A successful mission

Brazil's Gol aims to provide affordable air travel to more people

BY NICOLAAS GROENEVELD-MEIJER

In 2000, Boeing Commercial Airplanes faced a defining moment with a proposed Brazilian airline. It was a key moment not for the amounts of money at stake or the corporate risk involved, but for what the decision would reveal about BCA's corporate character and the nature of its relationship with airlines.

"We took a chance," said Ricardo Cavero, BCA's Brazil sales director.

Boeing bought four used 737-700s and worked with lessor General Electric Capital Aviation Services to place an additional two -700s with the startup carrier. That allowed the fledgling airline Gol to begin flying in January 2001. In addition, Boeing worked closely with the airline's principals to help ensure it would be a business success.

Four years later, Gol, whose full name is Gol Linhas Aereas Inteligentes SA, is thriving. Latin America's only low-cost carrier and a follower of the business model created by airlines such as Southwest Airlines in the United States and Ryanair in Europe, Gol today operates 23 Boeing Next-Generation 737s serving 29 Brazilian cities. It commands a nearly 25 percent domestic market share. In January, Gol began services to Buenos Aires, Argentina.

The "chance" Boeing took with Gol also solidified the company's business relationship with the airline. Last year, Gol approached both Boeing and Airbus for new airplanes. Although it was an all-Boeing operator using primarily 737-700s, the larger 737-800 could not land at some of Brazil's key but notoriously short runways, such as Santos Dumont Airport in Rio De Janeiro—4,200 feet of tire-scorched pavement surrounded by ocean and rock. Understanding the importance of the requirement, Boeing designed enhancements to make the 737-800 competitive on short runways.

Soon after, Gol, which means "goal" in both Portuguese and Spanish, placed an order for 15 737-800s with purchase rights for an additional 28. By January, it had converted six of those purchase rights for total firm orders of 21 and added purchase rights for up to 63 Next-Generation 737-800s.

Since 2000, Constantino de Oliveira Jr., president of Gol, has altered Brazil air travel just as Southwest¡'s Herb Kelleher and Ryanair's Michael O'Leary have altered their areas of service. Oliveira built Gol using the Southwest blueprint: a single type of airplane, 20-minute turnaround times and high utilization rates—combined with a glaring eye to the bottom line. The son of a bus transportation magnate whose own career started as a selfemployed bus and truck driver, Oliveira leads an airline that aims to grow its market by making plane travel as inexpensive and accessible as taking a bus.

"The primary purpose of Gol is to democratize air transportation for the Brazilian people," Oliveira Jr. is fond of saying.

After taking to the skies in 2001, Gol has consistently posted profits and increased its market share. The figure it closed 2004 with, nearly one-quarter of the domestic air travel market, is likely to increase as it continues aggressive growth.

Gol has adjusted the Southwest model to suit the needs of a populace isolated by geography in a country about as big as the continental United States. "The country's interior is vast and lacks infrastructure," BCA's Cavero said, and most people work in areas near the coast, far from homes in the rugged interior. "What Gol has done is make it possible for these people to return to home and family on a more regular basis."

Indeed, while other airlines travel from point A to point B, Gol flies from A to B but makes stops on the way. This way, the airline can serve remote destinations by touching down briefly and picking up additional passengers at what might be considered "aerial bus stops."

Like Southwest's Kelleher or Ryanair's O'Leary, Oliveira also has demonstrated a promotional flair. In 2004 he launched an offer for 1-Brazilian-real (about 35-U.S.- cent) roundtrip airfares on the Gol Web site. When the government prohibited the fares as anticompetitive, Oliveira left the offer on the site with a slash mark through the still-readable ad, implying government blame for restricting the offer. The offer drew thousands to the site, where many visitors purchased other Gol tickets.

nicolaas.groeneveld-meijer@boeing.com