GOL Gol Linhas Aereas Inteligentes SA

Low cost airline GOL Linhas Aereas Inteligentes S.A. (GOL) is seeking to expand its operations between Brazil and the U.S. The carrier has made a formal request to Brazilian Civil Aviation Agency (ANAC) to run a regular service between Campinas (Brazil) and Miami (U.S.), with a scheduled stop at Santo Domingo (Dominican Republic).    

The Brazilian carrier wants to provide the service on Mondays, Wednesdays and Saturdays and plans to use The Boeing Co.’s (BA) B-737 next generation aircraft for the service. GOL expects to start the operations by the end of Jul 2014, provided it gets approval from ANAC.

The Brazilian city of Campinas is located in the Sao Paolo state and together with its metropolitan area, has a total population of 2.23 million. On the other hand Miami, which is also known as the ‘’Capital of Latin America” has a large Hispanic population. We believe Miami will not only increase GOL’s U.S. exposure, but will also draw many tourists from Campinas to the “Magic City”, which is famous for its beaches.

GOL is concerned that higher-than-expected fuel prices will increase its expenses in 2014 and eventually affect operating profit. Other risks, such as competition, subdued global economy, increased aircraft maintenance costs and high debt could affect the company’s performance.  

However, Brazil will host the 2014 football world cup and 2016 summer Olympics, two of the biggest sporting extravaganzas. The events are expected to attract around 600,000 international and 3 million domestic visitors this year, presenting a big opportunity for passenger carriers like GOL.

GOL recently declared mixed financial results for the fourth quarter of 2013, with the top line beating the Zacks Consensus Estimate, while the bottom line missing the same. The quarter’s results were hurt by a decline in domestic supply, record jet fuel prices and depreciation of Brazilian real against the dollar.

GOL – which operates with other industry players like Copa Holdings S.A. (CPA) – has a Zacks Rank #3 (Hold). Better-ranked stocks within this sector include Southwest Airlines Co. (LUV), which sports a Zacks Rank #1 (Strong Buy).

 
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