Leading Latin American airlines GOL LinhasAereas SA (GOL) said that it now expects to end 2014 with operating margin in the range of 4% to 6% as opposed to the previous guidance of 3% to 6%. The carrier has stuck to the other aspects of its previously released guidance for 2014.
For 2014, the company still expects its supply to vary between negative 1% and 3% in the domestic market, while growth in international market is projected at around 8%. GOL reiterates Brazil’s GDP growth rate forecast in the range of 1.5%–2.0% for 2014. RASK (revenue per available seat kilometer) growth projection stays at 10% or above. Meanwhile, CASK (cost of available seat kilometer) growth, excluding fuel growth, is still expected around 10% or below.
Apart from adjusting its operating margin forecast, the carrier stated that it expects domestic supply for 2015 to be identical to 2014 levels. We note that GOL has been struggling on the domestic supply front. The company’s third-quarter 2014 results were hurt by a decline in domestic supply. Slow economic growth in Brazil is hurting the company’s domestic operations.
The company is looking to boost its international presence. In a bid to expand its operations between Brazil and Europe, GOL announced an exclusive strategic partnership with European giant Air France-KLM SA earlier in the year. We believe this should contribute significantly to international revenues in the upcoming quarters.
Zacks Rank
GOL currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the airline space include American Airlines Group (AAL), Spirit Airlines (SAVE) and Hawaiian Holdings (HA). All these sport a Zacks Rank #1 (Strong Buy).
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