GOL Linhas Aéreas, the Brazilian carrier, announced a net loss of $419.28 million (2.3 billion reais) in the first quarter. The loss was mainly attributed to the depreciation of the Brazilian currency. The airline also said that it has enough liquidity and it is “in a strong position to face this crisis.” Let’s investigate further.
GOL went from a possible record quarter to 50 flights per day
From January to the second week of March, GOL Linhas Aéreas was on a roll. According to the carrier, the first quarter was on target for record results, but then the coronavirus pandemic hit hard in Latin America.
On 16 March, GOL reduced its capacity to 60% in the domestic market and 95% in the international market. Then the Brazilian Government implemented a skeleton route map to keep the country connected. Of this map, GOL received 353 weekly flights, the least among the three domestic airlines of Brazil. LATAM received 483 weekly flights. Azul operates 405 flights.
This reduction led GOL from operating 800 flights per day to 50 daily essential flights between Sao Paulo International Airport and all 26 state capitals and Brasilia. Currently, the airline expects to maintain this current network configuration until 20 May. GOL reduced its capacity by 93%.
At the end of the month, GOL expects to increase flight frequencies and coverage to other cities, such as Foz de Iguaçu and Navegantes. The airline additionally expects to reinitiate operations from Congonhas Airport in Sao Paulo and Santos Dumont Airport in Rio de Janeiro.
It has the lowest unit costs in Latin America
Even after facing a near half a billion USD loss, GOL remains optimistic about the future. This optimism is because GOL has the lowest unit costs in Latin America, said the carrier.
During the first quarter, the Cost per Available Seat Kilometer (CASK) decreased by 13.3%. This “enables a better balance of fixed costs during this pandemic period,” said the airline.
Paulo Kakinoff, GOL’s CEO said,
“By acting with speed and decisiveness, we have reduced our fixed costs to preserve the jobs of our employees and the Company’s working capital in the short term. This will provide us with the necessary liquidity to weather the storm.”
To achieve the CASK decrease, GOL temporarily halted almost all flights, deferred lease payments, and aircraft deliveries. It also cut all non-essential capital expenditure, renegotiated vendor terms, and reduced its personnel expenses.
Currently, GOL Linhas Aereas has over one billion USD (7 billion reais) in liquidity sources. This amount equals the expected revenues to the end of the year.
GOL faces other issues: depreciation, MAX, and post-coronavirus recovery
During the first quarter of the year, coronavirus was barely a factor, said GOL. At the end of 2019, one dollar equaled 4.03 reais but, by the end of March, the Brazilian currency lost 29.7% of its value.
The airline faced a 23.7% increase in depreciation and amortization during the first three months of the year. But fortunately for GOL, it had a 21.5% reduction of its total net operating expenses.
Regarding the post-coronavirus world, the Brazilian carrier prepares for a long recovery. GOL is not giving future guidance at this time and will focus on delivering cost savings, protecting jobs, and preparing for the return to regular services when the crisis has passed.
Finally, GOL signed in March an agreement with Boeing due to the current MAX crisis. The airline received compensation of US$80 million (447 million reais), addressing damages resulting from additional non-planned costs.
Additionally, GOL reduced the number of firm Boeing 737 MAX commitments by 34 aircraft to a total of 95 firm orders.
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