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Gol Linhas Aéreas: An Uncertain Future Ahead


  • Gol’s excessive debt burden will prevent the airline from creating shareholder value anytime soon.
  • In addition to facing a liquidity crisis, Gol is also highly exposed to the weak state of the Brazilian economy.
  • Without proper guidance for the rest of the year, we believe that it’s better to avoid Gol’s stock.

Gol Linhas Aéreas (GOL) is one of Brazil’s biggest airlines with a fleet of over 120 planes. In the last few months, Gol’s day-to-day operations were disrupted by the spread of COVID-19 in South America, and the company now burns R$5 million to R$7 million per day just to stay alive. While its cash preservation measures will help it to stay afloat until the end of the year, its high debt burden will prevent the airline from driving growth once the pandemic is over. At the same time, its high exposure to Brazil makes Gol’s stock unattractive to international investors. In addition to fighting the pandemic, the country entered the recession in Q1, while its currency already depreciated by more than 20% to USD since the beginning of the year. Since the recovery of air travel will take several years, Gol faces an uncertain future ahead. We believe that it’s better to avoid its stock, as there are better opportunities on the market right now with a more attractive risk/reward ratio.

It’s Going to Get Worse

In Q1, Gol managed to avoid major losses, as its revenue of R$3.15 billion was down only 1.9% Y/Y. However, this was solely due to the fact that COVID-19 arrived late to Brazil in comparison to other countries. As of today, Brazil is the second most infected country in the world with more than 800,000 cases of COVID-19. The government of Brazil decided not to impose any strict lockdown measures and the movement restrictions in the country are minimal. However, this won’t help Gol to avoid major losses in Q2. In April, the company’s load factor was down 79.5% Y/Y, while in May, it was down 74.8% Y/Y. Total departures decreased by 90% Y/Y and will remain at such low levels in the foreseeable future.

This article was written by

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Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (7)

marklondra profile picture
Gol reports a 105% month-on-month increase in ticket sales
June 15, 2020
Gol provided (09-Jun-2020) an investor update for May-2020, reporting an 18% month-on-month increase in airline ticket searches. The carrier reported a 105% month-on-month increase in ticket sales and 22% increase passenger revenue from transported passengers. Gol VP sales and Marketing Eduardo Bernardes stated: “Gol‘s sales have increased by more than 20% every seven days for the last three weeks and we are ramping up our Jul-2020 network to offer Clients more travel options”
marklondra profile picture
GOL says it has enough cash to keep going for a year
Last week, GOL said it was improving its cash reserves and had enough funds to keep the airline flying for 12 months. GOL said it had approximately US$670 million in total liquidity at the end of May. GOL said this would keep the airline going for another year.
As a pioneer of the low-cost model in South America, GOL has had the lowest operating costs, on a CASK basis, of any Brazilian airline since it was founded”, said GOL’s CEO, Paulo Kakinoff.
“Combined with our flexible fleet management model, which enables us to adjust capacity faster, and our 12 months of cash-on-hand, we are confident in GOL’s continued ability to not only overcome the crisis but thrive.”
Gol, he has all the credentials to overcome the COVID-19 crisis, the money promised by the Brazilian government to support the airline's liquidity will arrive at the end of June.
Gol’s independent auditors publicly warned them of their financial position today.
Didn't see, $300m Debt maturity payment in August. Also for Boeing paying $2.5B Reals, only $600m in cash, remainder in credit.
juangoicoa profile picture
Guaranteed by delta
HardCovenant profile picture
I understand that posting an article on SA involves an approval time lag but to be more precise GOL is a trading stock, the 20% real currency depreciation versus USD the author refers to actually reversed beginning late March, I got back in around $3 and am already out @$10 when USD weakness peaked, also see my GOL trade two years ago for 300% appreciation. AZUL similar just that AZUL in a slightly better financial situation.

Great trading stocks, good luck to all
@HardCovenant, thought Azul had maybe 4 mos of cash on hand. The whole airline industry is BK. When a business' survival depends on a government hand out and there is no foreseeable profit, no other valuation is possible.
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