Gol Intelligent Airlines Inc. ADRGOL

Morningstar Rating

Stock Research and Analysis

by Basili Alukos, CPA

Although air travel growth in Brazil has potential, structural impediments may temper Gol Intelligent Airlines' ability to prosper.

Historically, bus travel has dominated the transportation market in Brazil because of nonexistent railways and costly Read more

Bulls Say

Gol's fleet, with an average age of seven years, is one of the youngest fleets in all of South America. Having a younger fleet should assist in both minimizing aircraft maintenance and maximizing fuel efficiency, while allowing Gol to preserve precious cash.

Management's obsession with aircraft efficiency, including an expeditious turnaround between flights, has led Gol to boast the highest aircraft utilization rate in South America. If this obsession persists, it should translate into increased future operating performance.

Gol's transition into an all-Boeing next-generation 737 fleet during the coming decade should help minimize both inventory levels and training expenses. As a result, the firm's cost structure should continue to remain the lowest in the industry, which will allow the firm to keep prices low and stimulate future demand. Read more

Bears Say

Azul Linhas Aéreas Brasileiras S/A (or Azul) commenced operations in December 2008 and has grown to become Brazil's third-largest domestic carrier. As this new entrant fights for more market share, we expect Gol's profitability and growth could suffer as a result.

Government regulations forced Gol to utilize one jet-fuel supplier for nearly all of its fuel needs. Not only does this regulation impose substantial counterparty risk, but it also reduces competition, which may artificially inflate the price Gol pays for fuel.

Gol's foray into international traffic with the Varig Group acquisition has been unsuccessful. The firm discontinued almost all international flights (expect for South America), reducing the firm's ability to capture higher-yielding passengers. Read more

Strategy

During the next decade, profitably expanding the business remains Gol's number-one priority. The firm will add additional flights in high-demand routes, including night flights; offer routes in nascent Read more

Management

Constantino de Oliveira, who controls one of Brazil's largest bus companies, is chairman and founder of Gol, which he started with his son, CEO Constantino de Oliveira Jr. Although family members hold five of Gol's eight board seats, this is commonplace Read more

Profile

Low-cost carrier Gol Intelligent Airlines is a relatively new entrant in the Brazilian domestic air travel market. Since launching operations in 2001, Gol has become one Read more

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