UPDATE 2-Brazil Gol Q1 profit sinks on flight cancellations

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BRASILIA, April 19 (Reuters) - Low-cost Brazilian airline Gol Linhas Aereas Inteligentes (GOL.N) said on Thursday its first-quarter profit fell by more than a third due to flight cancellations and delays that reduced its load factor.

Gol said ongoing problems in Brazil's air traffic system caused flight cancellations that affected travel demand and in turn eroded its passenger occupancy rates in the first quarter.

Net income, calculated under U.S. accounting rules, fell to 116.6 million reais ($57.4 million) from 179.8 million reais in the same quarter last year and 92.7 million reais in the fourth quarter of 2006.

Gol shares (GOLL4.SA) fell 0.85 percent to 29.10 reais in Sao Paulo Thursday before the results were released.

The average fare paid by passengers fell 22 percent in the first quarter, and Gol's load factor slipped to 69.8 percent from 70.6 percent in the same quarter a year ago.

Net revenue from passengers rose 18 percent from the year earlier, but operating costs rose twice as much, increasing 43 percent on the year.

Brazil's air traffic has had trouble since Sept. 29, when a Boeing 737 flown by Gol clipped wings with a business jet over the Amazon, causing the 737 to crash into the jungle.

Air traffic controllers have staged periodic work slowdowns to protest work conditions and faulty equipment, causing hundreds of flight delays and cancellations.

In April Gol paid $320 million in cash, stock and debt to buy smaller rival Varig, which controls coveted slots in Sao Paulo's Congonhas airport and routes to the United States and Europe.

The acquisition will bring Gol's domestic market share closer to that of its main rival, TAM Linhas Aereas, which controls nearly half of Brazil's domestic air travel.

Gol's share of the domestic air travel market was 38.5 percent at the end of the first quarter compared with 28.8 percent a year ago.

The incorporation of Varig's fleet and the planned addition of another Boeing 737 in the second quarter should increase Gol's overall number of seats available per kilometer flown by about 80 percent.

Gol forecast a load factor of 71 percent for the second quarter and more or less 72 percent by the end of the year.

Long-term debt rose to 1.43 billion reais at the end of March from 949 million reais three months before.

($1 = 2.025 reais)