São Paulo-based LCC GOL reported a BRL1.3 billion ($329.1 million) second-quarter 2018 net loss, deepened from a BRL409.5 million net loss a year ago, largely attributable to a steep 16% drop in the monetary exchange rate between the Brazilian real and the US dollar during the three-month period ended June 30.

The fluctuation, from BRL3.3 per US dollar on March 31, to BRL 3.9 per US dollar on June 30, caused GOL to report exchange and monetary losses of BRL1 billion on its 2Q 2018 financial report, released Aug. 2.

“The traditional low season in Brazilian air travel was particularly challenging,” GOL CEO Paulo Kakinoff said, citing the accelerated appreciation of the US dollar versus the real and “industry-wide supply disruption that affected demand for travel.”

In May, an 11-day nationwide truck drivers’ strike, in which trucks stopped and blocked roadways, prevented fuel supplies from being delivered to distribution points. GOL said it was able to “successfully navigate through the industry-wide disruption … [through] its flight network strategy and single fleet type [all Boeing 737s],” operating 99.8% of its scheduled flights.

GOL’s 2Q revenues increased 9% year-over-year (YOY) to BRL2.4 billion, representing a combination of demand growth and optimized pricing, the company said. Expenses were up 8.1% to BRL 2.3 billion, resulting in a BRL42.8 million operating profit for the quarter, nearly doubling GOL’s 2Q 2017 operating income, and producing a 1.8% EBIT margin, GOL’s highest 2Q margin in eight years.

Aircraft fuel expenses increased 25.9% YOY and salary, wage and benefits costs rose 7.6%.

GOL’s net passenger RASK increased 8% YOY to BRL20.11 cents. CASK excluding fuel were down 1.4% to BRL14.23 cents. Net yield increased 7.6% YOY to BRL25.74 cents. GOL’s average fares increased 6% compared to a year ago.

Consolidated passenger traffic during the quarter was up 2.5% to 8.3 billion RPKs on a capacity increase of 2.2% to 10.7 billion ASKs, producing an 78.1% load factor for the quarter, up 0.2-point YOY. GOL’s domestic traffic was up 4.2%, and domestic capacity increased 3.2%. The carrier’s international traffic, however, fell 12.9% YOY during the quarter; international capacity contracted as well, falling 6.1% for the quarter.

As of June 30, GOL’s fleet comprised 118 Boeing 737-NG aircraft (92 737-800s and 26 737-700s) and the carrier’s first 737 MAX 8. At Farnborough in July, GOL ordered an additional 15 MAX 8s, on top of 120 of the type it had already placed for fleet renewal by 2028. Also at the air show, GOL announced it is converting 30 of the earlier MAX 8s to MAX 10s. GOL expects to begin flying its MAX 10s in 2022.

GOL is planning to utilize its forthcoming MAX 8s on routes between midwest and northeast Brazil to Florida, beginning with nonstop service from Brasilia and Fortaleza to Miami and Orlando in 4Q 2018. GOL said the Brasilia to Orlando flight will be the “world’s longest regular flight ever made with a 737—approximately 6,079 km.” The new MAX 8s will also operate on GOL’s newest international route, its 14th, between São Paulo GRU and Quito, Ecuador, starting in December.

GOL is projecting an operating (EBIT) margin of approximately 11% for full-year 2018 and a preliminary EBIT margin guidance of about 12% for 2019. Total forecast net revenues for 2018 and 2019 are now revised upward by BRL500 million; for 2018 GOL projects about BRL11.5 billion in net revenue; for 2019, net revenues are forecast about BRL12.5 billion. 2018 capacity growth remains forecast at between 1%-2%. Ancillary revenue projections were revised downward 17% to about BRL1 billion.

Mark Nensel mark.nensel@informa.com