Gol Linhas Aereas Inteligentes, a Brazilian low-cost no-frills carrier

|7 pages |13-12-2010 | | Not evaluated |
Price : €5.40

Presentation

Gol Linhas Aereas Inteligentes is a Brazilian low-cost no-frills carriers operating in the United States and Europe. It started operations in 2001 and has been growing rapidly from a domestic market share of 4.7% in 2001 to over 37% today. This explosive growth has come in spite of global recession, rising fuel prices, high inflation, and one of the airline industry's worst recessions. Gol 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 service on routes connecting all of Brazil's major cities and also to major cities in Argentina, Bolivia, Chile, Paraguay, Peru, and Uruguay. The company's target is to be recognized by 2010 as the airline that popularized high-quality, low-fare air transportation in South America. This business case discuses how Gol is going to finance its operations in order to achieve its goals. We will also evaluate the risks involved in going public in the both the domestic and international markets.

Extract

Gol decided to go public on both Sao Paulo Bovespa and the New York Stock Exchange. The simultaneous offering was oversubscribed, with the underwriters lifting the offering price twice, and raised about $322 million. The question of the case here is what would be the reasons that Gol stock offering was oversubscribed? The fact that the stock was oversubscribed means that the buyers wanted more shares than were available. The main reason was that many investors believed that this airline company is going to be the most profitable. Investors understood that Gol business is going to be profitable, especially because it was the only airline company that was covering a new market segment in Brazil were the growth of the demand for traveling to this area was higher and higher. Also, investors knew that Gol’s competitors JetBlue Airways and Ryanair were already profitable in this business, which was a sign that Gol will also achieve considerable profits. Now, the next question would be if Gol had raised as much money if it had just listed on the Sao Paulo exchange market. The answer is for sure no. First of all, the strategy of the company was to attract as many as possible long-term investments that were able to understand their business. So, doing both the NYSE and Bovespa was part of their strategy to sell shares to investors that have familiarity with low cost carriers. And they succeeded, because looking at their list of major investors in the company the majority of them have high positions in trade of the equities of their competitors too. (...)

Gol Linhas Aereas Inteligentes, a Brazilian low-cost no-frills carrier Gol Linhas Aereas Inteligentes, a Brazilian low-cost no-frills carrier
Price : €5.40

Table of Contents

- Introduction
- Financing expansion
- Going public (advantages and disadvantages)
- Simultaneous offering
- Risks, price of stock
- Brazilian air traffic control
- Present stock situation
- Joint Listing

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