Conference Call – 2Q11 Results

Conference Call – 2Q11 Results
August, 2011
“Consistent Investment Case”
1
Disclaimer
“The material that follows is a confidential presentation of general background information about GOL Linhas Aéreas Inteligentes S.A. and its
subsidiaries (collectively, “Gol” or the “Company”) as of the date of the presentation. It is information in summary form and does not purport to be
complete. No representation or warranty, express or implied, is made concerning, and no reliance should be placed on, the accuracy, fairness, or
completeness of this information.
This confidential presentation may contain certain forward-looking statements and information relating to Gol that reflect the current views and/or
expectations of the Company and its management with respect to its performance, business and future events. Forward looking statements
include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain
words like “believe,” “estimate,” “anticipate,” “expect,” “envisages,” “will likely result,” or any other words or phrases of similar meaning. Such
statements are subject to a number of risks, uncertainties and assumptions. We caution you that a number of important factors could cause actual
results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in this presentation. In no event, neither the
Company nor any of its affiliates, directors, officers, agents or employees, shall be liable before any third party (including investors) for any
investment or business decision made or action taken in reliance on the information and statements contained in this presentation or for any
consequential, special or similar damages.
This presentation does not constitute an offer, or invitation, or solicitation of an offer, to subscribe for or purchase any securities. Neither this
presentation nor anything contained herein shall form the basis of any contract or commitment whatsoever.
The market and competitive position data, including market forecasts and statistical data, used throughout this presentation was obtained from
internal surveys, market research, independent consultant reports, publicly available information and governmental agencies and industry
publications in general. Although we have no reason to believe that any of this information or these reports are inaccurate in any material respect,
we have not independently verified the competitive position, market share, market size, market growth or other data provided by third parties or by
industry or other publications. Gol does not make any representation as to the accuracy of such information.
This presentation and its contents are proprietary information and may not be reproduced or otherwise disseminated in whole or in part without
GOL’s prior written consent”.
2
Agenda
1
The Brazilian Airline Sector
2
3
Financial Results
4
5
GOL’s Cost Reduction Initiatives
6
Q&A
Guidance
GOL and Webjet
3
1| The Brazilian Airline Sector
4
IATA Air Transport Market Analysis
Regional differences in traffic volumes persist, due to a combination of differing
economic conditions and the various shocks of recent months
“Latin American airlines are showing the strongest regional growth, propelled by the strength of
economies and trade flows to and from the region.”
“Brazil has been the fastest growing domestic market so far this year, propelled by strong growth in
household incomes over the past year.”
26.2%
21.8%
16.1%
13.8%14.0%
10.4%
7.9%
4.0%1.3%
5.0%
13.4%
0.4%
6.1%
1.9%
9.9%
7.6%
8.1%
6.4%
7.0%
6.1%
4.4%
2.8%
4.1%
1.7%
-24.6%
-27.8%
-0.6%
-3.2%
Brazil had the strongest growth in demand
Latin America had the highest total passenger
growth in the industry.
Source: IATA
comparing to the other important countries, growing
more than China and India.
5
Competitive Environment in Brazil
GOL has been the most prudent player to add capacity
2011 Brazilian Capacity Growth
21.6%
20.8%
14.4%
14.3%
5.1%
21.2%
4.7%
4.2%
1T11
1Q11
GOL´s Domestic ASK Growth (YoY)
14.4%
2T11
2Q11
Other´s Domestic ASK Growth (YoY)
6M11
6M11
Industry Domestic ASK Growth (YoY)
6
Competitive Environment in Brazil
Accelerated domestic market growth due to lower yields
2011 Brazilian Demand Growth
34.7%
28.4%
26.5%
22.7%
21.5%
17.0%
14.2%
11.4%
9.0%
1Q11
1T11
GOL´s Domestic RPK Growth (YoY)
2Q11
2T11
Other´s Domestic RPK Growth (YoY)
6M11
6M11
Industry Domestic RPK Growth (YoY)
7
Competitive Environment in Brazil
Load Factor increase through lower fairs
GOL’s
Load Factor | Yield | RASK
21.13
20.01
20.42
19.83
19.37
18.21
15.50
15.43
15.98
15.96
14.38
13.76
71.29%
70.21%
71.08%
72.35%
4Q10
4T10
1Q11
1T11
1Q11
66.53%
60.35%
1Q10
1T10
2Q10
2T10
3Q10
3T10
Load Factor
Yield GOL R$ (cents)
2Q11
2T11
2Q11
RASK
8
2| Financial Results
9
2Q11 Highlights
The 2Q11 results reflects the competitive landscape in the domestic market and
pressure on the operational costs
Financial Highlights
2Q11
1Q11
2Q10
Var% 2Q11/2Q10
Net operating revenues (R$MM)
1,566.3
1,895.7
1,590.9
-1.54%
EBIT(R$MM)
(270.8)
193.1
57.3
Nm
EBIT Margin
-17.3%
10.2%
3.6%
Nm
EBITDAR (R$MM)
(67.6)
411.5
274.2
Nm
EBITDAR Margin
-4.3%
21.7%
17.2%
Nm
Adjusted Gross Debt / LTM EBITDAR
6.3 x
4.8 x
5.8 x
9.4%
Adjusted Net Debt / LTM EBITDAR
4.6 x
3.6 x
4.5 x
1.7%
Cash / LTM Net Revenue
29.0%
25.9%
24.7%
+4.3 p.p.
Operational Highlights
2Q11
1Q11
2Q10
Var% 2Q11/10
Capacity
11,380
11,875
11,060
2.9%
Demand
7,571
8,591
6,675
13.4%
Load Factor
66.5%
72.3%
60.4%
+6.2 p.p.
CASK (R$)
16.14
14.34
13.87
16.4%
CASK Ex-Fuel (R$)
9.72
8.70
8.70
11.8%
RASK (R$)
13.76
15.96
14.38
-4.3%
Spread (RASK – CASK)
-2.38
1.63
0.52
Nm
10
Factors that Impacted 2Q11 vs. 2Q10 Results
Passenger Revenue = -2.3%
™ 6.2 p.p. increase in GOL’s load factor
RASK 4.3%
™ Yield decreased 13.8%
™ PRASK down in 5.0%
Operating Costs (Ex-Fuel) = +15.0%
CASK Ex- Fuel 2Q11 (R$)
™ Maintenance Expenses and Return of three B767s
™ Salaries, Wages and Benefits Expenses
9
Operating volume
9
Hiring and Training 400 co-pilots
9
Contract Terminations
9.72
R$ 43 MM
R$10 MM
R$5 MM
9.21
™ Real Increase in Services Prices
9
Landing fees
9
Ramp Services
9
Hotels and Transport Crew
™ Extraordinary Costs generated by the Chilean Volcano
™ Suppliers Fines
Total
Ex- Devolução
TotalDesp.
Ex-Fuel
Return of de
Comb.
B767
Expenses
B767
Rescisão
Suppliers
Contract
Contratual
Terminations
com
Fornecedor
ExRestrições
Volcano do Total
TotalDesp.
Adjusted
Comb.
Vulcão
Restrictions
Ex-Fuel
Expenses
Ajustado
11
Financial Indicators
Net Revenue and RASK
15.98
15.96
15.43
14.38
13.76
1,896
1,870
1,789
1,591
1,566
2T10
2Q10
3T10
3Q10
4T10
4Q10
Net Revenue
Receita
Líquida (R$MM)
1T11
1Q11
(cents of R$)
RASK (centavos
de R$)
EBIT
EBITDAR
25.4%
14.0%
10.5%
2T10
2Q10
21.7%
21.3%
10.2%
17.2%
3.6%
57
2T11
2Q11
187
3T10
3Q10
262
4T10
4Q10
193
1T11
1Q11
2T11
(271)
381
475
411
274
(68)
17.3%
EBIT (R$MM)
EBIT MARGIN
Margem
EBIT
2T10
2Q10
3T10
3Q10
EBITDAR (R$MM)
4T10
4Q10
1T11
1Q11
EBITDAR
Margin
Margem
EBITDAR
2T11
-4.3%
12
Strong Cash Position
Maintenance of High Liquidity Levels
Cash Position
29.0%
28.3%
24.7%
1,589
2T10
2Q10
26.3%
1,768
3T10
3Q10
Total
Caixa (R$MM)
Totaldo
Cash
25.9%
1,978
4T10
4Q10
1,847
1T11
1Q11
2,067
2T11
2Q11
TotaldoCash
/ Net
Revenue
(LTM)
Total
Caixa
/ Receita
Líquida
(UDM)
13
Financial Indicators
Adjusted Gross Debt / EBITDAR
Total Cash / Short Term Debt
6.3x
5.8x
5.7x
5.6x
5.9x
6.0x
313
342
5.2x
5.0x
4.8x
597
2.7x
7,352
7,532
7,631
7,344
7,612
2Q10
2T10
3Q10
3T10
4Q10
4T10
1Q11
1T11
2Q11
2T11
2Q10
2T10
338
346
3Q10
3T10
4Q10
4T10
1Q11
1T11
Adjusted
Gross
Debt
Dívida
Bruta
Ajustada
Short de
Term
Debt
Dívida
Curto
Prazo (R$MM)
Adjusted
Gross
Debt//EBITDAR
Dívida
Bruta
Ajustada
EBITDAR(LTM)
(UDM)
Totaldo
cash
/ Short
TermdeDebt
Total
Caixa
/ Dívida
Curto Prazo
2Q11
2T11
14
3| Guidance
15
2011 Guidance
High competition in the local market and non-recurrent increase in certain ex-fuel costs,
pressure the results of operations in the short term, demanding GOL’s 2011 guidance
revision
Previous Scenario
2011 Guidance
Current Scenario
Worst-case
Best-case
Worst-case
Best-case
4.0%
5.0%
4.0%
5.0%
10.0%
15.0%
12.0%
18.0%
34
36
34
36
GOL Capacity (ASKs billion)
48.0
50.0
48.0
50.0
Operational Fleet (end of period)
115
115
115
115
Yield (R$ cents)
19.5
21.0
18.5
19.8
GOL Demand (RPKs billion)
33.0
35.0
34.0
36.0
Departures (000)
315
340
315
340
CASK Ex-fuel (R$ cents)
8.7
8.3
9.4
9.0
Fuel Liters Consumed (billion)
1.55
1.65
1.55
1.65
Fuel Price (R$/liter)
2.10
2.00
2.10
2.00
Average WTI (US$/barrel)
115
100
115
100
Average Exchange Rate (R$/US$)
1.68
1.58
1.65
1.55
Operating Margin (EBIT )*
6.5%
10.0%
1.0%
4.0%
Brazilian GDP Growth
Domestic Demand Growth (%RPKs)
Passengers Transported by GOL (MM)
* Considering the adjusted 1Q11 result, excluding any non-cash effects as disclosed in the 1Q11 earnings release.
16
4| GOL’s Cost Reduction Initiatives
17
GOL’s Cost Reduction Initiatives
Focus on results: reduce costs and generate new revenues
GOL’s Nexts Steps
Initiatives
Action
Impact R$ MM
Maintenance
Delta Agreement
B 767s
Lease Exp/Early Return
75
Contingency Sale
Spare Parts
30
Access Level of Services
Evaluate B737-700
60
Aircraft density
Review “Lopas”
35
Roll-out Buy on Board
Standardize Free Service
20
Other Expenses
Consulting/Contingencies
Taxes/Contracts
130
Higher Fleet Productivity
> 13 hours/day
80
Subtotal
Costs Ex-fuel
530
R$ 1.10 reduction on
Cask Ex-fuel
Fuel Saving
New Engines/APU
120
R$ 0.25 reduction on
Cask
Total
Total Cost
650
100
Cost Reduction Initiatives will have a positive impact of 15% on Cask Ex-Fuel
18
Other Strategic Initiatives
Focus on results: reduce costs and generate new revenues
GOL’s Nexts Steps
4 Revenue Development
4 Code-shares
Strengthen International Partnerships
Increase aircraft utilization
Focus on profitability
Active management of route network (profitable routes)
Higher Seat Share and Load Factor
Increase Distribution Channels (Shops)
4 Ancillary Revenue Development
Expansion of Buy on Board services
INTELLIGENT CHECK-IN
Continuously cargo service development
(new services and more cities attended)
Sales of miles in advance
Partnership with retailers and hotels
*
Entertainment on Board (2H11)
* Illustrative picture of the entertainment gateway to be launched
19
GOL’s Strong Balance Sheet Supports Its Plan
Focus on results: Reduce costs and generate new revenues
GOL’s Financials Aspects
Strategy
Hedge Position
Prioritization of Higher-Return Projects
Continue Stretching Debt Profile
Maintain High Liquidity (25% of LTM
Current
Position
If triggers
reached
Current
% Average HR
Maximum
% Average HR
Revenues)
6 months
44%
47%
Conservative and Non-Speculative Hedge
12 months
32%
46%
Policy
24 months
16%
30%
Return to Positive Operating Margins
36 months
10%
22%
20
5| GOL and Webjet
21
Strengthening of Company Position
in Domestic Market
Largest route network in Latin America with high frequency in major cities
GOL’s Dominant position in Brazil’s Main
Airports
(1,2)
The Operation seeks the Company strengthening in
Domestic Market
(1,2)
GOL + Webjet
GOL
6
5
Brasília
as
así
asíl
sília
(Brasília)
ííli )
Confins
Con
Conf
fiins
fins
s
((Belo
(B
Belo
B
Be
elo Horizonte
Ho
orizo
zo
onte
o
on
nte)
4
6
5
Brasília
as
así
asíl
sília
(Brasília)
ííli )
Confins
Co
Con
Conf
fins
s
(Belo
(Be
(B
Belo Horizonte
Ho
orizo
zo
ont
o
nte)
6
6
5
7
4
1
Salgado Filho
(Porto Alegre))
2
Galeão
(Rio de Janeiro)
5
7
4
1
3
7
Salgado Filho
(Porto Alegre))
3
3
1
2
Subtitle:
ubtitle:
Santos
s Dumo
Dumont
ont
Janeiro)
(Rio de Janei
ro)
1
2
7
3
3
1
Con
Congonhas
ngonhas
(São Paulo)
Guarulh
Guarulhos
(São Paulo)
2
Guarulhos
Guarulh
(São Paulo)
Others
Others
(1) Source: Hotrans approved on 07/01/2011
(2) Source: ANAC Annual Report
•
•
•
Galeão
(Rio de Janeiro)
3
Subtitle:
e:
Con
Congonhas
ngonhas
(São
o Paulo)
4
Cabotage operations (ex:GIG-POA-Foreign) are considered as domestic
Only Friday frequencies were considered
TAM consolidates Tam Group + Pantanal
Santos
s Dumo
Dumont
ont
Janeiro)
(Rio de Janei
ro)
Southeast
Region:
-75% of GDP
G
-65 % of total
traffic, in which
65% are business
passengers
22
Benefits of the Transaction
R$100 million estimated synergies between the companies
Synergies
9 Corporate (Sales, general expenses and administrative): R$60 millions
¾ International distribution channel increase
¾ Process standartization
¾ Scale gains in negotiations with suppliers (fuel)
9 Operational: R$40 millions
¾ Main airports basis integration
¾ Implementation of phased maintenance process on all aircraft
¾ Optimization of spare parts stock (CFM turbines for B737)
¾ Additional synergies also includes higher utilization of GOL's CNF maintenance center and handling
9 People:
¾ Integration eased due to similiar corporate cultures
¾ Litlle need of new certifications for technical and comercial crew
¾ Market´s growth perspective offers career opportunities
23
Debt Schedule on December/2010 (Pro Forma)
1,344
*
622
227
Webjet
GOL
2011
81
146
89
73
42
2012
34
55
2013
24
49
2014
24
18
2015
24
598
After 2015
Após
1344
* Source: Webjet´s Offering Form
Includes R$ 500 MM of last issued bond
24
Next Steps of the Operation
Steps of Acquisition Process
Signature of MOU (Memorandum of Understanding)
Signature of Acquisition Contract
9
9
Companies operating
separately
(synergy analysis)
ANAC´s Approval/ Payment/ Share Transfer (closing)
CADE´s Approval
Final structure decision
Companies Working Under a Full Complementary Strategy
25
6| Q&A
26