American is at it again. Soon after putting money into Chile-based Jetsmart, the airline is now doing the same thing with Brazil’s Gol. This feels a lot more like a Delta strategy than an American one, but, well, I guess if you’re desperate enough to fill in the gaps, you do what you think you have to do.
When Delta lured LATAM away from American with a very large equity investment, it shifted the landscape of US-based carriers in South America. Delta had a weak presence in South America, trying to fill in the holes itself with an equity investment in Gol and ties to the weak-link of Skyteam, Aerolineas Argentinas.
By adding LATAM, Delta was able to open up new opportunities all around South America that would also feed into the US. The end results is a network that looks like this. Keep in mind this looks at all flying for Delta and partners with reciprocal elite benefits — LATAM is a work in progress, but it’s included here — within the Americas as of January 2020, so assuming a pre-pandemic network returns.

That is a pretty thorough network and one that can serve Delta well. Then there’s United, an airline which has long leaned on Copa as its crutch going south, but it has added Avianca and Azul in recent years to beef things up even more.

The nature of United’s east-west network becomes quite apparent in this map, but you can see that South America is somewhat choppy. Yes, Copa and Avianca give good coverage through the northwest part of the continent, but that Azul route map on the right is largely unconnected to where United flies in South America. And the southernmost part of the continent is all but bare.
And then there’s American. Once LATAM left, American was left with a map that doesn’t look great, although it’s surprisingly less empty than you might expect.

In this map, what do you see? American covers the domestic market incredibly well, especially considering both the Alaska and JetBlue partnerships. American does very well south of the line from the Northeast to Southern California. With Alaska in Seattle and JetBlue in Boston and New York, it gains the rest of the country as well.
Canada is certainly a weak point for American since Air Canada and WestJet partner with others. Maybe that gets resolved or maybe it doesn’t, but to Latin America, it has impressive coverage on its own. The problem is, without partners, it still lags Delta and United significantly.
We talked about this in the Jetsmart post. American has nearly all it needs to fly people from the US into Latin America. Sure, it could generate some extra connections, but the big issue is that it thinks it has a huge loyalty base in South America itself that it will lose if it can’t cater to their needs to go everywhere, even within the continent.
Jetsmart entered the conversation then, but there’s not much to show for it yet. Sure, it helps in Santiago, but that deal is more about future growth which will eventually blanket the important parts of the Spanish-speaking part of the continent. If we add Jetsmart to the map today, it barely changes things at all.

Jetsmart, however, is not likely to be big enough player over on the Portuguese-speaking side of the continent, in Brazil. American had already picked up Gol as a partner after Delta cast it off, but that was a very basic arrangement. This new one will bulk up the benefits significantly.
Now, AAdvantage elite members will get elite benefits when flying Gol. There will be more earning and burning options coming, apparently. The codeshare will be expanded, and there’s an exclusivity deal here. American can’t codeshare with anyone else in Brazil, and Gol can’t codeshare with anyone else in the US.
Is this all worth $200 million? I doubt it. We’ve seen this equity strategy time and time again, and just ask Delta how that’s working out. The good news is that in the scheme of things, this isn’t a lot of money. But still….

From a connectivity standpoint this may add a little value, but it really doesn’t do all that much. Yes, American will be able to connect people into Gol, primarily at Sao Paulo/Guarulhos, but Gol isn’t generally built for connecting traffic. It has sub-daily schedules that aren’t meant to feed a hub. (I say that, but it’s way better than what Jetsmart has.) Sure, there are enough flights in bigger markets to have a decent connection, but those aren’t huge markets for the most part.
Instead, what this does is give options for all those AAdvantage loyalists based in Brazil to fly Gol for their local travel and get elite benefits. It’s the same thing American used to be able to do with LATAM before the breakup.
What’s hard to know is how big that opportunity is, and what would be lost without it. I had previously asked American for a breakdown of members in AAdvantage by country, but they wouldn’t provide that. I do know that they consider it to be substantial.
While I don’t like these equity deals, this is a small sum in the general scheme of things — remember, Delta spent 10 times this amount on LATAM — so maybe it’s worth taking a chance. But without knowing more about American’s AAdvantage numbers and the ultimate goal here, it’s not something that can properly be evaluated from the outside.