GOL to Add 60 More Boeing Aircraft

Brazilian low-cost and low-fare airline, Gol Linhas Aéreas Inteligentes S.A. ( GOL - Analyst Report ) recently signed a contract to purchase from Boeing an additional 60 Boeing 737 MAX Aircraft. To be delivered by 2018, these aircraft will enable operational efficiency through fleet modernization.

Gol Linhas, over time, has been adopting means to enhance the efficacy of its fleet in order to boost productivity and occupancy rates in the quarters ahead. The company targets to achieve a fleet size of 138 by the end of 2012, 136 by 2013 and 140 by 2014. The fleet target for 2014 includes roughly 32 Boeing 737-700 NG and 108 Boeing 737-800 NG aircraft.

Also, of late, the company issued a second series of Guaranteed Notes amounting to $22.7 million in order to raise money for financing engine maintenance. The Notes carried an interest rate of 0.85% p.a. The first issue was worth $39.1 million carrying an interest rate of 1.0% p.a. These notes with a term period of two years were guaranteed by the Export-Import Bank of the United States (Ex-Im Bank). The proceeds from both the issues will be used for funding the maintenance of CFM56-7B engines by Delta TechOps, the maintenance division of Delta Air Lines.

Furthermore, the company focuses on continuous improvement in the ancillary services. Such services include extensive e-commerce platform, and offer of services such as insurance, car rentals and ticket sales from kiosks. These are expected to reinvigorate customer demand and increase sale.

The Zacks Consensus Estimate for the third quarter of 2012 stands at a loss of 19 cents, representing a year-over-year growth of 82.9%. Estimates for 2012 and 2013 stand at a loss of 96 cents and earnings of 23 cents, respectively, reflecting a year-over-year growth of 37.5% for 2012 and 124.3% for 2013.

We currently have a Neutral recommendation on GOL. The stock also bears a Zacks #3 (Hold) Rank. The company’s prime competitors Copa Holdings SA ( CPA - Snapshot Report ) currently has a Zacks #3 (Hold) Rank and LAN Airlines S.A ( LFL - Snapshot Report ) has a Zacks #5 (Strong Sell) Rank.