GOL Linhas Aéreas Inteligentes S.A. (GOL) recorded a demand increase of 2.8% year over year with a load factor of 65.5% for the month of December. Yield however remained flat over previous month.
Domestic demand increased by 2.8% over December 2010, backed by higher volume of domestic passenger traffic during the holiday periods of Christmas and New Year. Domestic demand registered a growth of 8.5% over November demand, primarily due to higher number of operational days and factors of seasonality.
For international flights, the return of three B767 aircraft that had been chartered out and flights to Bogota, Colombia were discontinued. As a consequence, demand on the company's international route network fell by 24.0% year over year in the reported month. In comparison with the previous month, international demand grew by 3%, due to seasonality and higher number of operational days between the months.
GOL’s domestic demand grew less than that of the industry’s and remained marginally below the initial forecast for 2011. However, the company adopted a prudent approach toward adding capacity in the domestic market and management expects domestic market demand growth to reach at its highest ever level, with GDP growth and attractive market fares.
Coming back to the supply side, mention may be made of high fleet productivity (approximately 13.3 block hours per day in December 2011 versus 13.0 block hours per day in December 2010), combined with the new international flights to Punta Cana in the Dominican Republic, Santiago in Chile, Santa Cruz de la Sierra in Bolivia. This has boosted total supply by 5.3% year over year. Compared with November figures, supply grew by 5.0%, mainly due to seasonality and higher number of operational days between months. The company’s estimated projection of supply growth was in line with expectations for 2011.
GOL’s total load factor came in at 64.8% in December, down 3.3 percentage point year overyear and up 1.8 percentage point, compared with the previous month. Yields stood at between 21.0 and 21.5 cents (R$), slightly up compared with December 2010. Yields for the fourth quarter as a whole grew approximately by 2% year-on-year. Yields have recorded a continuous improvement, since the second half of 2011, primarily due to the business passengers plying across the major domestic routes. Management anticipates continued rise in yields in 2012 as well.
GOL, the largest low-cost and low-fare airline in Latin America, offers more than 940 daily flights to 63 destinations that connect all the important cities in Brazil and 13 major destinations in South America and Caribbean. It faces stiff competition from its peers including Copa Holdings SA (CPA), LAN Airlines S.A (LFL), and TAM S.A (TAM).
We currently hold a Neutral recommendation on the stock. Gol Linhas has a Zacks #3 Rank, implying a short-term (1-3 months) Hold rating.
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