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GOL losing load factor battle again

22-Apr-2009
  • GOL’s load factor slips 2.2 ppts year-on-year in Mar-2009, as international load factor declines 11.8 ppts;
  • Downgrades passenger forecast from 29 to 28 million passengers in 2009;
  • Signs commercial cooperation agreement with Air France-KLM;
  • Considers options to finance aircraft deliveries scheduled in 2011;
  • Introduces four new fare options;
  • Launches Gollog EXPRESS cargo service.

GOL, the Brazilian LCC, had appeared to be arresting the decline in its load factor in Jan-2009, but it slipped again for the second consecutive month in Mar-2009. GOL reported an average load factor of 54.9% last month, declining 2.2 ppts year-on-year, despite capacity cuts of 12.8%.

GOL domestic monthly passenger traffic (millions) and load factor (%): 12 months to 31-Mar-09 and 31-Mar-09

The carrier's international load factor continues to suffer the most, slipping 11.8 ppts, to 43.6%, despite a notable 49.6% capacity (ASKs) reduction, while the carrier's domestic load factor fared a little better, at 56.9%, although this still represented a year-on-year decline, of 0.8 ppts.

GOL traffic highlights for Mar-2009

 

 

% Change

Traffic RPKs (mill)

1,782.3

-16.1%

Capacity ASKs (mill)

3,246.2

-12.8%

Load factor (%)

54.9%

-2.2 ppts

Domestic Traffic RPKs (mill)

1,571.5

-1.3%

Domestic Capacity ASKs (mill)

2,762.2

+0.1%

Domestic Load factor (%)

56.9%

-0.8 ppts

International Traffic RPKs (mill)

484.0

-60.4%

International Capacity ASKs (mill)

210.8

-49.6%

International Load factor (%)

43.6%

-11.8 ppts

GOL's domestic capacity share fell from 45.7% in Mar-2008 to 40.8% in Mar-2009, according to Brazil's National Civil Aviation Agency (Anac). Overall domestic traffic however, rose 3.6% year-on-year to 4 billion, according to Anac. Brazilian market leader, TAM, controls the majority international capacity share to/from Brazil, now with 81% of the market, according to Anac.

As previously reported, GOL has downgraded its passenger forecast for 2009, from 29 to 28 million passengers, and now expects domestic market growth (RPKs) of 2-4%, down from a previously expected 6.0%.

GOL Consolidated Guidance

Currency: USD

2009E

2009E revised

Passengers (mill)

29

28

Domestic market growth (% RPKs)

6.0

2.0-4.0

Capacity (ASKs) (bill)

Domestic

International

40.5

34.0

6.5

40.5

34.5

6.0

Fleet (end of period)

108

108

Traffic (RPKs) (bill)

25.8

24.0

Departures (000)

290

290

Cost per ASK (ex fuel)

3.93

4.20

Fuel cost per litre

0.84

0.72

Fuel litres consumed (mill)

1.25

1.25

Average exchange rate (BRL/USD)

1.95

2.29

For the whole of 2009, reflecting the network integration, GOL expects consolidated load factors in the range of 61%. Capacity (ASKs) is projected to be 40.5 billion, of which 85.2% is expected to be deployed domestically (an increase from the previously forecast 84.0%).

Strengthens the relationship with Air France-KLM

GOL Linhas Aéreas Inteligentes, the parent company of Brazilian airlines GOL Transportes Aéreos (GOL) and VRG Linhas Aéreas (VRG), recently signed a commercial cooperation agreement with Air France-KLM.

The agreement enables the carriers to codeshare. Scheduled to commence by mid-2009, the Air France will codeshare on services between Sao Paulo, Rio de Janeiro and thirteen major Brazilian cities: Belem, Brasilia, Belo Horizonte, Campinas, Curitiba, Florianopolis, Fortaleza, Iguassu Falls, Manaus, Porto Alegre, Recife, Salvador and Vitoria. KLM is yet to finalise such an agreement.

Effective 01-May-09, GOL's 'Smiles' frequent flyer passengers and Air France-KLM's 'Flying Blue' frequent flyer passengers can earn Miles on each carrier's flights, opening access to new benefits and destinations. Commencing 01-Jul-09, FFP members will qualify to redeem their Miles as award tickets with all three carriers.

In 4Q08, GOL announced interline agreements with Air France-KLM and American Airlines, increasing the number of flight feeder channels. Oneworld members are also reportedly considering entering an interline agreement with GOL.

Considers funding options for 2011 aircraft deliveries

GOL announced it is considering options to finance aircraft deliveries scheduled for 2011. The carrier maintains that credit has not been an issue amid the economic slowdown, although GOL only has financing for aircraft deliveries up until 2010.

Earlier this year, GOL stated it is considering wet-leasing some of its grounded B767 fleet and deferring some of the 15 new B737s scheduled for delivery in 2009.

The carrier previously stated it had signed LoIs to sublease three of its seven B767s, although these agreements have yet to be concluded. The carrier also stated it has the option to return some of its B737NG aircraft early to leasing companies this year, although the penalties associated with early returns make this alternative more costly than deferring new deliveries.

GOL's fleet modernisation programme will replace five B737-300s with five new B737NG aircraft, and, by the end of 2009, 65% of the fleet will consist of B737-800SFPs, maintaining the average fleet age of 6.9 years.

As part of this fleet renewal programme, and despite previously-announced fleet reductions, the airline still plans to add new aircraft at a rate of between four and nine aircraft p/a until 2014. GOL currently plans to end 2010 with 115 aircraft, increasing to 121 in 2011 and 127 aircraft by the end of 2012. However, this is subject to change as the carrier has several aircraft leases expiring during this period.

GOL's consolidated fleet from 2009 to 2012 (year-end): Dec-2008

Fleet Plan

2007

2008

2009

2010

2011

2012

B737-300

28

11

-

-

-

-

B737-700

31

38

40

40

40

40

B737-800

18

20

16

11

7

2

B737-800SFP

25

35

52

64

74

85

B767-300ER

9

-

-

-

-

-

Total

111

104

108

115

121

127

Offers new fare options catering to individual travel needs

Meanwhile, GOL is offering new fare options for tickets booked online. The carrier is aiming to meet passengers' different needs, including price, booking period, the need to reschedule flights and participation in the "Smiles" frequent flyer programme. Four fare options are now available:

  1. Free: Freedom to reschedule at no extra cost;
  2. Flexible:
  3. Scheduled; Minimum stop-over at a destination;
  4. Promotional: Low rates under specified conditions.

A 'comfort' category is also available for VRG international flights, including access to Smiles VIP airport lounges, priority check-in, higher baggage limits, greater leg room and increased on-board privacy, 50% Miles bonus for Smiles frequent flyer passengers, and greater range of in-flight entertainment options.

Launches Gollog EXPRESS cargo service

In mid Apr-2009, GOL also launched Gollog EXPRESS, a new product line under its freight subsidiary, Gollog. Gollog EXPRESS offers express shipping services, door-to-door deliveries and scheduled delivery times.

Gollog EXPRESS was approved following the launch of Gollog PRóximo Voo in 4Q08. The new product broadens GOL's cargo services offering, which was responsible for 3% of the company's revenue in 2008.

GOL is also scheduled to launch Gollog DEZ HORAS in Jun-2009. Gollog DEZ HOROS will further broaden the company's offering, focused on the next day delivery of packages and documents by 10:00 to GOL's major cities.

GOL Share price growth: Apr-08 to Apr-09

GOL Background Information:

  • Operates nearly 800 daily services to 59 destinations connected key cities in Brazil and ten major destinations in South America;
  • Has transported more than 75 million passengers since commencing operations in 2001, of which more than 7 million were first-time fliers;
  • The combined GOL/VRG airline currently operates 106 aircraft, with plans to increase this to 139 by 2012;
  • Expects to carry 26 million passengers in 2008;
  • Corporate restructure of GOL Transportes Aéreos (GTA) and VRG Linhas Aéreas (VRG) approved by Anac (Brazil's National Civil Aviation Agency) in Sep-08, enabling the combination of GTA and VRG into a single airline company. GOL is expected to save an estimated USD180 million through the merger.

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