Zacks_Analysts' Blog : GOL: Stake Increase by Investors - Analyst Blog

Gol Linhas Aereas Inteligentes(GOL) recently announced to have received investments from subsidiaries of Fidelity Investments, whereby the latter acquired a 5.27% stake in the Brazilian low cost airline. The stake acquisition amounts to roughly 6.15 million American depository shares (ADS) and nearly 890,000 preferred shares.

Also, prior to this, the company’s shares were acquired by its existing shareholder Wellington Management Co., which bought about 6.72 million shares or 5% interest in the airline for $46 million.

GOL Linhas is one of the most profitable low-cost airlines in the world and the most profitable airline in South America. It is also the only low-fare, low-cost airline providing frequent services on routes connecting the major cities of Brazil as well as those in Argentina, Bolivia, Chile, Paraguay, Peru and Uruguay.

The company experienced a 4.4% increase in its demand in the month of September 2011 along with a load factor of 69.4%. Domestic demand grew by 6.7% year over year while international demand rose by 16.3% year over year.

The company offers more than 940 daily flights to 63 destinations that connect all the important cities in Brazil and 13 major destinations in South America and the Caribbean. It faces stiff competition from its peers including Copa Holdings SA (CPA), LAN Airlines S.A (LFL), and TAM S.A (TAM).

The current Zacks Consensus Estimate for the third quarter is a loss of 10 cents, representing a year-over-year decline of 141.67%. Estimates for fiscal years 2011 and 2012 are a loss of 16 cents and a gain of 54 cents, reflecting a decline of 134.38% and growth of 428.14%, respectively.

We currently maintain an Underperform recommendation on GOL Linhas.