US Delta Air Lines Inc. agreed to buy a 100 million dollar stake in Gol Linhas Aereas Inteligentes SA, Brazil's second-largest airline by market value, and begin booking passengers on each other's jets.
Buying 3% of Gol expands Delta's foothold in Latin America, the region where passenger yields, or the average fare per mile, are highest for US airlines, according to Bloomberg Industries data. Delta trails AMR Corp.'s American Airlines and United Continental Holdings Inc. in Latin America traffic.
This is the most important relationship we have in South America, and we're very, very pleased with it, Delta Chief Executive Officer Richard Anderson said Wednesday in an interview in Sao Paulo, where Gol is based.
This is Atlanta-based Delta's second investment in a foreign carrier this year, after buying a 65 million dollars stake in Grupo Aeromexico SAB in August to deepen their alliance on flights between their home countries. That accord gave Delta a board seat, as does the agreement with Gol.
The companies will place their industry booking codes on each other's flights, allowing them to take reservations for passengers flying on either airline. Travellers also will be able to accrue and redeem frequent-flier points on both carriers.
Delta will buy the Brazilian airline's American depositary receipts backed by preferred shares, Gol said Wednesday in a regulatory filing. Gol will boost its capital by as much as 280 million Reais (160 million dollars) by issuing preferred shares for 22 Reais apiece, 47% more than Tuesday’s closing price.
Gol also is transferring leases to Delta on two parked Boeing Co. 767 wide-body jets, saving 50 million Reais a year.
Gol isn't joining the SkyTeam global marketing alliance, of which Delta is an anchor member, CEO Constantino de Oliveira Jr. told reporters. Delta has no intentions to increase its stake in Gol, said President Ed Bastian, who will join Gol's board.
Delta will keep the board seat as long as the U.S. carrier retains at least 50% of the acquired shares, according to the Gol filing. Delta agreed not to sell the stake for 12 months and won't buy additional shares without Gol consent.
We aren't making this investment to turn a profit on a stock, Anderson said in the interview. We're making the investment because we are recognizing the inherent value of the relationship we will have together and, candidly, the stock is significantly undervalued in the market today.
Gol fell 40% this year before Wednesday. The airline was advised by Morgan Stanley, and Barclays Capital advised Delta.
Gol trails Tam SA in market value in Brazil. Tam is being acquired by Chile's Lan Airlines SA, Latin America's largest carrier by market value, in a 3.3 billion all-stock transaction. The purchase, announced in August 2010, needs approval by Chilean and Brazilian regulators, and the companies expect it to close in next year's first half.