Gol Sees Profitability Improving This Year

February 23, 2012

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Gol, Brazil's second-largest airline, expects a higher profit margin this year as stronger ticket pricing overshadows the impact of lower travel demand and high fuel costs.

The São Paulo-based airline, controlled by the Constantino family, expects earnings before interest and taxes at between 4 percent and 7 percent of revenue, compared with an estimated range of 1 percent to 4 percent for 2011, according to a securities filing on Thursday.

The EBIT margin is a gauge of profitability before depreciation, amortisation and plane lease expenses. In the third quarter, the indicator showed a negative 4.12 percent margin after Gol posted operational losses as fuel costs spiked and the currency tumbled.

Passenger yield will "continue its trend of progressive recovery," the filing said. The airline declined to provide estimates for yields, but said that it expects domestic travel demand to grow between 7 percent and 10 percent this year.

"We maintain a sceptical view on profitability in the short term, as visibility on cost control and reduction remains very low," Sara Delfim, an analyst at Bank of America Merrill Lynch, wrote in a note to clients.

According to Delfim, Gol and rivals will feel the pinch of fluctuations in foreign exchange and oil prices, as well as pressure stemming from payroll and other expenses.

Available seats per kilometre, a measure of seat supply, is seen by Gol between 50.2 billion and 51.2 billion, compared with a 48.8 billion-50 billion range last year.

(Reuters)