Delta signs another Codeshare

[GuppyWN]

Good or Bad?

Delta to Buy Minority Stake in GOL




By: Zacks Equity Research
December 09, 2011 |Comments: 0
Recommended this article (0)
LUV | AMR | GOL | DAL | UAL


The second largest U.S. airline Delta Air Lines Inc. (DAL) plans to acquire a minority stake in Brazil’s second largest airline GOL Linhas Aereas Inteligentes (GOL).
Delta will buy a 3% of stake In GOL Linhas for $100 million and will become a member of its board. The investment, awaiting approval from the board of directors of both companies, will be in the form of American Depositary Shares.
The acquisition will aid Delta to accelerate its presence in Latin America, where it is lagging its peers American Airlines, a subsidiary of AMR Corp. (AMR) and United Continental Holdings Inc. (UAL). Under the terms of the deal, Delta will use its code for GOL flights in Brazil, the Caribbean and South America. In exchange, GOL will use its code for Delta's flights between Brazil and the US, and from the US to other destinations.
This is the second time the company has invested in a foreign carrier this year to expand its footprint domestically. In August, Delta invested $65 million in the largest Mexican airline, Grupo Aeromexico, which boosted its network capacity in Mexico.
The deal affirms Delta Air Lines’ continued effort to increase domestic and international flights. Within the country, the company is adding various flights in Latin America, Mexico, Brazil and New York through various alliances and partnerships. Delta Air Lines is also progressing on the $1.2 billion expansion of Terminal 4 at New York-JFK, which is scheduled to open in 2013, and the new Maynard H. Jackson Jr. International Terminal in Atlanta, slated to open in 2012. Internationally, Delta’s deal with a Chinese international airline China Eastern in early June should prove profitable.
Coming to GOL Linhas, the move is in line with its long-term strategy to strengthen its capital structure and focus on generating increased returns to its shareholders. Delta’s expertise in the US market provides GOL an opportunity to grow its business with new products and services in the other regions, apart from Brazil.
We believe Delta’s global network, hub structure and alliances with other airlines will enable it to offer customers an improved global reach compared with its peers – United Continental, AMR and Southwest Airlines Co. (LUV).
A month earlier, we upgraded our long-term recommendation on Delta Air Lines from Neutral to Outperform on strong third quarter results and its continued focus on improving and expanding new products and services. The stock retains the Zacks #2 (Buy) Rank for the short term (1–3 months).

 

[FlyinGuy]

The pilot group should step up and offer these guys relative seniority. They need to take the lead on this issue and demand that management fold this company into mother delta!!! It is the right thing to do!!!

 

[ACL65PILOT]

It is a Intra-Brazil code share. They are dropping their 767 flying and those two jets should come this way. This deal will be feeding our Brazilian flights.

 

[General Lee]

Good or Bad?

Good. Not only did we get 2 767s out of the deal, but we invested in a fairly cheap stock that is bound to go up before the Olympics and World Soccer events there. We signed up to be GOL's exclusive North American partner, and we don't have rights to fly INTRA Brazil flights. We can't fly within Brasil, so they fly their planes to the larger cities, and we take full airplanes to ATL, JFK, and DTW. We currently fly to Sao Paulo, Rio, and Brasilia in Brazil, but used to fly to Forteleza, Salvador de Bahia, and Manaus. Those 3 were good routes, but not enough to make a consistant profit. Well, now we can get the feed down there to possibly bring those flights back and have sustained profits. GOL bought BK Varig, and that is where they had the leases on those 2 767s. Vairg is pretty much dead, and the only real INTL airline in Brazil is TAM, but now GOL has an interline agreement exclusively with Delta. This is also a slam on AA, becuase GOL had a chance to work with them too. Delta also gets a seat on the board with GOL.


Delta also did the same thing with Aeromexico (for $65 million). And, buying parts of airlines also proves they can afford other things most likely, like pilot raises. It can't hurt with that request.


Bye Bye---General Lee

 

[scoreboardII]

This all looks good until you look at the whole picture:

http://www.reuters.com/article/2011...9?feedType=RSS&feedName=innovationNews&rpc=43

GOL is puny and on the ropes down there, the real playa is LAN taking over TAM.

$2B versus 8B+3B or for us vatos, an $11B dollar powerhouse.

http://finance.yahoo.com/q?s=LFL
http://finance.yahoo.com/q?s=tam&ql=1

Now who do you think will codeshare with those LAN hombres?


Maybe a little airline from Texas.

 

[Whataburger]

Another? Dang.

 

[General Lee]

This all looks good until you look at the whole picture:

http://www.reuters.com/article/2011...9?feedType=RSS&feedName=innovationNews&rpc=43

GOL is puny and on the ropes down there, the real playa is LAN taking over TAM.

$2B versus 8B+3B or for us vatos, an $11B dollar powerhouse.

http://finance.yahoo.com/q?s=LFL
http://finance.yahoo.com/q?s=tam&ql=1

Now who do you think will codeshare with those LAN hombres?


Maybe a little airline from Texas.

Good, go for it. You will likely never see Brazil in your airplanes, so you might as well. BTW, the only place currently you actually fly to that LAN also does is LAX. TAM might be able to codeshare with you in MCO and MIA (via Airtran), but the only other place they fly to currently is JFK, and you don't. Here is another interesting point in that same initial article:


With Delta booking more passengers on its flights, Gol is hoping to boost its load factor, a gauge of seat occupancy, where it has lagged behind rivals even as the airline cut fares. Cost savings through the alliance could also improve measures of Gol's operating costs, which are running above TAM's.

The deal's biggest winner may be Delta, which gains much better access Latin America's leading air travel market and its attractive yields, a metric of ticket pricing.

Gol agreed to appoint a Delta representative to its board as long as the U.S. company retains a minimum 50 percent of the acquired shares. Delta agreed not to sell the stake within the next 12 months or to add to it without Gol's consent.


So have fun in LBB and keep reaching for the stars. Maybe you too can follow a TAM A330 into MCO someday. Wave at them, they may wave back when they stop laughing.



Bye Bye---General Lee

 

[PCL_128]

Good, go for it. You will likely never see Brazil in your airplanes, so you might as well.

Never, General? You can't possibly be dense enough to believe that SWA won't start doing a lot of international flying over the next 10 years. First it's Mexico and other near international, then branching further down into Central and South America, and then over the pond. Prepare for it. The LBB joke only has a few years of usefulness left in it for you.

 

[waveflyer]

So when general?
I've been lamenting USAIR and their rates- mother delta made a $1B this year-
How about leapfrogging that lil intraTexas airline and take the pressure completely off?
When, brothaLee? You've been running your mouth for years about it: when do your pilots get a slice of that $B?

 

[Golden Falcon]

Southwest has been very successful with it's current business plan, I'm not sure if I worked there I would wish for large international expansion...