GOL Feb Traffic Impresses - Analyst Blog

Leading Latin American airline, GOL Linhas Aereas SA GOL posted solid traffic results for Feb 2014. Net passenger revenue per available seat kilometer (PRASK) for the month increased 27% year over year on better load factor.

Revenue passenger kilometers or RPK – implying revenue generated per kilometer per passenger – for the month increased 20.2% from the year-ago month to 2,905.3 million. Both domestic and international RPK showed an improvement of 19.5% and 25.4%, respectively.

Available seat kilometers (ASK) – that measures an airline's passenger carrying capacity –increased 0.3% year over year to 3,788.8 million. Home ground capacity increased 0.2%, while on the international front, ASK improved 1.6%.

Domestic and international load factor increased 12.6% and 13.5%, respectively, while consolidated load factor increased 12.7% to 76.7%. A weak domestic market supply as compared to a high demand led to the solid load factor. As a result, the company's yield also grew 6% from the prior-year quarter, leading to the improved performance.

The biggest impediment to GOL's 2014 growth is persistent weakness in Brazilian currency, which contributed to the 8% increase in fuel prices thus offsetting some of the positives of the quarter.

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

To tap these opportunities, GOL recently announced an exclusive strategic partnership with European giant Air France-KLM SA, to expand its operations between Brazil and Europe. We believe that this would significantly improve its international performance.

GOL – which operates with other industry players such as LATAM Airlines Group S.A. LFL – has a Zacks Rank #3 (Hold). Better-ranked stocks within this sector include Southwest Airlines Co. LUV and American Airlines Group Inc. AAL. Both carry a Zacks Rank #1 (Strong Buy).