A Chance to Score With Gol

This column was originally published on RealMoney on Nov. 2 at 2:02 p.m. EDT. It's being republished as a bonus for TheStreet.com readers.

On Mad Money last week, Jim Cramer highlighted -- energetically, as always -- Lan Airlines (LFL), a South American regional carrier.

Cramer expected his television audience to be surprised that he would have something nice to say about an airline -- after all, the U.S. airline business has been dreadful. Warren Buffett concurs, having been quoted as saying, "I have an 800 number now that I call if I get the urge to buy an airline stock. I call at 2 in the morning and I say: 'My name is Warren and I'm an airoholic.' And then they talk me down."

However, the South American airline industry is an exception. I'm seeing some of the same alluring trends that Cramer mentioned, but I have a different way to play it: Gol Linhas Aereas Inteligentes(GOL).

Brazilians on the Move

Even today, in the 21st century, most of Brazil's 186 million citizens lack any meaningful interstate passenger rail service and travel by bus rather than air. In 2003, interstate bus companies transported more than 132 million passengers, while the domestic airlines carried less than 30 million passengers, according to the Brazilian Department of Highways.

For many years, air transportation has been affordable only to the well-to-do in Brazil.

Enter Brazil's only no-frills airline, Gol. Founded in 2001, Gol has a low-cost, low-fare business model that has played a major role in significantly increasing air travel in Brazil, which is up nearly 20% from year-earlier levels. Brazil's market now ranks second, only behind China, in terms of projected air-travel growth.

Gol's secret to success is simple: Keep costs down.

By maintaining a simplified, single-class aircraft fleet that is one of the industry's newest, Gol has been able to reduce maintenance costs and limit its planes' down time. It also relies heavily on low-cost distribution channels and sales: About 80% of the company's ticket sales are online. And unlike the U.S. air market, where labor costs can amount to 40% of overall costs, in Brazil that figure is closer to 10%.