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Gol Linhas (GOL) Rides on Air Travel Demand Amid Debt Woes
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Gol Linhas Aereas Inteligentes S.A. is benefiting from a decrease in operating expenses and a surge in air travel demand. Shares of Gol Linhas have gained 23.6% so far this year, outperforming the 12.6% surge of the industry it belongs to.
Image Source: Zacks Investment Research
Let’s Delve Deeper
GOL’s impressive traffic reports for July 2023 look encouraging. In July, consolidated revenue passenger kilometers (a measure of air traffic) and available seat kilometers (a measure of capacity) increased 6.5% and 3.3%, respectively, on a year-over-year basis. With consolidated passenger traffic growth outpacing capacity expansion, the load factor (the percentage of seats filled by passengers) improved to 83.4% from 80.8% in June 2022. The number of flight departures at GOL in July registered a 10.6% year-over-year jump. Consolidated passengers on board rose 14.5% year over year.
Continued recovery in air-travel demand in Brazil bodes well for Gol Linhas. In second-quarter 2023, revenues from passenger transportation, accounting for 89.7% of total revenues, rose 24.2%, thanks to continued recovery in air-travel demand in Brazil. Gol Linhas transported 7 million passengers in the second quarter, up 19.9% from the year-ago number. Strong air-travel demand is likely to aid third-quarter results as well. Backed by a continued recovery in leisure travel demand and a rise in international travel, we expect third-quarter passenger unit revenues to improve year over year.
Declining fuel prices should boost Gol Linhas’ bottom line. Average fuel price per liter declined 22.2% year over year in the second quarter of 2023. Cost per available seat kilometer also fell 7.9% year over year in the second quarter. For 2023, GOL now expects the fuel price per liter to be R$5.1 (prior view: R$5.4).
Despite such headwinds, GOL's liquidity position is a concern. Cash and cash equivalent of $137 million at the second quarter of 2023-end was lower than the $3,782 million of long-term debt. This implies that the company does not have enough cash to meet its debt burden.
Zacks Rank and Stocks to Consider
Currently, Gol Linhas carries a Zacks Rank #3 (Hold).
United Airlines has an expected earnings growth rate of more than 100% for the current year. UAL delivered a trailing four-quarter earnings surprise of 21.44%, on average.
The Zacks Consensus Estimate for UAL’s current-year earnings has improved 18.9% over the past 90 days. Shares of UAL have soared 34.5% year to date.
SkyWest's fleet-modernization efforts are commendable.A fall in operating expenses is a tailwind for SkyWest. In second-quarter 2023, the metric dipped 2.4% to $693.8 million due to a decline in operating costs. Low operating expenses boost bottom-line results. Shares of SKYW have surged 144.6% year to date.
SKYW delivered a trailing four-quarter earnings surprise of 31.51%, on average.
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Gol Linhas (GOL) Rides on Air Travel Demand Amid Debt Woes
Gol Linhas Aereas Inteligentes S.A. is benefiting from a decrease in operating expenses and a surge in air travel demand. Shares of Gol Linhas have gained 23.6% so far this year, outperforming the 12.6% surge of the industry it belongs to.
Image Source: Zacks Investment Research
Let’s Delve Deeper
GOL’s impressive traffic reports for July 2023 look encouraging. In July, consolidated revenue passenger kilometers (a measure of air traffic) and available seat kilometers (a measure of capacity) increased 6.5% and 3.3%, respectively, on a year-over-year basis. With consolidated passenger traffic growth outpacing capacity expansion, the load factor (the percentage of seats filled by passengers) improved to 83.4% from 80.8% in June 2022. The number of flight departures at GOL in July registered a 10.6% year-over-year jump. Consolidated passengers on board rose 14.5% year over year.
Continued recovery in air-travel demand in Brazil bodes well for Gol Linhas. In second-quarter 2023, revenues from passenger transportation, accounting for 89.7% of total revenues, rose 24.2%, thanks to continued recovery in air-travel demand in Brazil. Gol Linhas transported 7 million passengers in the second quarter, up 19.9% from the year-ago number. Strong air-travel demand is likely to aid third-quarter results as well. Backed by a continued recovery in leisure travel demand and a rise in international travel, we expect third-quarter passenger unit revenues to improve year over year.
Declining fuel prices should boost Gol Linhas’ bottom line. Average fuel price per liter declined 22.2% year over year in the second quarter of 2023. Cost per available seat kilometer also fell 7.9% year over year in the second quarter. For 2023, GOL now expects the fuel price per liter to be R$5.1 (prior view: R$5.4).
Despite such headwinds, GOL's liquidity position is a concern. Cash and cash equivalent of $137 million at the second quarter of 2023-end was lower than the $3,782 million of long-term debt. This implies that the company does not have enough cash to meet its debt burden.
Zacks Rank and Stocks to Consider
Currently, Gol Linhas carries a Zacks Rank #3 (Hold).
Investors interested in better-ranked stocks from the Zacks Transportation – Airline industry can consider United Airlines (UAL - Free Report) and SkyWest, Inc. (SKYW - Free Report) . United Airlines presently sports a Zacks Rank #1 (Strong Buy), while SkyWest carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
United Airlines has an expected earnings growth rate of more than 100% for the current year. UAL delivered a trailing four-quarter earnings surprise of 21.44%, on average.
The Zacks Consensus Estimate for UAL’s current-year earnings has improved 18.9% over the past 90 days. Shares of UAL have soared 34.5% year to date.
SkyWest's fleet-modernization efforts are commendable.A fall in operating expenses is a tailwind for SkyWest. In second-quarter 2023, the metric dipped 2.4% to $693.8 million due to a decline in operating costs. Low operating expenses boost bottom-line results. Shares of SKYW have surged 144.6% year to date.
SKYW delivered a trailing four-quarter earnings surprise of 31.51%, on average.