August 2, 2018 / 12:02 PM / 4 months ago

UPDATE 4-Brazilian airline Gol says demand holding up as loss widens

(Adds shares, analyst comment)

SAO PAULO, Aug 2 (Reuters) - Brazilian airline Gol Linhas Aereas Inteligentes SA reported a wider-than-expected quarterly loss on Thursday, but said that demand from both domestic and international customers remained strong.

Gol reported a net loss of 1.326 billion reais ($354 million) in the second quarter, compared to a forecast loss of $125 million, according to a Thomson Reuters I/B/E/S poll. The airline had posted a net loss of 477 million reais a year earlier.

Turnaround efforts were overwhelmed by higher fuel costs and a significant depreciation of Brazil’s currency.

“In 2018, the traditional low season in Brazilian air travel was particularly challenging due to accelerated appreciation of the U.S. dollar against the real, and industry-wide supply disruption that affected demand for air travel,” Chief Executive Paulo Kakinoff said in the statement.

Despite headwinds from the weak real, higher oil prices, and a truck drivers’ strike in May, the company’s margins had improved, said Banco Santander’s investment banking division in a note to clients, adding that it saw the results as “relatively positive.”

The stock rose 0.5 percent on Thursday afternoon, after dropping more than 2 percent immediately after the results were released.

The airline, Brazil’s largest, also revised its earnings per share estimate for the year to a loss of about 1 real per share, down from an expected profit of about 1 real per share last quarter.

But in a post-earnings conference call with analysts, Kakinoff and Chief Financial Officer Richard Lark said that demand for Gol flights remained high.

A weakening Brazilian real pushes up the cost of fuel, which is priced in dollars, while driving up the cost of repaying foreign debt and discouraging Brazilians from traveling abroad. Gol attributed 1 billion reais in losses to the weakening real.

The company slashed its foreign flights by about 15 percent in May and June from a year before. Occupancy on remaining international flights fell, although Lark said on the call that international demand remained “pretty solid.”

Fuel consumed 34 percent of Gol’s revenue in the second quarter, up from 29 percent a year earlier. In their forward-looking guidance, Gol said it expects fuel costs to remain flat for 2019.

Earnings before interest, taxes, depreciation and amortization (EBITDA) rose 47.3 percent from a year earlier to 208 million reais. (Reporting by Marcelo Rochabrun; Editing by Steve Orlofsky and Rosalba O’Brien)

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