Rumors of a Brazilian airfare cap send Gol stock price tumbling

Gol Linhas Aereas Inteligentes SA fell the most in four months after Veja magazine reported that Brazil may try to force airlines to cap some fares. Shares pared losses after the government denied the report.

Gol slumped 4 percent to 14.40 reais today in Sao Paulo after earlier tumbling as much as 7.8 percent in the steepest intraday decline since Oct. 2. The Bovespa benchmark index fell 1.8 percent.

Brazil is considering changes at Sao Paulo’s Congonhas airport including a cap on fares for flights there, Veja reported, without saying where it got the information. Brazil’s aviation regulator Anac said it’s unaware of any plan to limit airline ticket prices, easing concern that the government would intervene in the sector. Anac said it will publish a plan to revise rules for distribution of the slots available for takeoffs and landings in airports tomorrow.

“Anac’s statement eased the market concern that the government would intervene heavily,” Paulo Hegg, an analyst at Sao Paulo-based investment adviser Blue Star Private, said by phone. “Now the fear is the slot distribution revision the government will announce tomorrow and how it will impact Gol; the concern about what they may say explains this still strong drop.”

The regulator can’t intervene in ticket prices under rules in place since 2001, Anac said.

Gol has operated the most flights connecting Congonhas with Brazil’s busiest airports since 2008, according to a statement on the airline’s website. A press official at Gol declined to comment.

Economic Growth

Sao Paulo-based Gol has gained 21 percent in the past year, while the Bovespa dropped 5.5 percent. Brazil’s economic growth slowed to 1 percent in 2012, according to central bank estimates.

Gol’s tumble was driven in part by concern that President Dilma Rousseff planned to expand to the airline industry an interventionist policy she has been using to try to boost growth. Other measures have included forcing electric utilities to cut rates and pressuring banks to reduce borrowing costs.

The government’s policies have hampered the benchmark stock index’s performance and should continue to damp stock gains in the short term, said Fernando Goes, an analyst at brokerage Clear Corretora.

“It’s not the measures that have been taken, or this one specifically, but the vision that that’s the style of the government,” Goes, who lists Gol as one of his top stock picks this year, said by phone from Sao Paulo. “The political risk is much bigger.”

With assistance from Carla Simoes in Brasilia Newsroom. Editors: Richard Richtmyer and Brendan Walsh.

To contact the reporter on this story: Julia Leite in New York at jleite3@bloomberg.net. To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net.