Brazil's Gol Cutting 1,200 Jobs As Airline Seeks 'Orderly' Growth
May 22 2012 - 2:25PM
Dow Jones News
Gol Linhas Aereas Inteligentes SA (GOLL4.BR, GOL), Brazil's
second-biggest airline, is cutting 1,200 jobs, largely by natural
attrition, as it seeks "to grow in a more orderly fashion", the
company's Vice-President and Chief Financial Officer Leonardo
Pereira said late Monday.
Gol, which describes itself as the largest low-fare, low-cost
airline in Latin America, will announce by the end of June the
precise number of job losses, Pereira said in an interview during
the Rio Investors' Day in Rio de Janeiro.
"But very few people will actually be fired. We're not going to
replace employees who leave or retire," Pereira said, noting the
job-losses program started in March. "We're reviewing processes,
decreasing capacity and operating with fewer planes. This doesn't
mean that we're not going to grow: we're going to grow in a more
orderly fashion."
Gol, which had 19,500 employees before the job-losses program
began, including 1,200 at its subsidiary Webjet, is also seeking to
tailor its seating capacity to better match market demand and boost
margins, Pereira said.
Gol reported a loss of 41.4 million Brazilian reais ($20.29
million) in the first quarter, from a net profit of BRL69.4 million
in the first quarter of 2011, as expenses, mainly aircraft fuel
costs, increased at a faster pace than revenue. This followed
losses of BRL751 million in 2011 and has led the company to step up
a cost-cutting effort introduced in 2011.
"Oil prices are high, and it doesn't make sense to keep flying
to places which give no return," Pereira said, noting the company
discontinued flights from Brazil to Bogota, Colombia, in 2011.
"We're optimizing our flight network, to adapt to a volatile
market."
The aviation market in Brazil is meanwhile expected to grow 7%
this year, twice the expected GDP growth rate, according to Gol's
calculations. Nonetheless, aviation fuel taxes in Brazil are
30%-35% higher than in other countries and Gol is in talks with
other airlines to attempt to find a solution for this problem.
"The airlines haven't yet benefited from the government's Brasil
Maior package of tax incentives, but the government's showing us
goodwill," the executive said. Gol has obtained discounts in
aviation fuel purchases from state-controlled oil producer Petroleo
Brasileiro SA (PBR, PETR4.BR) or Petrobras, because it's buying
more fuel after it purchased Webjet, he said.
Gol's policy of fuel hedging continues amid exchange-rate
volatility, Pereira said. "Forty percent of our consumption is
hedged for the next 12 months. We've also hedged at this level for
last 12 months, in line with international norms."
Gol will continue to enter partnerships "to help feed flights,"
after its announcement of a partnership with regional airline
Passaredo Linhas Aereas, Pereira said. Gol also has link-ups with
Air France-KLM (AF.FR, AFLYY), Iberia and Delta Air Lines Inc.
(DAL), which purchased 3% of Gol last year for $100 million and
expects to announce "two or three more international alliances," he
said.
Gol isn't interested in making a bid for Portugal's TAP, he
added.
The link-up with Delta is of strategic interest, as it gives Gol
exclusive rights to the Brazil-U.S. route for the next 5 years,
Pereira said. "Gol's focus is on South America and the Brazil-U.S.
corridor. Over the next 10 years the Brazil-U.S. corridor will be
one of those which grows most. Around 5,000 visas are being issued
a day to Brazilians wishing to visit the U.S."
Gol said earlier this month that it would start operating
flights to the U.S. via Venezuela. The stopover in Caracas allows
Gol to operate flights to the U.S. while still making use of its
Boeing 737 planes.
The company's policy continues to be to use standard-size planes
such as the Boeing 737-700 and 737-800 with up to 180 seats to keep
costs low, Pereira said. Webjet's fleet of 18 smaller 737-300
planes will all be returned to the leaser within 18-24 months, as
these are less efficient nowadays than the larger planes, he
said.
Gol meanwhile has no plans to increase Webjet's fares following
its takeover of the smaller airline last year, even though Webjet
essentially competes with Gol on ticket sales. "There's no
possibility [of increasing Webjet fares]," Pereira said. "We have
to have a range of fare prices."
The Smiles loyalty program, which two years ago was dormant, is
being revived to give passengers greater benefits and will be
managed separately from the rest of the company, he said.
-By Diana Kinch and Paulo Winterstein, Dow Jones Newswires;
+55-21-2586-8086; diana.kinch@dowjones.com
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