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Gol Airlines profits are strained due to declining Real

Gol Airlines is the the most indebt in the Americas and facing its seventh
quarterly loss due to the Brazilian real decining.

The real’s 12 percent drop against the U.S. Dollar last year preventing GOL to improve its operations. This happens because 77 percent of its debt is denominated in dollars, while Gol gets most of its revenue from within the country. On top of that, fuel (Gol’s biggest expense) is priced in dollars as well.

Gol’s struggles are the same for other industries in Brasil because of the Real’s decline. This situation gets worse due to a drop in traffic and slowing economy. On top of all these, there is a bigger problem hurting; GOL is  hyper-indebted. The other Brazilian Airlines Latam and Azul have been seeing their operation costs more then double.

For GOL, a big problem is their debts.“The problem is Gol is hyper-indebted, and the dollar hurts them.

Gol’s chief Executive Paulo Sergio Kakinoff has been
cutting flights to reduce costs and boost revenue. Gol
has posted monthly gains of as much as 24 percent this year on
that basis, compared with a 2012 high of 7 percent.

The company is trying to return to profit with jet fuel accounting
for 41 percent of operating expenses in the second quarter. And has projected a 2013 margin of earnings before interest and taxes of 1 percent to 3 percent.

Next year, if there is an improvement in the economy,GOL flights will
be fuller.