Gol Linhas Aereas Inteligentes SA, Brazil’s second largest airline, stated it will receive a cash infusion of up to 1 billion reais ($251 million) as it cuts its routes and fleet in an effort to cut costs due to weak demand. The airline will cut flights by 6 percent this year and eliminate service to 7 cities. It is also returning 5 aircraft to leasing companies, while it slashes the scheduled deliveries of new aircraft to 1 from 15 through the end of 2017. The airline industry in Brazil is suffering from weak bookings, as a recession and a decline in the value of Brazil’s currency drives up the cost of its US dollar based costs and debt. The airline has had 15 consecutive quarters of losses, as demand has fallen 8 percent in the latest quarter year over year. The company’s stock value has declined 97% since 2006.
Gol Service Reductions
Gol announced service cuts that include ending operations to the island nation of Aruba, Caracas, Venezuela, and Miami and Orlando in Florida. It will also end operations in the domestic Brazilian markets of Bauru, Altamira and Imperatriz in the next few days. The new cash injection will commence with $376 million in Brazilian currency. The cash that will be received is for a block of frequent flyer award travel tickets. The rest of the money will come in installments as needed through the 30th of June 30, 2017. The airline will pay interest on the injected money at an interest of around 18.7% a year. This cash comes after US carrier Delta Air Lines bought a 9.5% stake in Gol. The airline, and other Brazilian companies, are hoping for an economic uptick with the 2016 Olympics this summer in Rio de Janeiro.
