Brazilian airline cuts capacity and boosts profits

Gol Linhas Aereas Inteligentes SA, Brazil’s second-biggest air carrier by market share, rallied after announcing that a measure of profitability increased as the company reduced capacity to boost net income.

Shares climbed 4.4 percent to 11.83 reais at 12:58 p.m. in Sao Paulo after earlier rising as much as 5.2 percent in the biggest intraday advance since April 8. It was the second-best performer on the benchmark Bovespa index, which added 1.3 percent.

A measure of profitability known as Prask that considers net passenger income per available seat-kilometer increased 16 percent in March from a year earlier, Gol said in a regulatory filing after the close of trading yesterday. The company attributed the increase to its strategy of cutting flights in markets where there is less demand. It reduced domestic flights by 9.8 percent, according to the filing.

“March statistics show another very impressive unit revenue increase,” Stephen Trent, an analyst at Citigroup Inc, wrote in a note to clients today.

Gol is reducing domestic capacity by 7 percent in 2013 as it tries to improve margins after economic growth came in lower than forecast last year. The airline had projected Brazil’s gross domestic product would grow 3 percent to 4 percent, more than three times the 0.9 percent advance.

Gol is also conducting an initial public offering of its frequent-flier unit, Smiles SA, to raise cash and trim debt.

The carrier’s shares declined 8.4 percent this year while the Bovespa fell 12 percent.

–Editors: Richard Richtmyer, Brendan Walsh

To contact the reporter on this story: Denyse Godoy in Sao Paulo at [email protected]

To contact the editor responsible for this story: David Papadopoulos at [email protected]