Brazil’s GOL Looks To Slash Expected Cash Burn

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GOL Linhas Aereas expects to burn half a million dollars a day for the rest of 2020, it said on Thursday. If it achieves it, the Brazilian low-cost would halve the previously announced cash consumption and help its finances as the current COVID-19 crisis has struck them. Let’s investigate further.

GOL is trying to reduce its cash burn to US$500 thousand per day. Photo: GOL Linhas Aereas

GOL’s mission: reduce cash burn now

The Brazilian airline has had a complicated third quarter. It recently had to pay US$300 million to a loan that it acquired in 2015. In normal circumstances, this loan wouldn’t have been a problem for the low-cost operator but, since the COVID-19 pandemic has crippled airlines’ finances worldwide, one has to wonder how bad the hit for GOL was?

The carrier said that, after paying the loan, it ended up with US$391 million of liquidity in cash and receivables. GOL added that its total liquidity, including deposits and unencumbered assets, is over one billion dollars. According to Reuters, GOL’s liquidity has fallen 46% since June.

In the first half of 2020’s results, GOL estimated that the third quarter’s cash burn would be six million reais per day (approximately one million USD). But, it added,

“Including the full payment of debts not related to aircraft, the Company estimates a net cash burn of R$12 million/day for 3Q20.”

Nevertheless, GOL remains optimistic. Richard Lark, GOL’s CFO, said,

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“Going forward, we have no significant debt maturities until 2024. This is a reflection of the Company’s commitment to strengthening its balance sheet over the last four years.”

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GOL recently paid a US$300 million loan. Photo: Getty Images.

The US probe against GOL continues

At the end of July, we reported several law firms launched investigations against GOL in the US. “The investigation concerns whether GOL Linhas and certain of its officers and/or directors have engaged in securities fraud or other unlawful business practices,” said the Pomerantz Firm.

Today, the Rosen Law Firm announced that the investigation goes on. In a statement seen by Simple Flying, it said,

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“Rosen Law Firm continues to investigate potential securities claims on behalf of shareholders of GOL Linhas Aereas Inteligentes S.A. resulting from allegations that GOL may have issued materially misleading business information to the investing public.”

The Law Firm added that it is preparing a securities lawsuit on behalf of GOL shareholders. Nevertheless, this case is far from over.

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In September, GOL signed a codeshare agreement with Ethiopian Airlines. Photo: GOL Linhas Aereas

A quick recap of the good news

Not all has been bad news for GOL Linhas Aereas. The low-cost airline recently signed a new codeshare agreement with Ethiopian Airlines. This deal will allow GOL to offer plane tickets to far-away destinations in Africa, Middle East, and beyond.

Additionally, GOL has seen a recovery in its domestic traffic during the last months. In August, the airline operated approximately 190 flights per day and reopened four bases. It also added 51 daily frequencies in its main hubs at Sao Paulo and Rio de Janeiro airports.

Last month, GOL received 792 thousand passengers, all on domestic routes, as the company hasn’t restarted its international operations. Yearly, the company has had over 10.4 million passengers, a 56% decrease with 2019. Domestically, GOL has had 9.9 million passengers, while international, it stuck at 494 thousand.

How do you see GOL’s actions to preserve cash? Let us know in the comments.

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