GOL Displays Dull Feb Traffic

Low-cost and low-fare airline GOL Linhas Aereas Inteligentes S.A. ( GOL - Analyst Report ) reported weak air traffic for Feb 2013. Revenue passenger kilometers or RPK – implies revenue generated per kilometer per passenger – for the month declined 17.8% from the corresponding month prior year to 2,417.8 million. While revenue from domestic grounds registered a 20.3% drop, international RPK improved 10.1%.

Available seat kilometers (ASK) – that measures an airline's passenger carrying capacity – fell 15.3% year over year to 3,776.4 million, with domestic decline of 19.2%. On the international front, ASK moved up 29.7%.

Load factor on the domestic arena fell 90 basis points (bps) and internationally it plunged 1,020 bps. On a consolidated basis, the load factor was 64.0% compared with 66.0% recorded in Feb 2012.

For the reported month, the passenger revenue per available seat kilometer (PRASK) increased by 14% as a result of the reduction in the domestic market supply. Also, fuel prices for the month increased roughly 16% year over year.

Performance within the boundaries of the country was negatively impacted by the channeling of domestic capacity to overseas routes and the freeze of The Boeing Company’s ( BA - Analyst Report ) 737-300 aircraft services, following the suspension of Webjet operation, last November.

Activities in the international market remained impressive as a result of expansion of GOL’s operations to newer destinations like Santo Domingo, Miami and Orlando.

Latin America based GOL currently holds a Zacks Rank #3 (Hold). The company is expected to perform well in the coming months based on its strategies of route expansion, lucrative acquisitions and collaborations with other prominent market players. These are expected to create significant operational synergies, resulting in higher revenues.

However, we stay cautious due to competitive threats, international business risks, increased operating expenses along with lower demand and appreciation of the U.S. dollar against Brazilian real.

Other Stocks

Other airline stocks worth considering include Zacks Ranked #1 Ryanair Holdings plc ( RYAAY - Snapshot Report ) that has a Strong Buy rating as well as Delta Air Lines Inc. ( DAL - Analyst Report ) that currently holds a Zacks Rank #2 (Buy).