Gol banks on heightened competitiveness with Smiles reorg

Gol banks on heightened competitiveness with Smiles reorg

Corporate & Sovereign Strategy Debt IPO Brazil

Brazilian Gol's intent to reintegrate Smiles with a potential buyout of minority shareholders' stock in the airline's loyalty program aims to keep the company competitive as Brazil expands economically, according to company CFO Richard Lark.

Gol is looking to regional peers such as Azul and Latam Airlines, the latter of which is also working to reintegrate its own frequent flyer program Multiplus in order to remain competitive.

“Multiplus, we expect, will become a better competitor,” Lark said in a recent interview with LatinFinance. “And TudoAzul has never been separated and they use that aggressively to help them compete in the Brazilian market because it is all integrated," he said in reference to Azul's loyalty program.

Competition also remains fierce from non-airline loyalty business: Livelo, Lark adds.

“We are just starting on the expansionary period, so it will get more competitive on the product side. What is happening is that the competition for the price of points, but also competition for price of the seats [is increasing].”

Lark said the reintegration of Smiles as a part of Gol Airlines, will better prepare the airline to remain competitive once the Brazilian economy grows in earnest – by 2020.

Gol raised BRL1.13bn ($565m) through a Smiles IPO in 2013. The airline retained a 53% stake in the program after going public.

The CFO said the company started talks over the Smiles reintegration fairly recently and expects the terms to be ironed-out by February 2019.

Lark said Gol estimates saving up to $200m in dividends and taxes by reintegrating Smiles into Gol Airlines.

The company last came to the capital markets in January when it raised $150m from a 2025 retap that priced at 7%.

Paragraph one of this article was updated on October 24th to reflect that Gol intends to reintegrate its loyalty program Smiles through a potential buyout of its minority shareholders' stock.

Paragraph seven was amended to reflect that Gol retained a 53% stake in Smiles after its IPO and not 47% as the article originally stated.