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GOL reports $20 million first-quarter profit

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GOL reports $20 million first-quarter profit

Unread post by bimjim » Thu May 12, 2011

http://atwonline.com/airline-finance-da ... RID=#email#

GOL reports $20 million first-quarter profit
By Aaron Karp
May 12, 2011

GOL reported a first-quarter net profit of BRL31.9 million ($19.8 million), up 33.5% over net income of BRL23.9 million in the year-ago period, saying it continues to tap into a growing market of "emerging middle class" air travelers in Brazil.

The all-737NG operator is focusing its growth on the domestic market, where it is in a tight battle against rival TAM with a share near 40% (ATW Daily News, April 11). CEO Constantino de Oliveira told analysts and reporters on Wednesday that GOL is targeting "segments of the population that have never flown before or who have flown infrequently … The company has been doing everything possible to facilitate access to tickets," including locating sales offices in heavy pedestrian traffic areas of Brazilian cities and pushing online distribution.

GOL's first-quarter revenue lifted 6.3% to BRL1.84 billion while expenses climbed 14.4% to BRL1.76 billion, producing an operating profit of BRL78.5 million, down 59% from operating income of BRL191 million in the year-ago period. (Net result was heavily affected by a BRL65.1 million exchange valuation gain in the 2011 first quarter compared to a BRL59 million exchange valuation loss in the year-ago period.)

First-quarter traffic rose 9.7% year-over-year to 8.59 billion RPKs on a 6.4% lift in capacity to 11.88 billion ASKs, producing a load factor of 72.3%, up 2.1 points. Yield lowered 0.9% to BRL0.198. GOL said in a statement that the yield dip was "chiefly due to GOL's strategy of focusing on PRASK growth" as well as its policy of maximizing load factors through fare stimulation to attract members of the emerging middle class and the fact thatCarnival fell in March this year, "extending the leisure travel season and driving demand for [low fare] flights from the south to the northeast of Brazil."

First-quarter PRASK increased 2.1% to BRL0.1435 while CASK grew 4% to BRL0.1434. CASK ex-fuel decreased 1.6% to BRL0.087.

De Oliveira said GOL, while continuing to grow, will be "very cautious in how we add capacity." He noted that the carrier, which operates a fleet of 111 737NGs with four more of the type slated to join the fleet this year, is adding capacity at a slower rate than the overall Brazilian airline industry, which he estimated upped ASMs 14%-15% year-over-year in the first quarter.

Adding capacity is particularly challenging since fare increases have not been possible, he explained: "Usually, once you have a spike in oil prices, the natural thing to do is raise fares. But even with a 38% market share, we are seeing there are a lot of competitors willing to burn cash to achieve market share … We will keep our focus on profitability but I cannot assume that competitors will change the way in which they view the market."

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