Brazilian low-cost and low-fare airline, Gol Linhas Aéreas Inteligentes S.A. (GOL) issued another series of Guaranteed Notes amounting to $22.7 million in order to raise money for financing engine maintenance. The Notes carried an interest rate of 0.85% p.a.
This was the second series of its kind; the first worth $39.1 million carrying interest rate of 1.0% p.a. was issued in July 2012. These notes, with a term period of two years, were guaranteed by the Export-Import Bank of the United States (Ex-Im Bank). The proceeds from both the issues will be used for funding maintenance of CFM56-7B engines by Delta TechOps, the maintenance division of Delta Air Lines.
Exiting the second quarter of 2012, GOL Linhas' cash and cash equivalents decreased 25.2% sequentially to R$983.3 million (US$472.7 million) while Long-term debt increased 5.1% to R$4,627.2 million (US$2,224.5 million).
We believe GOL Linhas' strategy of enhancing its fleet efficacy is expected to boost productivity and occupancy rates in the coming quarters. The company targets to achieve a fleet size of 138 by the end of 2012, 136 by 2013 and 140 by 2014.
The Zacks Consensus Estimate for the third quarter of 2012 stands at a loss of 19 cents, representing a year-over-year growth of 82.9%. Estimate for 2012 and 2013 stands at a loss of 96 cents and earnings of 23 cents, respectively, reflecting a year-over-year growth of 37.5% for 2012 and 124.3% for 2013.
We currently have a Neutral recommendation on GOL. The stock also bears a Zacks #3 (Hold) Rank. The company gives tough competition to other industry players, such as Copa Holdings SA (CPA) and LAN Airlines S.A (LFL), both having a Zacks #3 (Hold) Rank.