Topic
1
Group Name: Dew Drops
Name
ID
Intake
Section
Kazi Jahid Hasan
10112101028
24th
01
Shawn Mahmud
10112101034
24th
01
Md. Moshiullah
10112101036
24th
01
Md. Zahidul Islam
10112101032
24th
01
2
Letter of Transmittal
Date: 26th April, 2013
Md. Arafater Rahman Bhuiyan
Assistant Professor,
Department of Management
Bangladesh University of Business &Technology (BUBT)
Subject: Submission of Case on Brazil’s Gol Linhas Aéreas Inteligentes.
Sir,
Here is the Case you assigned to submit on International Business. We are very happy to submit
this case on time. We would like to inform you that we have completed our case study on
“Brazil’s Gol” It is a great experience for us to work on this topic. We hope this case will meet
your satisfaction and will please you.
We are very much grateful to you for your kind assistance. Thank you for your valuable time and
cordial consideration.
Sincerely Yours
Dew Drops Group
3
First of all we would like to acknowledge the almighty Allah without his help we do not prepare
this case. This case is prepared with high inspiration and efforts of some people. The people who
do not appear in the picture but always help us to prepare this case. Please take us heartiest
thanks to Md. Arafater Rahman Bhuiyan from Dew Drops group to assign the case and for
providing instruction on Brazil’s Gol.
We have so far tried our best to present the Paper According to The Instructing of our Honorable
Teacher. But the limitation was unavailability of reference book on the related topic and time.
However above on all limitations we have tried to quote the information in the approved manner
with our best effort. But still there might be mistakes. We urge to our admirable course teacher
Md. Arafater Rahman Bhuiyan to see the faults in exonerate eye.
4
Executive Summary
The case is about the Brazil’s most growing & low cost model Airlines Company named GOL
Linhas Aereas Inteligents established in the year of 2001, which cover near about 70% of
Brazil’s air travel. it also entered into the large Brazilian BUS market in 2001. Being so
attractive service in 2001. 130 million people traveled by GOL’s interstate Bus service.GOL has
four brands Voe Fácil ,Varig, Gollog & Smiles. Gol Sells discount Tickets mainly over the
internet. To attract the customer GOL standardized its air craft by adding Boeing 737 series. It
also offers the most popular features NO FRILLS service. The reason of GOL’s popularity is
ON TIME FLIGHT near about 95% flight it makes on time. In the year 2004 Gol entered into
the capital market to raise its additional capital. Gol issued its preferred share in two capital
markets in New York stock exchange NYSE & SAO PAULO BOVESPA & raised $322 million.
After raising the capital now GOL has 115Aircrafts End of April 2011. 900Daily take offs during
the week. Market share 36,47% Domestic in April 2011 9,98% & International April 2011.
According to the Consolidated Audited financial statement for the third quarter of 2012, total net
operating revenues increased with 8.04%. The Current Ratio (Current Assets/Current Liabilities)
went from 1.05 to 0.90 when compared to the previous year. Behind this success the main reason
is GOL focuses on Market strength not leadership. Gol plans to enter into global capital market
in future to raise the additional capital so that it can cover large portion of market to develop its
brand image.
5
Table of Content:
Chapter
Executive Summery
Page
No:
Chapter 1: Introductory Part
1.1Introduction
1.2Objective of the report
1.3Methodology of the Study
1.4Limitation
Chapter 2: Brazil’ Gol
2.1Background
2.2 Origin
2.3Vision
2.4Mission
2.5 Values
Chapter 3: Company Profile
3.1Company’s Description
3.2JetBlue
3.3 Ryanair
3.5Innovation, pioneering spirit and low prices
3.6Structure, systems and controls
3.7GOL route network
3.8Aircraft and market expansion
3.9GOL’s “market strength
3.10Company Analysis
3.11Public Policy
3.12Brand(GOL, Smiles, Varig, Gollog, Voe Fácil)
3.13Awards
Chapter 4
Full Case
6
Case in Brief
Chapter 5
5.1Data and statistics
5.2Gol’s Competition in the Air Industry
5.3Gol’s Earnings per Share
5.4 Gol’s Revenue Fluctuation
5.5 'New York Stock Exchange-NYSE'
5.6 Sao Paolo Stock Exchange (SAO) .SA'
5.7 Strength
5.8Weakness
5.9Market share
5.10Fuel Spending
Chapter 6
6.1Questions to Be Answered:
7
Chapter 1
1. Introduction
1.1 Objective of the Report
General Objective: Finding the question’s answers of the Case Study.
Specific Objective:
 To Know the Background of the Brazil’s Gol.
 To know About the Customer Satisfaction of Brazil’s Gol.
 To know the overall Marketing Strategies of Brazil’Gol.
 To know gol’s strength & weakness.
 Identifying the probability of raising capital in future.
1.2 Methodology of the Study:
Source of data: The marketing plan Prepared on the Basis of Secondary data.
Secondary data:
 Group Discussion
 Discussion with our Course Teacher.
8
1.3 Limitations:
 Existing information is so back dated.
 Direct observation is impossible for that here has some mistake about information.
 No reference or guide book is available on Brazil’s GOL.
 Political instability creates extra pressure on us to meet with our group members.
Chapter 2
2.1 Background:
Gol Linhas Aéreas Inteligentes is a leading Brazilian airline operating, a low-cost business model
in Southwest Airlines established in 2001 & refined by the Jet blue & Rynair. Gol flies a uniform
fleet of 25 Boeing 737 series to about 40 destinations. Aeropar Participacoes S.A. is the major
shareholder, with 75.15 percent of total capital. Unlike Southwest, Gol arranges its route network
in a hub-and-spoke system, which increases passenger feed and aircraft utilization.
2.2 Origin:
Gol Linhas Aéreas Inteligentes S.A. was launched in 2000 with backing from the Aurea Group, a
bus company entrepreneur Constantino de Oliveira had formed in the 1950s. According to the
Associated Press, start-up capital was an estimated $12 million. The Associated Press noted the
timing of Gol's formation was helped by a newly relaxed regulatory environment regarding fares
and the availability of personnel following massive layoffs at Viaçao Aérea São Paulo S/A
(VASP). Oliveira had reportedly sent his sons across the world to study low-cost carriers such
as Southwest, Ryanair, and easy Jet. One of the sons, Constantino de Oliveira, Jr., served as the
new airline's CEO while his father was chairman. They imported a focus on strict cost control
first learned in the bus business. In fact, the airline was priced to compete with intercity buses.
2.3Vision: To be the best airline for travel, work and investment.
9
2.4Mission: Bring people closer safely and intelligently
2.5 Values:
 Security
 Innovation
 Customer focus
 Results oriented
 Sustainability
Chapter 3: Company Profile
3.1Company’s Description:
GOL Linhas Aereas Inteligentes is a tropical version of JetBlue & Rynair a holding company,
which engages in the air transport services within Brazil, South America, and Caribbean.
Company founded in 2004, operates in the airline industry, started its operation with the proposal
to be recognized as the largest low cost company in the air transport industry. It offers scheduled
air services on routes connecting all major Brazilian cities, as well as several major countries of
South and Central America.
It has a diversified passenger base, with customers ranging from business passengers traveling
within densely populated centers in southeastern Brazil, such as São Paulo, Rio de Janeiro and
Belo Horizonte, to leisure passengers traveling to destinations throughout Brazil.
In high-density competitive markets, such as São Paulo to Rio de Janeiro, it operates direct
point-to-point service at low fares. When providing service to our other markets, our aircraft
make multiple stops on our route network linking multiple destination points, which attracts
customers who prefer to pay lower fares even if this means making one or more stops before
their final destination.
3.2A no-frills: no frills service or product is one for which the non-essential features have been
removed to keep the price low. No-frills airlines are airlines that offer low fares but eliminate all
10
non - essential services, such as complimentary drinks snacks, in - flight entertainment systems,
business-class seating etc.
3.3JetBlue: JetBlue is one of the largest airlines in the Northeast United States. JetBlue's most
recent focus has been on Boston and the Caribbean. Its headquarters are in the Brewster Building
in Long Island City, New York. As of December 12, 2012 JetBlue Airways flies to 75
destinations in multiple countries, including Aruba, The Bahamas, Barbados, Bermuda,
Colombia, Costa Rica, Jamaica, the Dominican Republic, Mexico, Saint Maarten, Puerto Rico
and the United States.
JetBlue Airlines
3.4 Ryanair: Its headquarters is located on the grounds of Dublin Airport in Swords, County
Dublin, Ireland, with its primary operational bases at Dublin Airport and London Stansted
Airports. Since its establishment in 1984, Ryanair has grown from a small airline flying the
short journey from Waterford to London into one of Europe's largest carriers.
Ryanair now employs over 8,500 members of staff (as of 2012) including over 1,200 pilots.
After the rapidly growing airline went public in 1997.
11
Ryanair
3.5Innovation, pioneering spirit and low prices:
For eleven years, GOL has been driving the Brazilian aviation market to develop, always
presenting innovative and pioneering products, services and processes. With its low cost, low
fare business model, the company has made air travel in Brazil and in South America available
to all. Every year, the company succeeds in winning over more clients that could not previously
travel by air
3.6Structure, systems and controls :
GOL currently offers the most extensive and convenient route network in South America and the
Caribbean, with almost 900 flights a day to 62 destinations, domestic and international, in 13
countries. Combined with operational partnerships with foreign and domestic companies, GOL's
route network is among the best for clients that want to travel to Brazil, within Brazil, or from
Brazil. It has a business model based on structures, systems and controls that enhance the quality,
high technology, safety and standardization of its fleet.
3.7GOL route network
12
3.8Aircraft and market expansion:
The next-generation Boeing 737-700 and 737-800 aircraft used by GOL are equipped with
winglets, a technology that helps reduce operational costs even further. With a new and modern
fleet, GOL's operations are differentiated by reduced maintenance costs and low fuel
consumption, which translates into high use and efficiency rates for the company. In accordance
with its corporate objectives, GOL once again revolutionized Brazilian aviation when it acquired
VRG Linhas Aéreas, operating the VARIG brand, on March 28, 2007.
The acquisition was one of the most important steps in GOL's history.
13
3.9GOL’s “market strength”
Source: Gol
3.10 Company Analysis:
According to the Consolidated - Audited financial statement for the third quarter of 2012, total
net operating revenues increased with 8.04%, from BRL 1,843,698 thousands to BRL 1,991,993
thousands. Operating result decreased from BRL -75,059 thousands to BRL -200,656 thousands
which mean -167.33% changes. The results of the period increased 40.11% reaching BRL 309,352 thousands at the end of the period against BRL -516,500 thousands last year. Return on
equity (Net income/Total equity) went from -25.86% to -26.32%, the Return On Asset (Net
income / Total Asset) went from -5.36% to -3.29% and the Net Profit Margin (Net Income/Net
14
Sales) went from -28.01% to -15.53% when compared to the same period of last year. The Debt
to Equity Ratio (Total Liabilities/Equity) was 700.07% compared to 382.27% of last year.
Finally, the Current Ratio (Current Assets/Current Liabilities) went from 1.05 to 0.90 when
compared to the previous year.
3.11Public Policy:
Gol recognize that while low fares may initially encourage people to fly with must offer
excellent services to ensure that a new customer will become a repeat customer. As a result, we
pay particular attention to the details that help to make for a pleasant, hassle-free flying
experience, including:
 Ticketless travel;
 Convenient on-line sales, check-in, seat assignment and flight change and cancellation
services;
 Web-enabled cell phone ticket sales and check-in;
 Self check-in at kiosks at designated airports;
 Airport parking discounts;
 Single-class, pre-assigned seating;
 Friendly and efficient in-flight service;
 Modern aircraft interiors;
 Quick turnaround times at airport gates
Gol also recognize that efficient and punctual operations are of primary importance to our
customers. This emphasis resulted in our completion factor of 98% in 2004 and 2005, and ontime performance rate of 97% in2004 and 2005, based on company data. Based on feedback
from our customers, Gol believe they are meeting and exceeding their service expectations, as
more than nine out of every ten passengers are satisfied with Gol, would fly again with Gol and
consider Gol to be an innovative, modern and practical company. With regard to our service to
Buenos Aires, 83% of our Argentine passengers said they were “very satisfied” or “satisfied”
with our services.
3.12 Brand:
15
3.12.1GOL
Recognized for making air travel affordable in Brazil, the GOL brand is synonymous with
innovation and modernity, due to several actions initiated to provide simple, safe and efficient
service. Every year GOL has more clients flying to one of its 57 domestic and 14 international
destinations located in 12 countries.
3.12.2 Smiles
Smiles are GOL’s client relationship program, which has over nine million members. It allows
clients to pay for flights using miles. Miles are earned every time a client flies aboard
GOL/Varig or partner airlines, as well as when hiring services or acquiring products from our
many partner companies in Brazil and abroad.
3.12.3 Varig
In 2009 Gol was merged into VRG Linhas Aéreas. VRG Linhas Aéreas thus became an airline
that operates two brands: Gol and Varig, although in reality flights are operated only under Gol
flight numbers. Varig is the brand that operates GOL’s longest international routes to Bogotá
(Colombia), Bridgetown (Barbados), Caracas (Venezuela), Oranjestad (Aruba), and Punta Cana
(Dominican Republic). In the Comfort Class, GOL/Varig provides a series of benefits to its
clients, such as more room between seats, more privacy on board, a 150% bonus on smiles
earned, onboard service with more options of hot entrées and individual onboard entertainment.
16
3.12.4Gollog
Gollog is GOL’s cargo transportation service that, just like GOL, focuses on punctuality,
innovation, frequency of deliveries and reduced fares to transport cargo and deliveries. With 10
years of experience and quality in the services provided, it already has 95 Gollog Units, located
in 78 Brazilian cities, which serve over 1,940 cities in the country as well as eight international
bases.
3.12.5 Voe Fácil
Voe Fácil is an accessibility card that is accepted as a method of payment for flights on
GOL/Varig. Another of the company’s innovations, it allows its clients to purchase air tickets
online without requiring a credit card and allows them to pay in up to 36 installments.
17
3.13Awards
We have received a number of awards for matters such as service excellence, our website,
finance, Marketing and social responsibility. Among the highlights in 2005 were:
 Air Transport World’s (ATW)—Market Leadership Award for 2006.
 Best Airline in Latin America by Global Finance Magazine in its November 2005
edition;
 No. 1 in the category of “Disclosure Procedures” in Latin America and top 5 in the
category of “Corporate Governance” in Brazil at the Eighth annual IR Global Rankings
in February 2006
 Best Financial Management in 2004, in Isto é Dinheiromagazine; and
 One of Brazil’s most valuable brands by Isto é Dinheiromagazine in its 2005 Most
Valuable Brazilian Brands Ranking.
18
Chapter 4
Full Case:
Brazil’s Gol Linhas Areas Intelligences is a tropical version of JetBlue Airway and Ryanair, the
low-cost no-frills carriers in the United States and Europe. Established in 2001 Gol adopted the
low cost model pioneered by Southwest Airlines and refined by the likes of JetBlue and Ryanair.
Gol sells discount tickets, mainly over the Internet. It targets price –sensitive business travelers,
who account for 70 percent of all traffic in Brazil’s rapidly growing market for air travel(demand
for air travel in Brazil is growing at roughly twice the rate of growth in the country’s gross
domestic product).
Gol is also going after Brazil’s after Brazil’s large bus market in 2001 some130 million people in
Brazil’s traveled by interstate bus companies. Gol has standardized its fleet on a single aircraft
model, Boeing’s 737 series. There are no airport clubs or frequent flyer programs, cabins are a
single class, and light snacks and beverages replace meals. The airline also offer Internet check
in and delivers a reliable product, with 95 percent of flights arriving on time. Gol’s service has
elicited a remarkable response from customers, with an independent market research survey
finding that more than 90 percent of customer would continue to use the airline and recommend
it to others.
From a standing start in January 2001, this business model enabled Gol to capture a 22 percent
share of the Brazilian market by mid 2004.By then, Gol had a fleet of 25 aircraft and was already
ranked as one o the fastest growing and most profitable airlines in the world, but is aspirations
are much bigger. Gol wants to be the low cost carrier in South America .To get to that point, it
plans to expand its fleet to some 69 air craft by 2010.
To help finance this expansion, Gol decided to tap into the global capital market. In mid 2004 the
privately held company offered nonvoting preferred stock to investors on the Sao Paulo Bovespa
and the New York Stock Exchange. The simultaneous offering was oversubscribed, with the
underwriters lifting the offering price twice, and raised some $322 million. In explaining the
decision to offer stock through the New York Stock Exchange, Gols chief financial officer noted
19
that “We wanted to get a solid group of long term investors that understood the business. We
have got that. We also wanted to get a group of research analysts that understood this sector and
we now have seven analysts covering the stock. Southwest, JetBlue, Ryanair and Westjet are
considered the tier one in terms of operating profitability and successes. We were able to put Gol
right up in that group. Doing both the NYSE and Bovespa was part of our strategy to sell shares
to investors that have familiarity with low cost carriers. The strategy works. if our look at the list
of major investors in the company, the majority of them have high positions in trade o the
equities of JetBlue, SouthWest and Ryanair. For them it was a very easy analysis to understand
Gols business model and how it makes money”.
Aided by the financing, Gol was able to expand rapidly. By early 2007 it already had 65 aircraft
and was operating 600 daily it already had 65 aircraft and was operating 600 daily flights to 55
destinations, including seven international routes to five South American countries. Gol had
domestic and Brazilian market shares of 37 percent and 13 percent respectively ,its plans were
74 percent full on average, the best rate in Brazil ,and it was the most punctual airline in Brazil.
20
Case in Brief
Brazil’s Gol Linhas Areas Intelligences is a tropical version of JetBlue Airway and Ryanair in
the United States and Europe which established in 2001.Gol sells discount tickets over the
Internet. It targets price sensitive business travelers, who account for 70 percent of all traffic in
Brazil’s rapidly growing market for air travel. Gol has standardized its fleet on a single aircraft
model, Boeing’s 737 series. The airline offer Internet checks in and delivers a reliable product,
with 95 percent of flights arriving on time.
Gol is going after Brazil’s large bus market in 2001 some130 million people in Brazil’s traveled
by interstate bus companies. Gol captured 22 percent share of the Brazilian market by mid
2004.Gol had a fleet of 25 aircraft and was already ranked as one o the fastest growing and most
profitable airlines in the world. It plans to expand its fleet to some 69 air craft by 2010.
In mid 2004 the privately held company offered nonvoting preferred stock to investors on the
Sao Paulo Bovespa and the New York Stock Exchange. The simultaneous offering was
oversubscribed, with the underwriters lifting the offering price twice, and raised some $322
million. Southwest, JetBlue, Ryanair and Westjet are considered the tier one in terms of
operating profitability and successes.
By early 2007 it already had 65 aircraft and was operating 600 daily it already had 65 aircraft
and was operating 600 daily flights to 55 destinations. Gol had domestic and Brazilian market
shares of 37 percent and 13 percent respectively, its plans were 74 percent full on average, and
the best rate in Brazil, and it was the most punctual airline in Brazil.
21
Chapter 5
5.1Data and statistics
 18.706Employees End of April 2011.
 115Aircrafts End of April 2011.
 900Daily
take
offs
during
the
week
Market
share
36,47%
Domestic
April/119,98%International April 2011.
Source: National Civil Aviation Agency (Anac)
5.2Gol’s Competition in the Air Industry:
GOL & TAM :
Gol Linhas Areas Inteligentes S.A. (GOL) and TAM S.A (Transportes Aereas Meridional)
(TAM) are the two big Brazilian carriers currently fighting for market share in the rapidly
growing Brazilian airline market. The two companies hold between them 95% of the Brazilian
domestic flight market and are locked in a price war described as “brutal” by a leading Wall
Street investment bank, which recently cropped their rating on both stocks due to an estimated
20% expected drop in revenues going forward. Whilst this may be true in the near term, we feel
that investors would be shortsighted to walk away from this activity in Brazil and suggest the
discerning investor to take a long term view of the Brazilian players.
Brazil's domestic air industry surged after GOL began service in 2001 as a discount airline,
offering tickets 25% cheaper on average than competitors. Lower prices, along with steady
economic growth, prompted air travel to expand more than 13% per annum since 2003,
compared with the government's forecast of 8% a year.
22
The cut-price travel sector is a new concept in South America, as until today air travel within the
continent has been regarded as expensive and demands a far greater percentage of average
income than the no-frills services so widely available in Europe and the USA. Success stories
such as Southwestern (LUV) and Ryanair (RYAAY) on both sides of the North Atlantic show
the sector can be profitable, and we would point to the vast untapped market in Brazil and wider
Latin America as fertile ground for such a business model.
5.3Gol’s Earnings per Share:
5.4 Gol’s Revenue Fluctuation:
Gol has had a frustrating 1q07. The positives of adding a new international route to Lima, Peru
and another internal route have been offset by the drop in passenger occupancy blamed by all
carriers on the current mistrust that passengers have with Brazilian air traffic control. GOL says
it lost 230 million real of revenue in the past two quarters because it was forced to increase
discounts to attract passengers to its flights following the delays. The company also reported 71
million real of additional expenses because its airplanes were in the air longer because of the air
traffic controllers' slowdown. As a result, yields (revenue per passenger kilometer flown) will
fall this year to 20 centavos from 23 centavos.
23
The 1q07 revenue drop was in line with Wall Street’s expectation, down 22% YOY. In their
conference call on the 20th, the company also guided lower for the future quarters but were
however extremely upbeat on prospects.
The lower guidance for the next two quarters is also partly a result of the integration of Varig,
now a wholly owned subsidiary of GOL, into the company. Once things are running smoothly,
the company expected to enjoy earnings growth that matches its current expansion in market
share growth. They believe that current woes experienced from the Brazil ATC situation would
soon be forgotten.
5.5 'New York Stock Exchange-NYSE':
A stock exchange based in New York City, which is considered the largest equities-based
exchange in the world based on total market capitalization of its listed securities. Formerly run as
a private organization, the NYSE became a public entity in 2005 following the acquisition of
electronic trading exchange Archipelago. The parent company of the New York Stock Exchange
is now called NYSE Euro next, following a merger with the European exchange in 2007.
Also known as the "Big Board", the NYSE relied for many years on floor trading only, using the
open outcry system. Today, more than half of all NYSE trades are conducted electronically,
although floor traders are still used to set pricing and deal in high volume institutional trading.
24
5.6 Sao Paolo Stock Exchange (SAO) .SA'
Based in Sao Paolo, Brazil, this exchange has the fourth-largest market cap in all of the
Americas and the 13th largest in the world. It is also known as the BM&F Bovespa. The main
index of this exchange is the Indice Bovespa.
The Sao Paolo Exchange, formerly known as the Bovespa, merged with the Brazil Mercantile
and Futures Exchange in 2008 to create the BM&F Bovespa Exchange. As of April 30, 2008,
450 companies traded on the exchange. The original exchange was founded in 1890.
5.7 Strength:
 Gol revised upward its expectations for an increase in domestic traffic this year to up to
18% from up to 15% previously, helped by continued economic expansion
 Being a more competitive GOL reduced its estimates for its 2011 earnings before interest
and taxes, or EBIT, margin to 4% from 10%.
 Adding a new international route to Lima, Peru.
 When providing service to international markets ,it’s aircraft make multiple stops on it’s
route network linking multiple destination points, which attracts customers who prefer to
pay lower fares even if this means making one or more stops before their final
destination.
5.8Weakness:
 Brazil's gross domestic product is expected to expand more than 4% this year, compared
with a growth of 7.5% in 2010.
 Gol’s existing aircrafts needed high fuel consumption.
 Gol’s gross profit increasd by 8.04% but it’s EPS doesn’t in satisfactory level in 2007
EPS was $0.59.
25
5.9Market share
Competitors such as Panama City based Avianca are nibbling at Gol’s standing as No.2 in
Brazil by domestic fliers afer Tam,the local carrier acquired last year by Santiago-based Lan
Airlines SA. Tam’s January market share of 42.5 percent slid from 43.4 percent two years
earlier, while Gol’s fell to 34.3 percent from 37.3 percent. Avianca’s share rose to 6.5
percent from 2.5 percent, according to the Brazilian Aviation regulator, Known as Anac.
5.10Fuel Spending:
Spending on fuel accounted for 43 percent of sales based on its most-recent quarterly filing
fifth – highest total in the Americas, according to data compiled by Bloomberg.
26
Chapter 6
6.1Questions to Be Answered:
1. What were the benefits to Gol of a listing on the New York stock exchange in addition to
the San Paulo Bovespa?
2. Why do you think the Gol stock offering was oversubscribed?
3. Do you think Gol would have raised as much money if it had just listed on the New Sao
Paulo exchange?
4. How might the joint listing of the New York and San Paulo stock exchanges affect Gol’s
ability to raise additional capital in the future?
5. Is it the time to GOL In Long term enter into other international stock exchanges to rises
additional capital?
6.2Answer to the Questions:
1. What were the benefits to Gol of a listing on the New York stock exchange in addition to the
Sao Paulo Bovespa?
According to its strategy, Gol wanted to get a solid group of long-term investors that understood
the business and a group of research analysts that understood this sector in order to exploit its
expertise to achieve its (Gol’s) goals.
If we take a closer look at the majority of investors in the company, they have high
positions in trade of the equities of Jet Blue, Southwest and Ryanair. That’s mean that
they understand the business in this sector. The benefit of a listing on the NYSE in
addition to the Bovespa was that they reached investors based in South America (Gol
strives to be a low-cost carrier in South America) as well as investors based in USA (Jet
Blue, Southwest). Gol wanted to be the low cost carrier in South America by expanding
27
its fleet to some 69 aircraft by 2010 for that reason Gol needed much more capital and
wanted to get a solid gourp of long term investors that understood this sector in order to
exploit its expertise to achieve its goals.
The benefits to Gol of a listing on the New York stock exchange in addition Sao Paulo
Bovespa which were given below:
 Gol could capture the mature investors who had the equities of JetBlue
,Southwest and Ryanair Because those companies provide that low cost carrier in
the world.
based on results of operations for the year ended December 31, 2005.Set forth in
the table below is information about key performance indicators for select leading
low-costcarriers worldwide
Company
Operating
Net
Income
(Loss)
(in Millions of (in
Income Operating
Net Income
Margin
Margin
Millions
US$)
of US$)
820.0
548.0
10.8%
7.2%
Ryanair(2)
456.9
372.2
23.5%
19.1%
Gol(3)
265.5
219.3
23.3%
19.2%
Virgin Blue(4)
117.0
80.2
8.8%
6.0%
JetBlue
47.6
(20.3)
2.8%
(1.2)%
EasyJet(5) .
86.2
75.4
3.6%
3.2%
Air Asia(6)
32.2
48.7
15.7%
23.7%
Southwest
Airlines(1)
Airways(1)
Sources:
(1) U.S. GAAP figures for the fiscal year ended December 31, 2005. Based on a
Brazilian Real/US Dollar exchange rate of 2.3407 as of December 31, 2005.
28
(2) UK GAAP figures for the 12 month period ended September 30, 2005. Based
on a US Dollar/British vPound exchange rate of 1.7691 as of September 30, 2005.
(3) Malaysian GAAP figures for the fiscal year ended December 31, 2005. Based
(4) Brazilian GAAP figures for the fiscal year ended September 30, 2005. Based
on a Brazilian Real/US Dollar exchange rate of 2.2222 as of September 30, 2005.
 By reducing the cost of capital GOL could able to rise much capital from New
York stock exchange because there are larger number of investors.
 In the New York stock exchange there is sufficient liquidity than the Sao Paulo
Bovespa. The BOVESPA hass significantly less liquid than the NYSE or other
major exchanges in the world. As of December 2005, the aggregate market
capitalization of the 381 companies listed on the BOVESPA was equivalent to
R$1,128 billion and the 10 largest companies listed on the BOVESPA represented
approximately52% of the total market capitalization of all listed companies. In
contrast, as of December 2005, the aggregate market capitalization of the nearly
2,800 companies listed on the NYSE was US$21.4 trillion and the 10 largest
companies listed on the NYSE represented approximately 11.1% of the total
market capitalization of all listed companies. The average daily trading volume of
BOVESPA and NYSE for December 2005 was approximatelyR$1,783 million
and US$55,168 millions.
 As a investor view point Gol could diversity the portfolio thereby reducing its risk
to below what could be achieved in a purely domestic capital market.
 In the international stock exchange, stocks price do not fluctuate by the impact of
Inflation rate, Political, cultural other economic risks.
 Gol could able to rise the prestige or the Image, trade mark so that many investors
are attracted to invest in its stock.
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2. Why do you think the Gol stock offering was oversubscribed?
Because Gol is one of the most profitable airline in the world, that operates in a growing
industry. It is popular and successful company offering services that are highly rated by
customers and the expected value of the company will most probably rise up according to the
positive prognosis and Gol’s strategic plans.
The fact that the stock was oversubscribed means that the buyers wanted more shares
than were available. The main reason was that
 Many investors believed that this airline company is going to be the most
profitable.
 Investors understood that Gol business is going to be profitable, especially
because it was the only airline company that was covering a new market segment
in Brazil were the growth of the demand for traveling to this area was higher and
higher.
 investors knew that Gol’s competitors JetBlue Airways and Ryanair were already
profitable in this business, which was a sign that Gol will also achieve
considerable profits.
3. Do you think Gol would have raised as much money if it had just listed on the New Sao Paulo
stock exchange?
Absolutely not, the US investors would not have easy access to the stock exchange, which
offering the Gol’s stocks, if it would be located in South America only. Moreover, the majority
of investors are engaged in trading with the equities of JetBlue, Southwest and Ryanair (in the
US).
Besides An investment in preferred shares involves a high degree of risk. Before making an
investment decision. Golbusiness, financial condition and results of operations could be
materially and adversely affected by
any of these risks. The trading price of the preferred shares could decline due to any of these
risks or other factors, and you may lose all or part of investment.
The Brazilian government frequently intervenes in the Brazilian economy and occasionally
makes significant changes in policy and regulations such as:
 control inflation and other policies and regulations
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






increases in interest rates
changes in tax policies
price controls
currency devaluations
capital controls and
Limits on imports.
liquidity of domestic capital and lending markets
Gol business, financial condition and results of operations may be adversely affected by changes
in policy or regulations at the federal, state or municipal levels.
the strategy of the company was to attract as many as possible long-term investments that were
able to understand their business. So, doing both the NYSE and Bovespa was part of their
strategy to sell shares to investors that have familiarity with low cost carriers. And they
succeeded, because looking at their list of major investors in the company the majority of them
have high positions in trade of the equities of their competitors too.
4. How might the joint listing of the New York and Sao Paulo stock exchanges affect Gol’s
ability to raise additional capital in the future?
The advantage of offering Gol’s stocks over both stock exchanges is that more investors have an
access to those stocks. New investors might come up. Also, new investors who are share holders
of other companies operating in another sector (e.g. aircraft factory industry) might strike a deal
or bargain between Gol and the other companies. It might rise up the value of the company and
improve its profitability.
For joint listing both New York stock exchange & Sao Paulo Stock exchange The probability of
GOL’s capital raising in future indicate positive site .
Because for that GOL can capture both foreign & domestic investors which helps it to raise
sufficient capital.
Besides Gol typically financed leased aircraft through operating and finance lease financings.
Although they believe that debt and/or operating lease financings should be available for their
future aircraft deliveries. They expect to meet the pre-delivery deposits by using long term loans
from private financial institutions. The Company believes that it has and will in the future have
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appropriate funding resources available with the combination of U.S. Exim bank supported
financing, local development bank funding and sale and leaseback transactions. As a result, we
believe that the subprime credit crisis in the United States will not affect their financial position
and ability to finance their operations and the acquisition of aircraft.
5. Is it the time to GOL In Long term enter into other international stock exchanges to rises
additional capital?
Yes, Gol should be enter into other international stock exchanges to rises additional capital
because to attract the foreign investors many international stock exchange countries
Policymakers continue to provide more monetary and fiscal support than most investors had
expected, which is contributing to positive sentiment and higher equity prices. The top 10
International Stock Exchanges are where GOL can offer it’s Share:
1)
New York Stock Exchange (United States)
2)
NASDAQ (United States)
3)
London Stock Exchange (UK)
4)
Tokyo Stock Exchange (Japan)
5)
Euro next (Belgium, France, Netherlands, Portugal)
6)
Frankfurt Stock Exchange (Germany)
7)
Shanghai Stock Exchange (China)
8)
BME Exchange (Spain)
9)
Italian Stock Exchange (Italy)
10) Hong Kong Stock Exchange (Hong Kong)
after analyzing the the GOL’s case we can say that Yes it is the time for gol to enter into the
international capital market to raise additional capital to survive in the competitive market.
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Gol concerns about the European sovereign debt crisis have eased, and equity markets are
benefiting from a steady shift from low-yielding money funds into stocks. In Japan, markets have
been even more positively influenced by policy aimed at lifting inflation and asset prices.
Although most emerging markets generate stronger economic growth than their developed
countries market, several of the larger developing markets are challenged because of policy
issues to meet growth expectations. Overall, we remain optimistic on the long-term outlook for
non-U.S. equities. While near-term trends may persist for a bit, longer term we think that
emerging markets offer a better risk/reward proposition than developed equity markets.
However, Gol should be focused on bottom-up stock selection, and right now Gol favor markets
that generate stable growth and solid cash flow.
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Chapter 7
Findings:
1. High Fuel Consumption of aircrafts near about 43% of sales revenue. This huge
amount of fuel increases the expenditure.
2. Brazil's domestic air industry surged after GOL began service in 2001 as a discount
airline, offering tickets 25% cheaper on average than competitors.
3. Internal route have been offset by the drop in passenger occupancy blamed by all
carriers on the current mistrust that passengers have with Brazilian air traffic control in
2007. GOL lost 230 million reales of revenue.
4. Before merge with the Jet Blue & Ryanair air lines it was the major competitors of Gol.
5. Gol issued its Share only two Stock Exchange not many markets for that all the
investors couldn’t purchase the Gol’s Share.
6.If Gol only listed in SAO Paulo Bovespa Stock exchange it will not able in future to
raise capital it wants.
Recommendation:
1. Gol’s air craft needed huge energy for that cost increases. To survive in the current
highly competitive market Gol plans to buy new aircraft, the next-generation Boeing
737-700 and 737-800 aircraft that needed low energy .
2. 2. Since the competitor offers 25% discount on ticket price so GOL should offer new
extra low cost facility that will attract clients & will keep the clients.
3. Control of aircraft authority need to be more stronger to remove the passengers
mistrusts with Brazilian air traffic control.
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4.To capture new market new & customer Gol can merge with other international
airlines.
5. GOL should enter into the global capital market & offer its share to raise more capital
so that it can expand its service area & develop its image.
Conclusion: Brazil Gol is popular in Brazil’s domestic area though it operates flights in
international route but it is not as much popular in international market. Being most growing
company Gol has many strong competitors .Brazil’s Gol Linhas Aereas Inteligentes Company
expands its domestic market with low carrier cost. To capture the international market within
current competitive air service sector. Gol’s should raise its aircraft, reducing operational cost
and add new attracting feature and all of these should increase the marginal revenue
Reference:
 http://www.voegol.com.br
 Gol annual report 2006,2007,2011,2012
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