Brazil’s Gol to receive $200 mln from American Airlines, shares rise

Brazilian airline Gol (GOLL4.SA) announced an exclusive three-year codeshare agreement with American Airlines (AAL.O), sending shares higher on Wednesday.

Gol said it will receive a $200 million equity investment as part of the agreement, according to a securities filing on Wednesday, making its preferred shares jump about 5% in early trading in Sao Paulo, outperforming the broader Bovespa index (.BVSP), which fell 0.5%.

Gol said the new agreement builds on a previous codeshare arrangement between the two companies, and will increase options for Gol travelers on South American and North American routes.

American Airlines’ investment in Gol is expected to happen via a sale of 22.2 million recently issued preferred shares by the Brazilian airline, taking the U.S. firm’s stake in Gol to 5.2%.

“We believe it will further strengthen Gol’s presence on international markets, accelerate our long-term growth and maximize value for our shareholders,” Gol Chief Executive Officer Paulo Kakinoff said.

Analysts at J.P. Morgan said in a market report that they welcome the additional liquidity provided by American Airlines’ investment in Gol, as it should further enhance the Brazilian company’s financial flexibility, even though they remain cautious with the airline industry in Latin America.

“Today’s announcement represents a further evolution in the American-Gol partnership, in our view, rather than anything revolutionary,” J.P. Morgan said, adding that American’s right to appoint one member to Gol’s board may imply a desire by the U.S. company to exert as much influence as possible.