Gol Posts First Profit Since 2011 After Trimming Operations

  • Carrier reduced the number of available seats in the quarter
  • CEO says debt exchange is essential to reshape finances

Gol Linhas Aereas Inteligentes SA posted its first quarterly profit since 2011 after the Brazilian airline trimmed operations to compensate for plunging travel in its home market.

First-quarter net income totaled 757.1 million reais ($219 million), compared with a loss of 672.7 million reais a year earlier, Gol said in a statement Wednesday after the close of trading in Sao Paulo. Revenue rose 8.3 percent to 2.71 billion reais, more than the 2.58 billion reais estimated by analysts.

Brazil’s second-largest carrier by market share cut the total number of available seats in the quarter, attempting to reduce costs as unemployment above 10 percent and consumer confidence at record lows kept Brazilians at home. Domestic air travel dropped 7.2 percent in March, the eighth consecutive month of contraction, according to Brazil’s civil aviation agency.

Gol is seeking a $780 million debt exchange, looking to extend the maturity of 1.05 billion reais in local bonds and negotiating to return 25 airplanes to leasing companies this year. Those moves are part of its efforts to shrink operations and reduce its debt burden to survive the turbulent Brazilian macroeconomic scenario until at least 2018.

Restructuring Needed

The debt restructuring, including the bond exchange, is essential for the company to reshape its finances, Chief Executive Officer Paulo Kakinoff said.

"The company is facing several constraints to access credit," Kakinoff said on a conference call on Thursday. "We are 100 percent focused on restructuring initiatives. If the exchange offer is not successful, we won’t be able to deliver several other restructuring plans."

Bondholders of five tranches of dollar-denominated notes, one of them maturing as early as next year, are being asked to accept new securities due in 2018, 2022 and 2028. The new notes will be senior to all of the airline’s existing and future unsecured debt. The haircut for bondholders, who have until June 1 to accept the offer, will range from 30 percent to 70 percent.

Gol’s shares rose 5.7 percent to 2.96 reais at 12:12 p.m. in Sao Paulo. The shares gained 11 percent this year through yesterday. Its $158 million in bonds due 2020 advanced 2.2 cents to 29.4 cents on the dollar, according to data from Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Delta Relief

If the debt exchange offer succeeds, Gol will also get some relief from shareholder Delta Air Lines Inc. The U.S. airline, which holds 9.5 percent of its Brazilian partner, agreed to reduce the collateral Gol must hold under Delta’s guarantee of a $300 million term loan from last year.

The company has seen "good adherence" to the bond exchange offer, Kakinoff said. The airline isn’t considering changes to the terms already presented to bondholders, he said.

Gol had a cash position of 1.82 billion reais at the end of March, equivalent to 18 percent of net revenue in the last 12 months.

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