Brazil airline Gol eyes international routes to raise margins

[SAO PAULO] Brazilian airline Gol Linhas Aereas Inteligentes SA is looking to boost its international business and reduce fuel consumption to counter a weak local currency and fuel prices that likely took a chunk out of its third-quarter margins.

In an interview with Brazilian newspaper Valor Economico, Chief Executive Paulo Kakinoff said the carrier would increase the number of seats it offers internationally by 40 per cent in 2019, while domestic seating would grow by only 3 per cent.

As part of that strategy, the company is betting on the Boeing 737 Max-8 long-range airplane, which consumes 15 per cent less fuel than Gol's current fleet, he said.

Mr Kakinoff's comments came as the airline said in a Monday securities filing previewing quarterly results that it was likely to report an operating margin, or EBIT (earnings before interest and taxes) margin, of 5 per cent to 5.5 per cent in the third quarter, down 7 percentage points from the same period last year. The company has been hit hard by rising fuel prices and a serious depreciation of the Brazilian real currency .

Increased international flights could decrease the percentage of revenue collected in reais, mitigating the negative impact of currency fluctuations on Gol's bottom line.

Gol will launch at least one new international destination every quarter until 2021, Mr Kakinoff said. This week, Gol will receive its third Boeing 737 Max-8, and 70 per cent to 80 per cent of the planes' flights will be international, he added.

In the Monday securities filing, Gol said operating cash flow in the quarter will likely come to 450 million reais (S$162.3 million) to 500 million reais.

REUTERS