Gol considers 737-700 retirement, receives US$412 million in 737 MAX compensation

GOL Linhas Aéreas Inteligentes (GOL), Brazil's largest domestic carrier, has revealed that it is considering the retirement of its 23-strong Boeing 737-700 fleet and has announced that it has adjusted its 737 MAX delivery schedule for the coming years. Furthermore, the airline has said that it will receive US$412 million in compensation from Boeing for its 737 MAX fleet which has been grounded since March 2019.

GOL Boeing 737 MAX pictured on approach to Miami International Airport. Photo by Matt Lino | AeroNewsX

The Brazilian airline says it has grounded approximately 92% of its fleet, equal to 120 aircraft. Furthermore, it has cut services drastically and last month, operated just 7% of its April 2020 schedule. The airline only flew from Guarulhos airport in São Paulo to Brasilia and all of Brazil’s state capitals in April, it said.

In its investor update for April 2020 released today, the carrier disclosed its intention to retire all 23 of its Boeing 737-700s as it looks to cut capacity amid a grey outlook for demand for air travel over the coming years. The aircraft type accounts for 15% of GOL's total seat offering, meaning its removal is fairly significant. The Brazilian low-cost carrier confirmed the move was due to "the expected softer demand and the need for even lower lease costs per seat kilometer".

Further reducing capacity, GOL intends to retire a total of 18 aircraft this year, having removed 7 Boeing 737-800s during the first quarter of this year. During the second quarter, the company plans to withdraw a further 4 Boeing 737-800s meaning it will retire 7 aircraft during the second half of 2020.

GOL has also confirmed that it has agreed a reduced delivery schedule for its 737 MAX orders with Boeing. It has postponed the arrival of 14 Boeing 737 MAX's due in 2020, 20 due in 2021 and 13 due in 2022. As of March 31, 2020, GOL had 95 firm orders for the Boeing 737 MAX aircraft, of which 73 were orders for 737 MAX 8 and 22 for the -10 variant.

Furthermore, the airline has said that it will receive a total of R$2.4 billion (US$412 million) in compensation for the Boeing 737 MAX which has been grounded for more than a year. The airline confirmed that it had reached an agreement with Boeing in March which saw it receive R$0.5 billion in April. The deal also provides GOL with R$1.9 billion "which it will receive over the coming years".

GOL Boeing 737 MAX registered PR-XMB, pictured prior to delivery. Photo by Preston Fiedler | AeroNewsX

GOL says it is fully exercising its low-cost model in order to preserve as much cash as possible and overcome the crisis. GOL's Chief Financial Officer, Richard Lark said: “We have returned to our initial years of operation as a full low-cost, low-fare airline, and that allows us to be both realistic and optimistic. The Company has one of the most competitive cost structures worldwide."

GOL, in April, operated on average just 50 flights per day to 27 destinations, a fraction of what it was doing during the same period last year. The carrier is doing so with a fleet of just 11 planes. The company says it has, as of 30 April, R$4 billion in liquidity, allowing it to survive for at least another 10 months.