GOL’s Auditors Fired After Raising Concerns About Airline’s Finances

GOL Linhas Aereas fired its external auditor, KPMG, after “adverse opinions” regarding the Brazilian carrier’s financial statements. Previously, the auditor raised doubts regarding the future of the airline. Should we be worried about GOL? Let’s investigate further.

GOL’s Auditors Fired After Raising Concerns About Airline’s Finances
GOL fired its external auditor after an apparent disagreement with the financial statements of the airline. Photo: GOL Linhas Aereas

What did KPMG say?

The Brazilian carrier announced on Wednesday that it had fired KPMG after only a few months working together. Instead, it hired Grand Thornton Auditores Independentes (GT).

According to Reuters journalist Marcelo Rochabrun, the external auditor raised some questions regarding GOL’s internal controls. KPMG additionally stated that there was “substantial doubt” about GOL’s ability to survive in 2020.

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KPMG published its doubts in GOL’s annual report. Meanwhile, the Brazilian carrier published a notice to the market on 22 July. It said,

“Due to commercial conditions, GT and EY will replace KPMG Auditores Independentes as of the second quarter of 2020”. Neither party disagreed with GOL’s accounting, internal control, and financial statements, it added.

But should we worry?

Foto avión GOL
In the first half of the year, GOL returned 11 aircraft to the leasing companies. Photo: GOL Linhas Aereas

Is GOL in trouble?

GOL, along with all the airlines in the world, is currently struggling due to the coronavirus pandemic. During the first half of the year, GOL reduced its fleet by 11, after returning some Boeing 737-800 leased aircraft.

The carrier left the possibility of returning up to 48 B737 between 2020 and 2022 open also. Meanwhile, the company still has an order with Boeing for several MAX units and secured US$412 million compensation with the US company.

Also, the Brazilian low-cost carrier said in June that it was improving its cash reserves. It added that it has enough funds to keep flying for 12 months, by having approximately US$670 million in liquidity.

At the same time, GOL has been looking for ways to improve its finances. It recently got US$225.81 million in cash through its loyalty program, in a similar fashion to Aeromexico before filing for a Chapter 11 bankruptcy.

Azul Airlines and TAM
Coronavirus shook up Brazilian carriers. Something is going to happen in the country. Will it be a merger, a disappearance, or new airlines emerging? Photo: Getty Images

What’s the future for GOL Linhas Aereas?

Brazilian carriers currently have a difficult situation. Azul and GOL seem like the more reliable carriers, while LATAM Brazil is in Chapter 11. Nevertheless, the three airlines are constrained by the current restrictions in their country and South America. Currently, Brazil is forbidding entrance to any person that is not a resident in the country.

In theory, GOL should have an easier road ahead because of its fleet and route map. Like Southwest in the US, GOL operates solely with Boeing 737, something that benefits the unit costs. Also, it mainly operates domestic flights. In theory, GOL is in the driver’s seat compared with Azul’s and LATAM’s route maps.

But, GOL’s CFO Richard Lark recently said that the domestic Brazilian market could be smaller for some time after coronavirus. Paulo Kakinoff, GOL’s CEO, said that there are “lessons learned by some players in the market… now you can see how toxic an overcapacity approach can be.” 

What we can conclude at the moment is the Brazilian air market is up for a seismic shift. Whether it is a merger between Azul and LATAM, the appearance of new airlines in the country, or the exit of any of the key players, we’re in for a bumpy ride.

What do you think will happen in Brazil? Let us know in the comments.