$2,185.3 million (US$1,114.9 million) in the reported quarter. Operating income (EBIT) came in at a negative R$354.6 million (US$180.9 million), up 31% year over year with a margin of negative 19.4%. A negative EBIT margin of 17.3% was recorded in the prior-year period.

The company reported EBITDA of negative R$222.6 million (US$113.6 million), up 23.6% year over year. EBITDA margin came in at a negative 12.2% compared with negative 11.5% in the second quarter of 2011.

Balance Sheet

Exiting the second quarter 2012, GOL Linhas' cash and cash equivalents decreased to R$983.3 million (US$472.7 million) from R$1314.6 million (US$722.3 million) sequentially. Long-term debt increased sequentially to R$ 4,627.2 million (US$2,224.5 million) from R$4,404.2 million (US$2419.9 million).

Further, GOL retains its target of fleet rationalization with a 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 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 ) .

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.