GOL Will Lose Out On $1.5 Billion In Sales Due To COVID-19

GOL Linhas Aereas is facing a US$1.5 billion hit on its sales due to the COVID-19 pandemic, said Richard Lark, GOL’s CFO. During today’s third-quarter investors call, GOL’s management shed some light on the Brazilian low-cost carrier’s current state. Let’s investigate further.

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GOL had a net loss of US$300 million between July and September 2020. Photo: Getty Images.

How did GOL do in Q3 of 2020?

In Latin America, the Brazilian market has had the second-best recovery from the COVID-19 pandemic after Mexico. While it is still approximately 50% down from 2019 levels, there are reasons for hope. Moreover, Brazil still has its high season ahead as summer is set to start in December. With that in mind, GOL’s management painted a hopeful picture during the third-quarter results.

These are the highlights of GOL’s third-quarter:

  1. GOL had a net loss of 1.69 billion reais (US$300 million).
  2. The operating revenues of the company fell 73.7% compared to the third-quarter of 2019.
  3. Likewise, the operating costs and expenses fell 44.0%, including a whopping 73.6% decrease in labor costs without furloughing staff.
  4. GOL’s liquidity at the end of the quarter was 2.2 billion reais (US$388 million), a decrease of 1.1 billion reais compared with the previous quarter. The Delta loan payment explains the decline.
  5. The load factor of GOL’s flights was approximately 80%, the highest among Brazilian airlines.
  6. GOL served 122 domestic routes during the third-quarter. The airline ended the quarter operating 75% of the domestic routes it had last year.
  7. GOL reactivated 27 aircraft from its fleet, going from 44 active planes at the end of June to 71.
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GOL expects to operate 490 flights per day in December. Photo: Getty Images

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What can we expect going forward?

Paulo Kakinoff, GOL’s CEO, said that the promising results “reflect the return of passengers to the skies in Brazil.” The number of customers flying with GOL tripled in the third-quarter compared to the previous one.

When the COVID-19 pandemic struck the hardest on Latin America’s connectivity between April and June, GOL operated 57 flights per day. It also served 28 markets and had a capacity decrease of 91% compared to last year. Since then, the low-cost carrier has swiftly recovered. It ended the third quarter operating 271 flights per day and with a capacity 60% down.

For the final quarter of 2020, GOL expects to end operating 490 flights per day, serving 172 markets. The capacity would be 35% down compared to December 2019.

Finally, the Brazilian airline estimated how the market would look in the first quarter of next year. First of all, GOL expects to resume its international flights in this quarter. It also plans to operate 528 flights per day, serving 181 markets. Its capacity would only be 24% down compared to the first quarter of 2020 before the pandemic struck.

Why is GOL losing 1.5 billion in 2020?

Richard Lark was talking about the liquidity of GOL. He said that the company has to rebuild the current assets to the pre-pandemic levels. Then, he added,

“The full effect of the pandemic, from March to December, it was that 9 billion reais (US$1.5 billion) of sales were destroyed.”

According to a presentation of GOL, the 9 billion reais impact is divided into several initiatives like labor costs, operations, fuel costs, working capital, leases and the suspension of new aircraft deliveries, non-essential expenditures, and more.

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GOL has a fleet of 129 Boeing 737 aircraft. Photo: Getty Images.

GOL’s fleet

The Brazilian low-cost airline ended the third-quarter with a fleet of 129 Boeing 737 aircraft. It was comprised of 122 NGs and seven MAX, which are non-operational at the moment.

So far, in 2020, GOL has terminated 14 Boeing 737-800 aircraft leasing contracts. Also, it further has the ability to reduce its fleet by another 30 aircraft between 2021 and 2022.

Regarding its impending Boeing 737 MAX order, GOL still is expected to receive 95 additional MAX. Its order was originally of 129 aircraft, but GOL cut it down due to the COVID-19 crisis. Remember, GOL has already agreed on a MAX compensation with Boeing, which bolstered its liquidity during the second-quarter.

What do you think of GOL’s financial results? Let us know in the comments.