GOL Linhas Aereas (GOL) reported encouraging financial results for the first quarter of fiscal year 2011. Adjusted net income in the quarter surged to R$110.5 million (US$66.6 million) compared with R$23.9 million (US$13.2 million) in the year-ago quarter. The year-over-year increase in net income was mainly attributable to higher gains from currency translation.

GOL Linhas reported EPS of R$0.41 per share (US$0.25 per ADS) in the quarter compared with the Zacks Consensus Estimate of US$0.30 per ADS.

The company’s adjusted results excluded the impact of approximately R$120 million of one-time expense.


During the first quarter, net revenue was R$1,895.7 million (US$1,142 million), up 9.6% year over year and 1.4% sequentially. The improvement in revenue was due to escalating demand and higher ancillary revenues. Besides, the company also benefited from its competitive fare policy.

Demand for the company’s services increased by 9.7% year over year and 3.3% sequentially in the quarter with load factor reaching 72.4%. Domestic demand improved by 9.0% while international demand surged by 16%. The company increased its supply by 6.4% in the quarter.

GOL Linhas closed the quarter with an operational fleet of 111 aircraft and a total fleet of 125 aircraft, with an average age of 6.1 years.


Operating expenses based on revenues in the quarter increased 90 basis points year over year and 380 basis points sequentially to 89.8% in the quarter. Operating income came in at R$193.1 million (US$116.3 million) with a margin of 10.2% compared with $191.4 million (US$105.7 million) with a margin of 11.1% in the prior-year period. The year-over-year fall in margin was primarily due to higher fuel and salaries, wages and benefits costs.

The company reported an EBITDAR of R$411.5 million (US$247.9 million) including a margin of 21.7% compared with R$405.0 million (US$223.8 million) and a margin of 23.4% recorded in the first quarter of 2010.

Balance Sheet

Exiting the first quarter, GOL Linhas’ cash and cash equivalents decreased 8.1% sequentially to approximately R$1,797.6 million (US$1,096.1 million). Long-term debt declined 3.0% to R$3,292.6 million (US$2,007.7 million) from R$3,395.1 million (US$2,033 million) in the previous quarter.

Cash Flow

Cash flow from operating activities declined 25.4% year over year to R$108.0 million (US$65.1 million) while capital spending declined 17.1% to R$120.9 million (US$72.8 million).

Capital expenditure for fiscal year 2011 is anticipated to be approximately R$500-R$550 million.

GOL Linhas is one of the most profitable low-cost airlines in the world and the most profitable airline in South America. The company faces stiff competition from peers like Copa Holdings SA (CPA), LAN Airlines S.A. (LFL) and TAM S.A. (TAM). We currently maintain a Neutral recommendation on the stock.

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