Getting Back On Track By Applying More Accurate and Timely Data
GOL Linhas Aéreas (GOL) leveraged its low-cost model to become a successful South American startup in the early 2000s. Then, economic headwinds deterred further upward movement. Today, GOL is applying better data sources and renewed purpose to regain traction in a challenging marketplace.
Being a trendsetter can lead to early success, especially for a new company. However, it can also present challenges that, left unaddressed, may trigger a downturn.
Such is the history of Brazil-based GOL, which in 2001, entered the marketplace as South America’s first low-cost carrier and forged a success story during the first several years that attracted attention throughout the airline industry.
Not only did GOL steadily increase the size of its fleet of Boeing 737 aircraft from less than 10 in 2001 to more than 140 today, it also acquired Brazil-based competitor Varig in 2007, along with the popular Smiles frequent-flyer program.
GOL was making headlines as a business phenomenon and at the same time was assembling a route structure that now connects not only the major metropolitan areas of Brazil but also flies to other high-profile destinations across South America. In addition, GOL has added flights to destinations in the Caribbean, as well as to Miami and Orlando, Florida.
Today, GOL — with its low-cost model — and TAM have emerged as the dominant forces among Brazil’s commercial carriers, with TAM at No. 1 in the Brazilian marketplace and GOL at No. 1 with the largest domestic operation and volume of passengers in Brazil.
Nevertheless, several developments since GOL’s early success have altered Brazil’s — as well as much of the industry’s — economic landscape. As a result, the carrier has struggled to remain among the leaders in international commercial aviation, given current business conditions.
Rising fuel costs, of course, have hit all carriers at their bottom lines.
Additional unforeseen factors, including stronger competition and a more-diverse flying public that has the economic means to fly higher-cost carriers in the region (as the middle class and incomes have risen across South America), have adversely impacted GOL’s strategic planning efforts.
GOL was founded by Grupo Áurea, which also operates Brazil’s largest bus system. Knowing the “common-citizen” nature of bus travelers provided a marketing advantage that helped bring about GOL’s early success, as the airline benefited from many South Americans’ newfound financial ability to travel not only by bus, but also on low-cost carriers.
In response, GOL expanded its route system to the extent that when the global economy slowed down in 2008 and 2009, some of its flights were half or even three-quarters empty. This served as a red flag to route planners who were trying to better manage the airline’s routings and flight frequencies for maximum profitability.
In Brazil, a high depreciation rate of the Real, the country’s official currency, has exacerbated what was already a difficult economic equation. In addition, ongoing labor difficulties at GOL (some of which are related to the airline’s 2012 acquisition of low-cost competitor Webjet) have added further pressure, spurring GOL executives to construct a more resilient strategic plan.
During the past year, one of GOL’s primary objectives has been to effectively address problem areas to staunch its deeper-than-anticipated excursion into red ink. The carrier is determined to regain the positive growth pattern it established in 2001 and sustained through its early years as an expanding business entity and phenomenon.
As GOL’s executive team pondered the options for regaining its foothold in the industry, one thing became clear. The airline needed more accurate and reliable information on economic conditions.
With better, more-timely information, the airline could make better, more-informed decisions. For example, it could easily and accurately determine which routes to include or expand and which to cut back.
Additionally, better decision-making would help strengthen the carrier’s approach to:
- Labor costs,
- Aircraft allocation,
- Frequent-flyer program,
- Business travelers,
- Aircraft configurations.
GOL, Brazil’s second-largest airline by market share and fleet size, implemented Sabre AirVision Market Intelligence to help strengthen its business in key areas such as labor costs, aircraft allocation and customer amenities through more accurate decision making. The airline is on a financial upswing as a result. For instance, it achieved a 21 percent increase in net passenger revenue per available seat-kilometer during the third quarter last year, a 14 percent growth for the year.
GOL addressed its needs for more timely and accurate information and statistical analysis by implementing Sabre® AirVision™ Market Intelligence software.
The results can be clearly seen in GOL’s upward-trending financial results. In the third quarter of 2013, for example, GOL had a 21 percent increase in net passenger revenue per available seat-kilometer, representing 14 percent growth for the year.
Furthermore, net passenger-seat-kilometer yield for September 2013 showed a 25 percent increase year-over-year, which was largely attributed to GOL’s evolving strategy to attract high-value customers.
Other GOL financial results have exhibited similar improvement.
In addition, the true impetus in the upward trends is a direct result of strong corporate commitment. GOL’s management team realized the challenges it faced were largely related to the carrier’s modest approaches to finding solutions — approaches that seriously needed to become more aggressive in areas including those related specifically to data collection and analysis to provide a firm foundation for better decision-making.
Such fundamental changes do not happen without management support. Therefore, the company had to make a conscious, collective decision to move forward with new systems and processes as well as renewed enthusiasm.
Since making its more visible commitment to lead the entire organization through a highly positive cycle of change, GOL has noticeably evolved as a company.
With regard to aircraft seating, for example, GOL devised a formula to expand the room between seats in some rows from 31 to 34 inches and in other rows from 31 to 32 inches. Passenger comfort, therefore, played a large part in GOL’s decision to set the parameters for its revised aircraft-seating arrangement, called GOL+.
Increasing space between rows of seats, of course, reduces the overall number of seats on an aircraft, which also aligns with GOL’s objective to fly fuller aircraft on a greater percentage of its flights.
Considering the continually increasing competition with regard to GOL’s basic pool of potential passengers and the destinations GOL serves within its expansive route network, better information was also needed to help identify new market opportunities.
And GOL has acted vigorously to identify and properly utilize that information.
In addition, the airline has established fundamental, defined procedures that appeal more directly to business travelers, including streamlining the boarding process, improving on-time performance, becoming more visible with a high-profile, attractive airport presence and developing more efficient, convenient schedules not only within GOL’s own route network but through codeshare partnerships as well.
These definitive moves by GOL’s management team have been aided by the carrier’s adoption of Sabre AirVision Market Intelligence, which is designed specifically to help airlines gather timelier, more accurate information that is vitally important for making critical decisions.
Sabre AirVision Market Intelligence has also enabled GOL to monitor market segments and specific markets to identify and measure the effects of competitors’ actions, as well as pinpoint agencies and markets deemed “underperforming,” as defined by the revenue-generation needs and objectives set forth by the airline’s leadership.
In addition, the software provides thorough insight into competitors’ service offerings and traffic flow, providing GOL with the capability to quantify and analyze competitive market share and react effectively based on the information.
GOL now operates more than 900 flights daily to more than 60 destinations in 13 countries. And with major seasonal events such as World Cup soccer competitions at a dozen Brazilian cities this year, GOL executives know that a winning performance requires application of the best information available.
“We’re confident that Sabre AirVision Market Intelligence is the most comprehensive solution for our needs, delivering precise information on the competitive landscape, with passenger traffic, airline schedules and fares,” said Claudio Neves Borges, GOL’s director of schedule planning. “Accurate data is critical to the success of our commercial planning. It enables us to efficiently respond to market dynamics both tactically and strategically.”
In other words, GOL is once again soaring.
And its greatly improved information resources can be counted among the biggest contributors to the carrier’s positive performance.