GOL Linhas Aereas Inteligentes Results

In 2Q19, GOL Airlines Achieves 26% EBITDA Margin and Record Net Revenues of R$3.1 Billion

GOL Linhas Aéreas Inteligentes S.A., (NYSE: GOL and B3: GOLL4), Brazil's premier domestic airline, today announces its consolidated results for the second quarter of 2019 (2Q19). All information is presented in accordance with IFRS, in Brazilian Reais (R$) and all comparisons are with the second quarter of 2018 (2Q18), unless otherwise stated.

  • The second quarter came in above expectations, and GOL consolidated its leadership position in the Brazilian market.
  • The Company reported 2Q19 earnings per diluted share of R$0.22.
  • Twelfth consecutive quarter in which GOL reported operating profit (R$399.4 million).
  • EBITDA margin was 25.9% in 2Q19, increase of 9.5 p.p. q-o-q.
  • Industry-leading aircraft utilization of nearly 12 hours per day.
  • The lowest unit costs of any airline in Brazil. CASK excluding non-recurring expenses was 24.12 cents (R$).
  • Operational cash flow generation was R$872.7 million.
  • Net debt (excluding perpetual bonds) to LTM EBITDA ratio was 3.1x as of June 30, 2019.

"Strong customer demand, especially in the corporate segment, combined with our capacity discipline, enabled us to deliver exceptional operating results in the second quarter, the traditional low-season for air travel in Brazil," said Paulo Kakinoff, GOL's Chief Executive Officer. "We continued our sustainable capacity expansion, growing into new regional markets from São Paulo's Guarulhos airport, and into Brazil's top travel markets of Rio de Janeiro, Brasilia, São Paulo and Salvador. Under our international expansion plans, we also began operations to Cancun, Mexico, our 14th international destination and where GOL is the only airline with non-stop flights from the Brasilia airport."

Richard Lark, GOL's Chief Financial Officer, added: "Looking ahead, our long-term financial goals remain unchanged: maintain a strong balance sheet, return to a BB credit rating, and ample liquidity; generate robust operating and free cash flows; and grow earnings, margins and returns."

Summary

Strong operating indicators:

Revenue per Passenger Kilometer (RPK) increased 11.7% totaling 9.3 billion in 2Q19, driven by 8.9% growth in the number of transported passengers, while Available Seat Kilometer (ASK) growth was 6.5%. Strong passenger demand and dynamic revenue management enabled GOL to offset the increase in operating unit costs. The Company achieved:

(i) Average yield per passenger of 31.76 cents (R$), an increase of 23.4% compared to 2Q18;

(ii) Average load factor of 82.0%, an increase of 3.9 p.p. quarter-over-quarter;

(iii) On-time performance of 93.0% in 2Q19 according to Infraero's methodology and data from major airports in Brazil.

Record revenues:

Net revenue was R$3.1 billion, the highest ever recorded by the Company for a second quarter, and an increase of 33.4% compared to 2Q18. Net Operating Revenue per Available Seat Kilometer (RASK) was 27.63 cents (R$) in 2Q19, increase of 25.3% over 2Q18. The increase in unit cost drove approximately 90% of the variation in unit revenue, in addition to higher demand compared to 2Q18, a period in which there was a reduction in demand due to a nationwide truck drivers' strike. Net Passenger Revenue per Available Seat Kilometer (PRASK) increased 29.5% over 2Q18, reaching 26.03 cents (R$). GOL's 2019 net revenue guidance is approximately R$13.5 billion.

Controlled costs:

Unit costs based on Cost per Available Seat Kilometer (CASK), excluding non-recurring expenses, increased by 13.6% to 24.12 cents (R$), mainly due to higher fuel costs – a consequence of the 9.8% increase in the price of jet fuel. CASK ex-fuel basis, excluding non-recurring expenses, increased 12.4% due to a number of factors:

(i) An 8.8% average depreciation of the Real against the U.S. Dollar that impacted maintenance, landing fees and international services costs;

(ii) The termination of the federal payroll tax relief, which increased the INSS payroll tax rate from 0% to 20%;

(iii) Increases in depreciation from five net additional aircraft in the fleet and the capitalized maintenance on the main components and rotables (including engines);

(iv) A 10% increase in rates of landing and navigation expenses;

(v) A R$192 million provision for re-delivery of aircraft.

GOL has the lowest unit costs of a Brazilian airline. GOL's 2019 non-fuel CASK guidance is approximately 14 cents.

Healthy margins:

Due to strong cost control and capacity and yield management, the Company achieved a positive operating result for the 12th consecutive quarter, despite the 8.8% average depreciation of the Brazilian Real against the U.S. Dollar and the 9.8% increase in price of jet fuel. 2Q19 demand enabled GOL to achieve an EBIT margin of 12.7%, the highest since 2006. Operating income (EBIT) was R$399.4 million, higher than the R$87.1 million in 2Q18. EBITDA margin was 25.9% in 2Q19, increase of 9.5 p.p. q-o-q. GOL's 2019 EBIT margin and EBITDA margin guidance is approximately 18% and 28%, respectively.

Balance sheet strengthening:

GOL reported operating cash flow generation of R$872.7 million in the quarter. Total liquidity was R$3.7 billion, R$135.2 million higher in comparison to March 31, 2019 and R$644.4 million higher than a year ago, including R$100 million in debt repayments in the quarter. The Brazilian Real appreciated 1.7% (end of period) against the U.S. Dollar causing net exchange and monetary variation gains of R$170.0 million. Net debt (excluding perpetual bonds) to LTM EBITDA was 3.1x as of June 30, 2019.



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