Last week, GOL Linhas Aereas Inteligentes S.A. (GOL), announced its preliminary traffic figures for July 2009, representing an increase in demand in its route network for the fourth consecutive month.
The company reported a 7.4% increase in passenger traffic over July 2008 and a 20.3% upturn over the previous month. This growth was primarily driven by the increase in the supply of low-fare seats and the SMILES program (Latin America’s largest mileage program, with more than 6.2 million members).
The recent Operational Safety Audit registration from the International Air Transport Association will create a potential for its new code-share agreements with foreign airlines. This will provide GOL with a larger intercontinental feeder network, increasing the number of passengers with direct, convenient access to its extensive South American network.
Earlier this month, the company posted better-than-expected second-quarter results. Net income was R$353.7 million (US$192 million) compared to a loss of R$166.5 million in the year-ago period based on a 26% drop in operating costs. GOL’s net financial result of R$369.9 million was also helped by a 19% gain in Brazilian Real.
Higher Brazilian real will have a strong effect on domestic demand for international flights during the second half of 2009. A stronger real will make international travels more affordable. However, TAM S.A. (TAM) will gain much more than GOL as the latter has limited number of international flights which only fly within South America. TAM has a broad number of international flights, including those catering to the U.S. and Europe, which are in high demand among Brazilian travelers.
We believe that the business will remain unstable in the short term, but lower oil prices and falling rates in Brazil will help the company in the coming quarters.
Read the full analyst report on “GOL”
Read the full analyst report on “TAM”
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