Gol Jumps as Profitability Increases After Capacity Cutback

Gol Linhas Aereas Inteligentes SA (GOLL4), Brazil’s second-biggest air carrier by market share, rallied after announcing that a measure of profitability increased as the company reduced capacity to boost net income.

The shares climbed 6.5 percent to 12.07 reais at the close of trading in Sao Paulo, the most since December 26. It was the third-best performer on the benchmark Bovespa index, which added 2 percent.

A gauge of profitability that measures net passenger income per available seat per kilometer increased 16 percent in March from a year earlier, Gol said in a statement after the close of trading yesterday. The company attributed the increase to its strategy of cutting flights in markets where there is less demand. It reduced domestic flights by 9.8 percent, according to the filing.

“March statistics show another very impressive unit revenue increase,” Stephen Trent, an analyst at Citigroup Inc, wrote in a note to clients today.

Gol is reducing domestic capacity by 7 percent in 2013 as it tries to improve margins after economic growth came in lower than forecast last year. The airline had projected Brazil’s gross domestic product would grow 3 percent to 4 percent, more than three times the 0.9 percent advance.

Gol is also conducting an initial public offering of its frequent-flier unit, Smiles SA, to raise cash and trim debt.

The carrier’s shares declined 6.4 percent this year while the Bovespa fell 11 percent.

To contact the reporter on this story: Denyse Godoy in Sao Paulo at dgodoy2@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.