JPMorgan Praises Gol’s Strategic Five-Year Plan, Maintains Sell Recommendation

Gol (GOLL4) unveiled a five-year business plan on Monday to aid its ongoing Chapter 11 process, started in January 2024.

Following this, Gol and Azul (AZUL4) announced a codeshare agreement to merge their flight networks across Brazil.

This codeshare, revealed last Friday, boosted the market, hinting at a possible merger.

Consequently, AZUL4 shares rose 5.18% to R$10.36, and GOLL4 shares increased by 11.9% to R$1.41.

JPMorgan praised this plan as a key milestone in Gol’s U.S. judicial recovery, though it still prefers CopaAirlines among Latin American carriers.

Gol plans to refinance $2.0 billion in secured debt and issue $1.5 billion in new shares to repay $1.0 billion in debtor-in-possession financing, enhancing liquidity.

However, the exact terms are still under discussion.

In early June, Gol will start evaluating exit financing proposals, a process expected to continue into late 2024.

As a result, Gol’s net debt is projected to be 3.6 times EBITDA in 2025, decreasing to 2.9 by 2026 and 1.7 by 2029.

Gol aims to reach pre-COVID domestic capacity by 2026, with an EBITDA margin of 29% in 2025, up from an estimated 23% in 2024.

JP Morgan Praises Gol’s Strategic Five-Year Plan

JPMorgan forecasts a slightly lower margin of 27% in 2025 and 25% in 2024.

Currently, Gol’s capacity is 14% below 2019 levels. JPMorgan expects a 19% decrease in 2024 and an 11% decrease by 2025 compared to 2019.

Gol also plans to increase its fleet to 169 aircraft by 2029, from 142 in Q1 2024.

It has secured new leases for 113 aircraft and 48 engines under Chapter 11, with plans to finalize nearly all remaining contracts soon.

Despite these positive steps, JPMorgan retains an “underweight” rating on Gol.

This plan and the codeshare with Azul show Gol’s commitment to financial restructuring, potentially reshaping Brazil’s aviation future.

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