São Paulo-based low-cost carrier GOL reported a BRL232.7 million ($74.4 million) net profit for the first quarter of 2017, down 69.3% from BRL 242.1 million in 1Q 2016.

GOL continued to rationalize operations during the Brazilian summer to meet reduced passenger traffic, which was down 739,000 passengers compared to 1Q 2016. The airline reduced the number of seats available for sale by 13% during the quarter.

GOL’s operating revenues declined 2.5% year-over-year (YOY) to BRL2.6 billion, attributable, the company said, to its reduction in capacity and concurrent optimization of aircraft utilization. GOL’s first quarter operating expenses increased 5.3% to BRL2.4 billion. The company posted an operating profit of BRL253.2 million, down 42.1% from BRL437.2 million in 1Q2016, representing an EBIT margin of 9.6%.

“[While] passengers transported in 1Q17 decreased 8.3% over 1Q16, GOL’s load factor increased two percentage points to 79.6% … [and] aircraft utilization was at 10.5 flight hours per day, [a] 16.7% increase over 1Q16,” GOL said. Overall traffic was up 0.7% to 9.6 billion RPKs as capacity decreased 2% to 12 billion ASKs.

“Our absolute market cost leadership is key to our value proposition and allowed us to provide [competitive] fares and service in the market, even during a challenging industry environment,” GOL CFO Richard Lark said.

The company’s first-quarter net yield fell 6.5% to BRL 24.02 cents as RASK was down 0.5% to BRL 22.01 cents and CASK increased 7.4% to BRL 19.91 cents. GOL’s CASK ex- fuel rose 11.6% to BRL 13.79 cents. GOL’s fuel expenses during the quarter were down 2.8% to BRL735.8 million.

As of March 31, out of a total of 124 Boeing 737 NG aircraft (96 737-800s and 28 737-700s), GOL was operating 116 aircraft. Four of the remaining aircraft will be returned to lessors while the other four have been sub-leased to another airline. The average age of GOL’s fleet was 8.4 years at the end of the quarter. The company said it has 120 firm aircraft acquisition orders with Boeing for fleet renewal by 2027; the next GOL 737 is expected to be delivered in July 2018.

Looking ahead, GOL adjusted its full-year 2017 operating margin (EBIT) guidance to be in the 6% to 8% range. GOL’s total seat guidance for 2017 continues to show a decrease of -3% to -5% with capacity down between 0% and -2%. By the end of 2017, GOL will have 115 aircraft in its operational fleet. Total volume of departures for 2017 will decrease between -3% and -5%. The average load factor for the year is expected to be between 77% and 79%. The company’s non-fuel CASK is expected to be +/- BRL14 cents for the year.

Mark Nensel mark.nensel@penton.com