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GOL Impresses with Strong Oct 2014 Traffic Numbers

Leading Latin American airlines GOL Linhas Aéreas Inteligentes S.A. (GOL) released solid traffic results for the month of October on the back of strong demand.

Revenue passenger kilometers or RPK – implying revenue generated per kilometer per passenger – increased 8% from the comparable year-ago period to 3,300.3 million in Oct 2014. International RPK jumped 27.3% and domestic RPK grew 5.9%.

Available seat kilometers (:ASK) – that measures an airline's passenger carrying capacity – improved 1.2% year over year to 4,196.2 million. Home ground capacity deteriorated 0.5%, while on the international front, ASK improved 16%.

Domestic and international load factor (percentage of filled seats) increased to 4.8% and 6.5%, respectively, while consolidated load factor increased 4.9% to 78.6%. A weak domestic market supply as compared to a high demand led to the solid load factor.

In the first ten months of 2014, GOL’s consolidated RPK has improved 9.8% while capacity has deteriorated 1.4% leading to a load factor growth of 7.8% to 76.5%.

Brazil hosted the 2014 FIFA World Cup earlier this year, leading to a huge influx of fans by air. This can be gauged by the 10% year-over-year increase in the number of passengers (international plus domestic) transported by the Latin American carrier in the first ten months of the year. Brazil is also slated to host the 2016 Summer Olympics, another sporting extravaganza, which provides long-term growth impetus for the company.

In a bid to expand its operations between Brazil and Europe, GOL announced an exclusive strategic partnership with European giant Air France-KLM SA earlier in the year. We believe this should contribute significantly to international revenues in future quarters.

The biggest impediment to GOL’s 2014 growth is the weak GDP (gross domestic product) growth rate in Brazil. The company expects the Brazilian economy to expand a mere 1.5%–2% this year. Additionally, poor quarterly performance continues to hurt the carrier.

Zacks Rank

GOL currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the airline space include Spirit Airlines (SAVE), Southwest Airlines (LUV) and Republic Airways Holdings (RJET). All these stocks sport a Zacks Rank #1 (Strong Buy).

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