New airline democratizes Brazil's skies

Discounter Gol Airlines to expand across South America.

In an age when airlines are going bankrupt faster than you can say Chapter 11, some might say that starting one in a developing nation like Brazil was a brave decision.

But since taking off in January 2001 with just six planes and seven destination cities, Gol Airlines has proven itself a worthy successor to the US and British discounters that founder Constantino de Oliveira Jr. used as templates. The youthful Mr. Oliveira sought to create affordable travel by "taking a bit of Southwest, a bit of Ryanair, a bit of JetBlue, and Easyjet and tropicalizing them for the Brazilian market," he says.

Just don't expect the stewardesses to dress up like Carmen Miranda.

The result has been nothing short of the democratization of Brazil's friendly skies, helped out by a partnership with US aircraft-maker Boeing - the first of its kind for a Latin American carrier. "Around 10, 11 percent of our passengers are flying on planes for the first time in their life," says Oliveira, a former race-car driver and onetime head of one of Brazil's largest bus companies. "People think a low-cost airline is for poor people, but it isn't; it's for people who have an eye for competitive prices," he says.

The company whose name means "goal" now boasts 31 planes, travels to 41 destinations, and has 22 percent of Brazil's domestic passenger market. It turned a profit of $145 million last year.

In a nation where even the 50-minute flight from Rio de Janeiro to São Paulo on the major carriers costs more than the country's $120 monthly minimum wage, Gol charges just $79.

Gol was fortunate to start operating when regulatory conditions were favorable, the price of modern telecommunications equipment was falling, and a large number of experienced workers were looking for employment. But the São Paulo-based company also aggressively cut costs, swapping steak dinners and booze for sandwiches and soft drinks, and allowing tickets to be booked over the Internet.

But Oliveira says no decision was more important than building a partnership with Boeing. Bucking the conventional wisdom that said budget airlines fly budget planes, Oliveira signed a deal to secure brand new Boeing 737-700s and 737-800s. Developed in the mid-1990s, the new-generation Boeings are among the most modern and economical jets on the market; their reliability helps Gol keep each plane in the air an average of 14.3 hours a day, a good three hours more than its closest rival.

Gol's enthusiastic embrace of Boeing's phased maintenance program - in which engineers repair and review planes every time they touch down rather than at the end of set periods - has helped slash maintenance costs. Gol will add 26 new Boeings by 2009 and has options to buy another 37. Each with its distinctive orange fuselage will come built to the company's own specifications - the first time Boeing has agreed to purpose-build planes for a Latin American airline. The jets, for example, are adapted to take off and land at Rio's Santos Dumont Airport, which has a short runway.

"We worked very closely with Gol to come up with a solution for them," says John Wojick, Boeing's vice president for Latin American and Caribbean sales. "Gol is a very, very important partner for us."

Another vital factor in the company's success is its personnel. In a country where the service does not always match the smile, Gol stresses the importance of teamwork and customer relations. For example, when pilots enter flight simulators for their annual refresher course on emergency procedures, cabin crew accompany them so they will have a better understanding of what the pilot is dealing with if a stressful situation arises.

To prevent cliques and promote a team spirit on board, every four-member cabin crew is comprised of two newcomers and two veterans with experience from different airlines. A goal-oriented, profit-sharing program that last year saw employees take home an extra four months of salary in bonuses helps keep productivity and morale high. Even Oliveira does his bit to show employees they matter; once a month, he hosts a sit-down lunch with 10 members of staff, drawn at random.

"The thing that most impresses me about Gol is their whole culture," says Bobby Booth, Miami-based editor of Avnews Latin America, a monthly newsletter that covers regional aviation issues. "Everyone thinks about this business as 'capital intensive.' Southwest and ... Gol, have proven that they are also 'people intensive.' "

Gol is part of a trend going on south of the Rio Grande. In Uruguay, Argentina, and Mexico, similar discount airlines are either up and running or are revving their engines for take off, industry experts say. Air Madrid recently began flying to seven Latin American destinations from Spain, and US budget carriers JetBlue and Spirit are also expanding into Latin America later this year.

"It is definitely a trend," says Mr. Booth. "It began in the US, followed in Europe and Asia, and is finally arriving in Latin America and the Caribbean."

The decision by Brazilian passengers to fly Gol has taken a bite out of the competition. Both Transbrasil and VASP have folded since Gol took to the skies, and although Varig and TAM still control two-thirds of the Brazilian market, how long they maintain that dominance is an open question. Gol is aggressively adding routes inside Brazil, and after putting Argentina on its schedule last December, it soon hopes to add Bolivia, Chile, and Uruguay.

"In 2000, our goal was to become a recognized world leader in low-cost, low-fare airlines by 2005," Oliveira says with a confident smile. "Now that we have achieved that goal we are setting ourselves the challenge of becoming known as the airline that popularizes air transport in South America by 2010."

Achieving that would be nothing short of a revolution. An orange revolution.

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