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GOL: May Traffic Slows

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Leading Latin American airline GOL Linhas Aereas Inteligentes S.A. (GOL - Free Report) posted dull traffic results for May 2013. However, net passenger revenue per available seat kilometer (PRASK) for the month increased 11% year over year.

Revenue passenger kilometers or RPK – implying revenue generated per kilometer per passenger – for the month decreased 2.7% from the year-ago month to 2,739.4 million. Although international RPK showed an improvement of 40.1%, activities on the domestic land was low (down 5.6%).

Available seat kilometers (ASK) – that measures an airline's passenger carrying capacity – slipped 2.7% year over year to 4,144.8 million. Home ground capacity dropped 6.1%, while on the international front, ASK moved up 39.3%.

Domestic as well as international load factor increased 30 basis points (bps), while the consolidated load factor remained unchanged at 66.1%.

For the first five months of 2013, on a consolidated basis, GOL generated RPK of 13.73 billion (down 10.5% year over year) and ASK of 20.52 billion (down 8.6% year over year). Load factor was 66.9%, reflecting a decline of 140 bps from the comparable period last year.

The company’s not-so-impressive performance was primarily due to the effects of the transfer of domestic capacity to overseas routes and the freeze of The Boeing Company’s (BA - Free Report) 737-300 aircraft services, following the suspension of Webjet operation, last November.

To cope with the disappointing results, GOL is consistently taking steps to enhance its operations. The company is in attempts to increase its operations at Viracopos Airport, in Campinas. Management plans to start six new daily flights from the city in Sao Paulo, including five to Santos Dumont/RJ and one to Brasília, from September. GOL is also contemplating to start new itinerary between Brazil and Nigeria, in Africa.

We believe that GOL’s growth initiatives that include streamlining of supply, introduction of new routes, expansion of overseas operations, collaboration with other carriers such as Della Airlines (DAL - Free Report) and purchase of modern and superior jets will aid the company to register higher revenue and earnings in the coming months.

GOL – which operates with other industry players such as Copa Holdings SA (CPA - Free Report) – has a Zacks Rank #3 (Hold).

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