His rationale was much the same one that pushed GOL up by 15% over the last several days: GOL is one of the major beneficiaries, the other one being TAM S.A. (NYSE:TAM), of Varig's problems. Varig is now likely to be bought out by it's former cargo division that was spun off a while back, but they're still going to be in a world of hurt as they try to cope with their declining market share and still very high costs.
Varig still has the lion's share of the long-haul international flights into and out of Brazil, and my assumption would be that they would focus their energy on holding that market share and managing that part of the business, where they have less competition from GOL, which flies only short international legs in South America, and TAM. I also expect that their international routes make them more money, though I don't know that for sure. If Varig does focus on international and doesn't try to effectively rebuild domestic market share, that's almost as good for GOL and TAM as if they go completely belly up.
What Cramer did not say, but what I believe, is that GOL is a great long term investment even if Varig is doing very well. We're getting a short term boost from Varig's problems here, but even with a strong and effective Varig there is still huge potential for growth in air travel in South America, and Gol is doing the best job of spurring that growth and profiting from it.
GOL is doing it on their end of the economic scale the same way Southwest did, creating customers by slashing costs and lowering prices to the level that they can compete with the existing travel infrastructure (long bus rides) and make air travel an affordable option for the millions of people in the southern cone who have never been on a plane. Air Travel in South America is decades behind the US in terms of market penetration, but GOL is changing that.
I've written a lot about GOL before so I won't go into more detail -- just thought it was interesting that Cramer was joining the GOL bandwagon after the Varig news, apparently thinking that there will be more benefit for GOL than just the short-term boost we've seen since late last week. That's fine with me, though I'm not counting on more of short term gain here ... I'm thinking that Gol will continue to grow steadily and profitably for many years to come, which should be great for shareholders like me. My former posts are here if you're interested:
Brazilian Airline GOL Reaps Rewards From Varig’s Headaches Brazilian Airline GOL Continues to Gain Altitude MEMC Electronics and Gol Airlines: Deconstructing PE Expansion in Two Very Different Scenarios Brazilian Gol Has Highest Airline Margins Brazilian Airline Gol is Flying High Gol Revolutionizes South American Travel