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2 Brazil Airline Stocks to Watch

NEW YORK ( Karvy Global) -- Brazil's TAM (TAM - Get Report) and Gol Linhas Aereas Inteligentes (GOL - Get Report) are two airline stocks to watch.

Shareholders in TAM may benefit from the company's merger with another Latin America airline, while Gol could rise from a favorable industry outlook and strong fundamentals.

Brazilian domestic air traffic soared 18.6% to 6.98 billion passenger kilometers (4.33 billion miles) during December 2010 compared with the year-ago period, while international traffic rose 17.7% on a year-over-year basis during the same month, according to Brazil's Civil Aviation Authority (Anac).

For all of 2010, air traffic increased 23.5% to 70.2 billion passenger kilometers (43.6 billion miles), Anac adds. The Brazilian airline industry is witnessing rapid growth, benefiting from a significant increase in business travel and the country's robust economic growth (estimated at 7% for 2010).

Brazilian President Dilma Rousseff announced earlier this month that the government is mulling a plan to sell stakes in the country's airport authority, thereby bolstering private participation.

Brazil will experience higher passenger inflows related to the 2014 World Cup and 2016 Olympics. Moreover, the government is planning to ramp up investments for expanding airports.

According to Goldman Sachs, less than one-third of Brazilian families are potential air travelers right now. But that's expected to rise to 50% by 2020, with almost 12 million families flying for first time. What's more, international passenger traffic increased by 8.8% in 2010, due to a significant recovery in business and leisure travel, especially in Brazil, Russia, India and China, according to a United Nations report.

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