February 17, 2017 / 11:45 AM / a year ago

UPDATE 3-Gol shares jump as airline narrows quarterly loss by 97 pct

* Net loss of 30.2 mln reais smaller than estimates

* Net revenue climbs 0.5 pct, beat mkt expectations

* Financial expenses fall 77 pct to 163.6 mln reais (Adds management comments throughout)

By Guillermo Parra-Bernal

SAO PAULO, Feb 17 (Reuters) - Shares in Gol Linhas Aéreas Inteligentes SA hit a near two-year high on Friday as a lower-than-expected fourth-quarter loss and bullish operational targets for this year fanned investor hopes Brazil’s No. 2 airline would soon return to profitability.

Net losses at São Paulo-based Gol narrowed 97 percent to 30.2 million reais ($9.8 million) in the quarter, smaller than average analyst estimates for a loss of 213.07 million reais. Falling borrowing costs and a stronger currency helped reduce Gol’s quarterly shortfall, executives said on a conference call.

The airline also issued new revenue, margin and cost targets that investors viewed as consistent with Chief Executive Officer Paulo Kakinoff’s efforts to reduce debt and return to profit. Kakinoff said Gol this year would focus on keeping costs and supply of available seats on check to reinforce his strategy.

Shares rose for a ninth consecutive day, adding as much as 6 percent to 8.71 reais, the highest since April 2015.

The bullish reaction reflected confidence in Brazilian President Michel Temer’s ability to fix an economy hobbled by a three-year recession and prop up debt-laden companies like Gol, which have most of their cost structure tied to the dollar.

Since Temer took office in April the Brazilian real has rallied 15 percent, and foreign and local borrowing costs for companies have narrowed over 2 percentage points.

Over the past three years, Gol has struggled with a heavy debt load and fallout from the country’s recession and political instability. It has weighed on sales and the price of key costs like fuel. Kakinoff has introduced strict cost controls to offset the headwinds.


Net debt fell to 12.20 billion reais at the end of December from 14.71 billion reais at the end of 2015.

Gol targets net revenue at around 10 billion reais for the year, slightly above estimates, and cost per available seat at around 0.14 reais per kilometer. EBITDA, or earnings before interest, taxes, depreciation and amortization, are expected at between 11 percent and 13 percent of revenue this year.

“Although the capital structure still needs to be addressed in the medium and long run, Gol’s balance sheet in the short term looks okay,” said Renato Mimica, an analyst with Banco BTG Pactual. He almost doubled his 12-month price target on the stock to 13 reais.

Net financial expenses fell a bigger-than-expected 77 percent to 163.6 million reais, as debt-servicing costs dropped 42 percent and currency hedging expenses tumbled 89 percent.

EBITDA before plane lease costs was 440.5 million reais, missing an estimate of 482 million reais for the quarter.

$1 = 3.0889 reais Additional reporting by Bruno Federowski in São Paulo; Editing by Jeffrey Benkoe and Andrew Hay

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