Shares of carrier Gol fall amid bankruptcy rumors

Brazilian airline has high short-term debt and is considering filing for Chapter 11 in the United States, according to report

One of the largest Brazilian airlines, Gol Linhas Aéreas can file under Chapter 11, legislation that governs companies in bankruptcy in the United States.

The carrier, which accumulates high liabilities with a short payment period, is considering joining the administration process, according to sources from the newspaper Folha de São Paulo.

The news ended up surprising the market and causing the company’s shares to fall by up to 13% on January 15th – the following day, Gol’s shares recovered part of their value.

Despite having avoided bankruptcy during the coronavirus pandemic, Gol has had difficulty extending the term of its debts, especially from its aircraft lessors.

Gol’s Boeing 737 MAX 8 (Thiago Vinholes)

According to the newspaper, the company’s debt is equivalent to US$4 billion and there are efforts by top executives to try to reach agreements with its creditors in order to avoid filing under Chapter 11.

The preference for a process in the United States Bankruptcy Court is explained by the fact that Brazilian legislation is less predictable.

LATAM and Avianca followed this path and managed to settle their debts years ago.

Of the US$4 billion in debts, around US$600 million are short-term, with a term of just one year, but Gol’s cash flow would be weakened after the ABRA holding creation process.

Gol has started its operation in Brazil in 2001 (Thiago Vinholes)

The scenario is more delicate precisely with leasing contracts, whose market is heated and makes any type of negotiation to reduce the amounts paid difficult.

The company’s operational data until the third quarter of 2023 are, however, very promising, with net operating revenue growing and productivity also increasing.

The situation could be better if Boeing had delivered the 15 new 737 MAX 8 jets expected by Gol.

The US manufacturer delivered only six of the planned aircraft, five of them between the end of November and mid-December, therefore without time to reduce fuel costs on the company’s flights.

Debut in 2001 and rapid expansion

Founded by an entrepreneur in the road transport segment, Gol debuted on the Brazilian market in 2001 as a low-cost airline with a simpler service than its competitors.

Five years later, the company took over part of VARIG, the most famous Brazilian airline and soon after began to have Air France-KLM and Delta Air Lines as partners.

Avianca and Gol are managed by ABRA holding

With a standardized fleet of Boeing 737 jets, Gol maintains a large domestic network in addition to serving several destinations in South America and also cities in the Caribbean and Florida, USA.

Amid the pandemic, the carrier negotiated several contracts and decided to join Avianca, from Colombia, as part of the ABRA holding.

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With Delta’s entry into the partnership of rival LATAM Airlines, the US airline sold its shares in Gol, which then approached American Airlines.

In a statement, Gol stated that “it is in discussions with its financial stakeholders about several options that bring greater financial flexibility, including additional capital to finance operations.”

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