We are downgrading our recommendation on GOL Linhas Aereas (GOL) ADS from Neutral to Underperform based on poor results during the first quarter of 2010. Gyrating fuel prices was the primary reason behind this.
Moreover, we do not expect a significant recovery in the airline industry in 2010. Additionally, GOL operates in an intense competitive environment, which is going to further increase due to the emergence of new airlines in the region.
Over dependence on few clients such as Boeing and CFM International, and an increase in net debt is another reason for being wary of the stock. The company also faces infrastructure crisis in the Brazilian airports based on insufficient investments.Zacks Investment Research
