Brazil airline Gol profit tumbles as costs jump

SAO PAULO Tue Mar 27, 2012 8:45am EDT

SAO PAULO (Reuters) - Gol Linhas Aereas (GOLL4.SA), Brazil's second-biggest airline, saw fourth-quarter net income tumble 58.9 percent from a year earlier as a spike in operating expenses ate into profit.

Total consolidated operating costs and expenses jumped 41 percent, with fuel costs rising 56.6 percent, personnel costs climbing 30.3 percent, and maintenance expenses increasing 147.8 percent.

"The company is fully aware that it is experiencing a scenario of new fuel cost and exchange rate levels, and adjusting the cost base to this new reality will be crucial in ensuring disciplined and sustainable growth in the years ahead," Chief Executive Officer Constantino de Oliveira Junior said in a securities filing on Tuesday.

São Paulo-based Gol posted net income of 54.3 million reais ($29.89 million), down from 132.2 million reais a year ago, according to the filing. In a Reuters survey, three analysts forecast, on average, a loss of 96 million reais, while two others forecast a profit of 173 million reais.

Earnings before interest, taxes, depreciation, amortization and aircraft rent, a gauge of operating profit known as EBITDAR, fell to 238.9 million reais from 475 million reais a year earlier.

Slowing air traffic growth and a bruising fare battle in the domestic market also hampered the airline's performance last year.

Oliveira has said Gol's focus this year is on profitability over market share, promising investors the airline will be more disciplined with its domestic fleet plans in order to boost profit margins.

Still, some analysts remain skeptical about Gol's ability to cut costs, especially as tensions in the Middle East threaten to send fuel prices soaring.

Credit Suisse Group analysts led by Luiz Otavio Campos cut their recommendation on Gol shares to "underperform" from "neutral" on Monday, citing declining profitability.

Gol booked an adjusted loss of 710 million reais in 2011, compared with a profit of 214.2 million reais in 2010. The loss stemmed from the impact of the real's depreciation against the dollar, rising fuel costs, and non-recurring expenses such as the return of aircraft and contract termination fees, the company said.

($1 = 1.8165 Brazilian reais)

(Editing by W Simon and John Wallace)

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