The Brazilian carrier GOL has raised nearly US$200 million in new equity in the last quarter. Following the take-in of the Smiles minority interest (Smiles is GOL’s loyalty program, inherited from the extinct Varig airline), the Brazilian carrier announced today the raise of an extra US$83 million in equity.
New equity capital for GOL
Today, GOL announced the conclusion of the term for eligible shareholders to exercise preemptive rights. The company’s controlling shareholders, the Constantino brothers, raised 268 million reais (US$52.7 million); meanwhile, minority shareholders contributed another 155 million reais (US$30.5 million). In all, GOL has raised nearly US$200 million in new equity capital.
This month, GOL also finished the take-in of Smiles, the airline’s loyalty program. That take-in allowed a capital increase of 607 million reais (US$120 million). Therefore, GOL has issued approximately 1 billion reais of new equity capital this month, “making GOL the only South American airline to increase its equity capital over the past 12 months,” said in a statement.
During 2021’s second quarter, GOL has raised 2.7 billion reais of long-term capital. This amount allows GOL to have the best balance sheet among South American carriers, said the company.
Acquisition of MAP
Last week, GOL announced the acquisition of MAP Transportes Aéreos, a small regional carrier. The value of the purchase was 28 million reais in cash and stocks (US$5.5 million). By buying this airline, GOL deepens its presence in the Amazon region; MAP’s hub is the city of Manaus.
Acquiring MAP gives GOL three benefits: expansion of new routes, the chance to offer higher seat density to historically underserved markets, and enhancing cost-efficient operations.
Paulo Kakinoff, GOL’s CEO, said, “We believe the acquisition of MAP is the only viable opportunity for rational consolidation in the Brazilian aviation market at present. The company is investing even more in the regional air transportation market, with an emphasis on Brazil’s Amazon region.”
GOL will substitute MAP’s ATR fleet on Manaus routes and deploy its Boeing 737-700 aircraft. Moreover, the airline currently has 23 B737-700 but can substitute them with even more efficient planes in the future. “By servicing these routes with more modern and larger aircraft, the Company will increase the number of flights and seats from one of the main markets in the country,” said Celso Ferrer, Vice-president of Operations.
GOL has been doing more than just raising new equity capital. The airline has also reduced its fleet obligations and lease debt in the next few years.
For instance, GOL reduced its 2020-2023 MAX aircraft obligations by over 10 billion reais. GOL achieved this by scrapping 34 firm orders and delaying future deliveries by up to three years. Additionally, GOL and Boeing agreed on cash proceeds from its compensation agreement following the MAX crisis.
GOL has also sold 11 NG aircraft, generating cash gains of over 500 million reais; it has reduced its fleet by 15 NG planes and plans to return additional five aircraft before 2021 ends. This consolidation will allow the airline to decrease aircraft lease debt by over 1 billion reais.
Finally, GOL has also reduced monthly lease costs by 50% through rent reductions, converting fixed contracts to power by the hour and deferral agreements.