Gol Rises on Report Brazil May Lower Tax on Jet Fuel

Gol Linhas Aereas Inteligentes SA, Brazil’s second-biggest air carrier by market share, rose to a five-week high after the newspaper O Estado de S. Paulo reported that the government may cut taxes on jet fuel. The Tourism Ministry denied the report.

The shares rallied 4.7 percent to 13.81 reais at the close of trading in Sao Paulo, the highest since March 19. It was the second-best performance on the Ibovespa stock benchmark, which was little changed.

Brazil approved guidelines to boost tourism, and the Tourism Ministry has 30 days to publish details and goals, according to a notice published today in the official gazette. Estado reported that the plan would include a measure to cut taxes on fuel to reduce fares, citing a presidential decree it had access to that hasn’t yet been published.

“It’s very important news,” Fernando Goes, an analyst at Sao Paulo-based brokerage Clear Corretora, said in a telephone interview. “It would depend on the amount of the cut to determine how much help it would be. But it’s another push for the company.”

A press official for Gol didn’t reply to a phone call and e-mail seeking comment. The ministry’s press office said in an e-mailed response to questions that the plan “does not foresee tax cuts on jet fuel” and it “does not know of any government action in that regard.”

Fuel Tax

The Sao Paulo-based carrier surged 11 percent on April 18 after a report that Distrito Federal, the seat of Brazil’s government, was lowering a tax on jet fuel to 12 percent from 25 percent.

In the fourth quarter, fuel accounted for 38 percent of Gol’s operating costs, according to a regulatory filing. The company said it would pay bonuses to pilots for saving fuel, Folha de Sao Paulo reported April 15.

The airline is pricing after the market closes today an initial public offering of its frequent-flier unit, Smiles SA, to raise cash and reduce debt. Speculation the offering will attract investors may also be driving today’s gain, Goes said.

Gol said in a filing this month it’s selling as many as 52.2 million shares for 20.70 reais to 25.80 reais each to reap as much as 1.35 billion reais ($671.8 million).

Private-equity investor General Atlantic agreed to buy about one third of the stock in the offering, Gol said in a regulatory filing on April 8. The Greenwich, Connecticut-based firm will purchase as much as 400 million reais of shares at a maximum price of 20.70 reais apiece, the minimum in the expected range, according to the filing.

The airline is reducing domestic capacity by 7 percent in 2013 as it tries to improve margins. Gol, which had the worst operating margin in the fourth quarter among airlines globally tracked by Bloomberg, lost 11 cents for every dollar of sales in 2012 after predicting margins as high as 7 percent.

(Corrects number of shares in Smiles IPO in ninth paragraph.)
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