Yesterday, Gol Linhas Aereas Inteligentes S.A. (GOL) reported its preliminary traffic figures for September 2009.

During the month, Gol recorded a 26.6% yearly growth in air traffic demand due to the increased supply and improved distribution of seats based on the merger between Gol and Varig (VRG), the continued revitalization of the SMILES program — Latin America’s largest mileage program, with more than 6.4 million members and successive fare reductions, which boosted demand sharply in September.

Domestic market demand moved up by 36.4% over the same period in 2008 and by 6.5% over August 2009. However, international demand dropped by 22.4% year-on-year due to the reduction in the supply of seats on less profitable international routes. Nevertheless, international demand rose by 21.1% sequentially.
In line with its focus on optimizing operating profitability, the utilization ratio of Gol’s operational fleet (measured in block hours) remained above 12 hours/day versus 11.3 hours/day in the second quarter of 2009. Seating capacity per kilometer flown rose by 8.7% year over year but fell 4.2% sequentially, due to the reduction in the supply of seats in the international market.

Gol remains better positioned to capitalize on the growth of discount air travel in Brazil and the rest of Latin America given its strong market share position and efficient operations. Favorable trends in fuel prices and exchange rates are also benefiting the company’s outlook.

Although competitive pressures and the impact of the global financial crisis are a source of concern, Gol’s position is strong. We expect the company to experience growth in the short-to-medium term given its continued investment in fleet renovation and international agreements. Thus, we are maintaining our Outperform recommendation on Gol ADRs.
Read the full analyst report on “GOL”
Read the full analyst report on “VRG”
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