Thursday, 2 August 2018

GOL's second quarter operating income doubles

GOL Linhas Aéreas Inteligentes, the Brazillian airline has released its second-quarter 2018 results this week and the airline has done well, its operating income doubles and net revenues grow by 9% to a net revenue for the quarter of R$2.4 billion. The airline's load factor didn't move a great deal, ever so slightly up at 78.1%, which makes in the increase in revenue more surprising. However, this was achieved by higher prices and a greater cost awareness within the organisation. 

"We expect to continually drive our operational efficiency and capacity rationalization. In June, we took delivery of our first 737 MAX 8 aircraft, which enable GOL to serve Brazil's large addressable market of passengers travelling between Midwest/Northeast Brazil and the State of Florida," commented Paulo Kakinoff, the carriers CEO.

Financial and Operational Highlights:

Significantly improved operating indicators: RPKs increased by 2.5% to 8.3 billion in 2Q18, mainly due to a 4.1% increase in the number of transported passengers. As a result of strong passenger demand and GOL's continued focus on revenue management, the Company was able to achieve (i) an average yield per passenger of 25.74 cents (R$), an increase of 7.6% compared to 2Q17, (ii) an average load factor 78.1%, an increase of 0.2 p.p. compared to 2Q17, and (iii) on-time performance of 93.6% in 2Q18 according to Infraero.
Strong revenue growth: the combination of higher demand and optimized pricing resulted in net revenue for the quarter of R$2.4 billion, an increase of 9.0% compared to 2Q17. Net RASK was 22.05 cents (R$) in 2Q18, an increase of 6.7% over 2Q17. Net PRASK increased 8.0% over 2Q17, reaching 20.11 cents (R$). Average fare increased by 6.0% from R$268 to R$284. GOL's 2018 net revenue guidance is approximately R$11.5 billion.
Controlled cost environment: due to higher jet fuel prices, total CASK in 2Q18 increased 5.9% to 21.66 cents (R$) relative to 2Q17. On an ex-fuel basis, CASK fell by 1.4%. GOL remains the cost leader in South America for the 17th consecutive year.
Continued margin expansion: While the average price of jet fuel increased by 12.6% in 2Q18 over 1Q18, the combination of stronger pricing, higher demand, and R$36 million of operating results in hedging, permitted GOL's EBIT margin to expand to 1.8% in 2Q18, the highest second quarter indicator since 2010 and a 0.8 p.p. improvement over 2Q17. Operating income (EBIT) in 2Q18 was R$42.8 million, an increase of 92.7% compared to 2Q17 (R$22.2 million). EBITDA margin was 8.8% in 2Q18, a growth of 2.3 p.p. q-o-q. EBITDAR margin was 20.3% in 2Q18, an increase of 2.6 p.p. q-o-q over 2Q17. GOL's 2018 EBIT margin guidance is approximately 11%.
Balance sheet strengthening: While the Real depreciated 16.0% against the U.S. dollar in 2Q18 (end of period) causing a net exchange and monetary variation loss of R$1.0 billion, net debt (excluding perpetual bonds) to LTM EBITDA was 2.9x as of June 30, 2018, up versus March 31, 2018 (2.5x) and improving versus a year-ago metrics (4.2x). In 2Q18, the Company redeemed its Senior Notes due 2023 for R$80.7 million. Total liquidity, including cash, financial investments, restricted cash and accounts receivable, totaled R$3.0 billion, flat in comparison to March 31, 2018 and an increase by R$1.3 billion versus a year ago. The combination of GOL's operational cash flow generation of R$588.7 million in the quarter and improved cash liquidity increased the Company's financial flexibility.