GOL Linhas Aereas Inteligentes S.A. (GOL) reported third-quarter 2013 net loss per share of R$0.71 or approximately 31 cents, much wider than the Zacks Consensus Estimate of loss per share of 17 cents. The results, however, improved from the year-ago loss of R$1.16 (or approximately 57 cents). The quarter’s results were hurt by a rise in aircraft rent and traffic service fees, higher maintenance materials and repair charges and increased promotional expenses.
The company reported third-quarter net loss of R$197.0 million (approximately $86.1 million), better than the year-ago net loss of R$309.4 million (approximately $135.3 million).
Net revenue increased 12.2% year over year to R$2,230.5 million (approximately $975.2 million) in the reported quarter. The top line, however, was below the Zacks Consensus Estimate of $1,016.0 million.
Operational Statistics
Revenue passenger kilometers or RPK – implying revenue generated per kilometer per passenger – for the quarter declined 9.7% from the year-ago quarter to 8,658.8 million. International RPK improvement of 18.1% was somewhat negated by 12.1% lower revenues from domestic grounds.
Available Seat kilometers (ASK) – that measures an airline's passenger carrying capacity – fell 4.2% year over year to 12,446.6 million, with domestic decline of 7.0%. On the international front, ASK moved up 25.8%.
During the quarter, the company’s total load factor was at 69.6%, down 420 basis points from the year-ago quarter. Load factor in the domestic arena moved down 410 basis points (bps) and internationally, it fell 420 bps.
Margins
Operating costs and expenses was flat year over year at R$2,193.5 million (approximately $959.0 million) in the reported quarter.
Third-quarter operating income was R$37.0 million (approximately $16.2 million) compared with an operating loss of R$200.7 million (approximately $99.0 million) in the year-ago quarter.
Financials
Exiting the third quarter, GOL Linhas' cash and cash equivalents increased to R$1,629.3 million (approximately $772.1 million) from R$1,050.6 million (approximately $550.0 million) in the corresponding year-ago quarter. Long-term debt increased to R$5,054.7 million (approximately $2,395.4 million) from R$4,644.5million (approximately $2,432.4 million) in the year-earlier quarter.
Our Take
GOL intends to expand its international operations by 5–8% next year while keeping domestic network unchanged. We believe that GOL’s long-term business strategy of route expansion along with strategic acquisitions and agreements are likely to create significant operational synergies.
During the quarter, GOL and leading U.S. passenger carrier, Delta Airline Inc. (DAL) accomplished key milestones in their long-term exclusive alliance. The carriers have attained their immediate goal of expanding the code share agreement, offering greater benefits to their loyal customer base and a seamless experience at airports.
However, various risk factors such as competitive threats, subdued global economy, increased aircraft maintenance costs and weak demand remain nagging concerns on the stock.
GOL – which operates with other industry players such as Copa Holdings S.A. (CPA) – has a Zacks Rank #2 (Buy).
Other Stocks
Another company operating within this segment worth taking note of is US Airways Group, Inc. (LCC) with a Zacks Rank #1 (Strong Buy).
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