- GOL and Azul park hundreds of planes because their network has become a veil just a few weeks ago.
- GOL has been working to cut costs, which has caused the airline to almost break even on its “essential” network.
- GOL believes the Brazilian market could be smaller for some time after that COVID-19 the crisis is over.
- It may take time for the request to materialize Brazil again after the pandemic ends. The country’s economy will weaken significantly in 2020.
GOL and Azul join airlines around the world in parking hundreds of planes
GOL and his rivals Azul both have cut their capacity by 90%, and data from CAPA and OAG showing that for weeks 20-Apr-2020, BrazilDomestic ASK will fall 89% year-on-year, before it is planned to rise again in early May-2020.
In early March, before the effects of the COVID pandemic quickly wiped out the demand for air travel around the world, GOL operated around 750 flights per day.
The airline has parked more than 100 of them Boeing narrowbodies, and the CAPA fleet database shows that GOL only operates 10 aircraft.
GOL CEO, Paulo Kakinoff recently stated that the airline hopes to maintain a reduced schedule until early May.
Recently, domestic competitor GOL Azul has reduced its capacity by 90% from March 25 to April 30 and operates 70 non-stop flights to 25 cities. Azul has stated that they hope to continue approaching the full operating schedule in July.
The CAPA fleet database shows this Azul has parked 124 aircraft and only has 30 in operation.
However, Azul also said: “We are actually starting to see the government sort of change a little and realize that you cannot have a full shutdown for too long because it will be a disaster for the economy”.
See related reports: COVID 19: Brazil maps its own way to combat the aviation crisis
GOL almost achieved breakeven performance in the current network configuration
GOL has basically reduced its network to 10% from before the crisis, and Mr. Kakinoff explained that “automatically, we also reduced our variable costs to the same level”. The airline has also taken steps to cut its fixed costs, including a 50% reduction in payroll and deferment of rental payments.
“The good news from this important network is that we have almost reached a break-even point in money related to the operation of that important network,” Kakinoff said. “So we reduced our costs to our level of income. This means that by operating this important network, we do not burn money. ”
Brazil lost one of its main airlines in 2019 when Avianca Brasil, which at one point had a 15% share of domestic passengers, stopping operations. The remaining airlines in the country are mostly refilled Avianca BrasilCapacity.
At one point in 2019 the GOL expressed concern about growing domestic capacity, but when the year ended, the airline concluded that BrazilDomestic growth in 2020 will be rational.
Clear it COVID-19 the crisis has erased previous projections for industrial growth, and there is no certainty when – or if – demand will reach pre-crisis levels. GOL, according to the company’s CFO Richard Lark, believes that BrazilThe market “on the other hand” has the potential to become smaller for a certain period of time.
GOL does not believe that COVID-19 Pandemic will trigger consolidation in Indonesia BrazilThe market, but Mr. Kakinoff has stated that the possibility of a positive outcome from the crisis is that there might be “lessons learned by some players in the market … now you can see how poisonous the overcapacity approach is.”
LATAM Airlines Brazil is the second largest domestic airline in the country behind GOL, and for April-2020 COMPACT continues to operate to 39 destinations in the country, with lower frequencies. Overall, LATAM Airlines Group cut its operations by 95% for April-2020.
GOL also adjusted its expectations for international expansion. At one point, the airline plans to expand its international business to 25% of its total operations over the next few years. But clearly the plan will change; as stated, there is still uncertainty about when the demand pattern will guarantee the addition of new international routes.
BrazilThe economy is slowing down to zero and the return of demand is unknown
BrazilPassenger growth was only 1.7% in 2019, after 3.3% growth in 2018. The country’s economy began to grow after a recession in the middle of the last decade.
But now the country’s government has predicted zero economic growth for the country by 2020, and the possibility of contraction can occur.
Even if BrazilThe airlines are indeed continuing close to the normal schedule in 1H2020, they will likely need to stimulate demand at much lower rates, because Brazil will monitor their discretionary spending due to the faltering economic environment.
There are also general and ongoing concerns about trips made by COVID-19, and it can take time for residents to feel comfortable traveling again.
Brazil not the only market that will appear smaller in the post COVID-19 world. There is little evidence that demand will reach all types of normal levels until the end of 2021 or 2022, and the result is that airlines need to adapt to the reality of their new operations.
BrazilThe market is largely rational before the onset of the crisis, but airlines need to change the size of their operations to maintain the ideal supply and demand balance.