MUMBAI (Thomson Financial) - Moody's Investors Service downgraded Gol Linhas Aereas Inteligentes S.A. and Gol Finance and signalled further possible downgrade citing continued deterioration in financial strength and prospects for a decline in the financial metrics.
The corporate family rating was cut to 'B1' from 'Ba3' and senior unsecured debt downgraded to 'B1' from 'Ba3'.
Moody's said that though Gol's labour costs remain low relative to other airlines, the company's wage and benefit costs have increased because of a large, non-unionised workforce.
Besides, incremental costs associated with the integration and realignment of the route network of VRG Linhas Aereas S.A. and ongoing regulatory restrictions on Gol's operations at Congonhas Airport have pressured operating profits and generated negative free cash flow, Moody's said.
Although Gol represented that the integration of VRG is progressing and regulatory issues are being addressed, in the absence of a cut in fuel costs VRG's operations are expected to continue to pressure Gol's consolidated financial results and generate cash operating losses, the ratings agency said.
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