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GOL Q4 Loss Wider than Expected

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GOL Linhas Aereas Inteligentes S.A. (GOL - Free Report) reported fourth-quarter 2013 net loss per share of R$0.07 or approximately 3 cents, which compared unfavorably with the Zacks Consensus Estimate of break-even earnings. The results, however, improved from the year-ago loss of R$1.66 (or approximately 81 cents). The quarter’s results were hurt by a decline in domestic supply, record jet fuel prices and depreciation of Brazilian real against the dollar.

The company reported fourth-quarter net loss of R$19.3 million (approximately $8.49 million), better than the year-ago net loss of R$447.1 million (approximately $217.2 million).

For full-year 2013, the company reported loss per share of R$2.62 (approximately $1.22), 53.2% lower than the year-ago loss of R$5.61 (approximately $2.88).

For the year, net loss stood at R$724.6 million (approximately $337.15 million), 52.1% narrower than the year-ago loss of R$1,512.9 million (approximately $777.78 million).


Net revenue increased 28.7% year over year to R$2,728.2 million (approximately $1199.87 million) in the reported quarter. The top line, however, was way ahead of the Zacks Consensus Estimate of $961.0 million. Net revenue for full-year 2013 was up 10.5% year over year to R$8,956.2 million (approximately $4167.3 million).

The domestic market generated revenues of R$2,494.6 million ($1,097.12 million), while international market revenues totaled R$233.6 million ($102.73 million).

Operational Statistics

Revenue passenger kilometers or RPK – implying revenue generated per kilometer per passenger – for the quarter improved 10.1% from the year-ago quarter to 9,484.4 million. International RPK improved 44.4% while domestic RPK rose 7.3%.

Available Seat kilometers (ASK) – that measures an airline's passenger carrying capacity – inched up 2.6% year over year to 12,667.4 million. ASK in the domestic market improved 0.3% against a substantial 26.2% in the international front.

During the quarter, the company’s total load factor stood at 74.8%, up 510 basis points (bps) from the year-ago quarter. Domestically, load factor moved up 490 bps and internationally, it rose 860 bps.


Operating costs and expenses, in the reported quarter, remained flat with the year-ago figure of R$2,565.35 million (approximately $1,128.24 million).

Fourth-quarter operating income (EBIT) came in at R$162.86 million (approximately $71.62 million) compared with an operating loss of R$357.57 million (approximately $173.7 million) in the year-earlier quarter.


Exiting 2013, GOL Linhas' cash and cash equivalents increased to R$1,635.64 million (approximately $761.1 million) from R$775.51 million (approximately $367.7 million) in the corresponding year-ago quarter. Long-term debt increased to R$5,148.7 million (approximately $2,395.7 million) from R$3,471.55 million (approximately $1,690.0 million) in 2012.


For 2014, the company is expecting a negative 3–1% variation in domestic capacity, while growth in international market is projected at around 8%. GOL expects increased profits on improved yield management, supply flexibility and increased load factor. The company expects RASK (revenue per available seat kilometer) growth of above 10% and a CASK (cost of available seat kilometer), excluding fuel growth, of around 10% or below. In keeping with these views, GOL expects EBIT margin of 3–6% in 2014.

Our Take

Persistent weakness in Brazilian currency, which contributed to the 8% increase in fuel prices offsetting some of the positives of the quarter, is likely to pose considerable obstruction to GOL’s 2014 growth strategies. Other risks, such as competition, subdued global economy, increased aircraft maintenance costs and high debt, remain concerns.

However, Brazil will host the 2014 football world cup and 2016 summer Olympics, two of the biggest sporting extravaganzas. The country is expected to get around 600,000 international and 3 million domestic visitors this year, presenting a big opportunity for passenger carriers like GOL.

GOL – which operates with other industry players like Copa Holdings S.A. (CPA - Free Report) – has a Zacks Rank #4 (Sell).

Other Stocks

Better-ranked stocks within this sector include Southwest Airlines Co. (LUV - Free Report) and American Airlines Group Inc. (AAL - Free Report) . Both the stocks sport a Zacks Rank #1 (Strong Buy).

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