Gol warns of continued volatility in 2014

Washington DC
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Brazilian low-cost carrier Gol expects some reprieve from fuel prices and an unfavourable foreign exchange rate towards the end of 2013, but warns that volatility is still a concern for 2014.

Fuel prices rose 7% in the third quarter to between Brazilian real (R$) $2.43 ($1.12) and R$2.48, and the airline faced record high fuel prices in September and October, says the airline's chief financial officer Edmar Lopes in a call today to discuss the carrier's September performance.

However, the airline expects some relief in November and December as the Brazilian real strengthens, which will create a "much better environment", says Lopes.

"It is still early to say what happen for the fourth quarter," he adds. He cautions that the airline expects volatility caused by fuel prices and depreciation of the Brazilian real to loom over 2014. "We don't believe the volatility will fade away," says Lopes. "We think it will remain for the full year of 2014."

The airline does not see significant upside from the 2014 World Cup, which will take place in Brazil, he adds.

As a result of the expected volatility, Gol will continue exercising capacity discipline in 2014. Gol expects to reduce 2013 domestic capacity by 9%, and Lopes expects 2014 capacity to be at "roughly the same level". "If we cut capacity, it will be in the low single digit number [range]," he says.

Gol reiterates today that it expects to meet its target of achieving a positive operating margin of 1% to 3% for 2013. It will announce its third quarter financial results on 13 November. The airline posted two consecutive years of losses in 2011 and 2012.