=20 ---------------------------------------------------------------------- This article was sent to you by someone who found it on SFGate. The original article can be found on SFGate.com here: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2004/06/23/f= inancial1545EDT0207.DTL --------------------------------------------------------------------- Wednesday, June 23, 2004 (AP) Brazil's brash Gol airline going public, aiming to gain on competitors ALAN CLENDENNING, AP Business Writer (06-23) 12:45 PDT SAO PAULO, Brazil (AP) -- Three years after taking to the skies and shaking up Brazil's stalled airline industry, brash low-cost carrier Gol is going public Thursday on Wall Street and at home in a bid to grab an even larger share of the market. Brazil's other big carriers have struggled since Gol Linhas Aereas Inteligentes SA started flying in 2001, introducing Brazilians to online ticket sales and a no-frills experience modeled after JetBlue Airways Corp. and Southwest Airlines Co. in the United States and Europe's Ryanair. Gol, which started flying with six new Boeing 737s, now has 22 jets and plans to use much of the money raised by selling shares to finance a huge fleet expansion. The airline could add 43 more 737s by 2010 and expand service to other Latin American countries. The carrier -- whose name means "Goal" in Portuguese -- is selling a 20 percent stake expected to generate between $245 million and $277 million. American depository shares will trade on the New York Stock Exchange under the ticker "GOL," while Brazilian shares will be sold at Sao Paulo's Bovespa market. Gol has managed to grow exponentially despite a turbulent Brazilian economy that nearly sent its competitors into collapse. Its planes now carry nearly a quarter of the 30 million Brazilians who fly each year across a country nearly as large as the continental United States. But experts say Gol's initial public offering is based on a risky bet: that Brazil will buck its economic past and turn into a nation that grows in a steady, sustainable way instead of undergoing volatile swings every few years. "The company is very efficient, and their business model is perfect," sa= id Marcelo Ribeiro, an airlines analyst with the Pentagono brokerage in Rio de Janeiro. "But I believe macroeconomic forces dominate the scenario in Brazil, and I don't know if they can be profitable if Brazil goes through another crisis." If the nation's economy were to collapse, causing a huge devaluation of the local currency against the dollar, for example, Gol would have to come up with expensive dollars to keep up plane payments and purchases of jet fuel. That's the same situation Varig and Tam, Brazil's top two airlines, found themselves in during a 2002-2003 Brazilian economic crisis that put the country on the verge of a financial meltdown. Gol executives are not granting interviews because of U.S. laws requiring them to stay quiet before Thursday's IPO, but they noted in a Securities and Exchange Commission filing that the carrier managed to boost market share and thrive despite Brazil's worst recession in a decade. "Our emphasis on keeping operating costs low has, in turn, allowed us to set low fares while achieving and increasing profitability," Gol said. During that period, Varig and Tam initiated merger talks and started a code-sharing arrangement aimed at keeping them in business following the Sept. 11 travel drop-off and rising costs to pay off dollar-denominated debt. Varig, which teetered on the verge of bankruptcy, also got bad press internationally after some of its jets were seized overseas because the company failed to pay leasing fees on time. With some fares only slightly higher than tickets for bus trips that can last for days, Gol -- controlled by a family that also owns one of Brazil's biggest bus companies -- draws frequent business travelers as well as blue-collar passengers who couldn't afford to fly before. Wealthy Brazilians heading to the beach sometimes use Gol to fly in their maids and nannies. "They can do this because they have strict controls regarding costs," Ribeiro said. "Their pilots spend more time flying than pilots for Varig and Tam. Their planes spend less down time. They fly point to point and they don't serve hot food, so they spend less on food and take less time to clean the planes." Some experts believe Gol could eventually drive Brazil's No. 4 carrier, Vasp, out of business. But even though Gol is expected to take more of Varig's and Tam's market share, the two carriers are likely to maintain a lasting presence in Brazil. Both are big employers and sources of national pride in a country that maintains tight regulatory control over airlines. "Varig and Tam are extremely important for the economy, and the governme= nt is hesitant to let them go under," said David Fleischer, a political science professor at the University of Brasilia. "There would be big national security and national economic considerations, and Gol could not pick up the slack." ---------------------------------------------------------------------- Copyright 2004 AP