The Pomerantz Firm, specialized in corporate, securities, and antitrust class litigation in the US, launched an investigation against GOL Linhas Aereas on behalf of the Brazilian carrier's investors. In a statement, the firm said that it launched this investigation after GOL fired its external auditor, KPMG, last week. Let’s investigate further.

What is it investigating?

Last week, GOL fired its external auditor KPMG. The Brazilian carrier said the decision was “due to commercial conditions.” It added that Grant Thornton Auditores Independentes and CVM and Ernst & Young Auditores are replacing KPMG since the second quarter of 2020.

Additionally, GOL said that KPMG agreed with the reason for replacement and “confirmed that there were no disagreements [...] regarding GOL’s accounting, internal controls, and financial statements.”

We contacted GOL Linhas Aereas for a statement regarding the investigation. The Brazilian carrier declined to issue a comment. We also contacted Pomerantz Firm for an additional statement, but, at the time of publication, we haven’t received any response.

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But, was there a disagreement? According to Pomerantz, in mid-June, KPMG raised concerns about GOL. It also said KPMG had an “adverse opinion” on the strength of GOL’s internal controls regarding the preparation of financial statements. KPMG also said it had “substantial doubt” about GOL’s ability to exist in a year from now.

So, what is the Pomerantz Firm investigating exactly? In a statement seen by Simple Flying, it said,

“The investigation concerns whether GOL Linhas and certain of its officers and/or directors have engaged in securities fraud or other unlawful business practices.”

Is there a future for GOL?

GOL Linhas Aereas is set to publish its second-quarter results on 31 July. Those results may shed more light on the current state of the Brazilian carrier.

During the first quarter of 2020, GOL posted a net income loss of $2,288.3 billion reais (over US$440 million).

The carrier also canceled 34 orders for Boeing 737 MAX aircraft, reducing its remaining firm order from 129 to 95. Additionally, during the first half of the year, GOL reduced its current fleet by 11, after returning some Boeing 737-800 leased airplanes. Between 2020 and 2022, the airline may return up to 48 additional B737.

In the earnings report, Paulo Kakinoff, GOL’s CEO, said that the carrier’s actions would allow it to survive the current pandemic. “We have reduced our fixed costs to preserve the jobs and the Company’s working capital in the short term. This will provide us with the necessary liquidity to weather the storm,” he said.

What else do we know?

GOL is currently seeing a recovery in the domestic market, even when Brazil has the second most coronavirus cases worldwide. In June 2020, demand was up by 95.4% over May 2020, and supply increased by 84.8%, said the airline.

Despite that, GOL attended 319 thousand passengers in June, an 87.9% decrease in a year-to-year comparison. During 2020, the airline has lost 47.1% of its domestic traffic and 53.5% of the international.

Recently, GOL also secured US$412 million compensation with Boeing over the MAX grounding. Also, the airline got US$225.81 million in cash through its loyalty program. Meanwhile, Brazilian airlines are looking for State support. Nevertheless, as it has been the case in Latin America, loans from the Brazilian Government are slow to come by.

We are only at the start of this story. What do you think may happen? Let us know in the comments.