Shares of GOL Linhas Aereas Inteligentes dropped 2.1% this week, touching a 52-week low of $1.88. However, the company’s shares ended a little higher at $1.91, declining more than 63% in the past six months.
The price decline was largely the result of adverse foreign currency movements characterized by the strengthening of the U.S. dollar against Brazilian real. Furthermore, the 2015 projection by the International Air Transport Association (IATA) paints a gloomy picture for Latin American carriers. According to the forecast, these carriers will account for only $600 million of the estimated $29.3 billion global net profit in 2015.
For 2015, the company expects domestic supply to remain flat year over year. The company is also exposed to currency fluctuation risks due to its substantial scale of international operations. Moreover, operating costs related to aircraft rent, maintenance and promotional activities have put margins under pressure.
The company is highly dependent on products of big suppliers like Boeing 737-700/800 Next Generation aircraft and CFM 56-7B engines. A shift in loyalty among suppliers may affect the company’s profits going forward. Moreover, GOL has been facing considerable loans and liabilities which have increased the company’s debts and subsequently led to a weaker balance sheet.