(GOL)
From ValueWiki
GOL Linhas Aereas Inteligentes (NYSE: GOL) is the only major low-fare, low-cost airline operating in Brazil. It provides frequent service to Brazil’s major cities and focuses on popularizing air travel air travel in Brazil and between Brazil and other South American destinations for both business and leisure passengers. ‘’’GOL’’’ has one of the lowest operating costs in the airline industry worldwide. Its longer-term business objective is to become the largest Brazilian airline.
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Background
GOL is the only low-fare, low-cost airline operating in Brazil. It provides frequent service to Brazil’s major cities and focuses on popularizing air travel air travel in Brazil and between Brazil and other South American destinations for both business and leisure passengers. GOL has one of the lowest operating costs in the airline industry worldwide. Its longer-term business objective is to become the largest Brazilian airline.
GOL Flight 1907
Gol Transportes Aéreos Flight 1907 was a Boeing 737-800 SFP, registration PR-GTD, on a scheduled passenger flight from Manaus, Brazil to Rio de Janeiro, with a planned stop in Brasília on September 29, 2006. While flying over the Amazon in Brazilian center-western state of Mato Grosso, it collided with an Embraer Legacy business jet and crashed in an area of dense rainforest vegetation, 200 kilometers (120 miles) east of the municipality of Peixoto de Azevedo. All 154 passengers and crew aboard the Boeing were killed, while the slightly damaged Embraer was able to land safely with its seven occupants uninjured. This became the worst accident in Brazilian aviation history, surpassing Vasp Flight 168, which crashed in 1982 with 137 fatalities near Fortaleza.[1]
Company Analysis
According to the Brazil’s civil aviation authority, GOL's share of the domestic market, based on revenue passenger kilometers, grew from 4.7% in 2001 to 11.8% in 2002, 19.4% in 2003, 22.3% in 2004 and 27.3% in 2005. Its strategy is not only to capture market share, but to increase the size of the market by attracting new passengers with low fares and a variety of payment mechanisms designed to air travel affordable to a broader ranges of incomes.
Fleet
GOL began its operations in January 2001 with six single-class Boeing 737-700 Next Generation aircraft serving five Brazilian cities. As of the end of 2005, it operated 42 single-class Boeing 737 aircraft, providing service between most of Brazil’s major cities and international destinations in Argentina, Bolivia, Paraguay and Uruguay. It has firm purchase orders with Boeing for 67 737-800 Next Generation aircraft and has options to purchase an additional 34 737-800 Next Generation aircraft. It had 11 firm purchase orders for aircraft deliveries scheduled in 2006, 13 in 2007, 10 in 2008, 11 in 2009, 8 in 2010 and 14 after 2010. In 2005, it took delivery, under 2- and 3-year operating leases, of seven Boeing 737-300 aircraft, which it used to help meet its short-term capacity needs while it awaited the delivery of the new 737-800 Next Generation aircraft.
Destinations
GOL's strategy is to offer travelers in Brazil and other South American countries a low-fare transportation alternative that it believes is cost-competitive compared to conventional airline and bus transportation. It has a diversified revenue base, with customers ranging from business passengers traveling between densely populated cities in Brazil, such as São Paulo, Rio de Janeiro and Belo Horizonte, to leisure passengers traveling to destinations throughout Brazil and to international destinations in Argentina, Bolivia, Paraguay and Uruguay. It evaluates opportunities to growth through increasing the frequency of flights to its existing markets and adding new routes to ‘overpriced’ routes in Brazil and other South American destinations. In 2005, it started nine new destinations, to 45 (43 in Brazil, one in Argentina and one in Bolivia). In January 2006 it started scheduled services to Asunción, Paraguay, and Montevideo, Uruguay and two additional destinations in Argentina: Rosario and Cordoba. It intends to further expand its service to international destinations in South America.
Service and Pricing
GOL offers single-class seating and a light snack and beverage service. Its relatively lower operating costs allow it to price its fares at levels significantly lower than the average fares of its primary competitors. This approach has helped it win customer loyalty and in certain markets, to stimulate demand by attracting new customers who previously used other means of travel or traveled less often due to price sensitivity. It has kept our operating costs low principally by maintaining a simplified aircraft fleet that is one of the newest in South America, reducing maintenance and fuel costs.
Internet-based Sales
GOL focuses on high aircraft utilization, ticketless travel, advanced yield management systems and depends heavily upon internet-based distribution channels and sales. The strong promotion of internet-based distribution channels and sales is an integral element of its low cost structure and efficiency and has made it one of leading e-commerce businesses in Brazil. Members of our senior management team have an average of approximately 20 years of experience in the domestic and international passenger transportation industries.
Airline Model
GOL's operating model is a highly integrated, multiple-stop route network that is a variation on the point-to-point model used by other successful low-cost carriers worldwide. The high level of integration of flights at selected airports permits it to offer frequent, non-stop flights at low fares between Brazil’s most important economic centers and interconnections through its network linking city pairs through a combination of two or more flights with little connecting or stop-over time. Its network also allows it to increase its load factors on its strongest city pair routes by using the airports in those cities to connect customers to their final destinations. This strategy increases the load factor by attracting customers traveling to secondary markets who prefer to pay lower fares even if this means making one or more stops before reaching their final destination. This operating model allows it to add destinations to cities that would not, individually, be feasible to serve in the traditional point-to-point model, but that are feasible to serve when simply added as additional points on a multiple-stop flight network. We do this by offering low-fare early-bird or night flights to lower-traffic destinations, which are usually the first or last stops on our routes, allowing us to increase our aircraft utilization and generate additional revenues.
Mexican Airline
In December 2005, GOL entered into a joint venture to create a low-cost Mexican airline. It will hold 25% of the voting capital stock and approximately 48% of the total capital stock of the Mexican airline company, with the remaining capital being subscribed by Mexican investors. Under a service agreement, it will implement and develop the operational structure of the company and render consulting services for all operational matters to the new Mexican company in return for a performance-based service fee.
Ownership and Control
GOL is controlled by Brazil’s Áurea group. The Áurea group has more than five decades of successful operating experience in Brazil’s bus transportation industry. The Áurea group is owned by the Constantino family, and is a traditional Brazilian transportation group with investments in ground transportation companies. Thorough Aurea , the family owns 72% of Gol, Gol is listed both in the NYSE and in the Bovespa, Brazil's stock exchange. The family also has investments in the infrastructure sector, specifically in highway concessions.
News Feed
| 09/03/08 7:09 pm | GOL Announces Traffic Statistics for August 2008 (PR Newswire) |
| 08/25/08 8:08 am | GOL Linhas Areas Inteligentes S.A. upgraded by UBS (Briefing.com) |
| 08/21/08 5:08 pm | GOL's Administration Awarded by IATA (PR Newswire) |
| 08/15/08 8:08 am | GOL Scores a Tie in Brazil (Zacks.com) |
| 08/15/08 2:08 am | Latin Stocks Offer Great Value, But Some Risk (at Seeking Alpha) |
| 08/15/08 12:08 am | Latin Stocks Offer Great Value, Some Risk (Zacks.com) |
| 08/12/08 6:08 pm | GOL Implements New Ticket Sales System (PR Newswire) |
| 08/12/08 12:08 pm | Fuel hits Brazil airlines, but TAM turns profit (at Reuters) |
| 08/12/08 9:08 am | Brazil stocks gain, currency falls for 7th session (at Reuters) |
| 08/12/08 5:08 am | Brazil airline Gol posts wider loss in 2nd quarter (at Reuters) |
Risks
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