Gol sees domestic growth in Brazil falling next year

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Brazilian low cost carrier Gol estimates that domestic demand for air travel in the country will drop in 2011, but remains bullish on the country's growth potential despite the decreasing levels of traffic growth.

In 2011 estimates released today, Gol says it expects Brazilian domestic traffic growth should fall between a low of 10% and a high of 15%. That compares with projected domestic traffic growth of 14% to 21% in 2010.

However, Gol believes Brazil still presents a high growth potential through the addition of direct flights between destinations located in the country's South, North and Northeast regions, increasing frequency on existing routes and adding new routes with a population density above 1 million.

Currently, Gol expects to transport between 33 million and 36 million passengers in 2011, compared with 31.5 million and 36.5 million estimated for 2010.

The carrier explains it plans to maintain the "efficient management of its seating capacity" it practiced in 2010 this year. Gol expects to "increase its capacity at a proportionally lower rate than the growth in demand in its route network".

Gol's forecasted capacity is expected to rise between 48 billion available seat kilometres (ASK) to 51.5 billion in 2011 compared with 45 billion to 47.2 billion ASKs in 2010. The carrier expects traffic growth of 32 billion to 35 billion revenue passenger kilometres for 2011 compared with an estimate of 31.5 billion to 33 billion RPKs in 2010.

Gol explains its 2010 capacity growth is being driven by the delivery of three aircraft in the third quarter of 2010, says the carrier, and four additional aircraft deliveries this year. Gol plans to end 2011 with 115 aircraft, and says the higher-density Boeing 737-800 will represent a higher portion of its fleet mix, which is also driving capacity growth. A final contributor to expanding capacity is a slight uptick in daily aircraft utilization above the 13h per day recorded in 2010.

The carrier expects to post an improvement in its operating margin for 2011, supplying guidance of a margin between 11.5% and 14% compared with 2010 estimates of 10% to 13%.

Gol's latest fuel cost estimates point to rising fuel prices next year. The carrier expects oil price per barrel to fall between $82 to $93 for 2011 compared with $77 to $82 for 2010.