Write-off on new revenue system crimps Gol’s Q1 pre-tax profits

Washington DC
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A $120 million write-off by Brazilian carrier Gol from a new revenue accounting and ticket control system resulted in a pre-tax first quarter profit of 53 million Reais ($32 million) compared with R405 million the year prior.

Excluding the write-off Gol recorded pre-tax first quarter profits of R411 million on revenues of R1.9 billion and operating income of R193 million. Gol's operating margin fell year-over-year from 11% to 10%.

Gol's expenses increased 10.7% to R1.7 billion driven by a 21% increase in fuel expense and a 6% rise in fuel consumption year-over-year during the first quarter. An 8.8% pay raise also contributed to a 26% jump in salary, wage and benefit expense.

Gol explained its yield notched down 0.9% for the quarter as it opted to focus on passenger unit revenue growth, maximising load factors to stimulate travel among members of Brazil's emerging middle class and the Brazilian Carnival holiday occurring in March of this year, which extended the leisure travel season.

The carrier also recorded a nearly 19% rise in ancillary revenues year-over-year due to a hefty 94% increase in revenue from its Smiles loyalty programme, a roughly 18% increase in cargo revenue, a 36% jump in buy-on-board revenue and a 44% increase in no-show and rebooking fees resulting from an overall increase in operating volumes.

During the first quarter Gol's traffic grew 9.7% as domestic traffic increased 9% and international traffic grew by 16%. New international destinations introduced during the last year include Punta Cana, Barbados, St. Maarten and the Jorge Newberry airport in Buenos Aires Argentina.

Gol ended the first quarter with R1.8 billion in cash, up nearly 24% from it total cash on hand as of 31 March 2010.