Zacks_Analysts' Blog : GOL-Delta Alliance on Air - Analyst Blog

Brazil's economy has undergone a remarkable phase of growth in the recent years recording an impressive GDP of USD $3.7 trillion. It is presently the seventh largest economy in the world and is predicted to soon become the fifth. The steady GDP growth is impacting both business and leisure travel positively, driving demand for air travel and revenue rise. The trend shows evidence that Brazil is destined to become the fourth largest aviation market in the world by 2014, with more than 90 million passengers.

GOL Linhas Aereas Inteligentes (GOL) and Delta Air Lines (DAL) entered into an agreement for a long-term exclusive commercial alliance. Delta has been reported to sign a binding agreement to acquire a stake in the Brazilian airline Gol Linhas Aereas Inteligentes. Delta has planned to invest $100 million into GOL Linhas’ preferred shares; which will offer them a seat in the company’s board of directors. Overtime, the economic tie between the U.S. and Brazil has strengthened, thus reflecting demand growth of 11% for flights between the two countries over the next four years. 

GOL, the largest low-cost and low-fare airline in Latin America, runs more than 940 daily flights connecting 51 domestic destinations in Brazil and 11 international markets in South America and the Caribbean. On the other hand, Delta is the largest passenger airline at Memphis International Airport, where it operates a hub. Under the latest agreement, both Delta and Gol anticipate co-operative expansion to leverage each other's strengths and further link Delta's extensive global network with that of GOL’s largest and low cost domestic air routes. This agreement entitles Delta and GOL to better respond to customer demand, offering comprehensive travel options in Brazil and beyond.

We currently hold a Neutral recommendation on the stock. Gol Linhas has a Zacks #3 Rank, implying a short-term (1-3 months) Hold rating.