In an investor update for the month of August, Gol Linhas Aereas Inteligentes SA (GOL - Free Report) stated that it expanded capacity to an average of 190 flights a day last month, thanks to gradual increase in travel demand. The company saw a 20% improvement in demand in the month, compared to July. The carrier’s gross sales surged 27% to R$523 million in August from July. Additionally, gross revenues jumped 15% in August from July.
During August, the company re-opened four bases and increased flights between São Paulo and Rio de Janeiro. Consequently, flight operations augmented 7% in August from July. With this, the carrier’s August capacity was 26% of the year-ago level. After an increase to a peak of 260 daily flights in August, Gol Linhas plans to boost capacity to approximately 300 flights per day in September. Thus, capacity in the month is expected to be around 40% of the September-2019 level. The carrier plans to operate 74 aircraft in the network and re-open three additional bases in the ongoing month.
Anticipating the uptrend in travel demand to continue, Gol Linhas expects to increase capacity by 300% in the third quarter of 2020, compared with the second quarter. In the fourth quarter, capacity is estimated to rise 120% from the third quarter. At the end of 2020, capacity is expected to be at 80% of the 2019 level (domestic).
Given this Brazilian airline’s consistency in its cost-cutting measures, the carrier expects to maintain personnel costs at 50% of pre-pandemic levels in the third quarter of 2020. Excluding payments related to debt service, the carrier’s net cash burn was R$6 million/day. Based on some assumptions, the company expects a net cash burn of approximately R$3 million/day during the September-December period.
Earlier, Gol Linhas announced the repayment of $300 million term loan. With this, the company’s long-term debt maturity is now approximately 4 years. The company’s CFO, Richard Lark stated, “Going forward, we have no significant debt maturities until 2024.” As of Aug 31, 2020, the company’s total liquidity was approximately R$2.1 billion.
Zacks Rank & Key Picks
Gol Linhas carries a Zacks Rank #5 (Strong Sell).
Some better-ranked stocks in the broader Transportation sector are Landstar System Inc (LSTR - Free Report) , Knight-Swift Transportation Holdings Inc (KNX - Free Report) and Canadian Pacific Railway Limited (CP - Free Report) . While Landstar and Knight-Swift sport a Zacks Rank #1 (Strong Buy), Canadian Pacific carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of Landstar, Knight-Swift and Canadian Pacific have rallied more than 15%, 26% and 17% respectively so far this year.
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