Delta Air Lines and GOL Linhas Aereas Inteligentes have announced an agreement for a long-term exclusive commercial alliance. Under the terms, Delta and GOL, which has a 40 percent market share in Brazil, will expand cooperation to leverage their respective strengths and further link Delta’s expansive network with one of Brazil’s largest airlines.
“GOL has been a strong partner for Delta in Brazil and Latin America. This agreement reinforces our relationship and moves Delta one step closer to achieving our goal of becoming the best U.S. carrier in the region,” said Delta Chief Executive Officer Richard Anderson.
“By forming a long-term commercial partnership, we will capitalize on the strengths of our two networks to provide expanded customer benefits and better serve the U.S.- Brazil marketplace.”
“The agreement is in line with GOL’s strategy of seeking out long-term partnerships and strengthening its capital structure with a focus on generating value to its shareholders,” said Constantino de Oliveira Junior, GOL chief executive officer. “Delta’s vast experience in the U.S., the industry’s most developed market, combined with Brazilian commercial aviation’s growth potential, provides an opportunity to improve our business model and return on capital employed over the next years. Our customers will benefit from additional flight options, more flexibility and new products and services.”
Brazil’s economy has undergone a remarkable period of growth in recent years with GDP at an impressive USD $3.7 trillion. It is now the seventh largest economy in the world and predicted to soon become the fifth largest. Economic ties between the U.S. and Brazil are strong, with demand for flights between the two countries expected to grow by 11 percent over the next four years. Brazil is destined to become the fourth largest aviation market in the world by 2014, with more than 90 million passengers, and this agreement enables Delta and GOL to better respond to customer demand. It offers comprehensive travel options not only within Brazil but to the U.S. and beyond, with Delta gaining access to GOLs extensive domestic destinations and GOL having access to Delta’s unparalleled global network.
Exclusive Delta - GOL Alliance
Along with the ability to accrue and redeem flight awards, customers will soon enjoy benefits from the deepened alliance between Delta and GOL, including:
Enhanced loyalty alignment, where premium customers of each airline will experience differentiated service and recognition;
Expanded codesharing to include GOL’s code on Delta flights between the U.S. and Brazil, as well as flights within the carriers’ domestic networks and to other key international destinations;
Reciprocal access to airport lounges;
Coordinated sales efforts allowing greater market access; and
Co-located airport facilities for easier passenger connections and check-in.
The carriers will leverage the extended, long-term commercial agreement to exchange, pending regulatory approvals, best practices across operations, marketing and sales.
Under terms of the Investment Agreement, Delta will invest $100 million in exchange for American Depositary Shares representing preferred shares in GOL. Delta will also receive a seat on the GOL board of directors.
With Brazil the leading engine for economic growth in Latin America and an increasingly popular travel destination from the U.S., the relationship with GOL is a critical milestone for Delta as it pursues its objective of becoming the U.S. carrier of choice in Latin America. This agreement complements Delta’s codeshare relationship with Aerolineas Argentinas which will join the SkyTeam alliance in 2012, as well as a long-standing codeshare relationship with its existing SkyTeam partner Aeromexico in which Delta is planning to take an equity stake. Delta is also focused on improving its product offering and is making a $2 billion investment in the customer experience via new terminals in New York-JFK and Atlanta, full flat-bed and Economy Comfort, a premium economy product.
Since its inception in 2001, GOL has stimulated flight demand with its extensive network of routes, competitive fares and quality service, securing an average 11 percent annual passenger growth. The enhanced alliance with Delta, coupled with GOL’s strong balance sheet and large e-commerce platform, solidifies the company’s strong position in the Brazilian market and increases its international presence, while preserving its strategy of operating short to medium-haul flights with a standardized narrow-body fleet. A significant number of Delta/GOL passengers will come from Brazil’s expanding middle class, which now accounts for 46 percent of the country’s purchasing power. Moreover, the number of people with the financial resources to fly is projected to increase by 19.5 percent by 2020 to reach 153 million, and GOL is well set to meet this growth.
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