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GOL strengthens cash position with new shares issue

  • Seeking new partnerships to cover international operations;
  • September yield suffers due to “highly competitive price scenario” in the domestic market;
  • Continues to scale back international expansion;
  • Strengthens cash position with new shares issue.

GOL has joined the stampede of airlines raising capital on debt and equity markets in the past two months, raising USD347 million from its global offering of 38 million preferred shares. The offering included preferred shares in the form of American Depositary Shares (ADS) by the company and its controlling shareholder, ASAS Investment Fund.

The ADSs were priced at USD9.48 each, while the preferred shares were priced at BRL16.50 (USD9.47) per share. Upon pricing, the transaction was upsized by 10% from 34.6 million to 38.0 million preferred shares.

The carrier plans to use the funds for general corporate purposes and to strengthen its cash position and balance sheet. The LCC’s cash and cash equivalents totalled USD332 million as at 30-Jun-2009, a 55.5% year-on-year increase, and approximately a 75% increase from Mar-2009 levels.

Continues to scale back international expansion

GOL is continuing to restructure its route network, launching scheduled services from Sao Paulo to Aruba via Caracas on 04-Oct-2009, after receiving approval from the Brazilian National Civil Aviation Agency and other relevant authorities.

The weekly service is operated by the VARIG brand with B737-800NG aircraft. Aruba, in the Caribbean, is the LCC’s tenth international destination.

In the past several months, the carrier has been consolidating its international network, including suspending services to European, North American and certain South America destinations, shifting focus toward its domestic network and the Caribbean. According to GOL CEO, Constantino de Oliveira, approximately 90% of the carrier’s revenue is generated from domestic routes.

Most recently, GOL more than halved its frequency between Brazil and Chile, reducing frequency from 16 to just seven per week, as the economic recession and the swine flu outbreak continue to affect air travel demand. The carrier currently operates a daily service from Sao Paulo to Santiago via Buenos Aires.

Also affected by the swine flu outbreak is air travel demand to Argentina, GOL’s largest international market, accounting for approximately 3% of total revenue. The carrier reported load factors on Argentina services fell by more than 50% in three months at the end of Jun-2009.

The drop in traffic prompted GOL to consider scaling back services to Argentina, although the carrier is required to maintain an undisclosed minimum number of services, in accordance with an agreement between Brail and Argentina.

September yield suffers due to “highly competitive price scenario” in the domestic market

GOL reported a 26.6% year-on-year increase in total passenger traffic in Sep-2009, measured in revenue passenger kilometres (RPKs), driven primarily by the rapidly recovering Brazilian domestic market. Domestic passenger traffic surged 36.4% in Sep-2009 while capacity (ASKs) increased 14.7%. The result was a 10.7 ppts increase in load factor to 67.2%. System load factor increased 9.4 ppts to 66.4%.

International traffic remained weak, falling 22.4% on the back of a 23.4% reduction in capacity, as the carrier cut capacity on less profitable international routes.

GOL traffic highlights for Sep-2009:



% Change

Traffic (RPKs mill)



Capacity (ASKs mill)



Load factor (%)



Domestic Traffic (RPKs mill)



Domestic Capacity (ASKs mill)



Domestic Load Factor (%)


+10.7 ppts

International Traffic (RPKs mill)



International Capacity (ASKs mill)



International Load factor


+0.8 ppt

GOL reported a decline in average net yield, to BRL 17.00 cents (USD 9.19 cents), in Sep-2009, bringing the average net yield for 3Q2009 to BRL 19.00 cents (USD 10.27 cents). The declining yield is attributed to increasing price competition in the domestic market.

Seeking new partnerships to cover international operations

As GOL cuts back on international operations, the carrier is continuing to seek new partnerships to feed its domestic operations. Most recently, GOL signed a codeshare agreement with AeroMexico covering the LCC’s services from Sao Paulo to six Brazilian destinations, including Rio, Belo Horizonte, Porto Alegre, Curitiba, Brasilia and Salvador.

The LCC also signed a reciprocal frequent flyer and codeshare agreement with American Airlines in Jul-2009, effective in 4Q2009. On the carrier’s focus on codeshares, Mr Oliveira stated, “it's very important as it means we'll capture more passengers from long-haul carriers and help us build stronger load factor. Also there's an expectation from our clients to have alternatives to fly outside Brazil."

GOL’s current codeshare partners also include Copa Airlines and Air France-KLM. In addition, the carrier has entered interline agreements with more than 25 carriers in the past 12 months.

GOL was awarded IOSA (IATA Operational Safety Audit) registration from IATA in Aug-2009, allowing the carrier to sign new codeshare agreements with foreign airlines that operate intercontinental flights to Brazil or South America.

GOL Background Information:

  • Operates nearly 800 daily services to 59 destinations, connecting 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 108 aircraft, with plans to increase this to 139 by 2012;
  • Expects to carry 28 million passengers in 2009;
  • 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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