Costs Down, Profits Up at Brazil’s Gol Airline

    Brazil's Gol

    Brazil's Gol Brazilian airline Gol has released the its operations results for the second quarter of 2009 (2Q09). Gol's 2Q09 operating result (EBIT) was positive and totaled 89.9 million Brazilian reais, with an operating margin of 6.5%,versus a operating loss of 295.3 million reais and a negative margin of 20.2% in 2Q08 and totaled 105.1 million reais with a margin of 6.9% in 1Q09.

    Despite the second quarter is the less favorable of the year due to seasonality, the company was able to achieve positive operating result for the fourth consecutive quarter.

    EBITDAR margin stood at 18.6% (258.8 million reais), versus  a negative 7.8% in 2Q08 (a negative EBITDAR of 114.4 million reais) and a positive margin of 23.7% (359.3 million reais) in 1Q09.

    Gol posted a 2Q09 net income of 353.7 million reais, with a net margin of 25.4%, versus a net loss of 166.5 million reais in 2Q08 and net income of 61.4 million reais in 1Q09.

    Operating costs and expenses totaled 1,304.1 million reais in 2Q09, 25.9% down on 2Q08. This decline, according to the company, is due to the merger of Gol and Varig's operations as of 4Q08, especially in the sales &
    advertising and maintenance, materials & repairs lines. The
    reduction in the average jet fuel price also contributed to this improvement.

    In comparison with 1Q09, operating costs and expenses fell by 7.6%, thanks to the average dollar devaluation against the Real of 10.3% and also by what Gol calls "capture of operational synergies."

    Gol entered into a partnership with banks Bradesco and Banco do
    Brasil on June 30, for the issue and management of co-branded credit cards, enabling the banks to issue credit cards under the Smiles brand.

    As part of the agreement, Gol will receive around 255.0 million reais (104 million reais of which already received in June 2009) from the sales of Smiles miles to the two institutions, the banks' right to access and use its database and a share in the revenue generated by the cards.

    Gol informs that it is continuing to restructure its cash and cash equivalents, which totaled 613.7  million reais in 2Q09, 55.5% up on the 394.6 million reais recorded in the previous quarter.

    The company says that it intends to achieve a balance of at least 800 million reais by the end of 2009 and 1.2 billion reais by the close of 2010, representing approximately 13% and 19%, respectively, of last-12-month net revenue.

    The increase was due to a series of initiatives implemented by the company with this in mind, including the capital increase announced in March 2009 and completed during the second quarter, the debenture issue and the partnership involving the co-branded Smiles cards.

    Gol recently concluded several operating agreements and initiatives: agreement with Boeing to reschedule the delivery of 20 Boeing 737 Next Generation aircraft from between 2010 and 2012 to between 2010 and 2014; sub-leasing of two 737-800s to a European airline, with return scheduled for October 2009; replacement of a 767-300 with a 737-800 in April, leaving six wide-body aircraft currently out of commission, two of which are currently under sub-leasing negotiations (sub-lease and wet-lease); delivery of three 737-800NGs (two of which SFPs) as part of the
    737-700 and 737-800 fleet standardization, which aims to replace all remaining 737-300s in 2009.

    As a result of the above,  Gol closed the quarter with an operational fleet of 110 operational aircraft and a total fleet of 124 aircraft comparing to 107 and 120 in 1Q09, respectively. The company estimates to reach the end of 2009 with 108 aircraft in its operating fleet.

    During the quarter, Gol signed two important code share agreements, the first with AirFrance-KLM in April and the second with American Airlines in July. The agreements are part of Gol's strategy of seeking partnerships with the most important airlines in the long-haul segment.

    In April, Gol strengthened its e-commerce platform by introducing car rental and insurance sales with Gol ticket purchase, creating, it believes, new opportunities of sales and ancillary revenue.

    Also in April, the company launched Gollog Express, a new GolLOG product line designed to meet growing demand in the express cargo market, offering door-to-door deliveries with previously defined deadlines. Express delivery services are currently experiencing the largest growth rates in the cargo transport segment.

    TAM-Air China Codeshare

    Brazil's TAM and Air China will begin operating codeshare flights that connect São Paulo and Beijing this month. The agreement should make life easier to passengers of both companies.

    Departing from Brazil on TAM, passengers will be able to purchase tickets to Beijing, with a connection in Madrid's Barajas International Airport. There, they will have the services and support of Brazilian TAM personnel to make connections on flights operated by Air China, which will use the code JJ to Beijing.

    From the Chinese capital to Brazil, Air China passengers will have the same benefits in creating their itineraries, also making a connection in the Spanish capital for the direct flight to São Paulo.

    TAM considers the partnership very strategic. "This is the first agreement we have made with an Asian company, a fact made more significant by being made with a company that has such an extensive network and high service standard as Air China, our Star Alliance partner," states Paulo Castello Branco, TAM's Commercial and Planning Vice President.

    "TAM is a new member of the Star Alliance. We are happy to establish this partnership with them, which lets the passengers travel more comfortably with our own operations or with codeshare partners," says Zhang Lan, Air China's Vice President.

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