LAN Airlines S.A. (ADR) (LFL), Gol Linhas Aereas Inteligentes SA (ADR) (GOL): Are Latin American Airlines Ready for Takeoff?

There has been a huge decline in stock prices for two of Latin America’s regional airlines that are publicly traded in the United States. The two airlines, Gol Linhas Aereas Inteligentes SA (ADR) (NYSE:GOL) from Brazil and LAN Airlines S.A. (ADR) (NYSE:LFL) from Chile, have all had big slides in their stock prices. This has meant a lot of pain for the shareholders of these two companies, but it could be a good opportunity to get in while the stocks have lower valuations. Both of these airlines have strong home markets, and they are also expanding to international destinations. This means that the airlines are growing and that their stock prices will eventually grow as well.

Where do they fly?

LAN Airlines S.A. (ADR) (NYSE:LFL) is a big player in the South American airline market. It flies all across the continent and to major markets in the United States, Europe and Australia as well. It recently merged with TAM airlines (a rival of Gol) and has several regional airlines (Lan Argentina, Lan Peru, Lan Ecuador and Lan Colombia). It has its main hub at Comodoro Benitez International Airport in Santiago, Chile and focus hubs at Jorge Chavez International Airport in Lima, Peru and Jose De Olmedo International Airport in Guayaquil, Ecuador. LAN Airlines S.A. (ADR) (NYSE:LFL) has a lot more destinations outside of its home market than Gol does.

Gol Linhas Aereas Inteligentes SA (ADR) (NYSE:GOL) has flights all across Brazil and also to international destinations as well. Gol flies to all of Latin America, the Caribbean and the United States. It has its main hubs at Sao Paolo Congonhas Airport and Rio De Janeiro Galeão Airport with focus hubs at several other airports all across Brazil. Brazil is a much larger country than Chile so Gol Linhas Aereas Inteligentes SA (ADR) (NYSE:GOL) flies a lot more domestic flights than Lan does.

A long path down

LAN Airlines S.A. (ADR) (NYSE:LFL) has had its stock price tumble, with the stock being down over the last month, the last quarter and year-to-date. The fact that the stock is down 28.2% year-to-date is the biggest indication of how far it has fallen. It is worrisome that the profit margin was negative this year and the return on investment and the return on equity were also negative this year. The fact that the stock price is toward its 52- year low means that it s trading at almost rock-bottom prices. In many ways, things do look bright for the future in that many of these issues are already priced  into the stock price, and there are areas for growth.

On paper, Gol Linhas Aereas Inteligentes SA (ADR) (NYSE:GOL) looks like it is doing even worse than LAN Airlines S.A. (ADR) (NYSE:LFL) is. The stock is also down by significant amounts this month, quarter and year-to-date. Gol shares are down 48.9% year-to-date, which is certainly worrisome. The profit margins, return on equity and return on investment all look worse than for Lan airlines. Gol Linhas Aereas Inteligentes SA (ADR) (NYSE:GOL) is also trading toward the bottom of its 52-week range. I believe that despite some of the grim numbers coming out of Gol’s balance sheet, there is some good news that makes Gol a better pick than LAN Airlines S.A. (ADR) (NYSE:LFL).