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GOL Linhas Aereas Inteligentes S.A. (GOL - Analyst Report) reported a net loss of R$309.4 million (US$152.7 million) in the third quarter of 2012, much lower than the year-ago loss of R$516.5 million (US$316.9 million).

Despite the narrower loss, the quarter’s results were impacted largely by a rise in fuel costs and landing fees at Brazilian airports with currency depreciation adding to the woes.

Revenue

Consolidated net revenue was up 7.8% year over year to R$1,987.3 million (US$993.7 million) in the reported quarter. This increase reflected a rise in consolidated demand as well as in load factor.

During the quarter, the company’s total load factor was recorded at 73.8%, up 210 basis points from the year-ago quarter. GOL’s domestic supply decreased 8.4% while supply on GOL’s international route network increased 7.0% year over year. Looking at the domestic demand side, GOL recorded a 5.7% year-over-year decline whereas, international demand increased 8.8% year over year.

Exiting the quarter, GOL Linhas had a total fleet of 127 B737-700 and 800 NG aircraft with an average age of 7.4 years, in addition to 20 B737-300s, with an average age of 21.0 years. Besides, under an operational leasing contract, the company took delivery of four aircraft and returned four, including three of Webjet's 737-300s.

Margins

Operating costs and expenses increased 14% year over year to R$2,188.0 million (US$1,094.0 million) in the reported quarter. Operating income (EBIT) came in at a negative R$200.6 million (US$100.3 million) compared to an operating loss of R$75.1 million (US$46.1 million) in the year-ago quarter. The operating margin stood at negative 10.1% in comparison with a negative operating margin of 4.1% in the prior-year period.

The company reported EBITDA of negative R$79.5 million (US$39.8 million), down from EBITDA of R$15.6 million (US$9.6 million) reported in third quarter 2011. EBITDA margin came in at (4.0%) compared with 0.8% in the third quarter of 2011.

Balance Sheet

Exiting the third quarter 2012, GOL Linhas' cash and cash equivalents increased to R$1.05 billion (US$525.3 million) from R$0.98 billion (US$0.47 billion) sequentially. Long-term debt increased sequentially to R$4.64 billion (US$2.32 billion) from R$4.62 billion (US$2.2 billion).

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 - Snapshot Report).

GOL has a Zacks #5 Rank, which translates into a short-term (1-3 months) Strong Sell rating.

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