Delta Airlines has made a $100 million minority stake in Brazilian domestic carrier GOL Lihnas, a move that further shakes up South America’s airline industry that is dominated by two recent mergers, LAN-TAM and TACA-Aviacna.

Law firm Milbank, Tweed, Hadley & McCoy advised GOL in the transaction, in which Delta is purchasing $100 million of GOL’s American Depository Shares.  As part of the agreement, the total capital increase will be $150 million  In taking its stake, Delta will also gain a seat on GOL’s board of directors.  GOL is the largest discount airline in Latin America.

In the context of the investment, Delta and GOL entered into a long- term commercial agreement with exclusivity provisions designed to strengthen the operational cooperation and synergies between the two companies, including:

• an increase in the scope of the code-share agreement (flight sharing), subject to the relevant approvals, allowing Delta to use its code for more GOL flights in Brazil, the Caribbean and South America, and GOL to add its code for Delta’s flights between Brazil and the United States, and from the U.S. to other destinations, thereby increasing the number of flight options for clients of both airlines and expanding their geographical reach;
• the optimization of connecting services in order to increase the attractiveness of the companies joint services, facilitating flight connections and cargo and passenger movement among the nearly 400 destinations in over 70 countries served by GOL and Delta;
• The increase in passenger comfort by aligning services and benefits for members of both the SMILES and SkyMiles mileage programs;
• joint commercial and promotional activities, encouraging both airlines’ sales forces to cooperate in Brazil, the United States and, eventually, in other countries;
• the exploration of synergies in passenger services, maintenance, VIP lounges and logistical support;
• the transfer of the lease of the two remaining Boeing 767 aircraft in GOL´s fleet and their spare parts to Delta.

The transaction does not envisage GOL’s adherence to a Global Alliance, and it is aligned with the Company’s goal of seeking out long-term strategic partnerships and strengthening its capital structure, with a focus on creating value for its shareholders. Delta handles more than 160 million passengers per year, has a fleet of more than 700 aircraft and flies to 350 destinations in almost 70 countries spread through six continents. It is the largest airline in the world in terms of passenger-kilometers transported and has more international routes than any other U.S. airline.

The experience and knowledge of global aviation acquired by Delta in more than 81 years of operations in the most developed market in the world, combined with the growth potential of Brazilian commercial aviation, provides an opportunity for both companies to increase their return on capital employed in the coming years.

Nicholas Gill (470 Posts)

Writer and photographer Nicholas Gill is the editor/publisher of New World Review. He lives in Lima, Peru and Brooklyn, New York. His work has appeared in publications such as the New York Times, Los Angeles Times, CondeNast Traveler, National Geographic Traveler, Afar, and Penthouse. Visit his personal website (nicholas-gill.com) for more information.