July 31, 2020 / 1:18 PM / 6 days ago

UPDATE 2-Brazilian airline Gol faces cash crunch as coronavirus losses add up

(Updates with statements from Gol executives)

By Marcelo Rochabrun

SAO PAULO, July 31 (Reuters) - Brazil’s Gol Linhas Aereas Inteligentes on Friday said its daily cash burn could quadruple in the next three months compared with the second quarter, adding to heavy 2020 losses already totaling 4.3 billion reais ($823.3 million).

Brazil’s largest domestic carrier, like almost all airlines around the world, is reeling from the impact of the coronavirus crisis on travel. It reported a net loss of 2 billion reais in the quarter.

Gol’s own forecasts show it could face a liquidity crunch soon. The airline is scheduled to repay $300 million to Delta Air Lines in September. If that happens, Gol could burn through more than the 416 million reais it has on hand in cash and cash equivalents.

Gol says its total liquidity, including accounts receivable and restricted cash, is much higher, at about 3.3 billion reais.

Executives said it is a “viable” possibility that Delta would agree to postpone the repayment, but Chief Executive Paulo Kakinoff would not confirm whether it is negotiating with the U.S. carrier.

“Continued support from GOL’s stakeholders is critical to ensuring the Company maintains the sufficient required months of cash-on-hand to see the Company through this crisis,” the company said in a statement.

Regional rivals Avianca Holdings and LATAM Airlines Group filed for bankruptcy in May.

Kakinoff said that Gol has not hired restructuring advisers for a potential bankruptcy filing and that any such move is not on its radar.

Gol’s cash burn would go up, however, whether it repays Delta or not.

The airline said it burned through 3 million reais a day in the second quarter, and would burn through 12 million reais per day in the next three months if it repays Delta. Gol provided little detail on the source of the increased cash burn, although it suggested it could come from previously deferred payments to lessors, suppliers and employees

Even if it does not repay Delta, its daily cash expenditures would still double to 6 million reais a day.

Gol executives said Brazil’s government could give the airline some extra liquidity, but that it would take some 60 days for any funds to be disbursed.

Talks about state aid began when the coronavirus crisis hit Latin America in March, and terms for a potential 2 billion reais loan have yet to be finalized. ($1 = 5.1720 reais) (Reporting by Marcelo Rochabrun; Additional reporting by Alberto Alerigi; Editing by John Stonestreet, Paul Simao and Jonathan Oatis)

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