Gol Plans to Cut Twice as Many Jobs by Year-End, CFO Says

Brazil Airline Gol Cutting Workforce by 2,500
A Gol Linhas Aereas Inteligentes SA Boeing 737 airplane taxies on the runway at Congonhas Airport in Sao Paulo, Brazil. The Sao Paulo-based airline is firing workers and won’t replace those that leave the company, Chief Financial Officer Leonardo Pereira said in an interview at Bloomberg headquarters in New York. Photographer: Paolo Fridman/Bloomberg

Gol Linhas Aereas Inteligentes SA, Brazil’s second-largest airline, will cut 2,500 jobs to restore profitability, twice as many as it had planned last month, Chief Financial Officer Leonardo Pereira said.

The Sao Paulo-based carrier is firing workers and won’t replace those leaving the company, Pereira said in an interview today at Bloomberg’s headquarters in New York. The company said as recently as May it would trim about 1,200 positions from a workforce of about 20,500. Gol expects to end 2012 with 138 planes, down from 150 to start the year.

A slowdown in economic growth, declines in the currency and an inability to raise prices amid increasing competition fueled losses at the airline in three of the past four quarters, according to data compiled by Bloomberg. Gol more than doubled capacity in the past five years as growth surged in Latin America’s largest economy.

The company will “most likely” end the year with fewer than 18,000 workers, Pereira said. “That’s a result of not hiring people, not opening new positions. We are being very cost conscious.”

The company’s stock has tumbled 47 percent in the past year, compared with a 12 percent decline for Brazil’s Bovespa stock index. Yields on the company’s benchmark dollar bonds due in 2020 have surged 325 basis points, or 3.25 pecentage point, in the past three months to 12.16 percent, Bloomberg data show.

Economic Projection

Brazil’s economy will expand 2.18 percent this year, down from 2.7 percent in 2011, according to the median estimate of 100 economists in a central bank survey published today. The real has lost 11 percent this quarter, the biggest drop among the 16 most-traded currencies tracked by Bloomberg. About 55 percent of Gol’s costs, including fuel and aircraft leases, are in dollars, while the majority of receivables are in reais.

The carrier announced June 18 that Chief Executive Officer Constantino de Oliveira Jr. was stepping down and Paulo Kakinoff, Audi AG’s Brazil head, was preparing to take over as CEO on July 2. Oliveira will become chairman.

“We have done a tremendous exercise inside the company in terms of adapting the cost structure,” Pereira said. “If you have a scenario where you have a weaker real or higher fuel costs, you have to have an operation that’s leaner. We are working very hard on cutting fixed costs.”

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