GOL Linhas Traffic Rises – Analyst Blog

Recently, the Brazilian airline operator, GOL Linhas Aereas Inteligentes S.A. (GOL) reported an increase in passenger traffic for May 2010 compared to May 2009.

 

During the month, total traffic bloated 14.5% year over year based on the company’s better positioning in its markets and increased demand driven by the recovery in the Brazilian economy. Domestic traffic grew 14.9% while international topped with 11.5% growth year over year.

 

GOL’s recorded an increase in traffic in both the months of the second quarter of fiscal 2010. During April 2010, total traffic swelled by 26.5% with domestic traffic increasing 29.6% and international traffic rising 5.6%.

 

The increase in international demand was due to adjustments in the company’s international network, which now includes new routes from Brazil to the Caribbean connecting Aruba, Curacao and Barbados. The repositioning of sales channels, including the opening and renovation of airport stores abroad in order to adjust them to GOL’s business model and the client profile of the location in question was also favorable.

 

GOL remains better positioned to capitalize on the increase in discounted air travel in Brazil and the rest of Latin America, given its strong market share and efficient operations. We expect the company to experience growth in the short-to-medium term given its continued investment in fleet renovation and international agreements.

 

Moreover, other Latin American and Chinese airline stocks performed well in 2009. We believe that 2010 may be another profitable year for the airlines industry in the emerging markets, provided the overall economy continues to grow. Besides, the economic growth in emerging markets will be higher than in the developed markets.

 

However, we maintain our Neutral recommendation on the GOL based on intense competition, particularly from TAM S.A. (TAM), and gyrating fuel prices