Delta-Gol alliance: Delta scores a Brazilian goal ahead of World Cup.

Author:Ogier, Thierry
Position:INDUSTRY REPORT: Latin Trade's DEALS of the YEAR


SAO PAULO -- They looked like two grown-ups playing with small toys. Richard Anderson, CEO of Delta Airlines, was handling a model of a Delta-branded airplane to Constantino Oliveira, his counterpart at Gol Linhas Aereas Inteligentes, who was simultaneously presenting his new partner with a Gol model. The scene was carefully stage-managed last December in a Sao Paulo Sheraton hotel room, as Delta agreed to take a small yet promising 2.9 percent stake in Brazil's second largest airline. A $100 million cash injection will also boost Gol's finances, after it registered losses of 516.5 million reais (equivalent to $300 million) in the third quarter of 2011, when the Brazilian economy was flat, registering 0 percent growth.

Still, medium and long-term growth perspectives look promising to Delta, which has set its sights on the growing (and traveling) Brazilian middle class ahead of the 2014 World Cup. "In 2014, Brazil will be the fourth largest market for airlines in the world," says Anderson. The company reckons that more than 150 million Brazilians will have enough money in their pockets to become airline customers by 2020, almost a 20 percent increase compared to the current population that travels by plane.

Delta and Gol will fly to 400 destinations in more than 70 countries. This is not the first time that Delta is making a strategic move in the fast growing Latin American market, as it already agreed to pay $65 million for a 3.5 percent stake in AeroMexico last August. But as far as Gol is concerned, the deal was largely a defensive move to prepare for stiffer competition after the merger between the Latin-America based lines LAN...

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