The Brazilian airline GOL is growing aggressively in the last few months. The company has acquired a smaller regional carrier in MAP, has merged its fidelity program Smiles, and now has announced an additional order for 28 Boeing 737 MAX 8 for delivery from late 2022. We’ll try to explain why GOL is stepping on the pedal, despite not being back to profitability. GOL is optimistic about the future In 2021’s first half, GOL Linhas Aereas posted a US$414 million net loss, as was reported in its financial results. The company is not back on profitability like other regional peers, particularly Mexican carriers Volaris and Viva Aerobus. Brazil is still facing heavy constraints due to the COVID-19 pandemic. The domestic airlines (GOL, Azul, and LATAM) have adjusted accordingly, but there’s still a long way to go before they recover their pre-pandemic levels. Nevertheless, GOL is optimistic about its future. Paulo Kakinoff, GOL’s CEO, noted three relevant themes for GOL’s sustainable growth going forward. GOL’s pillars to grow First, the Brazilian air travel market is resilient. While the passenger levels continue depressed (-55% compared to 2019, according to local stats), GOL believes demand for travel in Brazil is recovering rapidly. Moreover, the COVID-19 vaccination rollout advances at a good pace; Brazil expects to have enough vaccines to immunize over 90% of all citizens over 12 years old. [caption id="attachment_56505" align="aligncenter" width="580"] This is a look at how 2021 is faring against pre-COVID years between January and June. Data: Brazil's Civil Aviation National Authority (ANAC).[/caption] The second theme is the airline’s discipline yield management. The company has minimized cash burn through balancing capacity and demand, keeping high load factors and aircraft use. Finally, GOL expects a robust business travel recovery starting in 2022’s first quarter. Paulo Kakinoff said, “When that happens, we will increase the GOL network to enable high frequencies in the Sao Paulo, Rio de Janeiro, and Brazilian markets, restoring those routes to pre-pandemic levels.” The 737 MAX renewal process On Tuesday, GOL announced that it had ordered 28 MAX 8 aircraft for delivery from late 2022. This is also evidence that GOL is growing aggressively despite the ongoing pandemic. Not so long ago (sixteen months, actually), GOL reduced its original MAX order with Boeing, slashing the contract for 34 airplanes. Last week, during GOL’s investor call, Richard Lark, the airline’s CFO, explained, “We're pivoting to an acceleration of the fleet transformation from the NGs to the MAXs, and so as we kind of roll into 2022, we'll be kind of where we wanted to be three years ago from an asset perspective and back with our more normalized activities of transitioning in new aircraft and transitioning out the old aircraft.” The new order for 28 aircraft will help the airline replace 23 Boeing 737-800 NGs by the end of 2022. In the last year, the carrier has rejected the leasing contracts for 18 NGs while resuming operations with the MAX; it currently has 12 MAX planes. As a result of the new agreements, by the end of 2021, GOL will have 28 MAX aircraft, around 22% of the total fleet. In December 2022, it will have 44 MAX (32% of the fleet), and by 2030, approximately 75% of the fleet will be MAX. [caption id="attachment_56462" align="aligncenter" width="580"] This is a look of GOL's fleet plan going forward. Photo: GOL Linhas Aereas.[/caption]
