Gol not yet ready to follow TAM in loyalty spin-off

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TAM's sale this week of its frequent flier unit could generate interest in similar spin-offs at other Latin American carriers.

Gol CEO Constantino de Oliveira Junior calls yesterday's initial public offering (IPO) of Multiplus "successful" although it failed to fully meet TAM's expectations. Oliveira told attendees at today's Raymond James growth airline conference in New York that he "would like to learn about the process" that TAM has just completed in spinning off Multiplus but Gol has no near-term plans to spin off its Smiles programme.

"We would like to understand better how they will manage the results," Oliveira says. "The interdependence between the loyalty programme and the airline is huge. How will you manage that?"

TAM is set to raise R$724 million ($384 million) from the sale of just over 45 million shares in Multiplus. TAM had set an initial price range of R$18 to R$24 per share, but in the primary offering completed yesterday only R$16 per share was fetched. Trading of the stock will formally begin in Brazil tomorrow.

Oliveira says Smiles is the largest loyalty programme in all of Latin America but Gol has "a lot to improve" before it even considers a spin-off and IPO.

Gol acquired Smiles as part of its 2007 purchase of Varig. Gol is now focused on improving the value of the programme by switching to a new technology platform, which Oliveira says will give it more flexibility, and allow Smiles to add additional partners, including a local bank which has agreed to provide a co-branded credit card.

Oliveira says Smiles' market share in Brazil, which is measured by revenues from miles sold to partners, has increased from only 3% in 2007 to 30% at the end of last year. He says the plan is to reach 50% market share sometime this year.