Gol, Delta In Stake Sale Talks - Report

April 24, 2012

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Gol, Brazil's second-largest airline, is in talks to sell an additional 17 percent stake to US carrier Delta Air Lines to better cope with rising costs and declining market share, daily newspaper Folha de S. Paulo reported on Tuesday.

Delta might be willing to boost its stake in Gol, Folha said, citing people with direct knowledge of the situation. Gol chief executive Constantino de Oliveira Junior is personally conducting the negotiations with Delta, Folha said.

The Folha report comes as Gol announced layoffs and cut back 100 flights a day in recent months to return to profitability. The carrier posted a net loss of BRR710 million reais (uSD$377 million) in 2011.

Increasing Delta's share in Gol to the government's limit of 20 percent foreign ownership in Brazilian airlines could help the carrier better compete with rival TAM, which is being taken over by Chilean airline LAN, Folha said. Atlanta-based Delta currently holds a 3 percent stake in Gol.

Gol shares have slipped nearly 17 percent over the past three months in São Paulo trading.

In a recent report, credit ratings company Moody's said that Gol's current capital structure is unlikely to help the carrier absorb steep swings in fuel prices and currency fluctuations, constraining its ability to generate profits in the long run. Moody's cut Gol's credit rating by two levels to "B3" from "B1" previously.

Both rankings are below investment-grade.

According to a statement issued by Gol's media office, "Delta already said publicly that it is not interested in increasing its stake in Gol."

A Delta press representative declined to comment on the report.