Brazilian airline Gol’s fortunes are inextricably tied to and mired in Brazil’s weakening conditions

Brazilian airline Gol continues to battle the deteriorating conditions in its home market driven by high inflation and record currency devaluation. Unlike most Latin America airlines, Gol has a much larger exposure to the domestic market and the demand fluctuations created by the macroeconomic pressure in Brazil.

Given the conditions in Brazil, Gol has revised its planned capacity targets downward in the domestic market for 2015, but at a lower rate than rival TAM, part of the LATAM Airlines Group. Gol reasons that its rival is catching up after Gol undertook a significant capacity reduction in late 2012. However, Gol cites some fleet flexibility if market conditions dictate a further capacity reduction.

Gol for the last couple of years has been working to strengthen its balance sheet as the BRL has devalued significantly against the USD. It recently brokered a financing deal with Delta, which upped its equity stake in Gol. But currency devaluation is pressuring Gol's leverage position, diluting some of the balance sheet clean-up it has undertaken during one of the most challenging periods in Brazilian aviation.