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Gol Surges as Airline Readies Mileage Unit IPO: Sao Paulo Mover

Dec. 26 (Bloomberg) -- Gol Linhas Aereas Inteligentes SA surged the most in 16 months after the unprofitable Brazilian airline said it may sell stock in its frequent-flier unit to raise cash.

Gol, Brazil’s second-biggest airline, jumped 16 percent to 13.05 reais at the close of trading in Sao Paulo, the steepest advance since August 2011. It was the biggest gainer today on the country’s benchmark Bovespa stock index.

The carrier is cutting flights, firing workers and seeking to renegotiate terms on 1.1 billion reais ($540 million) of bank debt as it faces rising fuel costs that have led to 1.85 billion reais of net losses over the past six quarters. The Sao Paulo-based airline, whose shares tumbled to a three-year low in June, said Dec. 21 that its occupancy rate last month jumped to 69.1 percent from 64.1 percent a year earlier.

“Gol might be starting a turnaround process,” Banco Itau BBA SA’s analysts Renata Faber and Thais Cascello wrote in a note to clients dated Dec. 21.

Banco BTG Pactual raised its rating on the stock to buy from neutral today.

A spinoff of the Smiles frequent-flier program had been one of Gol’s best near-term options, according to Jansen Moura, a fixed-income analyst at BCP Securities LLC in Rio de Janeiro.

As a first step, the frequent-flier unit will be managed by a separate company called Smiles SA, according to a Dec. 21 filing. An initial public offering of Smiles would be subject to market conditions and approval of regulators, Gol said in the filing.

Rational Routes

The airline also said that revenue generated per seat flown increased 17 percent in November from a year earlier because it adopted a “more rational” strategy regarding the number of domestic routes, according to a Dec. 21 filing.

Banco Santander Brasil SA, the Brazilian subsidiary of Spain’s largest bank, earlier this week put its “underperform” rating on the stock on review for a possible increase.

“This recovery is stronger than we expected,” the analysts Pedro Balcao Reis, Bruno Amorim and Renan Manda wrote in a Dec. 24 note to clients.

Gol has gained 4.9 percent this year, compared with the Bovespa’s 7.4 percent advance.

To contact the reporter on this story: Denyse Godoy in Sao Paulo at dgodoy2@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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