Delta Lands in Brazil as Bankruptcy Grounds American

NEW YORK ( TheStreet) - Delta ( DAL) is spending $100 million to take a minority stake in Brazil's second largest airline Gol Linhas Aereas Inteligentes ( GOL), in a move that shows some U.S. carriers will continue to expand aggressively while American Airlines ( AMR) remains hamstrung after falling into bankruptcy.

As part of the minority investment, Delta will take a 3% stake in Gol Linhas by buying up its American depository receipt shares and will also begin a partnership arrangement that will allow both companies to book passengers on each other's planes.

The move will also pump nearly $160 million in capital to the Brazilian airline, which has seen its shares fall over 40% year-to-date.

For Delta, which is behind American Airlines and United Continental ( UAL) in Latin America, the deal is a further push to gain ground against its hobbled competitor after taking a stake in Aeromexico for $65 million in August. Both deals also give Delta, the world's second largest airline, board seats.

Delta shares traded at $8.50 and were little changed in afternoon trading. The company's stock has fallen over 30% year-to-date as fuel costs and fears over consumer spending threaten earnings. The company saw profits jump 51% to $550 million in its most recent quarter, however its still to be seen whether Delta will meet estimates of $646 million in 2011 earnings and nearly $2 billion in 2012 earnings, according to seven analysts polled by Bloomberg.

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While Delta's Gol Linhas stake is a way to tap into the fast-growing Brazilian economy, the Atlanta-based company won't add Gol to its SkyTeam marketing alliance, which includes carriers like AeroMexico, Air France, China Eastern Arilines ( CEA), KLM and Korean Air, among others around the world.

In Brazil, Gol Linhas is second to TAM ( TAM), which was bought by Chile's Lan Airlines ( LFL), the largest carrier in Latin America, for $3.3 billion in 2010.

-- Written by Antoine Gara in New York

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