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SAO PAULO, June 19 (Reuters) - Brazil's largest domestic airline, Gol Linhas Aereas Inteligentes SA, said on Wednesday it had failed to reach an agreement to absorb its loyalty program, Smiles Fidelidade SA, after five months of negotiations.

The failure of the talks, set up late last year after Smiles minority shareholders resisted efforts to do the deal outright, was a setback for Gol, which had said it needed an in-house loyalty program to be competitive.

Gol shares fell around 1 percent in early Wednesday trading.

Gol's main rival, LATAM Airlines Group SA, recently completed the buyout of its loyalty program, Multiplus, which had also been separately listed.

Smiles attracted minority investors with generous dividends, but its outlook is now unclear, given that its contract with Gol, its only associated airline, expires in 2032.

Gol reaffirmed on Wednesday that it does not plan to renew its operating agreement with Smiles, adding that the airline continues to "evaluate alternatives" to improve its efficiency and competitiveness.

Smiles shares fell around 10 percent in early trading. (Reporting by Christian Plumb Writing and additional reporting by Marcelo Rochabrun Editing by Chizu Nomiyama and Jonathan Oatis)