GOL Linhas A?reas Inteligentes S.A. (GOL), the largest low-cost and low-fare airline in Latin America, recently announced an interline agreement between its subsidiaries VRG Linhas A?reas S.A (“VRG”) and Webjet S.A.(“Webjet”) to sell the tickets of Webjet through VRG. As per the agreement, passengers will be able to purchase, through GOL’s sales channels, “pure” stretches, operated by Webjet only, or “combined” stretches, involving both airlines.
In July 2011, GOL announced the acquisition of Webjet. The companies, however, continued to operate as separate entities; awaiting operational approval of Brazil’s anti-trust authority, CADE. The new agreement is anticipated to permit greater flexibility to the customers with regard to ticket purchases, flight frequencies and destinations for clients of both companies.
Moreover, the agreement will facilitate clients, transferring from GOL flights to Webjet flights, with only one time check in and will send their baggage to the final destination. Similar advantage will be available for Webjet passengers in connection with GOL flights.
Both, GOL and Webjet also decided to rationalize on their route networks, in order to avoid flight overlap, and consequently increase flight frequencies and destinations, ensuring greater convenience for clients.
Of late, GOL signed a binding agreement involving the acquisition by the U.S. company, Delta Air Lines Inc. (DAL) for a strategic minority interest of US$100 million of GOL?s preferred shares. Delta Airlines Inc. announced investment of US$100 million in exchange for ADSs, representing GOL’s preferred shares with an issue price of R$22.0 per share.
GOL Linhas is one of the most profitable low-cost airlines in the world connecting the cities of Brazil as well as those in Argentina, Bolivia, Chile, Paraguay, Peru and Uruguay. It competes directly with its peers, such as Copa Holdings SA (CPA), LAN Airlines S.A (LFL), and TAM S.A (TAM).
Over time, GOL’s long-term business strategy involves successful expansion of high-demand routes. The company’s focus on strategic acquisitions, codeshare agreements with market leaders as well as partnership agreements have helped them expand with comfort thus far, without compromising on its commitment to safety and quality of service.
We currently maintain a long-term Neutral recommendation on the stock. GOL has a Zacks #3 Rank, which translates into a short-term Hold rating (1-3 months).
