American Airlines announced it has signed a definitive investment agreement with GOL, the Brazilian carrier. This investment will deepen the relationship between the two airlines and help them “create the broadest and most rewarding network in the Americas.”
Last year, American Airlines said it would invest in a couple of South American airlines, GOL Linhas Aereas in Brazil and JetSMART in Chile. These investments would help the US carrier enhance its presence in South America.
As part of the investment agreement previously announced in 2021, American Airlines will invest $200 million in 22.2 million newly issued preferred shares of GOL in a capital increase. That way, American Airlines will hold a 5.2 percent participation in GOL’s economic interest.
Nonetheless, the closing of the transaction, including the issuance and payment for the new shares of GOL, is subject to certain conditions, including antitrust approval in Brazil.
The growing importance of partnerships in South America
In 2019, Delta Airlines hit American hard in South America when it announced an investment in LATAM Airlines Group. Delta left American without its most powerful ally in South America, so American had to find new partners. American Airlines found those partners in GOL Linhas Aereas and JetSMART.
In all honesty, we have to say that American’s plan to form a joint venture with LATAM fell through before Delta’s investment. American Airlines was unable to get Chile’s antitrust immunity.
In February 2021, American and GOL announced a reciprocal codeshare agreement. At the time, American said the new partnership would provide access to 20 new destinations in South America. The US carrier would greatly benefit from GOL’s extensive domestic map route (which will increase even further with GOL’s deal to acquire MAP Transportes Aéreos, a regional carrier that operates mainly in the north of Brazil).
Additionally, both partners will offer an enhanced joint loyalty program. As reported by American Airlines: “In 2022, GOL’s SMILES and American’s AAdvantage® loyalty members will gain access to their status benefits on both airlines, such as priority check-in, priority security, priority boarding, a larger checked baggage allowance, lounge access, and preferred seats. The two airlines also expect to offer an enhanced joint loyalty offering to give customers more ways to earn and redeem miles.”
Investing in a couple of South American carriers is key for American Airlines in order to maintain its place as US’s top airline in the region. Other US carriers have interesting partnerships in the region: Delta has investments in Aeromexico and LATAM; United Airlines was close ties with Avianca and Copa Airlines; Frontier and Volaris have a minimal codeshare agreement; Allegiant is looking to obtain authorization to invest and launch a Joint Venture with Mexico’s Viva Aerobus.
Nonetheless, Delta (arguably American’s top challenger in the region) will suffer an ownership dilution both in Aeromexico and LATAM due to these carriers’ Chapter 11 proceedings.
American Airlines didn’t address its partnerships and investments with GOL and JetSMART in its latest quarter call. Nonetheless, as GOL’s investor’s call nears, the Brazilians will likely discuss the latest developments. GOL’s investor’s call will take place on February 17.
Daniel Martínez Garbuno is a Mexican journalist. He has specialized in the air industry working mainly for A21, a Mexican media outlet focused entirely on the aviation world. He has also published on other sites like Simple Flying, Roads & Kingdoms, Proceso, El Economista, Buzos de la Noticia, Contenido, and Notimex.