Gol Linhas' (GOL) September Traffic Down, Unveils Q3 Outlook

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GOL Linhas Aereas Inteligentes S.A. (GOL Free Report) reported unimpressive traffic figures for September 2018, with load factor (percentage of seats filled by passengers) declining as traffic contracted, in spite of capacity expansion.

Traffic, measured in revenue passenger kilometers (RPK), declined 1% to 2.96 billion. Domestic RPK contracted 0.5% and international RPK plunged 4.6%. On a year-over-year basis, consolidated capacity (or available seat kilometers/ASKs) expanded 1.8% to 3.79 billion. Domestic ASK improved 2.4%, while international ASK slid 2.9%. Load factor dipped 78.1% from 80.2% in the year-ago period. Departures in the month declined 2%.

At the end of the first nine months of 2018, both RPK and ASK were up 3.1%. Load factor for the period were flat at 79.3%. Volume of departures inched up 0.5% and the number of seats rose 2.6%.

Q3 Outlook

The Sao Paulo, Brazil-based carrier expects operating margin between 5% and 5.5% in the third quarter, down approximately 7 percentage points (pp) on a year-over-year basis. EBITDA (Earnings before interest, tax, depreciation and amortization) margin is estimated in the 11-11.5% range. Also, operating cash flow is predicted in the R$450-500 million band. The carrier will release third-quarter 2018 results on Nov 1.

Gol Linhas’ focus on capacity discipline and revenue management strategies has been driving results. Owing to this tailwind, the company anticipates third-quarter passenger unit revenues (PRASK) to expand in the 4.5-5% range. Unit revenues (RASK) are projected to increase between 4% and 4.5%.

Additionally, non-fuel unit costs (CASK ex-fuel) are expected to decline around 2.5% year over year in the to-be-reported quarter. Total capacity (ASK) is projected to grow approximately 4% year over year. Total number of seats is also anticipated to rise around 5%.

Zacks Rank & Key Picks

Gol Linhas carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader Transportation Sector are Canadian Pacific Railway Ltd. (CP Free Report) , Southwest Airlines Co. (LUV Free Report) and Trinity Industries, Inc. (TRN Free Report) . While Canadian Pacific and Southwest Airlines carry a Zacks Rank #2 (Buy), Trinity sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Canadian Pacific, Southwest Airlines and Trinity have gained 23.5%, 12% and 21%, respectively, in the past six months.

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