Gol Returns To Profit On Cost Reductions
Brazilian airline Gol Linhas Aereas on Thursday posted its first profit in six quarters as fuel costs dropped and the company trimmed financial and operational expenses.
The Sao Paulo-based carrier, Brazil's second-largest, reported net income of BRR61.4 million reais (USD$29.4 million) for the first three months of 2009, compared with a loss of BRR20.5 million in the year-ago period, a company statement said.
"The performance shown in the quarter mainly reflects our strategic repositioning," CEO Constantino de Oliveira said in the statement. "We are now stronger and better prepared for the future."
Revenue fell 5.4 percent in the first quarter to BRR1.52 billion as the company scaled down operations to cope with a drop in travel demand. It cut the number of seats it offered by 14 percent in the first three months of the year.
Gol, founded in 2001 as Brazil's first low-cost, low-fare airline, has also pared fare increases this year as domestic travel slows and cut its load factor target to 59 percent from 64 percent.
EBITDAR, earnings before debt, taxes, depreciation, amortization and the cost of lease rentals, jumped 46.2 percent to BRR359.3 million from BRR245.7 million in the first quarter of 2008.
The company also said it is near to completing an offering of 6.61 million new common shares and 19.5 million preferred stock announced on March 21. The company estimates the transaction will raise BRR203.5 million.
Management will seek approval from the company's board to sell BRR400 million in domestic guaranteed bonds due in two years.
COST CHALLENGE
Cutting operating costs and financial expenses is crucial for Gol, which has seen its share price drop 70 percent this year, said Victor Mizusaki, an analyst with Itau Corretora.
"With the domestic market in such a weak condition, they have to focus on cost reduction to protect earnings," said Mizusaki before the release.
Costs dropped 9.2 percent to BRR1.41 billion, driven by lower advertising and maintenance costs and an 8 percent drop in fuel costs. The company posted a BRR53.1 million loss from fuel hedging transactions, but booked a gain of BRR17.6 million in transactions related to currency hedges.
Gol's financial expenses were BRR80 million, up 22 percent from BRR65.7 million in the first quarter of 2008, the company said.
