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GOL Linhas Aereas Inteligentes S.A. (GOL - Analyst Report) has inked a code share agreement with UAE-based Etihad Airways that will initially give the latter increased access to South America. The deal fortifies the low-cost Brazilian carrier’s partnership with Etihad Airways.

Notably, the deal is an expansion of GOL’s interline pact with Etihad that was signed last October. However, the deal is subject to approval from ANAC (National Civil Aviation Agency) and CADE (Brazil's antitrust authority).

Both carriers want to enhance their tie-up in the future by signing a Frequent Flyer Program (FFP) deal. Such a deal would allow both sets of customers to leverage from their respective mileage programs – GOL’s Smiles and Etihad Guest of Etihad.  

Etihad will benefit from GOL’s expanded domestic and regional network across Brazil – one of the booming emerging nations. The Abu-Dhabi based carrier will get access to 52 destinations in Brazil in addition to 14 others in Latin America. Meanwhile, GOL, which does not fly to the Middle East could leverage from Etihad’s wide base in the Gulf.  

It is worth noting in this regard that GOL already has a code sharing agreement with Delta Airlines Inc. (DAL - Analyst Report), whereby the two carriers are able to maximize the connecting routes in the Brazil-United States passage. The current codeshare agreement allows Delta to access 23 destinations in Brazil while GOL customers can operate in five markets that Delta currently serves.

Further, the carrier has entered into an exclusive strategic partnership with the European giant Air France-KLM SA. The partnership will expand its operations between Brazil and Europe.

If successful, we believe the latest tie-up with Etihad Airways will enhance the international offerings for both the carriers.The FFP program too would give an added incentive to its respective passengers upon implementation. However, slow recovery in the Brazilian economy, a depreciating real and surging operating costs are some of the headwinds for GOL.

Currently, GOL carries a Zacks Rank #3 (Hold). Better-ranked stocks within this sector include Southwest Airlines Co. (LUV - Analyst Report) and American Airlines Group Inc. (AAL - Snapshot Report). Both stocks sport a Zacks Rank #1 (Strong Buy).

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