Gol Linhas Aéreas Inteligentes S.A. Preferred Stock

How does this company make money?

GOL collects money from passengers buying tickets on scheduled routes. Its GOLLOG unit charges cargo shippers to move freight on those same flights. The SMILES program brings in cash when Brazilian retail and banking partners buy miles in bulk to give to their customers as rewards. On top of those, GOL charges extra fees for things like choosing a specific seat or checking a bag.

What makes this company hard to replace?

SMILES is woven into the reward systems of Brazilian banks and retailers at hundreds of locations, so members earn miles through everyday spending, not just flying. Accumulated mileage balances and frequent flyer status take time to rebuild from scratch at a competing airline. And because Congonhas slots are fixed, no competitor can simply match GOL's São Paulo departure schedule — the routes and times that customers have built their travel habits around are not available elsewhere.

What limits this company?

Congonhas Airport is hemmed in by the city around it. No new runways can be built. The total number of slots is frozen. GOL cannot add more flights to São Paulo than its current slot block allows, and neither can anyone else. That ceiling on departures is also a ceiling on how much passenger volume GOL can generate — and therefore a ceiling on how much partners will pay for SMILES miles.

What does this company depend on?

GOL cannot operate without Boeing 737 aircraft and the maintenance support that comes with them. It needs jet fuel from Brazilian refineries to fly. Its entire São Paulo strategy rests on holding slots at Congonhas and Guarulhos airports. It must maintain active operating certificates from Brazil's civil aviation authority. And for any international route, it relies on bilateral air service agreements between Brazil and the destination country.

Who depends on this company?

Brazilian business travelers who rely on frequent São Paulo connections for same-day meetings would lose those routes if GOL stopped flying. The more than 700 locations where SMILES members can earn or spend miles would lose that redemption network. Cargo shippers using GOL's GOLLOG service — especially those moving goods to smaller Brazilian cities — would lose the integrated passenger-and-cargo service those routes provide.

How does this company scale?

Adding destinations to the Boeing 737 fleet is relatively straightforward — route scheduling and aircraft utilization algorithms work the same way whether GOL flies to 30 cities or 60. What does not scale the same way is airport slots. At Congonhas and other capacity-constrained Brazilian airports, no amount of money can purchase slots that do not exist, so frequency on the most valuable routes stays capped no matter how much the rest of the network grows.

What external forces can significantly affect this company?

Jet fuel is priced in US dollars, so when the Brazilian Real weakens, GOL's fuel bill rises even if nothing else changes. Demand for domestic business travel moves up and down with the Brazilian economy overall — a recession means fewer flights filled. On international routes, US visa and immigration policies can reduce the number of Brazilian passengers flying to American destinations, shrinking that slice of revenue.

Where is this company structurally vulnerable?

If Brazil's civil aviation authority ordered a redistribution of GOL's Congonhas slots — through a reallocation rule, a use-it-or-lose-it enforcement action, or a mandate to hand slots to a new entrant — GOL would lose the flight frequency that makes São Paulo routes irreplaceable. Once the frequency advantage is gone, the reason retail and banking partners pay for SMILES miles disappears with it, and both pillars of the business collapse together.