Brazil News.Net Thursday 20th February, 2014

PARIS – Air France-KLM announced Wednesday it is buying a stake in Brazil’s Gol Linhas Aereas by investing $100 million which will boost the airlines’ cooperation between Brazil and Europe.


The deal will help in increased code sharing and joint sales activities, giving the French-Dutch airline a greater foothold in South America, it said in a statement.

The deal will help the European carrier take advantage of an expected surge in travel demand during the coming soccer World Cup and the 2016 Olympics, to be held in Brazil.

“We are excited to join forces with Gol, a leading carrier in Brazil,” said Alexandre de Juniac, CEO of Air France-KLM.

“Brazil, the host country of the upcoming World Cup and the 2016 Olympic Games, benefits from growing business and leisure traffic volumes This collaboration confirms our strategy to establish deep and long-lasting partnerships in regions with relevant growth potential.”

Under the deal, Air France-KLM will buy $52 million of Gol preferred shares at $12.23 each, Gol said in a securities filing on Wednesday. The remaining $48 million will come in the form of commercial agreements and a bonus based on the achievement of potential cost savings.

Air France-KLM will pay Gol a premium of about 169 percent on its stock, based on Wednesday’s closing price of $4.55, according to Thomson Reuters calculations.

One of Gol’s preferred shares traded in Brazil equals one U.S. traded share. Gol’s shares closed at 10.93 reais in Sao Paulo on Wednesday, said Reuters.

Air France-KLM has also committed to inject the equivalent of $23 million in commercial, training and marketing services, plus another $25 million over two years if Gol reaches undisclosed synergy targets.

The airlines hope to close the deal within six months, subject to regulatory approval, said WSJ..

Brazil’s domestic airline market expanded just 0.8% last year, according to the International Air Transport Association, which forced carriers to cut capacity in an effort to stem losses.

Gol made a net loss of 705 million reals through the first nine months of 2013, narrowing its year-earlier deficit, although analysts don’t expect the airline to return to profitability soon.

The two airlines have had a code sharing agreement in place since 2009, giving Air France-KLM customers access to an additional 28 destinations in Brazil, beyond Rio de Janeiro and Sao Paulo.

In South America, Gol is a major player holding around 40 percent of the Brazilian domestic market.