It is stunning news, but for a period, the second quarter in 2004, a Brasilian airline was perhaps the most profitable airline in the world.
Brasilian low cost airline Gol has outperformed the bastion of positive airline results, Ryanair. Gol is the low cost carrier of Brasil, and in the period for April to June 2004 reported an operating margin of 24.1% compared to the Ryanair operating margin of 21.4% for the same period.*
Even on a net basis, GOL fared better than Ryanair with a net margin of 19% vs. the Ryanair net margin of 18%.
Gol has a similar operating philosophy to Ryanair, with a simple product offering and single type fleet focused on 737-700/800, but offers pre-assigned seating in contrast to the Ryanair open seating policy. Both airlines concentrate booking via the internet, with Gol achieving 74% of bookings via the internet.
In particular, Gol benefits from lower labour costs and lower enroute charges. Whilst the Ryanair aircraft utilisation is not publicised, Gol's aircraft utilisation increased to an incredible 13.5 hours, boosted by scheduling a large number of night flights.
Ryanair has been flying for twenty years and carried passengers 23m in 2003 at an overall load factor of 80.5% (this increased to 83% in 2Q04). In contrast GOL only began operations in 2001 and has carried over 16 million passengers since then. Its load factor in the second quarter of 2004 was 68.9%, 15% above its breakeven load factor of 54%.
Gol's share of the Brasilian domestic market has risen to 22.5%. It continues to plan for growth, with international routes to be added, beginning with Buenos Aires by the end of this year.
Ryanair continues expanding its network, primarily by growing the number of routes and adding frequencies at existing bases, whilst beginning to add bases in the Eastern European countries that have just become part of the European Union (beginning with Riga in Latvia). Ryanair currently operates over 160 routes from 11 base airports in Europe.
This brief snapshot of two prominent and growing low cost airlines serves to illustrate the permanent change in the structure of the air transport industry brought by implementation of the cost efficient business model.
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Major airlines | Mainline jets | Low cost airlines | Regional airlines | Regional jets | Business jets
