Gol Takes Lead in Brazilian Consolidation with $6 Million Deal for Map Transportes Aéreos

Gol taking the first step in the expected wave of Brazilian airline consolidation with a reais 28 million ($5.6 million) deal for regional carrier Map Transportes Aéreos.

The deal would strengthen Gol's presence at slot-constrained São Paulo Congonhas airport and expand its network into smaller cities in both the southern and Amazon regions of Brazil. And it comes as most in the industry are focused on the possibility of an Azul-Latam Airlines Brasil merger that could create a domestic behemoth in the country.

"We believe the acquisition of Map is the only viable opportunity for rational consolidation in the Brazilian aviation market at present," Gol CEO Paulo Kakinoff said in a statement late on Tuesday. "Going forward, we will continue to focus on our organic growth strategy, stimulating demand to expand our network."

Gol is the largest domestic carrier in Brazil with a more than 38 percent share of passenger traffic in 2020, according to Brazilian aviation regulator ANAC. Latam Brasil is the second largest with a nearly 34 percent share and Azul third with a nearly 28 percent share. Map has a less than 0.5 percent share of the Brazilian market.

Map operates seven ATR turboprops on regional routes from Congonhas and Manaus. Gol plans to replace those 70-seat ATRs with Boeing 737s — initially -700s that seat 138 passengers — that would provide more capacity to underserved regional destinations.

Expanding regional air service has been a focus of the Brazilian government for years. Prior to the country's last economic recession, officials were working on a package of incentives to encourage the country's airlines to expand regional flying. Then — as today — Gol and Latam both operate domestic fleets made up entirely of Airbus or Boeing jets, while Azul is the only national carrier with a regional fleet of ATRs and Embraer E-Jets.

The Gol-Map news comes amid talk of a possible merger between Azul and Latam Brasil. The latter suddenly broke off its new codeshare with the former at the end of May citing lower than expected passenger volumes. However, the suddenness of the move — and Azul's confirmation that it was exploring consolidation opportunities — gave credence to the view that Latam was rebuffed by a merger proposal.

“We are not considering in any way, shape or form, any sale of any of our assets at this point in time,” Latam Airlines Group CEO Roberto Alvo told Bloomberg earlier in June.

In a June 6 report, Bradesco BBI Analyst Victor Mizusaki wrote that an Azul-Latam Brasil combo was "very likely" citing the on-going U.S. Chapter 11 bankruptcy reorganization of the Latam group. He outlined a scenario where Azul could win over Latam creditors with an up to $1.1 billion offer for the domestic operations of Latam Brasil within 90 days — or by early September. At least two Latam creditors, Oaktree Capital Management and Knighthead Capital Management, have exposure to Azul that could influence them in support of a deal.

Latam is due to present a reorganization plan to the bankruptcy court by June 30, and creditors have until August 23 to approve or the reject the proposal. However, the airline could seek to delay the timeline.

Gol's acquisition of Map is subject to approvals by both ANAC and Brazil's antitrust regulator CADE.