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Gol expects WebJet integration to be easier than VRG acquisition

Gol is confident its proposed acquisition of fellow Brazilian low-cost carrier Webjet will be easier in terms of integration than its previous purchase of Varig successor VRG, and it expects to enjoy annual synergies of 100 million reais ($63.7 million) within two years.

The Webjet acquisition was announced on 8 July as part of Gol's strategy to strengthen its position in Brazil's fast-growing domestic market.

The sale price is 96 million reais, with Gol assuming 215 million reais of Webjet's debt and gaining the roughly 56 million reais in cash Webjet had on its balance sheet in 2010.

Gol chief executive Constantino de Oliveira Júnior described Gol's 2007 acquisition of VRG as "very complex" because the carrier was sold under the bankruptcy process. However, he is more optimistic about the integration of Gol with Webjet.

"Webjet is performing much better in operational terms than VRG when we bought the company," he said.

"Webjet has a motivated labour force. VRG employees were not receiving their salaries - the environment was really tough at that time."

The fact Webjet is a low-cost carrier means that "in my opinion it will be easier to integrate both companies", he added.

Gol expects 60% of the expected synergies from the Webjet acquisition to come from aligning corporate functions.

The remaining 40% will be derived from introducing phased maintenance on all aircraft, optimising spare parts stock for the CFM engines powering both carriers' fleets, and a higher utilisation of Gol's maintenance centre in Belo Horizonte. Webjet outsources its heavy maintenance.

Gol chief financial officer Leonardo Porciúncula Gomes Pereira said the synergies should start about two years after the acquisition is complete, and stated that Gol is also planning to gradually phase out Webjet's 24 Boeing 737-300s as their leases expire.

Gol operates a fleet of 96 Boeing 737-700/800 aircraft with a further 101 on order, as listed by Flightglobal's ACAS database.

The carrier has assured there will be less expense involved in returning Webjet's aircraft than there was when Gol returned 27 737-300s operated by VRG, as many of Webjet's lessors are "important lessors of Gol".

De Oliveira Júnior stressed it is "really tough to predict" how long the process of gaining approval from Brazil's competition regulator CADE will take, but he is confident the deal will be approved.

"In this case it is two companies operating under the same concept," he said, adding that the combined company "expects to maintain very competitive fares and stimulate the market".

If the acquisition goes ahead, Gol will become the domestic market leader in Brazil in terms of passengers carried.

Gol and Webjet carried roughly 32.8 million domestic passengers in 2010 combined, surpassing TAM's 29.2 million.

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