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December 13, 2011
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GOL Linhas Aéreas Inteligentes S.A. (GOL) recently recorded November yield with year-over-year demand growth of 3.0% and a load factor of 62.9% on its total route network.
The domestic demand grew 5.4% y/y primarily based on higher volume of domestic passenger traffic during the extended holiday periods in 2011. Moreover, the yield recovery conforms to the expectation of a sustainable domestic demand growth in 2012 backed by the rise in domestic capacity. The demand, however, fell 4.9% over the sequentially preceding month, mainly due to the lower number of operational days and seasonality.
Demand on the company’s international route network fell 18.5% year over year, due to the return of three chartered flights of B767 aircrafts, discontinuation of flights to Bogota in Colombia; and a major impact of currency fluctuation. In comparison with the previous sequential month, international demand dropped 10%, due to seasonality and lower number of operational days.
Total supply increased by 6.0% over November 2010,primarily due to high fleet productivity reflected by approximately 13.5 block hours per day in November 2011 versus 13.1 block hours per day a year ago. Moreover, the new flights to Punta Cana in the Caribbean, Santiago in Chile, Fortaleza, Rio Branco and in Bolivia added to the rising supply scenario. Supply fell by 1.9% sequentially.
The total load factor was recorded at 62.9%, down 1.8 percentage points year-over-year and 2.3 percentage points sequentially. GOL’s yields hovered between 21.0 and 21.5 cents in Brazilian Real.
GOL Linhas is one of the most profitable low-cost airlines in the world connecting the cities of Brazil as well as those in Argentina, Bolivia, Chile, Paraguay, Peru and Uruguay. It competes directly with its peers, such as Copa Holdings SA (CPA), LAN Airlines S.A (LFL), and TAM S.A (TAM). GOL, over time, has witnessed continued increase in productivity and higher occupancy rate, both in its domestic as well as international routes. The company’s initiatives to curb costs as well as its ancillary business strategies appear conducive toward growth going ahead.
We currently maintain a long-term Neutral recommendation on the stock. GOL has a Zacks #3 Rank, which translates into a short-term Hold rating (1-3 months).
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