Delta, Gol Boost Alliance With Share Deal

Delta Air Lines will expand its alliance with Brazil's Gol under a USD$446 million stock and loan agreement, Gol said.

Under the accord, Gol Linhas Aereas Intelligentes' controlling shareholder, Brazilian investment fund FIP Volluto, will buy up to USD$90 million and Delta up to USD$56 million of new Gol preferred stock. Delta will also guarantee third-party loans to Gol of up to USD$300 million, the statement said.

Gol plans to borrow the money this year, depending on market conditions, Edmar Lopes Neto, the company's chief financial officer, told investors. The loan will have a counter-guarantee of shares in Smiles, Gol's frequent-flyer plan, Gol said.

"It's always important to bolster the company's liquidity," Lopes Neto said. "It's not a short-term question because if we look at our debt profile, there is no growing cash need in the short term, and by short-term I mean 12 months."

According to the most recent number released by Gol, the Brazilian airline has a cash position of BRR2.4 billion reais (USD$1.1 billion).

Since 2012, Gol has sold stakes to Delta and Air France-KLM as it raised funds to add foreign routes and invest in a turnaround strategy after years of heavy losses.

Gol preferred shares have fallen more than 20 percent in the last two weeks and are down more than 50 percent this year.

Delta now owns 2.9 percent of Gol's non-voting preferred shares and Air France-KLM 1.5 percent, according to the Gol web site. Volluto owns 100 percent of Gol common, voting shares and 61.2 percent of its preferred stock.

The terms of the share offering will be announced on July 14, Gol said. Of the up to $146 million new shares to be sold, Volluto will buy 61 percent and Delta the rest.

Gol's problems have been exacerbated by a decline in the value of Brazil's currency the real. A weaker real has driven up the cost of aircraft leases and other foreign debt.

In the first quarter, Gol recorded a loss of BRR627.7 million reais (USD$199 million). The result was seven times larger than a year earlier and the company's 13th-straight negative quarter.

Delta and Gol also agreed to extend the terms of their strategic and commercial operating agreements, the statement said.