GOL and Delta Air Lines strengthen strategic alliance
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jimntx
Veteran
Sounds like the South American partner needs financial "propping up." $146 million in new preferred shares to be issued (which dilutes the value of the common stock), plus $300 million in outside loans guaranteed by DL. They have a practically brand-new fleet; so, getting new equipment is not the problem. What is?
WorldTraveler
Corn Field
- Dec 5, 2003
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There is too much capacity in the Brazilian market esp going into a near recession. Yet Gol has one of the largest market shares and asset packages in Brazil. The agreement doesn't say what DL gets besides a much larger voice but I would bet that like VS there is very valuable collateral involved
eolesen
Veteran
- Jul 23, 2003
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jimntx said:
Brasil is teetering on the brink of recession, and it's not clear how much of GOL's leases are in USD vs. BRL, but as the currency dives, the % they have in USD will get considerably more expensive.
They also have a lot of debt maturing in the next couple years, and that 330m USD in 2017 will be a lot more difficult to pay when their main income will be in BRL.
WorldTraveler
Corn Field
- Dec 5, 2003
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The entire Brazilian airline industry is under enormous financial stress and is also being slowly sold out to foreign investors. TAM is no longer just a Brazilian airline and UA just invested in Azul.
Gol has less long-haul int'l traffic than TAM or Azul but a significant portion of Brazil int'l traffic is Brazil originating and that is impacted by the weak Real (Brazilian currency) for all carriers.
Aircraft debt is heavily dollar denominated and jet fuel is priced in dollars for all carriers so no carrier is exempt.
Azul has lower costs as a result of rapid growth and being younger, but Gol still has far more access to the top revenue markets including the largest slot portfolio at Congonhas airport, São Paulo's equivalent to LGA.
This deal was undoubtedly about Gol's need for more liquidity, DL's willingness to invest in order to deepen its relationship with Gol but in the process gain a stronger foothold in a market that has a lot of value long-term and in a carrier that has a deep asset base which very likely secures those loans, just like what DL did with Virgin Atlantic.
Gol has less long-haul int'l traffic than TAM or Azul but a significant portion of Brazil int'l traffic is Brazil originating and that is impacted by the weak Real (Brazilian currency) for all carriers.
Aircraft debt is heavily dollar denominated and jet fuel is priced in dollars for all carriers so no carrier is exempt.
Azul has lower costs as a result of rapid growth and being younger, but Gol still has far more access to the top revenue markets including the largest slot portfolio at Congonhas airport, São Paulo's equivalent to LGA.
This deal was undoubtedly about Gol's need for more liquidity, DL's willingness to invest in order to deepen its relationship with Gol but in the process gain a stronger foothold in a market that has a lot of value long-term and in a carrier that has a deep asset base which very likely secures those loans, just like what DL did with Virgin Atlantic.
