UPDATE 1-Gol orders 60 Boeing 737 MAX as fuel triggers losses

Mon Oct 1, 2012 7:01pm EDT

* CEO says 13 pct efficiency boost bolsters low-cost model

* Order worth $6 bln at list prices, delivery starts 2018

* Shares jumped over 10 pct ahead of mystery announcement

* Gol shares surge 10.6 pct before announcement

By Bruno Federowski

SAO PAULO, Oct 1 (Reuters) - Gol Linhas AĆ©reas, Latin America's largest low-fare airline, plans to order 60 narrow-body jets with improved fuel efficiency from Boeing after soaring jet fuel prices triggered a year of heavy losses.

Gol said the order of 737 MAX airliners for delivery beginning in 2018 is worth $6 billion at list prices, making it the largest jet order ever in Latin America.

Chief Executive Paulo Kakinoff said the new planes would offer a 13 percent improvement over the fuel efficiency of Gol's current fleet, helping to reinforce its low-cost model.

The ambitious order highlights a robust forecast for Brazilian air traffic, even as demand from passengers cools from years of double-digit growth. But it comes at a tricky moment for Gol, which expects to post an operating loss in 2012 for the second year in a row.

The airline is cutting back its fleet and aims to slash 2,500 jobs - or about 12 percent of its workforce - this year to restore profitability. Its model of a low-cost airline has faced trouble in a country with expensive labor, cumbersome taxes and crowded airports.

Those challenges have been exacerbated over the past year by a tougher operating environment and stiff competition from Brazil's biggest airline, TAM, which was recently taken over to form regional giant LATAM Airlines.

Gol's struggles have led to speculation that it could be the target of a takeover similar to the TAM merger. Under that deal, Chile's LAN Airlines won control of the merged structure while leaving the local carrier with at least 80 percent domestic capital to comply with Brazilian law.

Gol denied reports last month that management was in takeover talks with fast-growing Qatar Airways.

Gol preferred shares rose 10.6 percent on Monday in Sao Paulo after the airline called a press conference without disclosing the subject. After markets closed, Gol announced the plane order in a securities filing and at the press conference.

Higher fuel costs and a weaker local currency contributed to Gol's net loss of 710 million reais ($350 million)in 2011. The airline lost another 821 million reais in the first half of this year and warned that it would book an operating loss for 2012.

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.