Bloomberg News

Gol Plunges to 12-Week Low as Brazil Plans New Airport Rules

December 28, 2011

(Updates with closing prices.)

Dec. 28 (Bloomberg) -- Gol Linhas Aereas Inteligentes SA, Brazil’s second largest airline by market share, plunged to a 12-week low on concern proposed new rules for rights for take- off and landing at the country’s airports will erode profits.

Gol fell 6.4 percent to 11.91 reais at the close of trading in Sao Paulo, the lowest since Oct. 7. Tam SA, Brazil’s largest airline by market share, slipped 2.3 percent to 35.67 reais, a three-week low. The benchmark Bovespa index dropped 2.5 percent.

Brazil’s civil aviation authority, known as Anac, wants to alter by the second half of 2012 how take-off and landing rights are distributed among airlines to stimulate competition and lower ticket prices, Marcelo Guaranys, the agency’s president, said yesterday in an interview in Brasilia. The idea is to encourage new airlines to fly there and get airlines already there to improve service, he said.

“Gol will be more affected in the short term because it has been operating with lower margins than Tam,” Banco do Brasil analyst Leonardo Nitta said by phone from Sao Paulo today. “Gol has been more affected by competition this year, so when you talk about further competition and further drops in prices, the risks related to the company also increase.”

Together, Tam and Gol had 77 percent of Brazil’s domestic airline market share in October, according the most recent data from Anac. David Neeleman’s Azul Linhas Aereas Brasileiras and Trip Linhas Aereas are the country’s third and fourth largest airlines and have few flights at the busiest airports, Guaranys said.

Improved infrastructure, such as more runways and terminals, could increase the number of flights and reduce fares starting in 2013, Guaranys said.

“There’s always the possibility of someone entering the market and driving down prices,” he said.

From January through August this year, airfare prices fell 18 percent from the same period in 2010, according to Anac’s website.

--Editors: Richard Richtmyer, Marie-France Han

To contact the reporter on this story: Carla Simoes in Brasilia at csimoes1@bloomberg.net Fabiola Moura in New York at fdemoura@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos in New York at papadopoulos@bloomberg.net Helder Marinho at hmarinho@bloomberg.net


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