GOL Teams Up With Passaredo

Last week, GOL Linhas Aereas Inteligentes S.A. ( GOL - Analyst Report ) declared that it has signed a long-term agreement with Passaredo Linhas Aereas. This has been done with the clear intent of ameliorating regional operational efficiency with an eye to heightened customer satisfaction.

Passaredo will create and manage a regional network targeting medium and low-density markets which would conflate with GOL’s routes. Destinations added to GOL’s network would now include Araguaina, Alta Floresta, Pampulha (BHZ), Barreiras, Carajas, Ji-Parana, Juazeiro do Norte, Londrina, Cascavel, Ribeirao Preto, Rondonopolis, Vitoria da Conquista, Sao Jose do Rio Preto, Sinop and Uberlandia.

The Interline contract would not only diversify GOL’s network but also offer easy-connectivity and flexible travel options to its clients. Complexities arising from flight transfers shall be mitigated through this venture, thereby reducing time lags and unnecessary traveling hassles.

GOL reported its first quarter financial results during the first week of May this year. While net revenues generated were robust, the international route network demand deteriorated nearly 17% annually. We can be hopeful that contracts like this would surge performance levels in this segment incipiently as the company traverses through 2012.

Catering to customer needs and global network expansion are attributes not singular only in the case of GOL. On May 16, 2012, American Airlines, a subsidiary of AMR Corp. ( AAMRQ ) , signed an application with the U.S. Department of Transportation to add 17 weekly frequency flights from U.S. to Brazil. Thus, it is imperative that GOL remains wary of such proactive moves made by big players in the industry it pertains to.

The company currently retains a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating. However, we presently maintain our ‘Neutral’ recommendation on the stock.