As the outbreak of the COVID-19 pandemic in Brazil reached the end of its first year, this time with the country in a much more complicated situation, GOL Airlines — the country’s largest airline by domestic traffic — published its financial results for the fourth quarter of 2020.

The airline registered revenues of 1.89 billion Brazilian reals ($344 million), a decrease of 50.3% over the same period of 2019 the last quarter before COVID-19 hit the country. As operational costs fell 28.9% to 2.21 billion reals, the airline registered negative earnings before interest and taxes — the metric used to assess strictly operational results — of 319.2 million reals. Overall, the net loss for the period was 861.9 million reals.

The airline’s liquidity position ended the quarter at the lowest of the three major airlines in Brazil, at 2.57 billion reals. At the end of the period, Azul Brazilian Airlines had 4.032 billion reals of liquidity and LATAM, as a group, had $3 billion.

After the gold run and massive capacity up-gauges in the second half of 2020, the airline expects the first half of 2021 will be the airline’s worst in terms of liquidity and financial performance before the situation starts to get back to normal.

In Brazil, the pandemic situation is worse than ever before, with multiple states’ health systems collapsing and daily COVID-19 casualty averages growing from around 350 in November to 2,200 by the second half of March. This prompted local governments to unleash severe mobility restrictions in February, which, in combination with the public’s natural desire to stay at home, has reduced the demand for travel.

Vaccine-Driven Recovery

In the quarterly call with analysts, GOL’s top executives lamented the melting demand scenario but claimed to be hopeful that the ramp-up of vaccinations in the country will change the game, with the full vaccination of the elderly being the key turn for an end to the crisis. At the beginning of March, the country’s Ministry of Health expected to distribute 30 million vaccine doses in March and 47.7 million in April, according to G1.

“Our experience tells us that we’re probably about 60 to 90 days behind what you’re seeing happening in the U.S.,” said GOL’s Chief Financial Officer, Richard Lark, referring to the roll-out of the vaccine as a prompt for demand heating. “I can say March where you are, it’s going to be May where we are because May where you are might end up going back”.

GOL Vice-President of Sales and Marketing Eduardo Bernardes said that there’s a “high likelihood that July would be much stronger than we are foreseeing right now, assuming, as I said before, that the population above 60 years will be already immunized.”

As of March 22, according to G1, 5.58% of the Brazilian population has received the first dose of the vaccine, with 1.96% being fully vaccinated. However, this month, the process has started to pick up in pace and all states are allowing younger citizens to begin the process. São Paulo state, for instance, will start to vaccinate people between 69 and 71 years old beginning March 27.

GOL CEO Paulo Kakinoff gave insight on the return of corporate travel, the most valuable for airlines yet the sector that has suffered the most during COVID-19.

“One-third of the business travelers never stopped flying even during the pandemic, and this is, I would say, the base level which never change[s],” Kakinoff said. “The second group is made of large corporations that are under human resources policies that are blocking flying. So I believe this is the group that we referred [to] sort of resume when the pandemic will be either under control or probably over.”

The other third shows how, according to GOL, COVID-19 may have changed air travel forever

“And then you have another portion, maybe one-third, which I believe two-thirds of this, one-third, possibly will take much longer are or maybe even not come back,” he said. “Those are the travelers that will replace business travel by one of the new technolog[ies] such as video conferences and this kind of stuff. I believe that when I say that, we will have from the third quarter on more business [from these]. So that’s resuming their old habits, I believe that we will have on top of the current one-third who’s still traveling, we would be another third, maybe 40 percentage points on top of the 30% still flying.”

Regarding the company’s liquidity position, Lark had a warning, again comparing Brazil to the U.S. and exposing the different situations between both countries.

“We have to be very careful about preserving our tools to access responsible capital,” Lark said. “If we need to, we can go to that. But, of course, we have to be careful and pick our moments because we will have incidents, if we run out of those things we can’t call up our friends in Washington D.C. and ask them going to send us $15 billion, that’s not going to happen.”

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João Machado

João has loved aviation since he was six-years-old when he started visiting his home airport in Porto Alegre, southern Brazil. As he always loved writing, in 2011, at age 10 he started his very own aviation blog. Many things have happened since then, and now he is putting all his efforts into being an airline executive in the future. João currently lives in Siena, Italy, where he studies Economics and Management at Unisi.

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