Gol Gains as Profitability Rises on Flights Cut: Sao Paulo Mover

Gol Linhas Aereas Inteligentes SA, Brazil’s second-biggest air carrier by market share, rose after the company said profitability increased last month as it cut flights where there was less demand.

The shares climbed 1.8 percent to 8.55 reais at the close of trading in Sao Paulo. It was the second best performer on the benchmark Ibovespa, which fell 2.1 percent.

Net passenger income per available seat-kilometer, a measure of profitability known as Prask, increased 18 percent in July from a year earlier, the Sao Paulo-based airline said yesterday in a regulatory filing. The company attributed the increase to a strategy adopted in May 2012 of cutting flights on routes where there is less demand.

The increase in profitability shows that Gol’s strategy is working, Sandro Fernandes, a trader at brokerage Geraldo Correa, said in a phone interview from Belo Horizonte, Brazil. “The hard adjustments Gol has been making are paying-off,” he said. “Investors are very encouraged by the numbers released today.”

Domestic flights in July dropped by 4.8 percent from a year earlier, according to the filing.

Gol’s shares have tumbled 34 percent this year as a falling Brazilian real drives up costs for dollar-based expenses such as fuel, airplane leases and debt payments. The Ibovespa fell 17 percent over the period.

Workforce Reduction

The airline has been cutting costs, reducing its workforce in the first half to 16,465 employees, down 13 percent from a year earlier. Simultaneously, the company has pushed to boost dollar-based revenue by adding international flights.

Gol’s international flights in July increased by 26.4 percent from a year earlier, according to yesterday’s filing.

Seventy-seven percent of Gol’s total debt of 5.6 billion reais at the end of the second quarter was denominated in dollars, according to a regulatory filing last week. The real has depreciated 14 percent this year.

“The weakening of the Brazilian currency represents a risk for the company’s profit in coming quarters, not only because of the operational expenses, but debt too,” Fernandes said.

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