SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the month of October 2019
(Commission File No. 001-32221)
GOL LINHAS AÉREAS INTELIGENTES S.A.
(Exact name of registrant as specified in its charter)
GOL INTELLIGENT AIRLINES INC.
(Translation of registrant’s name into English)
Praça Comandante Linneu Gomes, Portaria 3, Prédio 24
Jd. Aeroporto
04630-000 São Paulo, São Paulo
Federative Republic of Brazil
(Address of registrant’s principal executive offices)
Indicate by check mark whether the registrant files or will file
annual reports under cover Form 20-F or Form 40-F.
Form 20-F ___X___ Form 40-F ______
Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under
the Securities Exchange Act of 1934.
Yes ______ No ___X___
Individual and consolidated
Interim Financial Information
GOL Linhas Aéreas Inteligentes S.A.
September 30, 2019
with report on the review of interim financial information
Gol Linhas Aéreas Inteligentes S.A.
Individual and consolidated interim financial information
September 30, 2019
Contents
Management report |
01 |
Comments on business projection trends |
07 |
Report of the Statutory Audit Committee (CAE) |
08 |
Declaration of the officers on the individual and consolidated interim financial information |
09 |
Declaration of the officers on the review report of independent auditors on the interim financial information |
10 |
Report on the review of interim financial information |
11 |
Statements of financial position |
13 |
Statements of operations |
15 |
Statements of comprehensive income |
17 |
Statement of changes in shareholders’ equity |
18 |
Statement of cash flows |
20 |
Statements of value added |
22 |
Notes to the individual and consolidated interim financial information |
23 |
Management report
Strong customer demand, especially in the corporate segment, combined with our capacity discipline enabled us to deliver exceptional operating results in the third quarter. GOL is the leading company in six of the top ten high-traffic-density airports in Brazil. Our flight network of over 750 daily flights on a single fleet of Boeing 737 aircraft allows us to deliver the highest level of connectivity, integrating the largest markets and most wanted destinations in Brazil.
We are proud of our team’s consistent performance maintaining the highest quality Customer service during the quarter. We transported almost 10 million customers during the quarter, a growth of 13.0% over the same period last year. We achieved a 38% market share in the Brazilian domestic market, according to ANAC data, and a 39% share of the corporate passenger segment, according to ABRACORP data, which awarded GOL as the best domestic airline in September 2019. Our Net Promoter Score (NPS) reached 38 in the quarter and is indicative of the winning combination of our best-in-market product and our highly engaged Customer service team.
The Company celebrated recently the third anniversary of its on-board high speed Wifi, a key component that gives GOL the best in-flight experience in the market. More than 11 million passengers have been able to connect to high-speed internet on all national and international destinations operated by GOL. Also, recently, GOL provided a new payment option via the SafetyPay Brazil digital cash purchase platform, in partnership with Caixa Econômica Federal, enabling the over 60 million Brazilians without bank accounts or credit cards to buy GOL tickets – another example of GOL’s constant work to popularize air travel in Brazil.
GOL saw strong customer demand in the third quarter, as the outlook for Brazil’s economy continues to improve, Combined with our highly effective capacity management, this enabled us to deliver exceptional operating results for the quarter. GOL maximized the time our aircraft are in the air to almost 13 hours per day, and we have flexibility in the plan, including the possibility of leasing more aircraft. We believe this advanced model of fleet management gives us a competitive advantage over our peers as it enables us to quickly flex our capacity by +/-10%.
In the quarter, we continued sustainable capacity expansion, growing into new regional markets from São Paulo’s Guarulhos airport, and consolidated our operating partnerships with 23 new regional routes inaugurated in the quarter. This year we have announced nine regional destinations with our own aircraft, and in the third quarter we began non-stop flights from São Paulo to three cities: Cascavel, Passo Fundo and Vitória da Conquista, located in the states of Paraná, Rio Grande do Sul and Bahia, respectively. Considering these new destinations, along with our partners, we now serve almost 100 Brazilian cities, with an even more integrated and more complete network. As part of its regional network, GOL launched its stopover service, enabling Customers with connections in São Paulo to layover for up to two nights at no additional fare cost. During 3Q19, GOL increased its capacity by 14% on the São Paulo-Rio shuttle, contributing to our growth on this important route.
Continuing our international expansion, we began selling non-stop flights between Manaus and Orlando, our 30th international route, and where GOL is the only airline with non-stop flights from the Manaus airport. The capital of Amazonas thus becomes our third city with nonstop flights to the United States, offering the comfort of GOL’s best-in market service and fast connections to both our Brazilian Customers traveling from the Northern region of Brazil and to our U.S. Customers travelling to the Northern region of Brazil.
Our international expansion allows us to offer the best travel experience to corporate and leisure customers throughout the region.
Despite the temporary grounding of the Boeing MAX, GOL’s network is performing well, and the outlook for the remainder of 2019 remains solid. Our aircraft utilization reached 12.6 block hours in the quarter. We have flexibility in the plan, including the possibility of lease more aircraft. Based on the most recent guidance from Boeing, we are currently assuming regulatory approval of the MAX’s return to service during December 2019.
1
We will continue with our growth plan by managing the flexibility of our fleet, built over the years, which allows us to adjust its size to meet the needs of the Company and the market, and also enabled us to quickly manage temporary supply disruptions. We plan to take delivery of our orders for the MAXs as soon as they are available and will follow all procedures regarding the ungrounding of the 737 MAX from the world's leading aviation regulators. We are confident that the 737 MAX will represent one of, if not the safest aircraft in the world.
Due to a specific Airworthiness Directive issued by the FAA at the beginning of October, we placed 11 aircraft in unscheduled maintenance. Approximately 3% of Customers who purchased tickets for the period from October 10 to December 15, 2019 were re-accommodated on GOL's own flights or on interline partners. All maintenance will be concluded in 45 days. A key component of our flexible supply management is our 1.6 million square foot Aircraft Maintenance Center, that in the quarter celebrated its 13th anniversary as one of the largest in South America. In September, we began providing MRO (“Maintenance, Repairs and Operation”) services to other airlines.
Delta Airlines recently announced its plan to end its partnership with us. Revenues from the Delta agreements accounted for approximately 0.3% of GOL's total revenues. Our asset flexibility combined with our over 80-strong partner network allows us to serve and interconnect the regional, domestic and international markets.
The Company’s third quarter 2019 net revenues increased 28.3%, year-over-year, to an all-time quarterly record of R$3.7 billion. Currently, passenger booking and revenue trends remain strong, and the Company expects fourth quarter 2019 RASK to increase from 5% to 7%, compared to the fourth quarter of 2018.
GOL is the lowest unit cost leader in South America for the 18th consecutive year. Third quarter 2019 operating expenses increased 21.5%, year-over-year, to R$3.1 billion. Based on current trends, the Company estimates fourth quarter 2019 CASK to increase approximately 4% a 6%, year-over-year. The Company has hedged approximately 83% of its fuel consumption for the remainder of 2019 at an average WTI price of US$61.0 and 66% of its fuel consumption for 2020 at an average WTI price of US$61.5.
In the quarter, GOL received an upgrade to its highest Fitch credit rating since 2013. The foreign and local currency Issuer Default Ratings (“IDR”) were upgraded to B+ (from B), with a stable outlook. GOL’s unsecured 2022 and 2025 notes, and GOL’s perpetual bonds were upgraded at the same level as the Company’s IDR. GOL’s national scale rating was upgraded to A- (bra), from BBB- (bra), with a stable outlook. The ratings upgrade reflects the GOL management team’s focus on the consistent improvement of margins, strengthening the balance sheet through disciplined liability management, and as the best positioned airline to benefit from Brazil’s economic growth.
Also in the quarter, GOL re-tapped its Exchangeable Senior Notes at a 20% premium raising US$96 million in gross proceeds and increasing the total amount outstanding to US$425 million. The issuance received the 2019 Americas Equity Deal of the Year award from the Airline Economics Aviation 100 Awards. In addition, in line with the balance sheet deleveraging plan, we repaid R$463.2 million if financial debt in the quarter, reducing the average U.S. dollar debt interest rate to 6.09% p.a.
We remain focused on our long-term financial goals: 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.
2
Operating and Financial Indicators
Traffic data – GOL (in millions) |
3Q19 |
3Q18 |
% Var. |
9M19 |
9M18 |
% Var. |
RPK GOL – Total |
11,114 |
9,853 |
12.8% |
31,056 |
28,180 |
10.2% |
RPK GOL – Domestic |
9,595 |
8,923 |
7.5% |
26,760 |
25,229 |
6.1% |
RPK GOL – International |
1,519 |
930 |
63.3% |
4,295 |
2,951 |
45.5% |
ASK GOL – Total |
13,406 |
12,458 |
7.6% |
37,808 |
35,552 |
6.3% |
ASK GOL – Domestic |
11,463 |
11,128 |
3.0% |
32,230 |
31,527 |
2.2% |
ASK GOL – International |
1,943 |
1,330 |
46.1% |
5,578 |
4,025 |
38.6% |
GOL Load Factor – Total |
82.9% |
79.1% |
3.8 p.p. |
82.1% |
79.3% |
2.8 p.p. |
GOL Load Factor – Domestic |
83.7% |
80.2% |
3.5 p.p. |
83.0% |
80.0% |
3.0 p.p. |
GOL Load Factor – International |
78.2% |
70.0% |
8.2 p.p. |
77.0% |
73.3% |
3.7 p.p. |
Operating data |
3Q19 |
3Q18(1) |
% Var. |
9M19 |
9M18(1) |
% Var. |
Revenue Passengers - Pax on board ('000) |
9,803 |
8,677 |
13.0% |
26,939 |
24,520 |
9.9% |
Aircraft utilization (block hours/day) |
12.6 |
11.8 |
6.8% |
12.4 |
11.9 |
4.2% |
Departures |
68,579 |
63,918 |
7.3% |
191,149 |
186,609 |
2.4% |
Total seats (‘000) |
12,054 |
11,177 |
7.8% |
33,434 |
31,889 |
4.8% |
Average stage length (km) |
1,110 |
1,089 |
1.9% |
1,123 |
1,094 |
2.7% |
Fuel consumption (mm liters) |
387 |
359 |
7.8% |
1,092 |
1,038 |
5.2% |
Full-time employees (at period end) |
15,838 |
15,115 |
4.8% |
15,838 |
15,115 |
4.8% |
Average operating fleet(6) |
115 |
111 |
3.6% |
111 |
110 |
0.9% |
On-time departures |
91.2% |
92.1% |
-0.9 p.p. |
90.4% |
93.2% |
-2.8 p.p. |
Flight completion |
98.8% |
98.6% |
0.2 p.p. |
98.5% |
98.5% |
NM |
Passenger Complaints (per 1,000 pax) |
1.02 |
1.59 |
-35.8% |
1.21 |
1.91 |
-36.9% |
Lost baggage (per 1,000 pax) |
2.12 |
2.01 |
5.8% |
2.10 |
1.97 |
6.7% |
Financial data |
3Q19 |
3Q18(1) |
% Var. |
9M19 |
9M18(1) |
% Var. |
Net YIELD (R$ cents) |
31.50 |
27.44 |
14.8% |
30.57 |
27.14 |
12.6% |
Net PRASK (R$ cents) |
26.12 |
21.70 |
20.4% |
25.11 |
21.51 |
16.7% |
Net RASK (R$ cents) |
27.67 |
23.22 |
19.2% |
26.61 |
23.09 |
15.2% |
CASK (R$ cents)(5) |
22.51 |
21.28 |
5.8% |
22.28 |
20.66 |
7.9% |
CASK ex-fuel (R$ cents)(5) |
14.56 |
12.75 |
14.2% |
14.25 |
12.95 |
10.0% |
Breakeven Load Factor(5) |
67.4% |
72.5% |
-5.1 p.p. |
68.4% |
72.7% |
-4.3 p.p. |
Average exchange rate(2) |
3.9684 |
3.9505 |
0.5% |
3.8872 |
3.6055 |
7.8% |
End of period exchange rate(2) |
4.1644 |
4.0039 |
4.0% |
4.1644 |
4.0039 |
4.0% |
WTI (avg. per barrel. US$)(3) |
56.44 |
69.43 |
-18.7% |
57.10 |
66.79 |
-14.5% |
Price per liter Fuel (R$)(4) |
2.81 |
2.84 |
-1.1% |
2.84 |
2.50 |
13.6% |
Gulf Coast Jet Fuel (avg. per liter. US$)(3) |
0.51 |
0.56 |
-8.9% |
0.50 |
0.54 |
-7.4% |
(1) Unaudited amounts restated in accordance with IFRS 16. (2) Source: Brazilian Central Bank; (3) Source: Bloomberg; (4) Fuel expenses excluding hedge results and PIS/COFINS credits/liters consumed; (5) Excluding non-recurring expenses. (6) Average operating fleet excluding aircraft in sub-leasing and MRO. Certain calculations may not match with the information in the quarterly financials due to rounding.
Domestic market – GOL
GOL’s domestic supply increased by 3.0%, and demand increased by 7.5% in comparison to 3Q18. As a result, the Company’s load factor reached 83.7%, an increase of 3.5 p.p. quarter-over-quarter. GOL transported 9.2 million passengers in the quarter, an increase of 11.4% compared with the same period in 2019. The Company is the leader in transporting passengers in the Brazilian market.
International market - GOL
GOL’s international supply increased by 46.1%, and international demand grew by 63.3% in 3Q19 compared to 3Q18. The Company’s load factor in 3Q19 was 78.2%, an increase of 8.2 p.p.. During the quarter, the Company transported 0.6 million passengers in the international market, an increase of 48.6% quarter-over-quarter.
Volume of Departures and Total Seats - GOL
The total volume of GOL departures was 68,579, an increase of 7.3% over 3Q18. The total number of seats available to the market was 12.1 million in the third quarter of 2019, increase of 7.8% quarter-over-quarter.
PRASK, Yield and RASK - GOL
Net PRASK increased by 20.4% in the quarter when compared to 3Q18, reaching 26.12 cents (R$), driven by a growth in net passenger revenue of 29.5% in the quarter. GOL’s Net RASK was 27.67 cents (R$) in 3Q19, an increase of 19.2% over 3Q18. Net yield increased by 14.8% over 3Q18, reaching 31.50 cents (R$).
3
Fleet
At the end of 3Q19, GOL's total fleet was 125 Boeing 737 aircraft, comprised of 118 NGs and 7 MAXs. While the contractual delivery schedule of the Company with Boeing has not changed, the scheduled for 2019 deliveries is expected to take place in 2020. At the end of 3Q18, GOL's total fleet was 120 Boeing 737 aircraft with 119 aircraft in operation and one sub-leased aircraft to another airline. During the quarter, GOL entered a leasing contracts for 5 additional 737-800 NG aircraft. The average age of the Company's fleet was 10.0 years at the end of 3Q19.
Total fleet at the end of period |
3Q19 |
3Q18 |
Var. |
2Q19 |
Var. |
B737s |
125 |
120 |
+5 |
127 |
-2 |
B737-7 NG |
24 |
26 |
-2 |
24 |
-1 |
B737-8 NG |
94 |
92 |
+2 |
96 |
-1 |
B737-8 MAX |
7 |
2 |
+5 |
7 |
0 |
As of September 30, 2019, the Company had 129 firm orders for the acquisition of Boeing 737 MAX aircraft, of which 99 were orders for 737 MAX-8 and 30 orders were for 737 MAX-10.
Fleet plan |
2019E |
2020E |
2021E |
>2022E |
Total |
Operating fleet at the end of the year |
134 |
142 |
|
|
|
Aircraft commitments (R$ MM)* |
- |
- |
7,349.7 |
60,612.1 |
67,961.8 |
(*) Considers aircraft list price.
4
Glossary of industry terms
|
· |
AIRCRAFT LEASING: an agreement through which a company (the lessor), acquires a resource chosen by its client (the lessee) for subsequent rental to the latter for a determined period. |
|
· |
AIRCRAFT UTILIZATION: the average number of hours operated per day by the aircraft. |
|
· |
AVAILABLE SEAT KILOMETERS (ASK): the aircraft seating capacity multiplied by the number of kilometers flown. |
|
· |
AVAILABLE FREIGHT TONNE KILOMETER (AFTK): cargo capacity in tonnes multiplied by number of kilometers flown. |
|
· |
AVERAGE STAGE LENGTH: the average number of kilometers flown per flight. |
|
· |
EXCHANGEABLE SENIOR NOTES (ESN): convertible securities. |
|
· |
BLOCK HOURS: the time an aircraft is in flight plus taxiing time. |
|
· |
BREAKEVEN LOAD FACTOR: the passenger load factor that will result in passenger revenues being equal to operating expenses. |
|
· |
BRENT: oil produced in the North Sea, traded on the London Stock Exchange and used as a reference in the European and Asian derivatives markets. |
|
· |
CHARTER: a flight operated by an airline outside its normal or regular operations. |
|
· |
FREIGHT LOAD FACTOR (FLF): percentage of cargo capacity that is actually utilized (calculated dividing FTK by AFTK) |
|
· |
FREIGHT TONNE KILOMETERS (FTK): weight of revenue cargo in tonnes multiplied by number of kilometers flown by such tonnes. |
|
· |
LESSOR: the party renting a property or other asset to another party, the lessee. |
|
· |
LOAD FACTOR: the percentage of aircraft seating capacity that is actually utilized (calculated by dividing RPK by ASK). |
|
· |
LONG-HAUL FLIGHTS: long-distance flights (in GOL's case, flights of more than four hours' duration). |
|
· |
OPERATING COST PER AVAILABLE SEAT KILOMETER (CASK): operating expenses divided by the total number of available seat kilometers. |
|
· |
OPERATING COST PER AVAILABLE SEAT KILOMETER EX-FUEL (CASK EX-FUEL): operating cost divided by the total number of available seat kilometers excluding fuel expenses. |
|
· |
OPERATING REVENUE PER AVAILABLE SEAT KILOMETER (RASK): total operating revenue divided by the total number of available seat kilometers. |
|
· |
PASSENGER REVENUE PER AVAILABLE SEAT KILOMETER (PRASK): total passenger revenue divided by the total number of available seat kilometers. |
|
· |
PDP: credit for advance payments for aircraft purchases financing. |
|
· |
REVENUE PASSENGERS: the total number of passengers on board who have paid more than 25% of the full flight fare. |
|
· |
REVENUE PASSENGER KILOMETERS (RPK): the sum of the products of the number of paying passengers on a given flight and the length of the flight. |
|
· |
SALE-LEASEBACK: a financial transaction whereby a resource is sold and then leased back, enabling use of the resource without owning it. |
|
· |
SLOT: the right of an aircraft to take off or land at a given airport for a determined period of time. |
|
· |
SUB-LEASE: an arrangement whereby a lessor in a rent agreement leases the item rented to a fourth party. |
|
· |
TOTAL CASH: the sum of cash, financial investments and short and long-term restricted cash. |
|
· |
WTI BARREL: West Texas Intermediate - the West Texas region, where US oil exploration is concentrated. Serves as a reference for the US petroleum byproduct markets. |
|
· |
YIELD PER PASSENGER KILOMETER: the average value paid by a passenger to fly one kilometer. |
About GOL Linhas Aéreas Inteligentes S.A.
GOL serves more than 36 million passengers annually. With Brazil's largest network, GOL offers customers more than 750 daily flights to over 100 destinations in Brazil and in South America, the Caribbean and the United States. GOLLOG’s cargo transportation and logistics business serves more than 3,400 Brazilian municipalities and more than 200 international destinations in 95 countries. SMILES allows over 16 million registered clients to accumulate miles and redeem tickets to more than 700 destinations worldwide on the GOL partner network. Headquartered in São Paulo, GOL has a team of approximately 15,000 highly skilled aviation professionals and operates a fleet of 125 Boeing 737 aircraft, delivering Brazil's top on-time performance and an industry leading 18-year safety record. GOL has invested billions of Reais in facilities, products and services and technology to enhance the customer experience in the air and on the ground. GOL's shares are traded on the NYSE (GOL) and the B3 (GOLL4). For further information, visit www.voegol.com.br/ir.
Disclaimer
This release contains forward-looking statements relating to the prospects of the business, estimates for operating and financial results, and those related to growth prospects of GOL, as well as the expected impact of the recently issued accounting standard IFRS 16. These are merely estimates and projections and, as such, are based exclusively on the expectations of GOL’s management. Such forward-looking statements depend, substantially, on external factors, in addition to the risks disclosed in GOL’s filed disclosure documents and are, therefore, subject to change without prior notice.
5
Non-GAAP Measures
To be consistent with industry practice. GOL discloses so-called non-GAAP financial measures, which are not recognized under IFRS or U.S. GAAP, including “Net Debt”, “total liquidity” and "EBITDA". The Company’s management believes that disclosure of non-GAAP measures provides useful information to investors, financial analysts and the public in their review of its operating performance and their comparison of its operating performance to the operating performance of other companies in the same industry and other industries. However, these non-GAAP items do not have standardized meanings and may not be directly comparable to similarly-titled items adopted by other companies. Potential investors should not rely on information not recognized under IFRS as a substitute for the GAAP measures of earnings or liquidity in making an investment decision.
Contacts
E-mail: ri@voegol.com.br
Phone: +55 (11) 2128-4700
Website: www.voegol.com.br/ir
6
The Company’s guidance highlights key metrics which impact financial results and drive long-term shareholder value. GOL provides forward-looking information that is focused on the main metrics the Company uses to measure business performance. These indicators are useful for investors and analysts who project GOL’s results.
Financial Outlook (Consolidated, IFRS) |
2019E |
2020E | |||
Previous |
Revised |
|
Previous |
Revised | |
Total fleet (average) |
125 to 127 |
~126 |
|
131 to 136 |
134 to 139 |
Total operational fleet (average) |
119 |
119 |
127 |
127 | |
ASKs, System (% change) |
9 to 11 |
~9 |
6 to 8 |
7 to 9 | |
- Domestic |
5 to 6 |
~5 |
5 to 6 |
6 to 9 | |
- International |
35 to 40 |
~30 |
15 to 25 |
15 to 20 | |
Seats, System (% change) |
8 to 9 |
~8 |
5 to 7 |
6 to 8 | |
Departures, System (% change) |
6 to 7 |
~6 |
5 to 7 |
6 to 8 | |
Average load factor (%) |
79 to 81 |
~81 |
80 to 82 |
80 to 82 | |
Ancillary revenues, net1 (R$ bn) |
~1.2 |
~1.1 |
~1.3 |
~1.1 | |
Total net revenues (R$ billion) |
~13.5 |
~13.7 |
~15.5 |
~15.5 | |
Non-fuel CASK2 (R$ cents) |
~14 |
~14.5 |
~14 |
~14 | |
Fuel liters consumed (mm) |
~1,500 |
~1,500 |
~1,600 |
~1,600 | |
Fuel price (R$/liter) |
~2.9 |
~2.9 |
~3.1 |
~3.0 | |
EBITDA margin2 (%) |
~28 |
~29 |
~29 |
~30 | |
EBIT margin2 (%) |
~18 |
~17 |
~19 |
~19 | |
Net financial expense3 (R$ bn) |
~1.2 |
~1.2 |
~1.2 |
~0.9 | |
Pre-tax margin3 (%) |
~10 |
~7 |
~12 |
~13 | |
Effective income tax rate (%) |
~22 |
~20 |
~22 |
~15 | |
Minority interest4 (R$ mm) |
~293 |
~290 |
~320 |
~311 | |
Capex, net (R$ mm) |
~700 |
~700 |
~650 |
~650 | |
Aircraft Aquisition5 (R$ mm) |
- |
- |
- |
~600 | |
Net Debt6 / EBITDA (x) |
~2.8x |
~2.7x |
~2.4x |
~2.4x | |
Fully-diluted shares out.7 (mm) |
391 |
391 |
391 |
391 | |
EPS, fully diluted (R$) |
1.40 to 1.70 |
~0.90 |
2.00 to 2.50 |
2.80 a 3.30 | |
Fully-diluted ADS out. 7 (mm) |
195.5 |
195.5 |
195.5 |
195.5 | |
EPADS, fully diluted (US$) |
0.80 to 0.95 |
~0.45 |
1.20 to 1.50 |
1.40 to 1.65 | |
( 1) Cargo, loyalty, buy-on-board and other ancillary revenues; (2) Recurring; (3) Excluding currency gains and losses and Unrealized losses on Exchangeable Senior Notes; (4) Source: average of analyst estimates reported on Bloomberg; (5) Gross PDPs; (6) Excluding perpetual bonds; (7) Includes stock option exercises that may be issued from the stock option program and related to Exchangeable Senior Notes.
7
The GOL LINHAS AÉREAS INTELIGENTES S.A. Statutory Audit Committee, in compliance with its legal and statutory obligations, has reviewed the individual and consolidated interim financial information for the three-month and nine-month period ended of September 30, 2019. On the basis of the procedures we have undertaken and considering the independent auditors’ review report issued by KPMG Auditores Independentes and the information and explanations we have received during the period, we consider that these documents are fit to be submitted to the consideration of the Board of Directors.
São Paulo, October 30, 2019.
André Jánszky
Member of the Statutory Audit Committee
Antônio Kandir
Member of the Statutory Audit Committee
James Meaney
Member of the Statutory Audit Committee
8
In compliance with CVM Instruction No. 480/09, the Executive officers declare that they have discussed, reviewed and approved the individual and consolidated interim financial information for the three-month and nine-month period ended of September 30, 2019.
São Paulo, October 30, 2019.
Paulo S. Kakinoff
President and Chief Executive Officer
Richard F. Lark Jr.
Executive Vice President and Chief Financial Officer
9
In compliance with CVM Instruction No. 480/09, the Executive officers declare that they have discussed, reviewed and approved the conclusion expressed in the review report of independent auditors, KPMG Auditores Independentes, on the individual and consolidated interim financial information for the three-month and nine-month period ended of September 30, 2019.
São Paulo, October 30, 2019.
Paulo S. Kakinoff
President and Chief Executive Officer
Richard F. Lark Jr.
Executive Vice President and Chief Financial Officer
10
To the Shareholders, Board of Directors and Management of
Gol Linhas Aéreas Inteligentes S.A.
São Paulo – SP
Introduction
We have reviewed the interim, individual and consolidated balance financial information of Gol Linhas Aéreas Inteligentes S.A. (“Company”) contained in the Quarterly Information – ITR Form as of September 30, 2019, which comprise the individual and consolidated of financial position on September 30, 2019, the individual and consolidated statements of income and other comprehensive income for three- and nine-month periods then ended, and changes in shareholders' equity, and cash flows for the nine-month period then ended, including explanatory notes.
The Company’s management is responsible for the preparation of the individual and consolidated interim financial information in accordance with CPC 21 (R1) and IAS 34 - Interim Financial Reporting, issued by the International Accounting Board – (IASB), as well as for the presentation of this information in a manner consistent with the standards issued by the Securities Commission, applicable to the preparation of the Quarterly Information - ITR. Our responsibility is to express a conclusion on this quarterly information based on our review.
Scope of the review
We conducted our review in accordance with the Brazilian and International review standards (NBC TR 2410 – Review of Interim Financial Information Performed by the Independent Auditor of the Entity and ISRE 2410 – Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of quarterly information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and in the application of analytical procedures and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Brazilian and International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the individual and consolidated financial information included in the quarterly information referred to above was not prepared, in all material respects, in accordance with CPC 21 (R1) and IAS 34, applicable to the preparation of Quarterly Information - ITR, and presented in a manner consistent with the standards issued by the Securities Commission.
Other mathers
Statement of added value
The interim financial information referred above including the statements of added value (DVA), individual and consolidated, for the nine-month period ended September 30, 2019, prepared under responsibility of Company's Management, and presented as supplementary information for IAS 34. This financial information was submitted to review procedures carried out jointly with the audit of Company’s quarterly information. To form a conclusion, we evaluated whether these statements are reconciled with interim financial information and accounting records, as applicable, and whether their forms and contents are in accordance with criteria defined in Technical Pronouncement CPC 09 – Statement of Added Value. Based on our review, we are not aware of any other event that make us believe that these statements of added value were not prepared, in all material respects, in according the criteria defined by this standard and consistently in accordance with individual and consolidated interim financial information taken as a whole.
11
Corresponding amounts
The corresponding amounts for the individual and consolidated balance financial information as of December 31, 2018 were previously audited by other independent auditors who issued a report dated February 27, 2019 without modification and the related statements of income and comprehensive income for the period. The nine-month period ended September 30, 2018 and changes in shareholders' equity and cash flows for the nine-month period ended September 30, 2018 were previously reviewed by other independent auditors who issued a report dated October 31, 2018, without modification. The corresponding amounts for the individual and consolidated Statement of Value Added (DVA) for the nine-month period ended September 30, 2018, were subject to the same review procedures by those independent auditors and, based on their review, those auditors issued a report reporting that they were not aware of any fact that would lead them to believe that the DVA was not prepared, in all material respects, in a manner consistent with the individual and consolidated interim financial information taken as a whole.
São Paulo, October 30, 2019
KPMG Auditores Independentes
CRC 2SP014428/O-6
Original report in Portuguese signed by
Márcio Serpejante Peppe
Accountant CRC 1SP233011/O-8
12
|
Statements of financial position September 30, 2019 and December 31, 2018 (In thousands of Brazilian reais - R$) |
Parent Company |
Consolidated | ||||
Assets |
Note |
09/30/2019 |
12/31/2018 |
09/30/2019 |
12/31/2018 |
|
|||||
Current assets |
|||||
Cash and cash equivalents |
6 |
962,347 |
282,465 |
1,259,465 |
826,187 |
Short-term investments |
7 |
- |
92,015 |
973,211 |
478,364 |
Restricted cash |
8 |
40,886 |
- |
535,602 |
133,391 |
Trade receivables |
9 |
- |
- |
1,177,986 |
853,328 |
Inventories |
10 |
- |
- |
194,635 |
180,141 |
Recoverable taxes |
11 |
6,510 |
5,279 |
298,410 |
360,796 |
Advance to suppliers and third parties |
13 |
166,576 |
- |
295,220 |
68,394 |
Other assets |
5,459 |
425,913 |
153,374 |
410,234 | |
Total current assets |
|
1,181,778 |
805,672 |
4,887,903 |
3,310,835 |
|
|
|
|
| |
Noncurrent assets |
|
|
|
| |
Deposits |
14 |
116,749 |
108,386 |
1,930,909 |
1,612,295 |
Restricted cash |
8 |
1,252 |
39,784 |
88,337 |
688,741 |
Advance to suppliers and third parties |
13 |
- |
- |
45,761 |
- |
Recoverable taxes |
11 |
22,827 |
24,789 |
57,376 |
95,873 |
Deferred taxes |
12 |
49,627 |
24,209 |
117,319 |
73,822 |
Other credits and amounts |
|
- |
- |
1,064 |
- |
Related parties |
28.1 |
3,508,420 |
2,294,143 |
- |
- |
Derivatives assets |
34.1 |
128,506 |
- |
128,506 |
- |
Investments |
15 |
479,859 |
437,875 |
1,256 |
1,177 |
Property, plant and equipment |
16 |
234,586 |
202,698 |
5,769,701 |
2,818,057 |
Intangible assets |
17 |
- |
- |
1,776,058 |
1,777,466 |
Total noncurrent assets |
|
4,541,826 |
3,131,884 |
9,916,287 |
7,067,431 |
|
|
|
|
| |
Total assets |
|
5,723,604 |
3,937,556 |
14,804,190 |
10,378,266 |
The accompanying notes are an integral part of the individual and consolidated interim financial information.
13
|
Statements of financial position September 30, 2019 and December 31, 2018 (In thousands of Brazilian reais - R$) |
|
Parent Company |
Consolidated | |||
Liabilities and equity |
Note |
09/30/2019 |
12/31/2018 |
09/30/2019 |
12/31/2018 |
Current liabilities |
|||||
Loans and financing |
18 |
1,311,425 |
123,873 |
2,480,961 |
1,103,206 |
Leases |
19 |
- |
- |
1,330,326 |
255,917 |
Suppliers |
20 |
26,593 |
10,765 |
1,294,680 |
1,403,815 |
Suppliers - Forfaiting |
21 |
- |
- |
559,503 |
365,696 |
Salaries |
|
33 |
478 |
419,344 |
368,764 |
Taxes payable |
22 |
388 |
8,944 |
101,222 |
111,702 |
Landing fees |
- |
- |
688,399 |
556,300 | |
Advance ticket sales |
23 |
- |
- |
1,985,550 |
1,673,987 |
Mileage program |
- |
- |
920,322 |
826,284 | |
Advances from customers |
- |
- |
14,540 |
169,967 | |
Provisions |
24 |
- |
- |
317,690 |
70,396 |
Derivatives |
34.1 |
- |
- |
193,081 |
195,444 |
Other liabilities |
1,005 |
5,263 |
24,242 |
99,078 | |
Total current liabilities |
|
1,339,444 |
149,323 |
10,329,860 |
7,200,556 |
|
|
|
|
|
|
Noncurrent liabilities |
|
|
|
| |
Loans and financing |
18 |
5,262,520 |
4,535,229 |
5,815,073 |
5,340,601 |
Leases |
19 |
- |
- |
4,887,728 |
656,228 |
Suppliers |
20 |
- |
- |
25,383 |
120,137 |
Provisions |
24 |
- |
- |
840,557 |
829,198 |
Mileage program |
- |
- |
178,471 |
192,569 | |
Deferred taxes |
11.2 |
- |
- |
230,456 |
227,290 |
Taxes payable |
22 |
- |
7,794 |
146 |
54,659 |
Obligations to related companies |
28 |
2 |
- |
- |
- |
Derivatives |
34.1 |
- |
- |
46,289 |
214,218 |
Provision for loss on investment |
15 |
7,235,158 |
4,200,243 |
- |
- |
Other liabilities |
23,499 |
30,379 |
36,574 |
48,161 | |
Total noncurrent liabilities |
|
12,521,179 |
8,773,645 |
12,060,677 |
7,683,061 |
|
|
|
|
|
|
Equity (deficit) |
|
|
|
| |
Capital stock |
25.1 |
3,061,341 |
3,055,940 |
3,061,341 |
3,055,940 |
Advance for future capital increase |
25.1 |
28,343 |
2,818 |
28,343 |
2,818 |
Treasury shares |
|
(126) |
(126) |
(126) |
(126) |
Capital reserves |
|
97,610 |
88,476 |
97,610 |
88,476 |
Cash flow hedge reserve |
|
(816,999) |
(500,022) |
(816,999) |
(500,022) |
Share-based payments reserve |
|
148,431 |
117,413 |
148,431 |
117,413 |
Gains on change in investment |
|
759,335 |
759,984 |
759,335 |
759,984 |
Accumulated losses |
|
(11,414,954) |
(8,509,895) |
(11,414,954) |
(8,509,895) |
Deficit attributable to equity holders of the parent |
|
(8,137,019) |
(4,985,412) |
(8,137,019) |
(4,985,412) |
|
|
|
|
|
|
Non-controlling interest (NCI) |
|
- |
- |
550,672 |
480,061 |
|
|
|
|
|
|
Total deficit |
|
(8,137,019) |
(4,985,412) |
(7,586,347) |
(4,505,351) |
|
|
|
|
|
|
Total liabilities and deficit |
|
5,723,604 |
3,937,556 |
14,804,190 |
10,378,266 |
The accompanying notes are an integral part of the individual and consolidated interim financial information.
14
|
Statements of operations Periods ended September 30, 2019 and 2018(In thousands of Brazilian reais - R$, except basic and diluted earnings (loss) per share) |
|
|
Parent Company | |||
|
|
Three-month period ended |
Nine-month period ended | ||
|
Note |
09/30/2019 |
09/30/2018 |
09/30/2019 |
09/30/2018 |
|
|
|
|
|
|
Operating income (expenses) |
|
|
|
|
|
Administrative expenses |
30 |
(27,284) |
(10,068) |
(34,016) |
(13,941) |
Other operating income, net |
30 |
25,780 |
83,628 |
35,591 |
221,950 |
Total operating (expenses) income |
|
(1,504) |
73,560 |
1,575 |
208,009 |
|
|
|
|
|
|
Equity method investees |
15 |
(241,542) |
(304,740) |
(112,556) |
(1,032,266) |
|
|
|
|
|
|
Loss before financial result, and income taxes |
|
(243,046) |
(231,180) |
(110,981) |
(824,257) |
|
|
|
|
|
|
Financial results |
|
|
|
|
|
Financial income |
31 |
157,594 |
38,835 |
99,630 |
92,330 |
Financial expenses |
31 |
54,791 |
(116,870) |
(303,172) |
(343,574) |
Total financial results |
|
212,385 |
(78,035) |
(203,542) |
(251,244) |
|
|
|
|
|
|
Loss before financial income (expense), exchange (variation) and income taxes |
|
(30,661) |
(309,215) |
(314,523) |
(1,075,501) |
|
|
|
|
|
|
Exchange rate variation, net |
31 |
(210,906) |
(100,993) |
(178,244) |
(504,264) |
|
|
|
|
|
|
Loss before income taxes |
|
(241,567) |
(410,208) |
(492,767) |
(1,579,765) |
|
|
|
|
|
|
Income taxes |
|
|
|
|
|
Current |
|
(238) |
665 |
(1,633) |
(3,668) |
Deferred |
|
(247) |
302 |
25,418 |
(4,319) |
Total income taxes |
12.1 |
(485) |
967 |
23,785 |
(7,987) |
|
|
|
|
|
|
Net loss for the period |
|
(242,052) |
(409,241) |
(468,982) |
(1,587,752) |
|
|
|
|
|
|
|
|
|
|
|
|
Basic loss per share |
|
|
|
|
|
Per common share |
26 |
(0.020) |
(0.034) |
(0.038) |
(0.130) |
Per preferred share |
26 |
(1.228) |
(1.173) |
(1.338) |
(4.559) |
|
|
|
|
|
|
Diluted loss per share |
|
|
|
|
|
Per common share |
26 |
(0.020) |
(0.034) |
(0.038) |
(0.130) |
Per preferred share |
26 |
(1.228) |
(1.173) |
(1.338) |
(4.559) |
15
|
Statements of operations Periods ended September 30, 2019 and 2018(In thousands of Brazilian reais - R$, except basic and diluted earnings (loss) per share) |
|
|
Consolidated | |||
|
|
Three-month period ended |
Nine-month period ended | ||
|
Note |
09/30/2019 |
09/30/2018 |
09/30/2019 |
09/30/2018 |
|
|
|
|
|
|
Net revenue |
|
|
|
|
|
Passenger |
|
3,500,987 |
2,703,204 |
9,493,188 |
7,648,280 |
Cargo and other |
|
208,950 |
189,187 |
568,173 |
562,206 |
Total net revenue |
29 |
3,709,937 |
2,892,391 |
10,061,361 |
8,210,486 |
|
|
|
|
|
|
Cost of services provided |
30 |
(2,546,834) |
(2,337,202) |
(7,311,700) |
(6,425,450) |
Gross profit |
|
1,163,103 |
555,189 |
2,749,661 |
1,785,036 |
|
|
|
|
|
|
Operating income (expenses) |
|
|
|
|
|
Selling expenses |
30 |
(247,492) |
(190,466) |
(669,412) |
(557,815) |
Administrative expenses |
30 |
(330,815) |
(287,820) |
(812,531) |
(779,461) |
Other operating income, net |
30 |
28,178 |
103,395 |
170,265 |
279,481 |
Total operating expenses |
|
(550,129) |
(374,891) |
(1,311,678) |
(1,057,795) |
|
|
|
|
|
|
Equity results |
15 |
- |
205 |
79 |
360 |
|
|
|
|
|
|
Income before financial income (expense), exchange (variation) and income taxes |
|
612,974 |
180,503 |
1,438,062 |
727,601 |
|
|
|
|
|
|
Financial results |
|
|
|
|
|
Financial income |
31 |
200,658 |
152,674 |
282,965 |
236,492 |
Financial expenses |
31 |
(262,486) |
(295,216) |
(1,211,288) |
(790,623) |
Total financial results |
|
(61,828) |
(142,542) |
(928,323) |
(554,131) |
|
|
|
|
|
|
Income before exchange rate variation, net |
|
551,146 |
37,961 |
509,739 |
173,470 |
|
|
|
|
|
|
Exchange rate variation, net |
31 |
(728,623) |
(243,345) |
(681,327) |
(1,310,862) |
|
|
|
|
|
|
Loss before income taxes |
|
(177,477) |
(205,384) |
(171,588) |
(1,137,392) |
|
|
|
|
|
|
Income taxes |
|
|
|
|
|
Current |
|
(49,560) |
83,980 |
(125,203) |
(7,504) |
Deferred |
|
55,917 |
(187,448) |
40,053 |
(215,072) |
Total income taxes |
12.1 |
6,357 |
(103,468) |
(85,150) |
(222,576) |
|
|
|
|
|
|
Net loss for the period |
|
(171,120) |
(308,852) |
(256,738) |
(1,359,968) |
|
|
|
|
|
|
Net income (loss) attributable to: |
|
|
|
|
|
Equity holders of the parent |
|
(242,052) |
(409,241) |
(468,982) |
(1,587,752) |
Non-controlling shareholders |
|
70,932 |
100,389 |
212,244 |
227,784 |
|
|
|
|
|
|
Basic loss per share |
|
|
|
|
|
Per common share |
26 |
(0.020) |
(0.034) |
(0.038) |
(0.130) |
Per preferred share |
26 |
(1.228) |
(1.173) |
(1.338) |
(4.559) |
|
|
|
|
|
|
Diluted loss per share |
|
|
|
|
|
Per common share |
26 |
(0.020) |
(0.034) |
(0.038) |
(0.130) |
Per preferred share |
26 |
(1.228) |
(1.173) |
(1.338) |
(4.559) |
The accompanying notes are an integral part of the individual and consolidated interim financial information.
16
|
Statements of comprehensive income Three-month and nine-month period ended September 30, 2019 and 2018(In thousands of Brazilian reais - R$) |
|
|
Parent Company | ||||
|
|
Three-month period ended |
Nine-month period ended | |||
|
Note |
09/30/2019 |
09/30/2018 |
09/30/2019 |
09/30/2018 | |
|
|
|
|
|
| |
|
|
|
|
|
| |
Net loss for the period |
|
(242,052) |
(409,241) |
(468,982) |
(1,587,752) | |
|
|
|
|
|
| |
Other comprehensive income to be reclassified to profit or loss in subsequent periods |
34 |
|
|
|
| |
Cash flow hedge, net of income tax and social contribution |
|
(473,226) |
94,521 |
(316,977) |
110,195 | |
|
|
(473,226) |
94,521 |
(316,977) |
110,195 | |
|
|
|
|
|
| |
Total comprehensive income loss for the period |
|
(715,278) |
(314,720) |
(785,959) |
(1,477,557) | |
|
|
|
|
|
| |
|
|
Consolidated | ||||
|
|
Three-month period ended |
Nine-month period ended | |||
|
Note |
09/30/2019 |
09/30/2018 |
09/30/2019 |
09/30/2018 | |
|
|
|
|
|
| |
|
|
|
|
|
| |
Net loss for the period |
|
(171,120) |
(308,852) |
(256,738) |
(1,359,968) | |
|
|
|
|
|
| |
Other comprehensive income to be reclassified to profit or loss in subsequent periods |
34 |
|
|
|
| |
Cash flow hedge, net of income tax and social contribution |
|
(473,226) |
94,521 |
(316,977) |
110,195 | |
|
|
(473,226) |
94,521 |
(316,977) |
110,195 | |
|
|
|
|
|
| |
Total comprehensive income loss for the period |
|
(644,346) |
(214,331) |
(573,715) |
(1,249,773) | |
|
|
|
|
|
| |
Comprehensive income loss attributable to: |
|
|
|
|
| |
Equity holders of the parent |
|
(715,278) |
(314,720) |
(785,959) |
(1,477,557) | |
Non-controlling interest shareholders |
|
70,932 |
100,389 |
212,244 |
227,784 | |
The accompanying notes are an integral part of the individual and consolidated interim financial information.
17
|
Statements of changes in equity - Parent CompanyNine-month period ended September 30, 2019 and 2018 (In thousands of Brazilian reais - R$) |
|
|
|
|
|
Capital reserves |
Equity valuation adjustments |
|
|
| |||||
|
Note |
Capital stock |
Advance for future capital increase |
Treasury shares |
Bonus on transfer stock options |
Sale reserve of subscription warrants |
Special premium reserve of subsidiary |
Share- based payments |
Unrealized hedge gain (losses) |
Net gains from purchase / sale of non-controlling interest |
Accumulated losses |
Total | ||
Balances as of December 31, 2017 (Restated) |
|
3,040,512 |
- |
(4,168) |
17,783 |
- |
70,979 |
119,308 |
(79,316) |
760,545 |
(7,426,177) |
(3,500,534) | ||
Initial adoption of accounting standard – CPC 48 (IFRS 9) |
|
- |
- |
- |
- |
- |
- |
- |
- |
- |
1,675 |
1,675 | ||
Other comprehensive income, net |
|
- |
- |
- |
- |
- |
- |
- |
110,195 |
- |
- |
110,195 | ||
Stock options exercised |
|
9,770 |
167 |
- |
- |
- |
- |
- |
- |
- |
- |
9,937 | ||
Share-based payments |
|
- |
- |
- |
- |
- |
- |
12,980 |
- |
- |
- |
12,980 | ||
Equity interest dilution effects |
|
- |
- |
- |
- |
- |
- |
- |
- |
(561) |
- |
(561) | ||
Treasury share buyback |
|
- |
- |
(15,929) |
- |
- |
- |
- |
- |
- |
- |
(15,929) | ||
Treasury shares transferred |
|
|
|
19,971 |
(286) |
- |
- |
(19,685) |
- |
- |
- |
- | ||
Net loss for the period |
|
- |
- |
- |
- |
- |
- |
- |
- |
- |
(1,587,752) |
(1,587,752) | ||
Balances of 09/30/2018 |
|
3,050,282 |
167 |
(126) |
17,497 |
- |
70,979 |
112,603 |
30,879 |
759,984 |
(9,012,254) |
(4,969,989) | ||
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Balances as of December 31, 2018 |
|
3,055,940 |
2,818 |
(126) |
17,497 |
- |
70,979 |
117,413 |
(500,022) |
759,984 |
(8,509,895) |
(4,985,412) | ||
Initial adoption of accounting standard – CPC 06 (IFRS 16) (a) |
4.1.1 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
(2,436,077) |
(2,436,077) | ||
Other comprehensive income, net |
|
- |
- |
- |
- |
- |
- |
- |
(316,977) |
- |
- |
(316,977) | ||
Stock options exercised |
25.1 |
5,401 |
(2,818) |
- |
- |
- |
- |
- |
- |
- |
- |
2,583 | ||
Advances for future capital increase |
25.1 |
- |
28,343 |
- |
- |
- |
- |
- |
- |
- |
- |
28,343 | ||
Share-based payments |
|
- |
- |
- |
- |
- |
- |
31,018 |
- |
- |
- |
31,018 | ||
Equity interest dilution effects |
15 |
- |
- |
- |
- |
- |
- |
- |
- |
(649) |
- |
(649) | ||
Subscription warrants |
|
- |
- |
- |
- |
9,134 |
- |
- |
- |
- |
- |
9,134 | ||
Net loss for the period |
|
- |
- |
- |
- |
- |
- |
- |
- |
- |
(468,982) |
(468,982) | ||
Balances of September 30, 2019 |
|
3,061,341 |
28,343 |
(126) |
17,497 |
9,134 |
70,979 |
148,431 |
(816,999) |
759,335 |
(11,414,954) |
(8,137,019) | ||
(a) On January 1, 2019, the Company adopted CPC 06 (R2) – “Leases”, resulting in an initial adjustment to accumulated losses. For further information, see Note 4.1.1.
The accompanying notes are an integral part of the individual and consolidated interim financial information.
18
|
Statements of changes in equity - ConsolidatedPeriods ended September 30, 2019 and 2018 (In thousands of Brazilian reais - R$) |
|
|
|
|
|
|
Capital reserves |
|
Equity valuation adjustments |
|
|
|
|
| ||
|
Note |
Capital stock |
Advance for future capital increase |
Treasury shares |
Premium on transfer of shares |
Sale reserve of subscription warrants |
Special premium reserve of subsidiary |
Share- based payments |
Cash flow hedge reserve |
Net gains from purchase / sale of non-controlling interest |
Accumulated losses |
Deficit attributable to equity holders of the parent |
Non-controlling interests
|
Total | |
Balances as of December 31, 2017 (Restated) |
|
3,040,512 |
- |
(4,168) |
17,783 |
- |
70,979 |
119,308 |
(79,316) |
760,545 |
(7,426,177) |
(3,500,534) |
412,013 |
(3,088,521) | |
Initial adoption of accounting standard – CPC 48 (IFRS 9) |
|
- |
- |
- |
- |
- |
- |
- |
- |
- |
1,675 |
1,675 |
38 |
1,713 | |
Net loss for the period |
|
- |
- |
- |
- |
- |
- |
- |
- |
- |
(1,587,752) |
(1,587,752) |
227,784 |
(1,359,968) | |
Other comprehensive income (loss), net |
|
- |
- |
- |
- |
- |
- |
- |
110,195 |
- |
- |
110,195 |
- |
110,195 | |
Stock options exercised |
|
9,770 |
167 |
- |
- |
- |
- |
- |
- |
- |
- |
9,937 |
- |
9,937 | |
Stock options of stock option in subsidiary |
|
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
875 |
875 | |
Share-based payments |
|
- |
- |
- |
- |
- |
- |
12,980 |
- |
- |
- |
12,980 |
386 |
13,366 | |
Sale of shares in subsidiary without loss of control |
|
- |
- |
- |
- |
- |
- |
- |
- |
(561) |
- |
(561) |
561 |
- | |
Treasury share buyback |
|
- |
- |
(15,929) |
- |
- |
- |
- |
- |
- |
- |
(15,929) |
- |
(15,929) | |
Treasury shares transferred |
|
- |
- |
19,971 |
(286) |
- |
- |
(19,685) |
- |
- |
- |
- |
- |
- | |
Dividends and interest shareholders on equity paid by Smiles |
|
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
(172,563) |
(172,563) | |
Balances of September 30, 2018 |
|
3,050,282 |
167 |
(126) |
17,497 |
- |
70,979 |
112,603 |
30,879 |
759,984 |
(9,012,254) |
(4,969,989) |
469,094 |
(4,500,895) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Balances as of December 31, 2018 |
|
3,055,940 |
2,818 |
(126) |
17,497 |
- |
70,979 |
117,413 |
(500,022) |
759,984 |
(8,509,895) |
(4,985,412) |
480,061 |
(4,505,351) | |
Initial adoption of accounting standard – CPC 06 (IFRS 16) (a) |
4.1.1 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
(2,436,077) |
(2,436,077) |
(256) |
(2,436,333) | |
Net loss for the period |
|
- |
- |
- |
- |
- |
- |
- |
- |
- |
(468,982) |
(468,982) |
212,244 |
(256,738) | |
Other comprehensive income (loss), net |
|
- |
- |
- |
- |
- |
- |
- |
(316,977) |
- |
- |
(316,977) |
|
(316,977) | |
Stock options exercised |
25.1 |
5,401 |
(2,818) |
- |
- |
- |
- |
- |
- |
- |
- |
2,583 |
(6) |
2,577 | |
Advances for future capital increase |
25.1 |
- |
28,343 |
- |
- |
- |
- |
- |
- |
- |
- |
28,343 |
|
28,343 | |
Share-based payments |
|
- |
- |
- |
- |
- |
- |
31,018 |
- |
- |
- |
31,018 |
1,117 |
32,135 | |
Sale of shares in subsidiary without loss of control |
15 |
- |
- |
- |
- |
- |
- |
- |
- |
(649) |
- |
(649) |
649 |
- | |
Subscription warrants (b) |
|
- |
- |
- |
- |
9,134 |
- |
- |
- |
- |
- |
9,134 |
|
9,134 | |
Interest on shareholders equity distributed by Smiles |
|
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
|
(143,137) |
(143,137) | |
Balances of September 30, 2019 |
|
3,061,341 |
28,343 |
(126) |
17,497 |
9,134 |
70,979 |
148,431 |
(816,999) |
759,335 |
(11,414,954) |
(8,137,019) |
550,672 |
(7,586,347) | |
(a) On January 1, 2019, the Company adopted CPC 06 (R2) – “Leases” (corresponding do IFRS 16), resulting in an initial adjustment to accumulated losses. For further information, see Note 4.1.1.
(b) The subsidiary Gol Finance, through Gol Equity Finance, acquired warrants issued by the Company in the context of the issue of Exchangeable Senior Notes. For further information, see Note 18.1.1.
The accompanying notes are an integral part of the individual and consolidated interim financial information.
19
|
Statements of cash flowsNine-month period ended September 30, 2019 and 2018 (In thousands of Brazilian reais - R$) |
|
Parent Company |
Consolidated | ||
|
09/30/2019 |
09/30/2018 |
09/30/2019 |
09/30/2018 |
|
|
|
|
|
Net loss for the period |
(468,982) |
(1,587,752) |
(256,738) |
(1,359,968) |
Adjustments to reconcile net loss to net cash flows from operating activities |
|
|
|
|
Depreciation and amortization |
- |
- |
1,269,438 |
489,848 |
Provision for expected credit losses |
- |
- |
1,005 |
(2,307) |
Provision for legal proceedings |
- |
- |
145,288 |
194,058 |
Provision for inventory obsolescence |
- |
- |
32 |
4,940 |
Deferred taxes |
(25,418) |
4,319 |
(40,053) |
215,072 |
Equity method investees |
112,556 |
1,032,266 |
(79) |
(360) |
Share-based payments |
31,018 |
12,980 |
32,135 |
13,365 |
Foreign exchange, net |
196,692 |
377,078 |
667,930 |
1,206,824 |
Interest income |
322 |
- |
6,790 |
- |
Interest on loans and financing , Leases and other operations |
248,854 |
225,978 |
797,014 |
495,891 |
Provision for aircraft and engine return |
- |
- |
269,434 |
- |
Provision for maintenance reserve |
- |
- |
(55,346) |
- |
Result of derivatives recognized in profit or loss |
41,582 |
- |
138,901 |
- |
Unrealized hedge results |
(151,169) |
- |
(151,169) |
(42,403) |
Termination of obligation due to contractual term reduction |
- |
- |
(262,569) |
- |
Provision for labor obligations |
- |
- |
205,834 |
72,753 |
Disposals of property, plant and equipment and intangible assets |
3,301 |
68,807 |
135,723 |
12,238 |
Other provisions |
- |
- |
(12,038) |
- |
(11,244) |
133,676 |
2,891,532 |
1,299,951 | |
|
|
|
|
|
Changes in operating assets and liabilities: |
|
|
|
|
Trade receivables |
- |
- |
(325,005) |
(113,530) |
Short-term investments |
87,478 |
465,769 |
27,962 |
459,506 |
Restricted cash |
(2,354) |
- |
200,841 |
- |
Inventories |
- |
- |
(14,526) |
(29,832) |
Deposits |
(4,694) |
(862) |
(158,851) |
(220,152) |
Deposits in guarantee for lease agreements |
- |
- |
(34,408) |
- |
Recoverable taxes |
731 |
- |
100,883 |
- |
Suppliers |
15,742 |
8,591 |
(233,971) |
194,357 |
Suppliers - Forfaiting |
- |
- |
193,807 |
258,311 |
Advance from ticket sales |
- |
- |
311,563 |
55,942 |
Mileage program |
- |
- |
79,940 |
59,659 |
Advances from customers |
- |
- |
(155,427) |
273,247 |
Salaries |
(445) |
(260) |
(155,254) |
(24,678) |
Landing fees |
- |
- |
132,099 |
(134,770) |
Taxes obligation |
(22,529) |
(1,215) |
111,297 |
142,286 |
Derivatives |
- |
- |
(25,855) |
(2,947) |
Payment of fuel derivative bonus |
- |
- |
(17,627) |
- |
Advance to suppliers and third parties |
(157,991) |
- |
(284,460) |
- |
Operating leases |
- |
- |
- |
107,483 |
Provisions |
- |
- |
(208,902) |
(173,333) |
Other assets and liabilities, net |
(48,631) |
23,385 |
(92,326) |
(315,386) |
Interest paid |
(313,273) |
(274,086) |
(428,255) |
(407,126) |
Income tax paid |
(1,259) |
(2,532) |
(176,290) |
(161,269) |
Net cash flows from operating activities |
(458,469) |
352,466 |
1,738,767 |
1,267,719 |
|
|
|
|
|
Investing activities |
|
|
|
|
Transactions with related parties |
(926,118) |
(270,587) |
- |
- |
Short-term investments of Smiles |
- |
- |
(542,261) |
(298,116) |
Restricted cash |
- |
(1,157) |
- |
(42,100) |
Dividends and interest on shareholders’ equity received |
232,183 |
246,837 |
- |
- |
Advances for property, plant and equipment acquisition, net |
(35,189) |
(70,462) |
(39,418) |
(83,351) |
Receipt of aircraft sales |
348,389 |
- |
348,389 |
- |
Acquisition of fixed assets |
- |
- |
(561,307) |
(684,372) |
Acquisition of intangible assets |
- |
- |
(53,513) |
(55,956) |
Net cash flows used in investing activities |
(380,735) |
(95,369) |
(848,110) |
(1,163,895) |
20
|
Statements of cash flowsNine-month period ended September 30, 2019 and 2018 (In thousands of Brazilian reais - R$) |
|
Parent Company |
Consolidated | |||
|
09/30/2019 |
09/30/2018 |
09/30/2019 |
09/30/2018 | |
|
|
|
|
| |
Financing activities |
|
|
|
| |
Loans and financing issued, net of costs |
1,707,935 |
486,735 |
1,950,040 |
822,827 | |
Debt issuance and exchange offer costs |
(70,356) |
(8,578) |
(77,082) |
(16,361) | |
Loan and financing payments |
(50,320) |
- |
(570,413) |
(189,122) | |
Early payment of Senior Notes |
- |
(628,194) |
- |
(628,195) | |
Lease payments |
- |
- |
(1,223,685) |
(190,277) | |
Capped call (*) |
(153,038) |
- |
(403,022) |
- | |
Treasury share buyback |
- |
(15,929) |
- |
(15,929) | |
Dividends and interest on shareholders equity paid to non-controlling interests of Smiles |
- |
- |
(209,150) |
(219,493) | |
Capital increase |
2,583 |
9,770 |
2,576 |
9,770 | |
Capital increase from non-controlling interests |
- |
- |
- |
875 | |
Warrants |
9,134 |
- |
9,134 |
- | |
Shares to be issued |
28,343 |
167 |
28,343 |
167 | |
Transactions with related parties |
- |
17,958 |
- |
- | |
Net cash flows (used in) from financing activities |
1,474,281 |
(138,071) |
(493,259) |
(425,738) | |
|
|
|
|
| |
Foreign exchange variation on cash held in foreign currencies |
44,805 |
8,376 |
35,880 |
(14,508) | |
|
|
|
|
| |
Net (decrease) increase in cash and cash equivalents |
679,882 |
127,402 |
433,278 |
(336,422) | |
|
|
|
|
| |
Cash and cash equivalents at the beginning of the period |
282,465 |
103,727 |
826,187 |
1,026,862 | |
Cash and cash equivalents at the end of the period |
962,347 |
231,129 |
1,259,465 |
690,440 | |
|
|
|
|
| |
(*) Over-the-counter derivative (“Capped call”) with certain of the Notes subscribers with the objective of minimizing the potential dilution of the Company's preferred shares and ADSs.
The accompanying notes are an integral part of the individual and consolidated interim financial information.
21
|
Statements of value addedNine-month period ended September 30, 2019 and 2018 (In thousands of Brazilian reais - R$) |
|
Parent Company |
Consolidated | ||
|
09/30/2019 |
09/30/2018 |
09/30/2019 |
09/30/2018 |
Revenues |
|
|
|
|
Passengers, cargo and other |
- |
- |
10,508,186 |
8,695,243 |
Other operating income |
35,591 |
221,950 |
170,265 |
220,314 |
Allowance for doubtful accounts |
- |
- |
(1,005) |
17,322 |
|
35,591 |
221,950 |
10,677,446 |
8,932,879 |
Inputs acquired from third parties (including ICMS and IPI) |
|
|
|
|
Suppliers of aircraft fuel |
- |
- |
(3,099,808) |
(2,786,057) |
Material, electricity, third-party services and others |
(29,870) |
(11,018) |
(2,248,352) |
(1,778,937) |
Aircraft insurance |
- |
- |
(18,927) |
(14,913) |
Sales and marketing |
(338) |
(267) |
(475,315) |
(445,729) |
Gross value added |
5,383 |
210,665 |
4,835,044 |
3,907,243 |
|
|
|
|
|
Depreciation and amortization |
- |
- |
(1,269,438) |
(489,848) |
Value added produced |
5,383 |
210,665 |
3,565,606 |
3,417,395 |
|
|
|
|
|
Value added received in transfer |
|
|
|
|
Equity results |
(112,556) |
(1,032,266) |
79 |
360 |
Financial income |
134,625 |
(215,861) |
282,965 |
1,091,750 |
Value added for distribution |
27,452 |
(1,037,462) |
3.848,650 |
4,509,505 |
|
|
|
|
|
Distribution of value added: |
|
|
|
|
Salaries |
2,966 |
2,535 |
1,182,779 |
1,091,999 |
Benefits |
- |
- |
135,379 |
120,345 |
FGTS |
- |
(309) |
94,061 |
81,199 |
Personnel |
2,966 |
2,226 |
1,412,219 |
1,293,543 |
|
|
|
|
|
Federal taxes |
(21,004) |
13,149 |
775,388 |
771,381 |
State taxes |
- |
- |
14,367 |
15,424 |
Municipal taxes |
- |
- |
3,062 |
2,681 |
Tax, charges and contributions |
(21,004) |
13,149 |
792,817 |
789,486 |
|
|
|
|
|
Interest |
514,442 |
534,829 |
1,854,825 |
2,932,710 |
Rent |
- |
- |
45,412 |
853,530 |
Other |
30 |
86 |
115 |
204 |
Third-party capital remuneration |
514,472 |
534,915 |
1,900,352 |
3,786,444 |
|
|
|
|
|
Net loss for the period |
(468,982) |
(1,587,752) |
(468,982) |
(1,587,752) |
Net income (loss) for the period attributable to non-controlling interests |
- |
- |
212,244 |
227,784 |
Remuneration of own capital |
(468,982) |
(1,587,752) |
(256,738) |
(1,359,968) |
|
|
|
|
|
Value added for distribution |
27,452 |
(1,037,462) |
3,848,650 |
4,509,505 |
The accompanying notes are an integral part of the individual and consolidated interim financial information.
22
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
Gol Linhas Aéreas Inteligentes S.A. (the “Company” or “GLAI”) is a publicly-listed company incorporated on March 12, 2004, under the Brazilian Corporate Law. According to the Bylaws, the Company's main purpose is to exercise control of GOL Linhas Aéreas S.A. (“GLA”), which operates regular and non-scheduled passenger flight transportation services and the development of loyalty programs, among others.
The Company’s shares are traded on B3 S.A. - Brasil, Bolsa, Balcão (“B3”) and on the New York Stock Exchange (“NYSE”). The Company adopted Level 2 Differentiated Corporate Governance Practices from B3 and is included in the Special Corporate Governance Stock Index (“IGC”) and the Special Tag Along Stock Index (“ITAG”), which were created for companies committed to apply differentiated corporate governance practices.
The Company’s corporate address is located at Praça Comandante Linneu Gomes, s/n, concierge 3, building 24, Jardim Aeroporto, São Paulo, Brazil.
As of March 11, 2019, as a result of the second accident involving a Boeing 737 Max 8 aircraft, the Company’s Management decided to suspend the operation of its seven aircraft prior to this being mandated by regulatory authorities, given that safety is the Company’s number one priority. As a result of this strategy, the Company quickly reconfigured its flight network. The use of these aircraft is subject to authorization by the Brazilian regulatory authorities and destination countries, mainly the United States of America. The Company did not need and does not intend to interrupt any of its routes due to the suspension of the use of these aircraft.
During the second and third quarters the Company’s Management assessed and carried out impairment tests for these aircraft by comparing their carrying amount with the market value indicated in specialized publications (“BlueBook”), concluding that there are no losses related to the right-of-use asset and, therefore, no provision was recognized.
As of September 30, 2019, the Company’s deficit totaled R$8,137,019, versus R$4,985,412 as of December 31, 2018. The increase was primarily due to (a) the initial adoption of CPC 06 (R2) – “Leases”, equivalent to IFRS 16 – “Leases”, with impact on the parent company of R$2,436,077; (b) losses in the period of R$468,982; and (c) unrealized cash flow hedge losses, net of income tax and social contribution, totaling R$316,977.
Consolidated negative net working capital on September 30, 2019 was of R$5,441,957 (negative R$3,889,721 on December 31, 2018), the variation was primarily due to the initial adoption of CPC 06 (R2) with impact of R$854,681 and increase in loan obligations of R$1,377,755 due to long-term to short-term transfers according to the maturity dates, net of changes between other short-term assets and liabilities.
GLA is highly sensitive to the economy and the U.S. dollar, as approximately 41.55% of its costs are denominated in U.S. dollar (“US$”) and GLA’s capacity to adjust ticket prices charged to its customers in order to offset the U.S. dollar appreciation is dependent on capacity (offer) and ticket prices practiced by the competitors.
The Company carries out several initiatives to adjust its fleet size to demand and match seat supply to demand, in order to maintain a high load factor, reduce costs and adjust its capital structure.
23
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
At the end of 2017, the Company implemented initiatives to restructure its statement of financial position, extending terms and reducing the financial cost of its debt structure, as a result of an offering carried out on December 11, 2017, which raised US$500 million with interest rates of 7.1% p.a., partially used to amortize debt with an average rate of 9.8% p.a.
In October 2018, the Company concluded the refinancing of debentures of its wholly owned subsidiary GLA, fully amortizing the amount of R$1,025,000 and issuing a new series of non-convertible, unsecured debentures in the amount of R$887,500, thus reducing debt by R$137,500. The new debentures were issued with interest at 120.0% of the Interbank Deposit Certificate (“CDI”) rate, a significant reduction in relation to the amortized debt, at 132.0% of the CDI rate. This operation deleveraged the Company’s statement of financial position and better adjusted GLA’s operating cash flow generation by amortizing its liabilities.
In March, April and July 2019, the Company raised a total of US$425 million through the issue of bonds convertible into shares with nominal interest rates of 3.75% p.a. For further information, see Note 18.1.1.
The Company’s objective is to continue to strengthen its balance sheet management and results in order to guarantee sustainability. Management believes that the business plan prepared, presented and approved by the Board of Directors on January 17, 2019, demonstrates the Company’s ability to continue as going concern.
24
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
Entity |
Date of Incorporation |
Location |
Principal Activity |
Type of Control |
% of Interest | |
09/30/2019 |
12/31/2018 | |||||
Offshore Subsidiaries: |
|
|
|
|
|
|
GAC |
March 23, 2006 |
Cayman Islands |
Aircraft Acquisition |
Direct |
100.0 |
100.0 |
Gol Finance Inc. |
March 16, 2006 |
Cayman Islands |
Fund-raising |
Direct |
100.0 |
100.0 |
Gol Finance |
June 21, 2013 |
Luxembourg |
Fund-raising |
Direct |
100.0 |
100.0 |
Subsidiaries: |
|
|
|
|
|
|
GLA |
April 9, 2007 |
Brazil |
Flight transportation |
Direct |
100.0 |
100.0 |
AirFim (a) |
November 7, 2003 |
Brazil |
Investment Funds |
Indirect |
100.0 |
100.0 |
Sul América Gol Max (a) |
March 14, 2014 |
Brazil |
Investment Funds |
Indirect |
- |
100.0 |
Smiles Fidelidade |
August 1, 2011 |
Brazil |
Loyalty Program |
Direct |
52.6 |
52.7 |
Smiles Viagens |
August 10, 2017 |
Brazil |
Tourism Agency |
Indirect |
52.6 |
52.7 |
Smiles Fidelidade Argentina (b) |
November 7, 2018 |
Argentina |
Loyalty Program |
Indirect |
52.6 |
52.7 |
Smiles Viagens Argentina (b) |
November 20, 2018 |
Argentina |
Tourism Agency |
Indirect |
52.6 |
52.7 |
Fundo Sorriso (a) |
July 14, 2014 |
Brazil |
Investment Funds |
Indirect |
52.6 |
52.7 |
Joint venture: | ||||||
SCP Trip |
April 27, 2012 |
Brazil |
Flight Magazine |
Indirect |
60.0 |
60.0 |
Associate: |
|
|
|
|
|
|
Netpoints (c) |
November 8, 2013 |
Brazil |
Loyalty Program |
Indirect |
- |
25.4 |
(a) These comprise exclusive investment.
(b) Company with functional currency in Argentine pesos.
(c) On February 1, 2019, the subsidiary Smiles Fidelidade sold its equity interest for the total amount of R$914, recognized in the consolidated statement of income under “Other operating income”.
On October 14, 2018, through a Material Fact, the Company disclosed the plans for a corporate reorganization whose main purpose was the merger of Smiles into GLA.
On December 13, 2018, the Company was informed by B3 that its migration to the Novo Mercado listing segment was not admissible, pursuant to the Material Fact of October 14, 2018, described above.
On June 19, 2019, after five months of negotiation, the Company announced through a Material Fact that the parties were unable to reach an agreement on terms for the proposed corporate reorganization and, as a result, decided to terminate negotiations.
This fact has not influenced the Company’s decision to terminate existing agreements with the subsidiary, Smiles Fidelidade, at the end of their term. The Company will continue to evaluate alternatives to improve the efficiency and competitiveness of its economic group.
Since 2016, the Company has taken several steps to strengthen and expand its internal control and compliance programs, the details of which were presented in the annual financial statements disclosed on February 27, 2019.
Management is constantly reinforcing to its employees, customers and suppliers its commitment to continue improving its internal control and compliance programs.
As previously disclosed in the financial statements for the year ended December 31, 2018, the Company entered into an agreement with the Brazilian Federal Public Ministry in December 2016 (“Agreement”), under which the Company agreed to pay R$12 million in fines and make improvements to its compliance program. In turn, the Federal Public Ministry agreed not to raise any charges related to activities that are the subject of the Agreement. In addition, the Company paid R$4.2 million in fines to the Brazilian tax authorities.
25
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
The Company voluntarily informed the U.S. Department of Justice (“DOJ”), the Securities and Exchange Commission (“SEC”) and the Brazilian Securities and Exchange Commission (“CVM”) of the Agreement and the external independent investigation hired by the Company. These authorities may impose fines and possibly other sanctions to the Company.
There were no further developments on the subject during the nine-month period ended September 30, 2019.
This individual and consolidated interim information corresponds to the interim financial statements and has, therefore, been prepared in accordance with Technical Pronouncement CPC 21 (R1) - “Interim Financial Reporting”, approved by the Federal Accounting Council (“CFC”) and the Brazilian Securities and Exchange Commission (“CVM”), equivalent to IAS 34 - “Interim Financial Reporting”, issued by the International Accounting Standards Board (“IASB”), except for the recognition of provisions for loss of investment in the parent company, as per Note 15.
The individual and consolidated interim financial information was prepared using the Brazilian real (“R$”) as the functional and presentation currency. Figures are expressed in thousands of Brazilian reais. The amounts disclosed in other currencies, unless otherwise indicated, are also reported in thousands. The items disclosed in foreign currencies are duly identified, when applicable.
The preparation of the Company’s individual and consolidated interim financial information requires Management to make judgments, use estimates and adopt assumptions affecting the stated amounts of revenues, expenses, assets and liabilities. However, the uncertainty inherent in these judgments, assumptions and estimates could give rise to results that require a material adjustment of the book value of certain assets and liabilities in future reporting years.
The Company is continually reviewing its judgments, estimates and assumptions.
In preparing the individual and consolidated interim financial information, Management used disclosure criteria considering regulatory aspects and the relevance of transactions to understand the changes observed in the Company’s equity, economic and financial position and its performance since the end of the last fiscal year ended December 31, 2018, as well as the updating of relevant information included in the annual financial statements disclosed on February 27, 2019.
Management confirms that all the material information in this individual and consolidated interim financial information is being demonstrated and corresponds to the information used by Management in the development of its business management activities.
This individual and consolidated interim financial information was prepared based on historical cost, except for certain financial assets and liabilities that are measured at fair value when applicable:
· short-term investments classified as cash and cash equivalents measured at fair value;
· short-term investments comprising exclusive investment funds, measured at fair value;
· derivative financial instruments measured at fair value; and
26
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
· investments accounted for using the equity method.
The Company’s individual and consolidated interim financial information for the period ended September 30, 2019 has been prepared assuming that it will continue as going concern, realizing assets and settling liabilities in the normal course of business, as per Note 1.1.
This individual and consolidated interim financial information was authorized for issue by Management on October 30, 2019.
The individual and consolidated interim financial information presented herein was prepared based on policies, accounting practices and estimate calculation methods adopted and presented in detail in the annual financial statements for the year ended December 31, 2018, issued on February 27, 2019, except regarding:
(a) adoption on January 1, 2019 of CPC 06 (R2) - “Leases”, equivalent to IFRS 16 - “Leases”, presented in Note 4.1.1; and
(b) adoption on August 1, 2019 of hedge accounting protection in accordance with CPC 48 - “Financial Instruments”, equivalent to IFRS 9 - “Financial Instruments”, presented in Note 4.2.
CPC 06 (R2) establishes the principles for recognizing, measuring, presenting and disclosing lease transactions and requires lessees to recognize all leases in accordance with a single statement of financial position model, similar to the recognition of finance leases pursuant to CPC 06 (R1). The standard includes two recognition exemptions for lessees: leases of “low value” assets, for example, personal computers, and short-term leases, i.e. leases for which the term ends within 12 months or less. At the beginning of a lease, lessees recognize a liability to carry out payments (lease liability) and an asset representing the right to use the leased item for the lease term (right-of-use asset). Lessees shall recognize separately interest expenses from the lease liability and depreciation expenses of the right-of-use asset.
Lessees shall also reassess the lease liability if certain events occur, such as a change in the term of the lease or a change in future lease payment flows due to a variation in the reference index or rate used to calculate such payments. In general, lessees shall recognize any remeasurement to the lease liability as an adjustment against the right-of-use asset. Among the adoption methods provided for in the standard, the Company chose to adopt the modified retrospective approach.
Therefore, in accordance with IFRS 16, we did not restate comparative information and balances. Within the modified retrospective approach, the Company chose to adopt the following transition practical expedients and exemptions:
· the Company used hindsight, such as in determining the lease term and considering extensions and renegotiations throughout the agreement; and
27
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
· the Company applied a single discount rate to its portfolio of leases with similar characteristics, considering the remaining term of the agreements and the guarantee provided for by the assets.
The Company assessed the impacts arising from the adoption of this standard, considering the above-mentioned assumptions, and thus recorded 120 aircraft lease agreements and 14 non-aircraft lease agreements as right-of-use. The effects from the initial adoption of this standard are shown in the table below:
Assets |
Liabilities |
Equity | |
Operating leases (a) |
- |
(219,728) |
219,728 |
Right of use - aircraft agreements |
2,892,836 |
5,540,621 |
(2,647,785) |
Right of use - non-aircraft agreements |
41,420 |
49,975 |
(8,555) |
Deferred tax - Smiles (b) |
- |
- |
278 |
Total |
2,934,256 |
5,370,868 |
(2,436,334) |
(a) Refers to installments of operating lease that had their maturities renegotiated during 2016.
(b) Deferred income tax effects arising from the initial adoption of CPC 06 (R2)/IFRS 16 recorded in the Smiles subsidiary.
As of January 1, 2019, the impacts arising from deferred taxes related to the adoption of CPC 06 (R2) did not reflect the corresponding tax effects, given that GLA has no history of taxable income and is currently recording tax credit assets limited to the amount of tax credit liabilities, in accordance with item 35 of CPC 32 – “Income Taxes”.
As a consequence of the adoption of CPC 06 (R2), corresponding to IFRS 16, the Company made some reclassifications in the statement of financial position as of December 31, 2018, presented for comparison purposes, as shown below:
|
Consolidated | ||
|
12/31/2018 | ||
|
As previously disclosed |
Reclassification |
Restated |
|
|
|
|
Current |
|
|
|
Short-term debt |
1,223,324 |
(120,118) |
1,103,206 |
Leases |
- |
255,917 |
255,917 |
Operating leases |
135,799 |
(135,799) |
- |
|
|
|
|
Noncurrent |
|
|
|
Long-term debt |
5,861,143 |
(520,542) |
5,340,601 |
Leases |
- |
656,228 |
656,228 |
Operating leases |
135,686 |
(135,686) |
- |
In June 2017, the IASB issued IFRIC 23, which clarifies the application of requirements in IAS 12 - “Income Taxes” when there is uncertainty over the acceptance of income tax treatments by the tax authority. The interpretation clarifies that, if it is not probable that the tax authority will accept the income tax treatments, the amounts of tax assets and liabilities shall be adjusted to reflect the best resolution of the uncertainty. IFRIC 23 has been effective since January 1, 2019, and, after assessing the matter the Company’s Management concluded that there are no impacts or need for additional disclosures in this individual and consolidated interim financial information due to the adoption of this standard.
28
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
In the regular course of its operations, the Company has recurring sales in US dollars (“US$”), mainly as a result of international routes in South, Central and North America. Accordingly, Management has adopted cash flow hedge accounting as a hedge for future foreign currency revenues, which are considered highly probable, as provided for and expressed in Paragraph 6.3.1 of CPC 48, using as instruments 50 lease agreements recorded as debt as a result of the adoption of CPC 06 (R2), as provided for in paragraph 6.6.2 of CPC 48.
With the adoption of hedge accounting, the foreign exchange gains and losses arising from the lease agreements (hedge instrument) will be accumulated in shareholders’ equity, “Other Comprehensive Income”, appropriated to the Company's results upon the realization of the income from sales in US$.
Hedge accounting derives from the natural hedge of the Company’s operations, portrayed by cash flow (revenues and amortization of debt in US$) and does not represent an increase in financial costs, allowing the elimination of some of the exchange rate volatility in the Company's results. The final position of shareholders’ equity is not affected by the adoption of this accounting practice. The elements of hedge accounting are: (1) hedged object: highly probable sales revenue in US$; (2) hedge instrument: 50 lease agreements linked to US$; (3) designated amount: 60 months of highly probable revenues based on a range of 80 to 85% of historically earned revenues, totaling US$903,102. (4) nature of the hedged risk: exchange variation; (5) hedged risk specification: USD/BRL spot exchange rate; (6) hedge type: cash flow.
To improve the presentation of the interim quarterly information, the following amounts were reclassified in the Balance Sheet and Cash Flow:
|
Consolidated | ||
12/31/2018 | |||
|
|
Not reviewed |
Not reviewed |
|
As disclosed |
Reclassification |
Restated |
Current assets |
|||
Advance to suppliers and third parties |
- |
68,394 |
68,394 |
Other credits and amounts |
478,628 |
(68,394) |
410,234 |
According to Management, there are no other standards and interpretations issued and not yet adopted that may have a significant impact on the result or equity disclosed by the Company.
The Company expects revenues and operating results from its flights to be at their highest levels in the summer and winter months of January and July, respectively, and during the last weeks of December and in the year-end holiday period. Given the high proportion of fixed costs, this seasonality tends to drive variations in operating results across the fiscal-year quarters.
29
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
|
Parent Company |
Consolidated | ||
|
09/30/2019 |
12/31/2018 |
09/30/2019 |
12/31/2018 |
|
|
|
|
|
Cash and bank deposits |
1,550 |
6,587 |
79,535 |
157,970 |
Cash equivalents |
960,797 |
275,878 |
1,179,930 |
668,217 |
Total |
962,347 |
282,465 |
1,259,465 |
826,187 |
The breakdown of cash equivalents is as follows:
|
|
Parent Company |
Consolidated | ||
|
Weighted average rate (p.a.) |
09/30/2019 |
12/31/2018 |
09/30/2019 |
12/31/2018 |
|
|
|
|
|
|
Local currency |
|
|
|
|
|
Private bonds and deposits with banks |
94.0% of CDI |
280,613 |
1,895 |
496,100 |
74,819 |
Government bonds |
91.2% of CDI |
- |
- |
- |
39 |
Automatic deposits |
59.2% of CDI |
158,460 |
2,217 |
162,106 |
307,499 |
Total local currency |
|
439,073 |
4,112 |
658,206 |
382,357 |
|
|
|
|
|
|
Foreign currency |
|
|
|
|
|
Deposits with banks |
1.8% |
521,724 |
271,766 |
521,724 |
285,860 |
Total foreign currency |
|
521,724 |
271,766 |
521,724 |
285,860 |
|
|
|
|
|
|
Total |
|
960,797 |
275,878 |
1,179,930 |
668,217 |
|
|
Parent Company |
Consolidated | |
|
Weighted average rate (p.a.) |
12/31/2018 |
09/30/2019 |
12/31/2018 |
|
|
|
|
|
Local currency |
|
|
|
|
Government bonds |
100.5% of CDI |
- |
59,974 |
21,100 |
Investment funds |
100.2% of CDI |
- |
885,420 |
365,249 |
Total local currency |
|
- |
945,394 |
386,349 |
|
|
|
|
|
Foreign currency |
|
|
|
|
Private bonds |
2.8% |
92,015 |
23,309 |
92,015 |
Government bonds |
1.7% |
- |
3,140 |
- |
Investment funds |
- |
- |
1,368 |
- |
Total foreign currency |
|
92,015 |
27,817 |
92,015 |
|
|
|
|
|
Total |
|
92,015 |
973,211 |
478,364 |
30
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
|
|
Parent Company |
Consolidated | ||
|
Weighted average rate (p.a.) |
09/30/2019 |
12/31/2018 |
09/30/2019 |
12/31/2018 |
|
|
|
|
|
|
Local currency |
|
|
|
|
|
Deposits in guarantee of letter of credit |
97.8% of CDI |
3,739 |
2,318 |
136,301 |
100,394 |
Escrow deposits (a) |
96.4% of CDI |
35,977 |
33,928 |
101,477 |
72,089 |
Escrow deposits for hedge margin |
100.0% of CDI |
|
- |
6,625 |
18 |
Escrow deposits - leases (b) |
97.1% of CDI |
|
- |
160,689 |
102,880 |
Other deposits (c) |
75.5% of CDI |
2,422 |
3,538 |
16,442 |
113,447 |
Total local currency |
|
42,138 |
39,784 |
421,534 |
388,828 |
|
|
|
|
|
|
Foreign currency |
|
|
|
|
|
Escrow deposits for hedge margin |
1.8% |
- |
- |
202,405 |
433,304 |
Total foreign currency |
|
|
- |
202,405 |
433,304 |
|
|
|
|
|
|
Total |
|
42,138 |
39,784 |
623,939 |
822,132 |
|
|
|
|
|
|
Current |
|
40,886 |
- |
535,602 |
133,391 |
Noncurrent |
|
1,252 |
39,784 |
88,337 |
688,741 |
(a) The amount of R$35,977 (parent company and consolidated) refers to a guarantee for GLAI’s legal proceedings. The other amounts relate to guarantees of GLA letters of credit (R$33,928 as of December 31, 2018).
(b) Related to deposits made to obtain letters of credit for aircraft leases agreements from GLA.
(c) Refers to the guarantee of bank collaterals and judicial blockages in investment funds.
Consolidated | ||
|
09/30/2019 |
12/31/2018 |
|
|
|
Local currency |
|
|
Credit card administrators |
557,927 |
393,557 |
Travel agencies |
385,215 |
226,627 |
Cargo agencies |
37,730 |
40,431 |
Airline partner companies |
1,795 |
3,243 |
Other |
35,999 |
52,216 |
Total local currency |
1,018,666 |
716,074 |
|
|
|
Foreign currency |
|
|
Credit card administrators |
97,225 |
97,488 |
Travel agencies |
45,692 |
21,005 |
Cargo agencies |
1,794 |
1,378 |
Airline partner companies |
26,773 |
23,294 |
Other |
125 |
5,373 |
Total foreign currency |
171,609 |
148,538 |
|
|
|
Total |
1,190,275 |
864,612 |
|
|
|
Allowance for expected loss on trade receivables accounts |
(12,289) |
(11,284) |
|
|
|
Total trade receivables |
1,177,986 |
853,328 |
31
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
The aging list of trade receivables, net of allowance for expected loss on trade receivables accounts, is as follows:
Consolidated | ||
09/30/2019 |
12/31/2018 | |
Not yet due |
||
Until 30 days |
664,369 |
527,878 |
31 to 60 days |
210,076 |
101,226 |
61 to 90 days |
60,119 |
49,696 |
91 to 180 days |
138,594 |
83,128 |
181 to 360 days |
55,877 |
36,801 |
Above 360 days |
2,295 |
268 |
Total not yet due |
1,131,330 |
798,997 |
|
|
|
Overdue |
|
|
Until 30 days |
19,895 |
13,167 |
31 to 60 days |
7,249 |
4,726 |
61 to 90 days |
4,645 |
2,672 |
91 to 180 days |
1,611 |
11,173 |
181 to 360 days |
1,455 |
9,863 |
Above 360 days |
11,801 |
12,730 |
Total overdue |
46,656 |
54,331 |
|
|
|
Total |
1,177,986 |
853,328 |
The changes in expected loss on trade receivables are as follows:
|
Consolidated | |
|
09/30/2019 |
12/31/2018 |
Balances at the beginning of the period |
(11,284) |
(36,088) |
(Additions) reversals |
(1,005) |
24,804 |
Balances at the end of the period |
(12,289) |
(11,284) |
|
Consolidated | |
|
09/30/2019 |
12/31/2018 |
|
|
|
Consumables |
27,715 |
22,098 |
Parts and maintenance materials |
179,654 |
170,851 |
(-) Provision for obsolescence |
(12,734) |
(12,808) |
Total |
194,635 |
180,141 |
The changes in provision for obsolescence are as follows:
|
Consolidated | |
|
09/30/2019 |
12/31/2018 |
Balances at the beginning of the period |
(12,808) |
(12,509) |
Additions |
(32) |
(5,023) |
Write-offs |
106 |
4,724 |
Balances at the end of the period |
(12,734) |
(12,808) |
32
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
|
Parent Company |
Consolidated | ||
|
09/30/2019 |
12/31/2018 |
09/30/2019 |
12/31/2018 |
IRPJ and CSLL prepayments |
29,239 |
29,892 |
202,282 |
268,428 |
Withholding Income Tax |
38 |
119 |
3,808 |
4,744 |
PIS and COFINS to recover |
- |
- |
126,542 |
163,921 |
Withholding tax of public institutions |
- |
- |
8,286 |
6,812 |
Value Added Tax (VAT) abroad |
- |
- |
5,785 |
5,649 |
Other |
60 |
57 |
9,083 |
7,115 |
Total |
29,337 |
30,068 |
355,786 |
456,669 |
|
|
|
|
|
Current |
6,510 |
5,279 |
298,410 |
360,796 |
Noncurrent |
22,827 |
24,789 |
57,376 |
95,873 |
|
Parent Company |
Consolidated | |||||
|
12/31/2018 |
Unrealized |
09/30/2019 |
12/31/2018 |
Unrealized |
Other comprehensive income |
09/30/2019 |
Parent Company and controlled subsidiary Smiles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax losses carry forward |
16,983 |
18,866 |
35,849 |
16,983 |
18,866 |
- |
35,849 |
Negative basis of social contribution |
6,114 |
6,792 |
12,906 |
6,114 |
6,792 |
- |
12,906 |
Temporary differences |
|
|
|
|
|
|
|
Allowance for doubtful accounts and other credits |
196 |
(24) |
172 |
196 |
(24) |
- |
172 |
Provision for legal proceedings and tax liabilities |
916 |
(215) |
701 |
916 |
(215) |
- |
701 |
Other (unrealized profits) |
- |
- |
- |
49,613 |
18,078 |
- |
67,692 |
Total deferred taxes - Assets |
24,209 |
25,419 |
49,628 |
73,822 |
43,497 |
- |
117,319 |
Controlled subsidiary GLA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax losses carry forward |
- |
- |
- |
58,384 |
(39,149) |
- |
19,235 |
Negative basis of social contribution |
- |
- |
- |
21,018 |
(14,093) |
- |
6,925 |
Temporary differences |
|||||||
Allowance for doubtful accounts and other credits |
- |
- |
- |
72,649 |
11,813 |
- |
84,462 |
Breakage provision |
- |
- |
- |
(172,869) |
(18,238) |
- |
(191,107) |
Provision for losses on other credits |
- |
- |
- |
143,350 |
- |
- |
143,350 |
Provision for legal proceedings and tax liabilities |
- |
- |
- |
93,221 |
(2.254) |
- |
90,967 |
Aircraft return |
- |
- |
- |
62,642 |
102,796 |
- |
165,438 |
Derivative transactions |
- |
- |
- |
5,335 |
(47,911) |
- |
(42,576) |
Flight rights |
- |
- |
- |
(353,226) |
- |
- |
(353,226) |
Depreciation of engines and parts for aircraft maintenance |
- |
- |
- |
(174,129) |
(7,158) |
- |
(181,287) |
Reversal of goodwill amortization for tax purpose |
- |
- |
- |
(127,659) |
- |
- |
(127,659) |
Aircraft leases and other |
- |
- |
- |
30,956 |
39,390 |
278 |
70,624 |
Other |
- |
- |
- |
113,040 |
(28,641) |
- |
84,399 |
Total deferred taxes - Liabilities |
- |
- |
- |
(227,288) |
(3,445) |
278 |
(230,455) |
The Company, GLA and Smiles have net operating loss carryforwards, comprised of accumulated income tax losses and negative basis of social contribution. The net operating loss carryforwards do not expire; however, their use is limited to 30% of the annual taxable income. Net operating loss carryforwards are as follows:
|
GLAI |
GLA |
Smiles (*) | |||
|
09/30/2019 |
12/31/2018 |
09/30/2019 |
12/31/2018 |
09/30/2019 |
12/31/2018 |
Accumulated income tax losses |
168,338 |
170,418 |
5,779,325 |
5,631,209 |
366,147 |
522,743 |
Negative basis of social contribution |
168,338 |
170,418 |
5,779,325 |
5,631,209 |
366,147 |
522,743 |
33
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
The reconciliation of effective income taxes and social contribution rates for the periods ended September 30, 2019 and 2018 is as follows:
|
Parent Company | |||
|
Three-month period ended |
Nine-month period ended | ||
|
09/30/2019 |
09/30/2018 |
09/30/2019 |
09/30/2018 |
|
|
|
|
|
Loss before income taxes |
(241,567) |
(410,208) |
(492,767) |
(1,579,765) |
Combined tax rate |
34% |
34% |
34% |
34% |
Income at the statutory combined tax rate |
82,133 |
139,471 |
167,541 |
537,120 |
|
|
|
|
|
Adjustments to calculate the effective tax rate: |
|
|
|
|
Equity method investees |
(82,124) |
(103,612) |
(38,269) |
(350,970) |
Tax difference on results of subsidiaries |
60,899 |
(10,613) |
(75,159) |
(63,336) |
Non-deductible expenses, net |
(85) |
(42) |
(187) |
(167) |
Foreign exchange variation on foreign investments |
(61,308) |
(24,237) |
(53,393) |
(126,188) |
Interest on shareholders’ equity |
- |
- |
(3,114) |
(4,507) |
Extemporaneous benefit of deferred charges, net |
- |
- |
26,366 |
61 |
Total income tax |
(485) |
967 |
23,785 |
(7,987) |
|
|
|
|
|
Income taxes |
|
|
|
|
Current |
(238) |
665 |
(1,633) |
(3,668) |
Deferred |
(247) |
302 |
25,418 |
(4,319) |
Total income taxes |
(485) |
967 |
23,785 |
(7,987) |
|
Consolidated | |||
|
Three-month period ended |
Nine-month period ended | ||
|
09/30/2019 |
09/30/2018 |
09/30/2019 |
09/30/2018 |
|
|
|
|
|
Income (loss) before income taxes |
(177,477) |
(205,384) |
(171,588) |
(1,137,392) |
Combined tax rate |
34% |
34% |
34% |
34% |
Income at the statutory combined tax rate |
60,342 |
69,831 |
58,340 |
386,713 |
|
|
|
|
|
Adjustments to calculate the effective tax rate: |
|
|
|
|
Equity method investees |
- |
70 |
27 |
122 |
Tax difference on results of subsidiaries |
70,868 |
(27,655) |
(74,355) |
(82,044) |
Income tax on permanent differences and others |
19,366 |
111,769 |
51,821 |
274,300 |
Exchange variation on foreign investments |
(83,077) |
(110,127) |
(114,188) |
(257,355) |
Interest on shareholders’ equity |
- |
- |
2,805 |
4,050 |
Extemporaneous Tax Credit |
- |
- |
18,801 |
- |
Extemporaneous deferred asset benefit, net |
- |
- |
12,099 |
- |
Non-deferred asset benefit |
(61,142) |
(147,356) |
(40,500) |
(544,470) |
Use of tax credits in non-recurring installment payments |
- |
- |
- |
(3,892) |
Total income tax |
6,357 |
(103,468) |
(85,150) |
(222,576) |
|
|
|
|
|
Income taxes |
|
|
|
|
Current |
(49,560) |
83,980 |
(125,203) |
(7,504) |
Deferred |
55,917 |
(187,448) |
40,053 |
(215,072) |
Total income taxes |
6,357 |
(103,468) |
(85,150) |
(222,576) |
34
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
Parent Company |
Consolidated | |||
|
09/30/2019 |
12/31/2018 |
09/30/2019 |
12/31/2018 |
Oceanair Advance |
166,576 |
- |
198,062 |
- |
Advance to national suppliers |
- |
- |
70,884 |
30,635 |
Advance to international suppliers |
- |
- |
23,103 |
5,648 |
Advance for materials and repairs |
- |
48,932 |
32,111 | |
Total other credits |
166,576 |
- |
340,981 |
68,394 |
Current |
166,576 |
- |
295,220 |
68,394 |
Noncurrent |
- |
- |
45,761 |
- |
Within the scope of the judicial recovery plan of Oceanair Linhas Aéreas S.A. (“Oceanair”) and AVB Holding S.A. (“Judicial Recovery Plan”), approved by its creditors on April 5, 2019, the Company: (i) acquired DIP (debtor in possession) Loans granted to Oceanair by Elliot Group in the amount of R$50,647, and (ii) granted an advance to Elliott in the amount of R$100,595 (“Advance”) pursuant to an agreement entered into on April 3, 2019, such advances are subject to variation of the Real against the US$.
Advances will be refunded by Elliott Group if: (a) the Company or any third party acquires an isolated production unit as provided for in the Oceanair Linhas Aéreas S.A, Judicial Recovery Plan; or (b) another judicial recovery plan involving the sale of Oceanair’s landing and takeoff times is deemed valid and such an operation is successfully completed. In return for granting the Advance, and subject to certain conditions, the Elliott Group will pay to the Company a part of the funds that may be recovered by Elliott Group under the Recovery Plan.
On July 10, 2019, under the Judicial Recovery Plan, the Company presented winning bids for the acquisition of certain isolated production units (“UPIs”), in the total amount of US$77.3 million.
The Judicial Recovery Plan provides that DIP loans may be offset against the price to be paid by the Company for the acquisition of UPIs.
Accordingly, the Company plans to complete the acquisition of UPIs (and offset claims held against Oceanair against the respective acquisition price) in the event that the auction of UPIs sold by the judiciary is confirmed, and as soon as complying with other precedent conditions provided for in the Judicial Recovery Plan.
|
Parent Company |
Consolidated | ||
|
09/30/2019 |
12/31/2018 |
09/30/2019 |
12/31/2018 |
Judicial deposits |
64,000 |
59,305 |
827,444 |
726,491 |
Maintenance deposits |
- |
- |
809,063 |
647,057 |
Deposits in guarantee for lease agreements |
52,749 |
49,081 |
294,402 |
238,747 |
Total |
116,749 |
108,386 |
1,930,909 |
1,612,295 |
35
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
Investments in the GAC, Gol Finance and Gol Finance Inc. offshore subsidiaries are essentially seen as an extension of the Company and summed line by line with the GLAI parent company. Therefore, only Smiles Fidelidade and GLA are presented as investments in the parent company.
The financial information of the Company’s investees and the changes in the investments balance for the period ended September 30, 2019 are as follows:
|
Parent Company |
Consolidated | |
|
GLA |
Smiles Fidelidade |
Trip |
Financial information of Company’s investees |
|
|
|
Total number of shares |
5,262,335,049 |
124,158,953 |
- |
Capital stock |
4,554,280 |
254,610 |
1,318 |
Interest |
100.0% |
52.61% |
60% |
Total equity (deficit) |
(7,235,158) |
1,161,932 |
2,103 |
Unrealized profits (a) |
- |
(131,400) |
- |
|
|
|
|
Adjusted equity (deficit) (b) |
(7,235,158) |
479,859 |
1,256 |
Net income (loss) for the period |
(313,821) |
447,189 |
129 |
Unrealized profits in the period (a) |
- |
(35,094) |
- |
Adjusted net income (loss) for the period attributable to the Company’s interest |
(313,821) |
201,265 |
79 |
(a) Corresponds to transactions involving revenue from mileage redemption for airline tickets by members in the Smiles Program which, for the purposes of consolidated financial statements, are only accrued when program members are actually transported by GLA.
(b) Adjusted shareholders' equity corresponds to the percentage of total shareholders' equity net of unrealized profits.
|
Parent Company |
|
Consolidated | |
|
GLA |
Smiles Fidelidade |
Trip |
Netpoints |
Material Information on Subsidiaries at September 30, 2018 |
|
|
|
|
Total number of shares |
5,262,335,049 |
124,007,953 |
- |
130,492,408 |
Capital stock |
4,554,280 |
44,874 |
1,318 |
75,351 |
Interest |
100.0% |
52.7% |
60% |
25.4% |
Total equity (deficit) |
(3,764,491) |
991,058 |
2,842 |
(20,758) |
Unrealized profits (a) |
- |
(93,528) |
- |
- |
|
|
|
|
|
Adjusted equity (deficit) (b) |
(3,764,491) |
428,474 |
1,693 |
(5,273) |
Net income (loss) for the period |
(1,263,742) |
481,277 |
599 |
(3,613) |
Unrealized profits in the period (a) |
- |
(22,020) |
- |
- |
Adjusted net income (loss) for the period attributable to the Company’s interest |
(1,263,742) |
231,476 |
360 |
(918) |
(a) Corresponds to transactions involving revenue from mileage redemption for airline tickets by members in the Smiles Program which, for the purposes of consolidated financial statements, are only accrued when program members are actually transported by GLA.
(b) Adjusted shareholders' equity corresponds to the percentage of total shareholders' equity net of unrealized profits.
|
Parent Company |
Consolidated | ||
|
GLA |
Smiles Fidelidade |
Total |
Trip |
Balances as of December 31, 2018 |
(4,200,243) |
437,875 |
(3,762,368) |
1,177 |
Adoption of accounting standard – CPC 06 (R2) (IFRS 16) (a) |
(2,435,792) |
(285) |
(2,436,077) |
- |
Equity method results |
(313,821) |
201,265 |
(112,556) |
79 |
Unrealized gains on hedges |
(316,977) |
- |
(316,977) |
- |
Equity interest dilution effects |
- |
(649) |
(649) |
- |
Dividends and interest on shareholders’ equity |
- |
(158,818) |
(158,818) |
- |
Share-based payments |
31,018 |
- |
31,018 |
- |
Other equity changes in investments |
657 |
471 |
1,128 |
- |
Balances of September 30, 2019 |
(7,235,158) |
479,859 |
(6,755,299) |
1,256 |
36
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
|
|
Parent Company |
Consolidated | ||
|
GLA |
Smiles Fidelidade |
Total |
Trip | |
Balances as of December 31, 2017 |
(2,590,503) |
388,235 |
(2,202,268) |
1,333 | |
Adoption of Accounting Standards (b) |
(19,575) |
- |
(19,575) |
- | |
Balances as of December 31, 2017 (Restated) |
(2,610,078) |
388,235 |
(2,221,843) |
1,333 | |
Adoption of Accounting Standards (c) |
1,632 |
43 |
1,675 |
- | |
Equity method results |
(1,263,742) |
231,476 |
(1,032,266) |
360 | |
Unrealized gains on hedges |
110,195) |
- |
110,195 |
- | |
Equity interest dilution effects |
- |
(561) |
(561) |
- | |
Dividends and interest on shareholders’ equity |
- |
(191,906) |
(191,906) |
- | |
Other equity changes in investments |
- |
1,187 |
1,187 |
- | |
Amortization of losses with sale-leaseback transactions (d) |
(2,948) |
- |
(2,948) |
- | |
Balances of September 30, 2018 |
(3,764,491) |
428,474 |
(3,336,017) |
1,693 | |
(a) On January 1, 2019, the Company adopted CPC 06 (R2) – “Leases” (IFRS 16). For further information, see Note 4.1.1.
(b) On January 1, 2018, the Company initially adopted CPC 47 - “Customer Contract Revenue” (IFRS 15), which resulted in recording R$19,575 directly in the equity of the GLA subsidiary. For further information, see Note 2.3.
(c) On January 1, 2018, the Company initially adopted CPC 48 - “Financial Instruments” (IFRS 9). For further information, see Note 2.3).
(d) The GAC subsidiary has a net balance of deferred gains and losses on sale-leaseback transactions, the deferral of which is conditional on the payment of contractual installments by GLA. Accordingly, the net balance is essentially part of the parent company's net investment in GLA. The net balance to be deferred in the nine-month period ended September 30, 2018 was R$389 (R$2,887 for the year ended December 31, 2017). For further information, see Note 27.2.
As of September 30, 2019, the balance of advances for the acquisition of aircraft totaled R$126,048 (R$94,160 as of December 31, 2018), corresponding to prepayments made based on the contracts entered into. In addition, the residual value of the ownership rights on the aircraft totaled R$108,538 as of September 30, 2019 and December 31, 2018, both recorded in the subsidiary GAC.
37
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
|
Consolidated | ||||||
|
Weighted average rate (p.a.) |
12/31/2018 |
Adoption |
Additions |
Write-offs (6) |
Transfers (5) |
09/30/2019 |
Flight equipment |
|||||||
Cost |
|||||||
Aircraft - ROU (1) with purchase option |
|
673,675 |
- |
- |
(4,481) |
- |
669,194 |
Aircraft - ROU with no purchase option |
|
- |
2,821,509 |
595,103 |
(142,006) |
(12,250) |
3,262,356 |
Spare parts and engines - own |
|
1,583,865 |
- |
136,178 |
(7,952) |
(769) |
1,711,322 |
Spare parts and engines - ROU |
|
- |
71,327 |
32,828 |
(919) |
- |
103,236 |
Aircraft and engine overhauling |
|
2,443,747 |
- |
529,925 |
(174,534) |
- |
2,799,138 |
Tools |
|
44,121 |
- |
5,867 |
(479) |
769 |
50,278 |
|
4,745,408 |
2,892,836 |
1,299,901 |
(330,371) |
(12,250) |
8,595,524 | |
Depreciation |
|
|
|
|
|
| |
Aircraft - ROU with purchase option |
5.76% |
(222,240) |
- |
(13,209) |
4,481 |
- |
(230,968) |
Aircraft - ROU with no purchase option |
23.89% |
- |
- |
(562,046) |
33,345 |
- |
(528,701) |
Spare parts and engines - own |
7.34% |
(590,239) |
- |
(90,987) |
3,377 |
- |
(677,849) |
Spare parts and engines - ROU |
28.86% |
- |
- |
(18,602) |
- |
- |
(18,602) |
Aircraft and engine overhauling |
42.87% |
(1,275,298) |
- |
(493,343) |
166,191 |
- |
(1,602,450) |
Tools |
10.00% |
(21,153) |
- |
(2,574) |
275 |
- |
(23,452) |
|
|
(2,108,930) |
- |
(1,180,761) |
207,669 |
- |
(3,082,022) |
|
|
|
|
|
|
|
|
Total, net - flight equipment |
|
2,636,478 |
2,892,836 |
119,140 |
(122,702) |
(12,250) |
5,513,502 |
|
|
|
|
| |||
Property, plant and equipment in use |
|
|
|
|
| ||
Cost |
|
|
|
|
| ||
Vehicles |
|
11,513 |
- |
1,218 |
(1,200) |
- |
11,531 |
Machinery and equipment |
|
59,404 |
- |
3,169 |
(160) |
- |
62,413 |
Furniture and fixtures |
|
30,698 |
- |
1,879 |
(185) |
- |
32,392 |
Computers and peripherals - owned |
|
40,813 |
- |
4,631 |
(1,088) |
- |
44,356 |
Computers and peripherals - ROU |
|
- |
20,619 |
1,373 |
- |
- |
21,992 |
Communication equipment |
|
2,692 |
- |
69 |
(210) |
- |
2,551 |
Safety equipment |
|
856 |
- |
- |
- |
- |
856 |
Improvement on third party property - CMA (4) |
|
107,637 |
- |
- |
- |
- |
107,637 |
Leasehold improvements |
|
60,115 |
- |
456 |
- |
5,328 |
65,899 |
Third Party Real Estate - ROU |
|
- |
20,801 |
1,553 |
- |
- |
22,354 |
Construction in progress |
|
15,443 |
- |
8,702 |
- |
(5,328) |
18,817 |
329,171 |
41,420 |
23,050 |
(2,843) |
- |
390,798 | ||
Depreciation |
|
|
|
|
| ||
Vehicles |
20.00% |
(9,609) |
- |
(482) |
907 |
- |
(9,184) |
Machinery and equipment |
10.00% |
(41,619) |
- |
(3,072) |
132 |
- |
(44,559) |
Furniture and fixtures |
10.00% |
(18,188) |
- |
(1,488) |
169 |
- |
(19,507) |
Computers and peripherals - owned |
20.00% |
(31,314) |
- |
(2,455) |
1,070 |
- |
(32,699) |
Computers and peripherals - ROU |
36.59% |
- |
- |
(5,670) |
- |
- |
(5,670) |
Communication equipment |
10.00% |
(2,089) |
- |
(119) |
160 |
- |
(2,048) |
Safety equipment |
10.00% |
(533) |
- |
(62) |
- |
- |
(595) |
Leasehold improvements - CMA |
10.43% |
(91,395) |
- |
(8,460) |
- |
- |
(99,855) |
Leasehold improvements |
22.32% |
(29,354) |
- |
(6,951) |
- |
- |
(36,305) |
Third Party Real Estate - ROU |
32.18% |
- |
- |
(5,363) |
- |
- |
(5,363) |
|
|
(224,101) |
- |
(34,122) |
2,438 |
- |
(255,785) |
|
|
|
|
|
|
|
|
Total, net - property, plant and equipment in use |
105,070 |
41,420 |
(11,072) |
(405) |
- |
135,013 | |
|
|
|
|
|
| ||
Impairment losses (2) |
- |
(48,839) |
- |
- |
5,259 |
- |
(43,580) |
Total |
|
2,692,709 |
2,934,256 |
108,068 |
(117,848) |
(12,250) |
5,604,935 |
|
|
|
|
|
|
|
|
Advances for property, plant and equipment acquisition |
- |
125,348 |
- |
77,211 |
(37,793) |
- |
164,766 |
Total property, plant and equipment |
2,818,057 |
2,934,256 |
185,279 |
(155,641) |
(12,250) |
5,769,701 | |
(1) ROU - Right of Use
(2) Refers to provisions for impairment losses for rotable items, classified under "Sets of replacement parts and spare engines", recorded by the Company in order to present its assets according to the actual capacity for the generation of economic benefits.
(3) Effect related to IFRS 16 adoption, as disclosed in Note 4.1.1.
(4) CMA - Maintenance Center - Confins/MG
(5) Transfer of other GAC credits.
(6) The amounts are composed of sales and write-offs.
38
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
The breakdown of and changes in intangible assets are as follows:
|
Consolidated | ||||
|
Weighted average rate (p.a.) |
12/31/2018 |
Additions |
Write-offs |
09/30/2019 |
Cost |
|
|
|
|
|
Goodwill |
- |
542,302 |
- |
- |
542,302 |
Slots |
- |
1,038,900 |
- |
- |
1,038,900 |
Software |
- |
528,426 |
53,513 |
(22,390) |
559,549 |
Other |
- |
10,000 |
- |
- |
10,000 |
Total cost |
|
2,119,628 |
53,513 |
(22,390) |
2,150,751 |
|
|
|
|
|
|
Amortization |
|
|
|
|
|
Software |
25.18% |
(339,995) |
(53,055) |
22,024 |
(371,026) |
Other |
20.0% |
(2,167) |
(1,500) |
- |
(3,667) |
Total amortization |
|
(342,162) |
(54,555) |
22,024 |
(374,693) |
|
|
|
|
|
|
Net intangible assets |
|
1,777,466 |
(1,042) |
(366) |
1,776,058 |
39
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
The breakdown of and changes in short and long-term debt are as follows:
Parent Company | |||||||||||||||
|
|
|
12/31/2018 |
|
|
|
|
|
|
|
09/30/2019 | ||||
|
Maturity |
Interest rate |
Current |
Noncurrent |
Total |
Funding |
Unrealized gain and loss from ESN (*) |
Payments |
Interest |
Interest paid |
Exchange variation |
Amortization |
Current |
Noncurrent |
Total |
In US$: |
|
|
|||||||||||||
Term Loan |
08/2020 |
6.70% p.a. |
25,255 |
1,147,196 |
1,172,451 |
- |
- |
- |
56,850 |
(76,612) |
88,285 |
6,860 |
1,247,834 |
- |
1,247,834 |
Senior Notes IV |
01/2022 |
9.24% p.a. |
13,640 |
352,205 |
365,845 |
- |
- |
(50,320) |
20,683 |
(28,013) |
19,755 |
875 |
5,290 |
323,535 |
328,825 |
ESN (*) |
07/2024 |
3.75% p.a. |
- |
- |
- |
1,637,579 |
(151,169) |
- |
59,803 |
(14,748) |
145,777 |
2,567 |
13,827 |
1,665,982 |
1,679,809 |
Senior Notes VIII |
01/2025 |
7.09% p.a. |
72,658 |
2,439,492 |
2,512,150 |
- |
- |
- |
131,558 |
(166,894) |
180,101 |
6,417 |
31,234 |
2,632,098 |
2,663,332 |
Perpetual Notes |
- |
8.75% p.a. |
12,320 |
596,336 |
608,656 |
- |
- |
- |
39,371 |
(32,956) |
39,074 |
- |
13,240 |
640,905 |
654,145 |
Total |
|
|
123,873 |
4,535,229 |
4,659,102 |
1,637,579 |
(151,169) |
(50,320) |
308,265 |
(319,223) |
472,992 |
16,719 |
1,311,425 |
5,262,520 |
6,573,945 |
Consolidated | |||||||||||||||
|
|
|
12/31/2018 |
|
|
|
|
|
|
|
09/30/2019 | ||||
|
Maturity |
Effective interest rate |
Current |
Noncurrent |
Total |
Funding |
Unrealized gain and loss from ESN (*) |
Payments |
Interest |
Interest paid |
Exchange variation |
Amortization |
Current |
Noncurrent |
Total |
In R$: |
|
|
|||||||||||||
Debentures VII |
09/2021 |
120% of DI rate |
288,991 |
577,981 |
866,972 |
- |
- |
(295,834) |
43,760 |
(43,761) |
- |
5,600 |
290,857 |
285,880 |
576,736 |
|
|
|
|
|
|
|
|
|
| ||||||
In US$: |
|
|
|
|
|
|
|
|
|
| |||||
Import financing |
06/2020 |
5.65% p.a. |
503,869 |
- |
503,869 |
130,788 |
- |
(27,398) |
24,689 |
(23,947) |
45,823 |
- |
653,824 |
- |
653,824 |
Term Loan |
08/2020 |
6.70% p.a. |
25,255 |
1,147,196 |
1,172,451 |
- |
- |
- |
56,850 |
(76,612) |
88,285 |
6,860 |
1,247,834 |
- |
1,247,834 |
Credit Line - Engine Maintenance |
06/2021 |
2.87% p.a. |
173,422 |
189,888 |
363,310 |
178,926 |
- |
(184,353) |
10,638 |
(11,532) |
24,080 |
6,622 |
192,232 |
195,459 |
387,691 |
Senior Notes IV |
01/2022 |
9.24% p.a. |
13,640 |
352,205 |
365,845 |
- |
- |
(50,320) |
20,683 |
(28,013) |
19,755 |
875 |
5,290 |
323,535 |
328,825 |
ESN (*) |
07/2024 |
3.75% p.a. |
- |
- |
- |
1,637,579 |
(151,169) |
- |
59,803 |
(14,748) |
145,777 |
2,567 |
13,827 |
1,665,982 |
1,679,809 |
Senior Notes VIII |
01/2025 |
7.09% p.a. |
72,658 |
2,439,492 |
2,512,150 |
- |
- |
- |
131,558 |
(166,894) |
180,101 |
6,417 |
31,234 |
2,632,098 |
2,663,332 |
Loan with guarantee of engines |
12/2026 |
6.50% p.a. |
13,051 |
120,557 |
133,608 |
56,452 |
- |
(12,508) |
8,662 |
(8,657) |
15,431 |
108 |
32,623 |
160,473 |
193,096 |
Perpetual Notes |
- |
8.75% p.a. |
12,320 |
513,282 |
525,602 |
- |
- |
- |
34,000 |
(32,956) |
38,240 |
- |
13,240 |
551,646 |
564,887 |
Total |
|
|
1,103,206 |
5,340,601 |
6,443,807 |
2,003,745 |
(151,169) |
(570,413) |
390,643 |
(407,120) |
557,493 |
29,049 |
2,480,961 |
5,815,073 |
8,296,034 |
(*) Exchangeable Senior Notes
40
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
The terms of the short and long-term debt contracted up to December 31, 2018 by the Company and its subsidiaries were disclosed in detail in the financial statements for the year ended December 31, 2018 and have not been affected by contractual alterations during the nine-month period ended on September 30, 2019.
Total debt included issuance costs of R$153,981 as of September 30, 2019 (R$83,684 as of December 31, 2018), which are amortized over the term of the related debt.
The Company, through GOL Equity Finance (“issuer”), a special purpose company incorporated under the laws of Luxembourg, issued Exchangeable Senior Notes (“ESN”), maturing in 2024, which will bear interest of 3.75% p.a., to be paid in semi-annual installments. This transaction was guaranteed by the Company and GLA.
Holders of the securities will be entitled to exchange their securities in American Depositary Shares (“ADSs”) (each representing two GLAI preferred shares. The initial exchange rate of the Notes is 49.3827 ADSs per US$1 thousand of the Notes principal amount (equivalent to an initial exchange price of approximately US$20.25 per ADS and represents an exchange premium of approximately 35% above the initial public offering price of the ADSs sold in the simultaneous offering of ADSs described below, which was US$15.00 per ADS). The securities exchange rate is subject to adjustments on the occurrence of certain events.
Settlement of the ESN may be made in cash, ADSs or through a combination of both.
Funding under this operation for the nine-month period ended September 30, 2019 is as follows:
|
Amount in US$ thousand | |||||
Data |
Nominal issue |
Premium |
Cost assigned to the debt component |
Cost assigned to the derivative component |
Capped Call |
Net Funding |
March 26, 2019 |
300,000 |
- |
(12,179) |
(6,533) |
(26,190) |
255,098 |
April 17, 2019 |
45,000 |
- |
(3,862) |
(1,463) |
(3,929) |
35,746 |
July 17, 2019 |
80,000 |
16,000 |
(2,123) |
(2,247) |
(9,680) |
81,950 |
425,000 |
16,000 |
(18,164) |
(10,243) |
(39,799) |
372,794 |
|
Amount in R$ | |||||
Data |
Nominal issue |
Goodwill |
Cost assigned to the debt component |
Cost assigned to the derivative component |
Capped Call |
Net Funding |
March 26, 2019 |
1,169,010 |
- |
(47,067) |
(25,248) |
(101,214) |
995,481 |
April 17, 2019 |
177,539 |
- |
(15,205) |
(5,760) |
(15,499) |
141,075 |
July 17, 2019 |
301,192 |
60,194 |
(7,987) |
(8,453) |
(36,444) |
308,502 |
1,647,741 |
16,194 |
(70,259) |
(39,461) |
(153,157) |
1,445,058 |
In addition, in connection with the pricing of the Notes, the issuer entered into cash-settled private capped call transactions with certain of the initial purchasers of the Notes subscribers and/or other financial institutions ("counterparties"), which are generally expected to reduce the potential dilution of GLAI's preferred shares and ADSs upon the exchange of any Notes and/or offset any cash payments required of the issuer that exceed the principal amount of the Notes exchanged, as the case may be, such reduction or compensation being limited by the cap. The strike price initially corresponds to the exchange price of the Notes and is subject to anti-dilution adjustments substantially similar to those of the Nots and the maximum capped call price is approximately US$27.75 per ADS (representing a premium of approximately 85% above the price of the initial public offering of the ADSs sold in the simultaneous offer of ADSs).
41
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
The capped call is recorded under “Derivatives”. For further information, see Note 34.3.4.
As of September 30, 2019, the component corresponding to the option to convert securities to market value corresponds to R$525,669 and is presented together with the ESN balance, see Note 34.2.
The Company will use the proceeds from the issue of the Notes to pay the transaction costs associated with the issue, including costs related to derivatives, and to finance its operations.
During the nine-month period ended September 30, 2019, the Company, through its subsidiary GLA, obtained funding and renegotiated the maturities of the agreements, with the issue of promissory notes as collateral for these transactions, which are part of a credit line maintained by GLA for import financing in order to carry out engine maintenance, purchase spare parts and aircraft equipment. The funding operations are as follows:
Transaction |
Principal amount |
Interest | |
date |
(US$ thousand) |
(R$ thousand) |
rate (p.a.) |
New issuances |
|
|
|
January 24, 2019 |
6,454 |
24,409 |
6.57% |
February 4, 2019 |
5,924 |
21,777 |
6.52% |
February 21, 2019 |
7,069 |
26,576 |
6.46% |
April 18, 2019 |
7,045 |
27,737 |
4.98% |
July 5, 2019 |
4,334 |
16,560 |
5.93% |
August 20, 2019 |
3,396 |
13,729 |
4.37% |
|
34,222 |
130,788 |
|
During the nine-month period ended September 30, 2019, the subsidiary GLA obtained new credit lines by issuing Guaranteed Notes for engine maintenance services with Delta Air Lines. The funding operations are as follows:
Transaction |
Principal amount |
Insurance costs |
Interest | ||
date |
(US$ thousand) |
(R$ thousand) |
(US$ thousand) |
(R$ thousand) |
rate (p.a.) |
February 15, 2019 |
10,219 |
37,969 |
319 |
1,185 |
Libor 3m+0.75% p.a. |
May 10, 2019 |
10,219 |
40,444 |
289 |
1,143 |
Libor 3m+0.70% p.a. |
August 30, 2019 |
25,722 |
106,659 |
922 |
3,818 |
Libor 3m+0.60% p.a. |
|
46,160 |
185,072 |
1,530 |
6,146 |
|
42
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
In the nine-month period ended September 30, 2019, the Company, through its subsidiary GLA, obtained funding with guarantee of the Company’s own engines. The funding operations are as follows:
Transaction |
Principal |
Costs |
Interest | ||
date |
(US$ thousand) |
(R$ thousand) |
(US$ thousand) |
(R$ thousand) |
rate (p.a.) |
January 22, 2019 |
11,700 |
43,129 |
154 |
580 |
Libor 3m+0.75% p.a. |
April 24, 2019 |
1,161 |
4,603 |
- |
- |
Libor 1m+3.25% p.a. |
June 13, 2019 |
1,161 |
4,463 |
- |
- |
Libor 1m+3.25% p.a. |
September 30, 2019 |
1,161 |
4,837 |
- |
- |
Libor 1m+3.25% p.a. |
|
15,183 |
57,032 |
154 |
580 |
|
On September 30, 2019, the maturities of loans and financing recorded in non-current liabilities are as follows:
|
2020 |
2021 |
2022 |
2023 |
2023 onwards |
Without maturity date |
Total |
Parent Company |
|||||||
In US$: |
|||||||
Senior Notes IV |
- |
- |
323,535 |
- |
- |
- |
323,535 |
ESN |
- |
- |
- |
- |
1,665,982 |
- |
1,665,982 |
Senior Notes VIII |
- |
- |
- |
- |
2,632,098 |
|
2,632,098 |
Perpetual Notes |
- |
- |
- |
- |
- |
640,905 |
640,905 |
Total |
- |
- |
323,535 |
- |
4,298,080 |
640,905 |
5,262,520 |
Consolidated |
|||||||
In R$: |
|||||||
Debentures VII |
- |
285,880 |
- |
- |
- |
|
285,880 |
In US$: |
|
|
|
|
|
|
|
Credit Line - Engine Maintenance |
29,198 |
166,261 |
- |
- |
- |
- |
195,459 |
Senior Notes IV |
- |
- |
323,535 |
- |
- |
- |
323,535 |
ESN |
- |
- |
- |
- |
1,665,982 |
- |
1,665,982 |
Senior Notes VIII |
- |
- |
- |
- |
2,632,098 |
- |
2,632,098 |
Loan with guarantee of engines |
4,633 |
18,988 |
19,687 |
20,427 |
96,738 |
|
160,473 |
Perpetual Notes |
- |
- |
- |
- |
- |
551,646 |
551,646 |
Total |
33,831 |
471,129 |
343,222 |
20,427 |
4,394,818 |
551,646 |
5,815,073 |
The fair value of debt as of September 30, 2019 is as follows:
Parent Company |
Consolidated | |||
|
Accounting (c) |
Fair value |
Accounting (c) |
Fair value |
Senior Notes and Perpetual Notes |
3,646,302 |
3.648.051 |
3,557,044 |
3,651,794 |
Term Loan |
1,247,834 |
1,255,994 |
1,247,834 |
1,255,994 |
ESN |
1,679,809 |
1,898,496 |
1,679,809 |
1,898,496 |
Debentures |
- |
- |
576,736 |
591,666 |
Other |
- |
- |
1,234,611 |
1,234,611 |
Total |
6,573,945 |
6,802,541 |
8,296,034 |
8,542,561 |
43
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
As of September 30, 2019, long-term debt (excluding perpetual notes and exchangeable senior notes) that amounted to R$3,597,445 (R$4,827,319 as of December 31, 2018) is subject to restrictive covenants, including but not limited to those that require the Company to maintain liquidity requirements and interest expenses coverage.
The Company has restrictive covenants on the Term Loan and Debentures VII. In the Term Loan, the Company must make deposits for reaching contractual limits of the debt pegged to the U.S. dollar. As of September 30, 2019, the Company did not have collateral deposits linked to the contractual limits of the Term Loan and of the Debentures and has met the minimum required levels and, therefore, is complying with the restrictive clauses. The next measurement will take place at the end of the current year.
44
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
|
Consolidated | ||||||||||||||||
12/31/2018 |
|
|
|
|
|
|
|
|
|
|
09/30/2019 | ||||||
|
Weighted average rate (p.a.) |
Current |
Noncurrent |
Total |
IFRS Adoption 16 (1) |
Additions |
Write-offs |
|
Payments |
Payment (escrow deposit) |
Payment (maintenance reserve) |
Provision for interest |
Interest payment |
Exchange variation |
Current |
Noncurrent |
Total |
In R$: |
|
|
|||||||||||||||
Right of use leases without purchase option |
12.92% |
- |
- |
- |
49,975 |
2,925 |
- |
- |
(12,839) |
- |
- |
6,718 |
- |
(963) |
20,017 |
25,799 |
45,816 |
Total |
- |
- |
- |
49,975 |
2,925 |
- |
- |
(12,839) |
- |
- |
6,718 |
- |
(963) |
20,017 |
25,799 |
45,816 | |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
In US$: |
|
|
|
|
|
|
|
|
|
|
|
| |||||
Right of use leases with purchase option |
3.72% |
120,118 |
520,542 |
640,660 |
- |
- |
- |
- |
(83,511) |
- |
- |
17,442 |
(17,651) |
40,891 |
132,161 |
465,670 |
597,831 |
Right of use leases without purchase option |
8.55% |
- |
- |
- |
5,540,621 |
627,931 |
(6,782) |
(262,569) |
(1,079,062) |
(476) |
(4,888) |
353,163 |
- |
406,469 |
1,178,148 |
4,396,259 |
5,574,407 |
Right of use leases (2) |
- |
135,799 |
135,686 |
271,485 |
(219,728) |
- |
- |
- |
(48,273) |
- |
- |
- |
(3,484) |
- |
- |
- |
- |
Total |
255,917 |
656,228 |
912,145 |
5,320,893 |
627,931 |
(6,782) |
(262,569) |
(1,210,846) |
(476) |
(4,888) |
370,605 |
(21,135) |
447,360 |
1,310,309 |
4,861,929 |
6,172,238 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Total leases |
255,917 |
656,228 |
912,145 |
5,370,868 |
630,856 |
(6,782) |
(262,569) |
(1,223,685) |
(476) |
(4,888) |
377,323 |
(21,135) |
446,397 |
1,330,326 |
4,887,728 |
6,218,054 | |
(1) Effect related to the adoption of CPC 06 (R2) – “Leases” (IFRS 16), as disclosed in Note 4.1.1.
(2) Refers to operating lease installments renegotiated during 2016.
45
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
The future payments of right of use lease agreements are detailed as follows:
|
Without purchase option |
With purchase option | |
|
09/30/2019 |
09/30/2019 |
12/31/2018 |
2019 |
442,284 |
38,281 |
140,307 |
2020 |
1,547,870 |
153,330 |
140,080 |
2021 |
1,303,241 |
153,840 |
139,852 |
2022 |
1,098,704 |
213,123 |
139,624 |
2023 |
874,215 |
75,465 |
69,985 |
Thereafter |
1,940,815 |
17,388 |
65,776 |
Total minimum lease payments |
7,207,129 |
651,427 |
695,624 |
Less total interest |
(1,586,906) |
(53,596) |
(54,964) |
Present value of minimum lease payments |
5,620,223 |
597,831 |
640,660 |
Less current portion |
(1,198,165) |
(132,161) |
(120,118) |
Noncurrent portion |
4,422,058 |
465,670 |
520,542 |
In the nine-month period ended September 30, 2019, the Company recorded a net gain of R$7,924 in the consolidated arising from one aircraft sale-leaseback transaction recorded under “Sale-leaseback transactions” (note 30).
Parent Company |
Consolidated | |||
|
09/30/2019 |
12/31/2018 |
09/30/2019 |
12/31/2018 |
|
|
|
|
|
Local currency |
1,443 |
888 |
892,131 |
826,641 |
Foreign currency |
25,150 |
9,877 |
427,932 |
697,311 |
Total |
26,593 |
10,765 |
1,320,063 |
1,523,952 |
|
|
|
|
|
Current |
26,593 |
10,765 |
1,294,680 |
1,403,815 |
Noncurrent |
- |
- |
25,383 |
120,137 |
As of September 30, 2019, the balance to be paid to related parties recorded in the consolidated caption “Suppliers” was R$1,447 (R$1,107 as of December 31, 2018), and refers substantially to transactions with Viação Piracicabana Ltda.
The Company has arrangement in place that allow suppliers to receive their payments in advance. This type of operation does not change the original commercial conditions between the Company and its suppliers. As of September 30, 2019, the amount recorded under current liabilities of the consolidated from forfaiting operations totaled R$559,503 (R$365,696 as of December 31, 2018).
46
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
|
Parent Company |
Consolidated | ||
|
09/30/2019 |
12/31/2018 |
09/30/2019 |
12/31/2018 |
PIS and COFINS |
201 |
947 |
39,721 |
43,237 |
Installment payments - PRT and PERT |
- |
15,588 |
2,319 |
23,858 |
Withholding income tax on salaries |
103 |
133 |
30,468 |
34,883 |
ICMS |
- |
- |
329 |
46,952 |
IRPJ and CSLL payable |
- |
- |
17,336 |
8,991 |
Other |
84 |
70 |
11,195 |
8,440 |
Total |
388 |
16,738 |
101,368 |
166,361 |
|
|
|
|
|
Current |
388 |
8,944 |
101,222 |
111,702 |
Noncurrent |
- |
7,794 |
146 |
54,659 |
As of September 30, 2019, the balance of Advance from ticket sales classified in current liabilities was R$1,985,550 (R$1,673,987 as of December 31, 2018) and is represented by 6,294,192 tickets sold and not yet used (5,804,941 as of December 31, 2018) with an average use of 62 days (57 days as of December 31, 2018).
|
Consolidated | ||
|
Provision for aircraft and engine return (a) |
Provision for legal proceedings (b) |
Total |
Balances as of December 31, 2018 |
652,134 |
247,460 |
899,594 |
Additional provisions recognized |
269,434 |
145,288 |
414,722 |
Utilized provisions |
(106,391) |
(102,511) |
(208,902) |
Foreign exchange rate variation, net |
53,187 |
(354) |
52,833 |
Balances of September 30, 2019 |
868,364 |
289,883 |
1,158,247 |
|
|
|
|
As of December 31, 2018 |
|
|
|
Current |
70,396 |
- |
70,396 |
Noncurrent |
581,738 |
247,460 |
829,198 |
Total |
652,134 |
247,460 |
899,594 |
|
|
|
|
On September 30, 2019 |
|
|
|
Current |
317,690 |
- |
317,690 |
Noncurrent |
550,674 |
289,883 |
840,557 |
Total |
868,364 |
289,883 |
1,158,247 |
(a) The additions of provisions for aircraft and engine return include present value adjustment effects.
(b) The provisions recorded include write-offs due to the revision of estimates and processes settled.
The increase in the provision for aircraft return balance was a result of the Company’s decision to return three aircraft early, which were originally scheduled to be returned in 2023, 2024 and 2025.
As of September 30, 2019, the Company and its subsidiaries are parties to lawsuits and administrative proceedings. Details of the relevant lawsuits were disclosed in the financial statements for the year ended December 31, 2018.
47
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
The Company's Management believes that the provision for tax, civil and labor risks, recorded in accordance with CPC 25 – “Provisions, Contingent Liabilities and Contingent Assets”, equivalent to IAS 37, is sufficient to cover possible losses on administrative and judicial proceedings. The breakdown of the proceedings with probable and possible losses is presented below:
|
Consolidated | |||
|
Probable loss |
Possible loss | ||
|
09/30/2019 |
12/31/2018 |
09/30/2019 |
12/31/2018 |
Civil |
80,387 |
64,005 |
38,042 |
36,320 |
Labor |
207,113 |
181,556 |
223,177 |
183,506 |
Taxes |
2,383 |
1,899 |
575,886 |
548,136 |
Total |
289,883 |
247,460 |
837,105 |
767,962 |
As of September 30, 2019, the Company’s capital stock was R$3,103,631 and represented by 3,131,973,351 shares, comprised by 2,863,682,710 common shares and 268,290,641 preferred shares. The Company’s shares are held as follows:
|
09/30/2019 |
12/31/2018 | ||||
|
Common |
Preferred |
Total |
Common |
Preferred |
Total |
Fundo Volluto |
100.00% |
- |
23.02% |
100.00% |
- |
23.42% |
Mobi FIA |
- |
37.62% |
28.96% |
- |
48.85% |
37.41% |
Delta Air Lines, Inc. |
- |
12.03% |
9.26% |
- |
12.29% |
9.41% |
AirFrance - KLM |
- |
1.55% |
1.19% |
- |
1.58% |
1.21% |
Other |
- |
1.13% |
0.87% |
- |
1.03% |
0.79% |
Free float |
- |
47.67% |
36.70% |
- |
36.25% |
27.76% |
Total |
100.00% |
100.00% |
100.00% |
100.00% |
100.00% |
100.00% |
The authorized capital stock on September 30, 2019 was R$6.0 billion.
In the period ended September 30, 2019, the Company’s Board of Directors approved capital increases through the exercise of stock options: (i) on February 27, 2019, in the amount of R$4,589, through the subscription of 521,528 preferred shares; (ii) on April 26, 2019, in the amount of R$512, through the subscription of 140,896 preferred shares; and (iii) July 31, 2019, totaling R$300 through the subscription of 84,477 preferred shares.
As of September 30, 2019 and December 31, 2018, the balance of share issuance costs was R$42,290.
During the nine-month period ended September 30, 2019, the Board of Directors approved issuing shares totaling R$2,818 as a result of stock options exercises. At September 30, 2019, the Company had a balance of R$28,343 related to the subscription of 5,286,408 stock options.
On July 31, 2019, the shareholders approved the Share Buyback Program, through which the Company may acquire up to 3,000,000 preferred shares within one year.
48
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
The Company's earnings (loss) per share was determined as follows:
|
Parent Company and Consolidated | |||||
|
Three-month period ended | |||||
|
09/30/2019 |
09/30/2018 | ||||
|
Common |
Preferred |
Total |
Common |
Preferred |
Total |
Numerator |
|
|
|
| ||
Net loss for the period attributable to equity holders of the parent |
(56,482) |
(185,570) |
(242,052) |
(96,013) |
(313,228) |
(409,241) |
|
|
|
|
|
|
|
Denominator |
|
|
|
|
|
|
Weighted average number of outstanding shares (in thousands) |
2,863,683 |
151,165 |
|
2,863,683 |
266,925 |
|
Adjusted weighted average number of outstanding shares and diluted presumed conversions (in thousands) |
2,863,683 |
151,165 |
|
2,863,683 |
266,925 |
|
|
|
|
|
|
|
|
Basic losses per share |
(0.020) |
(1.228) |
|
(0.034) |
(1.173) |
|
Diluted losses per share |
(0.020) |
(1.228) |
|
(0.034) |
(1.173) |
|
|
Parent Company and Consolidated | |||||
|
Nine-month period ended | |||||
|
09/30/2019 |
09/30/2018 | ||||
|
Common |
Preferred |
Total |
Common |
Preferred |
Total |
Numerator |
|
|
|
| ||
Net loss for the period attributable to equity holders of the parent |
(109,436) |
(359,546) |
(468,982) |
(373,024) |
(1,214,728) |
(1,587,752) |
|
|
|
|
|
|
|
Denominator |
|
|
|
|
|
|
Weighted average number of outstanding shares (in thousands) |
2,863,683 |
268,814 |
|
2,863,683 |
266,440 |
|
Adjusted weighted average number of outstanding shares and diluted presumed conversions (in thousands) |
2,863,683 |
268,814 |
|
2,863,683 |
266,440 |
|
|
|
|
|
|
|
|
Basic losses per share |
(0.038) |
(1.338) |
|
(0.130) |
(4.559) |
|
Diluted losses per share |
(0.038) |
(1.338) |
|
(0.130) |
(4.559) |
|
Diluted earnings (loss) per share are calculated by adjusting the weighted average number of shares outstanding by instruments potentially convertible into shares. However, due to losses recorded in the three- and nine-month periods ended September 30, 2019, these instruments issued by the parent company have no dilutive effect and therefore were not included in the total quantity of outstanding shares to calculate diluted losses per share.
49
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
The conditions of the restricted share and share-based payment plans granted to the Company’s Executive Officers were disclosed in detail in the financial statements for the year ended December 31, 2018, and did not change during the period ended September 30, 2019.
The movement of the stock options outstanding for in the period ended September 30, 2019 is as follows:
|
Number of stock options |
Weighted average exercise price |
Options outstanding as of December 31, 2018 |
7,820,512 |
9.19 |
Conversion of restricted stock to call options |
4,355,123 |
2.62 |
Options exercised |
(5,570,751) |
5.25 |
Options canceled and adjustments in estimated prescribed rights |
(151,368) |
25.58 |
Options outstanding as of September 30, 2019 |
6,453,516 |
8.83 |
On August 21, 2019, through an extraordinary shareholders’ meeting, the shareholders approved the conversion of the restricted stock grant, held in 2016, into preferred stock options.
Number of options exercisable as of: |
|
|
December 31, 2018 |
7,065,174 |
8.01 |
September 30, 2019 |
6,220,267 |
8.51 |
|
Total restricted shares |
Restricted shares outstanding as of December 31, 2018 |
4,865,741 |
Conversion of restricted shares to call options |
(3,372,183) |
Restricted shares transferred |
(265,532) |
Restricted shares cancelled and adjustments in estimated expired rights |
379,576 |
Transferable Shares as of September 30, 2019 |
1,607,602 |
Number of stock options |
Weighted average exercise price | |
Options outstanding as of December 31, 2018 |
1,077,053 |
50.16 |
Adjustments in estimated prescribed rights |
48,947 |
26.21 |
Options exercised |
(151,000) |
5.58 |
Options outstanding as of September 30, 2019 |
975,000 |
49.09 |
During the nine-month period ended September 30, 2019, the subsidiary Smiles recognized R$2,357 in shareholders’ equity regarding the stock-based compensation with a corresponding expense in the statement of operations in the caption as personnel expenses (R$678 for the period ended September 30, 2018).
In addition, management and employees are granted additional bonuses settled in cash referenced to Company shares in order to strengthen their commitment to results and productivity. As of September 30, 2019, the balance of this obligation totaled R$3,425 (R$6,899 as of December 31, 2018) recorded under “Salaries”, referenced to 90,440 equivalent shares of Smiles Fidelidade (111,272 as of December 31, 2018). The same amount was recorded under “Personnel” in the statement of operations (R$4,390 during the period ended September 30, 2018) related to these bonuses.
50
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
The parent company maintains assets from loan agreements with its subsidiary GLA without interest, as shown in the table below:
|
|
|
|
|
Assets |
Liabilities | |
Creditor |
Debtor |
Type of transaction |
Maturity of the contracts |
Interest rate (p.a.) |
09/30/2019 |
12/31/2018 |
09/30/2019 |
|
|
|
|
|
|
|
|
GLAI |
GLA |
Loan |
05/2020 |
6.50% |
500,528 |
82,655 |
- |
GAC |
GLA |
Loan |
03/2025 |
0.0% (*) |
1,052,146 |
232,488 |
- |
Gol Finance |
GLA |
Loan |
08/2025 |
5.10% |
1,955,746 |
1,979,000 |
2 |
Total |
|
|
|
|
3,508,420 |
2,294,143 |
2 |
(*) According to the local legislation, the Company applies symbolic interest rates.
The following table shows the balances between the Company and its subsidiaries that were eliminated in the consolidated:
|
|
|
|
|
Balances | |
Creditor |
Debtor |
Type of transaction |
Maturity of the contracts |
Interest rate (p.a.) |
09/30/2019 |
12/31/2018 |
Gol Finance |
GLAI |
Subscription Bonus (*) |
07/2024 |
- |
602,350 |
- |
Gol Finance Inc. |
GAC |
Loan |
01/2023 |
9.83% |
1,285,357 |
1,128,845 |
Gol Finance |
GAC |
Loan |
03/2025 |
8.64% |
1,080,021 |
596,204 |
Gol Finance |
Gol Finance Inc. |
Loan |
01/2020 |
9.83% |
752,703 |
887,395 |
Gol Finance Inc. |
Gol Finance |
Loan |
07/2020 |
11.70% |
246,876 |
250,950 |
Smiles Fidelidade |
GLA |
Advance ticket purchases |
12/2032 |
8.97% |
1,015,914 |
5,439 |
Smiles Fidelidade |
GLA |
Miles sold |
12/2032 |
- |
20,174 |
38,144 |
Smiles Fidelidade |
GLA |
Management fees |
12/2032 |
- |
451 |
856 |
Smiles Fidelidade |
GLA |
Letter of indemnity agreement |
- |
- |
- |
1,296,077 |
Smiles Fidelidade |
GLA |
Shared services |
12/2032 |
- |
6,291 |
24,035 |
Smiles Fidelidade / Smiles Viagens |
GLA |
Transfer - GLA |
12/2032 |
- |
25,545 |
803 |
Smiles Fidelidade |
GLA |
Share-based payments |
- |
- |
856 |
10,559 |
Smiles Fidelidade |
Netpoints |
Miles converted |
- |
- |
- |
48 |
Total |
|
|
|
|
4,434,188 |
4,239,355 |
(*) The subsidiary Gol Finance, through Gol Equity Finance, acquired the subscription bonus issued by the Company under the Exchangeable Senior Notes, detailed in note 18.1.1.
In the course of its operations, the Company, through its subsidiaries, hires and is hired by related parties, namely: Viação Piracicabana Ltda., Mobitrans Administração e Participações S.A., Expresso Caxiense S.A, Aller Participações and Limmat Participações S.A. The nature of the contracted services is detailed in the annual financial statements for the year ended December 31, 2018.
In the period ended September 30, 2019, subsidiary GLA recognized a total expense related to these services of R$7,450 (R$9,358 for the period ended September 30, 2018). As of September 30, 2019, the balance to be paid to related companies recorded under trade payables was R$1,447 (R$1,107 as of December 31, 2018), and refers substantially to transactions with Viação Piracicabana Ltda.
51
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
In September 2011, GLA entered into agreements with the related parties Empresa de Ônibus Pássaro Marron S/A., Viação Piracicabana Ltda., Thurgau Participações S.A., Comporte Participações S.A., Quality Bus Comércio De Veículos S.A., Empresa Princesa Do Norte S.A., Expresso União Ltda., Oeste Sul Empreendimentos Imobiliários S.A. SPE., Empresa Cruz De Transportes Ltda., Expresso Maringá do Vale S.A., Glarus Serviços Tecnologia e Participações S.A., Expresso Itamarati S.A., Transporte Coletivo Cidade Canção Ltda., Turb Transporte Urbano S.A., Vaud Participações S.A., Aller Participações S.A. and BR Mobilidade Baixada Santista S.A. SPE, all with no expiration date, whose purpose is to issue credits to purchase airline tickets issued by the Company. The UATP account (virtual card) is accepted as a payment method on the purchase of airline tickets and related services, seeking to simplify billing and facilitate payment between the participating companies.
On April 9, 2012, the Company entered into an agreement with Delta Air Lines Inc. (“Delta Air Lines”) for the mutual use of the VIP lounge, with expected payments of twenty dollars (US$20) per passenger. On August 30, 2016, the companies signed a contractual amendment establishing a prepayment for the use of the VIP lounge in the amount of US$3 million. As of September 30, 2019, the outstanding balance was R$3,358 (R$4,741 as of December 31, 2018) recorded under “Advances from customers”.
In 2010, GLA entered into an engine maintenance service agreement with Delta Air Lines. The maintenance agreement was renewed on December 22, 2016 and will expire on December 31, 2020.
On January 31, 2017, the subsidiary GLA entered into a Loan Agreement with Delta Air Lines in the amount of US$50 million, maturing on December 31, 2020, with a refund obligation to be performed by the Company, GLA and Gol Finance, pursuant to the refund agreement entered into on August 19, 2015, with personal guarantee granted by the Company to the subsidiary GAC. Under the terms of this agreement, the Company holds flexible payment maturities regarding engine maintenance services, through a credit limit available. In the period ended September 30, 2019, expenses incurred for components maintenance services provided by Delta Air Lines amounted to R$312,439 (R$242,964 as of September 30, 2018). As of September 30, 2019, the outstanding balance with Delta Air Lines recorded under “Suppliers” totaled R$140,343 (R$211,087 as of December 31, 2018).
On November 4, 2018, the subsidiary GLA entered into an agreement with Delta Air Lines for handling services in the Miami and Orlando airports. These agreements expire on November 3, 2021.
During the period ended September 30, 2019, expenses related to this agreement came to R$8,351, which was recorded under “Services amounted”. As of September 30, 2019, there is no outstanding balance recorded under “Suppliers” with Delta Air Lines.
52
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
On August 31, 2015, through its subsidiary Gol Finance, the Company issued a term loan in the amount of US$300 million, with a term of 5 years and effective interest rate of 6.7% p.a. The Term Loan has an additional guarantee provided by Delta Air Lines. For additional information, see Note 18.
On February 19, 2014, the Company signed an exclusive strategic partnership agreement for business cooperation with AirFrance-KLM. On January 1, 2017, the Company signed an extension of the scope for inclusion of maintenance services. In the period ended September 30, 2019, expenses incurred for components maintenance services provided by AirFrance-KLM amounted to R$59,961 (R$128,569 as of September 30, 2018). As of September 30, 2019, the Company had no deferred revenue recorded as “other liabilities” (R$8,565 as of December 31, 2018) and had R$111,033 recorded under “Suppliers” in current liabilities (R$170,673 as of December 31, 2018).
|
Three-month period ended |
Nine-month period ended | ||
|
09/30/2019 |
09/30/2018 |
09/30/2019 |
09/30/2018 |
Salaries and benefits (*) |
5,875 |
18,206 |
42,868 |
51,912 |
Related taxes and charges |
4,652 |
4,646 |
11,671 |
9,233 |
Share-based payments |
2,064 |
2,560 |
6,912 |
7,434 |
Total |
12,591 |
25,412 |
61,451 |
68,579 |
(*) Includes the Board of Directors’, Fiscal Council’s and Audit Committee’s compensation.
Consolidated | ||||
|
Three-month period ended |
Nine-month period ended | ||
|
09/30/2019 |
09/30/2018 |
09/30/2019 |
09/30/2018 |
|
|
|
|
|
Passenger transportation (*) |
3,614,577 |
2,835,926 |
9,800,275 |
8,015,475 |
Cargo |
104,600 |
99,696 |
298,501 |
292,140 |
Mileage revenue |
118,186 |
110,871 |
328,352 |
321,428 |
Other revenue |
28,114 |
18,133 |
81,331 |
66,545 |
Gross revenue |
3,865,477 |
3,064,626 |
10,508,459 |
8,695,588 |
|
|
|
| |
Related tax |
(155,540) |
(172,235) |
(447,098) |
(485,102) |
Net revenue |
3,709,937 |
2,892,391 |
10,061,361 |
8,210,486 |
(*) Of the total amount, the amounts of R$138,907 and R$402,505 for the three-month and nine-month periods ended September 30, 2019 (R$110,670 and R$343,645 for the three-month and nine-month periods ended September 30, 2018) respectively, are comprised of revenue from no-show passengers, rebooking and ticket cancellation.
Revenues are net of federal, state and municipal taxes, which are paid and transferred to the appropriate government entities.
53
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
Revenue by geographical location is as follows:
|
Consolidated | |||||||
|
Three-month period ended |
Nine-month period ended | ||||||
|
09/30/2019 |
% |
09/30/2018 |
% |
09/30/2019 |
% |
09/30/2018 |
% |
|
|
|
|
|
|
|
|
|
Domestic |
3,187,580 |
85.9 |
2,517,673 |
87.0 |
8,635,771 |
85.8 |
6,922,373 |
84.3 |
International |
522,357 |
14.1 |
374,718 |
13.0 |
1,425,590 |
14.2 |
1,288,113 |
15.7 |
Net revenue |
3,709,937 |
100.0 |
2,892,391 |
100.0 |
10,061,361 |
100.0 |
8,210,486 |
100.0 |
|
Parent Company | |||
Three-month period ended |
Nine-month period ended | |||
|
09/30/2019 |
09/30/2018 |
09/30/2019 |
09/30/2018 |
Administrative expenses |
||||
Personnel |
(1,110) |
(657) |
(3,247) |
(2,657) |
Services provided |
(10,971) |
(9,411) |
(23,269) |
(11,284) |
Other administrative expenses |
(12,941) |
- |
(15,926) |
- |
Other administrative income |
(2,262) |
- |
8,426 |
- |
Total administrative expenses |
(27,284) |
(10,068) |
(34,016) |
(13,941) |
|
|
|||
Other operating (expenses) income |
|
|
||
Other operating expenses |
- |
537 |
- |
(1,430) |
Sale-leaseback transactions |
- |
83,089 |
7,413 |
218,332 |
Other operating income |
25,780 |
2 |
28,178 |
5,048 |
Other operating income, net |
25,780 |
83,628 |
35,591 |
221,950 |
|
|
|||
Total operating income (expenses) |
(1,504) |
73,560 |
1,575 |
208,009 |
54
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
Consolidated | |||||
Three-month period ended |
Nine-month period ended | ||||
|
09/30/2019 |
09/30/2018 |
09/30/2019 |
09/30/2018 | |
|
|
|
|
| |
Cost of services provided |
|||||
Salaries (a) |
(412,501) |
(299,490) |
(1,216,443) |
(904,414) | |
Aircraft fuel |
(1,066,603) |
(1,063,238) |
(3,038,027) |
(2,740,143) | |
Aircraft rent |
- |
(296,622) |
- |
(800,979) | |
Maintenance, material and repairs |
(91,497) |
(89,648) |
(412,253) |
(288,754) | |
Passenger costs |
(156,999) |
(122,429) |
(442,305) |
(346,029) | |
Services provided |
(38,100) |
(38,808) |
(110,792) |
(113,959) | |
Landing fees |
(223,610) |
(186,566) |
(604,747) |
(542,128) | |
Depreciation and amortization |
(444,417) |
(167,961) |
(1,239,971) |
(472,424) | |
Other operating costs |
(113,107) |
(72,440) |
(247,162) |
(216,620) | |
Total cost of services provided |
(2,546,834) |
(2,337,202) |
(7,311,700) |
(6,425,450) | |
|
|
|
|
| |
Selling expenses |
|
|
|||
Salaries (a) |
(8,818) |
(7,204) |
(27,240) |
(24,986) | |
Services provided |
(44,633) |
(29,079) |
(120,574) |
(88,376) | |
Sales and marketing |
(179,644) |
(148,254) |
(495,554) |
(428,207) | |
Other selling expenses |
(14,397) |
(5,929) |
(26,044) |
(16,246) | |
Total selling expenses |
(247,492) |
(190,466) |
(669,412) |
(557,815) | |
|
|
|
|
| |
Administrative expenses |
|
|
|||
Salaries (a) |
(199,155) |
(180,069) |
(470,380) |
(451,708) | |
Services provided |
(117,612) |
(97,138) |
(292,702) |
(237,239) | |
Depreciation and amortization |
(4,218) |
(6,239) |
(29,467) |
(17,424) | |
Administrative and Other |
(162,489) |
(103,239) |
(210,919) |
(171,955) | |
Other administrative income |
152,659 |
98,865 |
190,937 |
98,865 | |
Total administrative expenses |
(330,815) |
(287,820) |
(812,531) |
(779,461) | |
|
|
|
|
| |
Other operating income |
|
|
|||
Sale-leaseback transactions (b) |
- |
103,395 |
7,924 |
279,481 | |
Others (c) |
28,178 |
- |
162,341 |
- | |
Total other operating income, net |
28,178 |
103,395 |
170,265 |
279,481 | |
|
|
|
|
| |
Total |
(3,096,963) |
(2,712,093) |
(8,623,378) |
(7,483,245) | |
(a) The Company recognizes compensation paid to members of the Audit Committee, the Board of Directors and the Fiscal Council in the "Salaries" line item. The increase in this item is due to the end of the Payroll Tax Exemption Program, in addition to collective bargaining agreements.
(b) During the period ended September 30, 2019, the Company recorded a net gain of R$7,924 related to the sale-leaseback transaction of 1 aircraft (In the period ended September 30, 2018, the Company recorded a net gain of R$279,481 arising from sale-leaseback operations of 8 aircraft traded in the period, together with deferred gains of R$696 arising from such operations, and losses of R$1,919 related to the deferral of aircraft traded from 2006 to 2009). (note 19.1)
(c) The amount is related to the remeasurement of the lease liability due to the early return of 3 aircraft in the period ended September 30, 2019.
55
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
Parent Company |
Consolidated | |||||||
Three-month period ended |
Nine-month period ended |
Three-month period ended |
Nine-month period ended | |||||
09/30/2019 |
09/30/2018 |
09/30/2019 |
09/30/2018 |
09/30/2019 |
09/30/2018 |
09/30/2019 |
09/30/2018 | |
|
|
|
|
|
|
|
|
|
Financial income |
||||||||
Gain on derivatives |
- |
- |
- |
- |
9,251 |
6,001 |
49,368 |
8,567 |
Derivative gains - capped call |
117,094 |
- |
- |
- |
117,094 |
- |
- |
- |
Gains from financial investments |
8,767 |
8,548 |
20,542 |
30,220 |
66,665 |
87,995 |
196,797 |
170,934 |
Inflation indexation |
598 |
400 |
1,784 |
1,752 |
4,990 |
56,040 |
37,339 |
61,545 |
(-) Taxes on financial income (a) |
(607) |
(723) |
(1,904) |
(3,312) |
(5,666) |
(11,349) |
(18,697) |
(25,605) |
Interest income |
28,817 |
30,437 |
75,963 |
63,497 |
- |
8,102 |
- |
8,102 |
Other |
2,925 |
173 |
3,245 |
173 |
8,324 |
5,885 |
18,158 |
12,949 |
Total financial income |
157,594 |
38,835 |
99,630 |
92,330 |
200,658 |
152,674 |
282,965 |
236,492 |
|
|
|
|
|
|
|
|
|
Financial expenses |
|
|
|
|
||||
Loss with derivatives |
- |
- |
- |
- |
(48,017) |
(697) |
(94,997) |
(9,986) |
Derivative losses - capped call |
- |
- |
(41,582) |
- |
- |
- |
(41,582) |
- |
Unrealized Loss - Conversion Right |
200,701 |
- |
134,079 |
- |
200,701 |
- |
134,079 |
- |
Interest on short and long-term debt and others - ESN |
(115,767) |
(98,993) |
(319,118) |
(254,235) |
(203,786) |
(184,713) |
(571,587) |
(523,408) |
Bank charges and expenses |
(15,023) |
(14,990) |
(21,781) |
(21,902) |
(26,988) |
(29,217) |
(53,256) |
(54,287) |
Exchange offer costs |
- |
- |
- |
(54,105) |
- |
- |
- |
(54,104) |
Losses from financial investments |
- |
- |
- |
- |
(23,974) |
(55,435) |
(104,994) |
(69,805) |
Interest on leases (b) |
- |
- |
- |
- |
(121,496) |
- |
(359,881) |
- |
Other |
(15,120) |
(2,887) |
(54,770) |
(13,332) |
(38,926) |
(25,154) |
(119,070) |
(79,033) |
Total financial expenses |
54,791 |
(116,870) |
(303,172) |
(343,574) |
(262,486) |
(295,216) |
(1,211,288) |
(790,623) |
|
|
|
|
|||||
Foreign exchange rate variation, net |
(210,906) |
(100,993) |
(178,244) |
(504,264) |
(728,623) |
(243,345) |
(681,327) |
(1,310,862) |
|
|
|
|
|
|
|
|
|
Total |
1,479 |
(179,028) |
(381,786) |
(755,508) |
(790,451) |
(385,887) |
(1,609,650) |
(1,864,993) |
(a) Relates to taxes on financial income (PIS and COFINS), according to Decree 8,426 of April 1, 2015.
(b) Amount related to present value adjustments of the right of use from the initial adoption of CPC 06 (R2). For further information, see Note 4.1.1.
56
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
The information below presents the summarized financial position of the reportable operating segments as of September 30, 2019 and December 31, 2018:
|
09/30/2019 | ||||
|
Flight transportation |
Smiles loyalty program |
Combined information |
Eliminations |
Total consolidated |
Assets |
|
|
|
|
|
Current |
3,371,500 |
2,557,841 |
5,929,341 |
(1,041,438) |
4,887,903 |
Noncurrent |
10,289,743 |
72,509 |
10,362,252 |
(445,965) |
9,916,287 |
Total assets |
13,661,243 |
2,630,350 |
16,291,593 |
(1,487,403) |
14,804,190 |
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
Current |
10,056,067 |
1,136,969 |
11,193,036 |
(863,176) |
10,329,860 |
Noncurrent |
11,742,109 |
331,449 |
12,073,558 |
(12,881) |
12,060,677 |
Total equity (deficit) |
(8,136,933) |
1,161,932 |
(6,975,001) |
(611,346) |
(7,586,347) |
Total liabilities and equity (deficit) |
13,661,243 |
2,630,350 |
16,291,593 |
(1,487,403) |
14,804,190 |
|
12/31/2018 | ||||
|
Flight transportation |
Smiles loyalty program |
Combined information |
Eliminations |
Total consolidated |
Assets |
|
|
|
|
|
Current |
2,216,168 |
2,365,789 |
4,581,957 |
(1,271,122) |
3,310,835 |
Noncurrent |
7,373,864 |
269,339 |
7,643,203 |
(575,772) |
7,067,431 |
Total assets |
9,590,032 |
2,635,128 |
12,225,160 |
(1,846,894) |
10,378,266 |
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
Current |
7,012,120 |
1,347,684 |
8,359,804 |
(1,159,248) |
7,200,556 |
Noncurrent |
7,563,287 |
273,214 |
7,836,501 |
(153,440) |
7,683,061 |
Total equity (deficit) |
(4,985,375) |
1,014,230 |
(3,971,145) |
(534,206) |
(4,505,351) |
Total liabilities and equity (deficit) |
9,590,032 |
2,635,128 |
12,225,160 |
(1,846,894) |
10,378,266 |
57
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
|
Nine-month period ended 09/30/2019 | ||||
|
Flight transportation |
Smiles loyalty program |
Combined information |
Eliminations |
Total consolidated |
|
|
|
|
|
. |
Net revenue |
|
|
|
|
|
Passenger (a) |
9,137,160 |
- |
9,137,160 |
356,028 |
9,493,188 |
Cargo and other (a) |
314,440 |
- |
314,440 |
(9,702) |
304,738 |
Mileage revenue (a) |
- |
794,707 |
794,707 |
(531,272) |
263,435 |
Cost of services provided (b) |
(7,275,203) |
(57,036) |
(7,332,239) |
24,543 |
(7,311,700) |
Gross profit |
2,176,397 |
737,671 |
2,914,068 |
(160,403) |
2,749,661 |
|
|
|
|
|
|
Operating income (expenses) |
|
|
|
|
|
Selling expenses |
(716,881) |
(93,667) |
(810,548) |
141,136 |
(669,412) |
Administrative expenses (c) |
(677,677) |
(102,170) |
(779,847) |
(36,784) |
(1,812,531) |
Other operating income, net |
170,265 |
915 |
171,180 |
(915) |
170,265 |
Total operating expenses |
(1,224,293) |
(194,922) |
(1,419,215) |
103,537 |
(1,311,678) |
|
|
|
|
|
|
Equity results |
201,342 |
(2,086) |
199,256 |
(199,177) |
79 |
|
|
|
|
|
|
Operating result before financial result, net and income taxes |
1,153,446 |
540,663 |
1,694,109 |
(256,047) |
1,438,062 |
|
|
|
|
|
|
Financial income (expenses) |
|
|
|
|
|
Financial income |
243,422 |
97,623 |
341,045 |
(58,080) |
282,965 |
Financial expenses |
(1,266,719) |
(2,649) |
(1,269,368) |
58,080 |
(1,211,288) |
Foreign exchange rate variation, net |
(684,243) |
(451) |
(684,694) |
3,367 |
(681,327) |
Total financial result |
(1,707,540) |
94,523 |
(1,613,017) |
3,367 |
(1,609,650) |
|
|
|
|
|
|
Income (loss) before income taxes |
(554,094) |
635,186 |
81,092 |
(252,680) |
(171,588) |
|
|
|
|
|
|
Income and social contribution taxes |
85,112 |
(187,997) |
(102,885) |
17,735 |
(85,150) |
Net income (loss) for the period |
(468,982) |
447,189 |
(21,793) |
(234,945) |
(256,738) |
|
|
|
|
|
|
Net income attributable to equity holders of the parent |
(468,982) |
234,945 |
(233,037) |
(234,945) |
(468,982) |
Participation of Non-controlling interests |
- |
212,244 |
212,244 |
- |
212,244 |
58
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
|
Nine-month period ended 09/30/2018 | ||||
|
Flight transportation |
Smiles loyalty program |
Combined information |
Eliminations |
Total consolidated |
|
|
|
|
|
|
Net revenue |
|
|
|
|
|
Passenger (a) |
7,343,669 |
- |
7,343,669 |
304,611 |
7,648,280 |
Cargo and other (a) |
307,500 |
- |
307,500 |
(10,998) |
296,502 |
Mileage revenue (a) |
- |
708,556 |
708,556 |
(442,852) |
265,704 |
Cost of services provided (b) |
(6,379,568) |
(41,986) |
(6,421,554) |
(3,896) |
(6,425,450) |
Gross profit |
1,271,601 |
666,570 |
1,938,171 |
(153,135) |
1,785,036 |
|
|
|
|
|
|
Operating income (expenses) |
|
|
|
|
|
Selling expenses |
(593,834) |
(84,828) |
(678,662) |
120,847 |
(557,815) |
Administrative expenses (c) |
(738,207) |
(78,285) |
(816,492) |
37,031 |
(779,461) |
Other operating income, net |
279,481 |
38,106 |
317,587 |
(38,106) |
279,481 |
Total operating expenses |
(1,052,560) |
(125,007) |
(1,177,567) |
119,772 |
(1,057,795) |
|
|
|
|
|
|
Equity results |
231,834 |
- |
231,834 |
(231,474) |
360 |
|
|
|
|
|
|
Operating result before financial result, net and income taxes |
450,875 |
541,563 |
992,438 |
(264,837) |
727,601 |
|
|
|
|
|
|
Financial income (expenses) |
|
|
|
|
|
Financial income |
153,429 |
179,179 |
332,608 |
(96,116) |
236,492 |
Financial expenses |
(885,443) |
(1,296) |
(886,739) |
96,116 |
(790,623) |
Foreign exchange rate variation, net |
(1,312,697) |
1,835 |
(1,310,862) |
- |
(1,310,862) |
Total financial result |
(2,044,711) |
179,718 |
(1,864,993) |
- |
(1,864,993) |
|
|
|
|
|
|
Income (loss) before income taxes |
(1,593,836) |
721,281 |
(872,555) |
(264,837) |
(1,137,392) |
|
|
|
|
|
|
Income and social contribution taxes |
6,084 |
(240,004) |
(233,920) |
11,344 |
(222,576) |
Net income (loss) for the period |
(1,587,752) |
481,277 |
(1,106,475) |
(253,493) |
(1,359,968) |
|
|
|
|
|
|
Net income attributable to equity holders of the parent |
(1,587,752) |
253,493 |
(1,334,259) |
(253,493) |
(1,587,752) |
Net income attributable to non-controlling interests of Smiles |
- |
227,784 |
227,784 |
- |
227,784 |
(a) Eliminations are related to transactions between GLA and Smiles Fidelidade.
(b) Includes depreciation and amortization charges totaling R$1,239,971 for the period ended September 30, 2019 allocated to the following segments: R$1,224,064 for air transportation and R$15,907 for the Smiles loyalty program (R$461,740 and R$10,684 for the period ended September 30, 2018, respectively).
(c) Includes depreciation and amortization charges totaling R$29,467 for the period ended September 30, 2019 allocated to the following segments: R$27,011 for air transportation and R$2,456 for the Smiles loyalty program (R$15,384 and R$2,040 for the period ended September 30, 2018, respectively).
59
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
As of September 30, 2019, the Company had 129 firm orders for aircraft acquisitions with Boeing. These aircraft acquisition commitments include estimates for contractual price increases during the construction phase. The approximate amount of firm orders, not including contractual discounts, was R$67,961,829 (US$16,3 million), segregated as follows:
|
Consolidated | |
|
09/30/2019 |
12/312018 |
2020 |
- |
1,791,661 |
2021 |
7,349,741 |
5,046,966 |
2022 |
8,472,468 |
7,883,277 |
2023 |
9,421,343 |
8,766,165 |
2024 |
9,558,506 |
8,893,790 |
Thereafter |
33,159,771 |
30,853,780 |
Total |
67,961,829 |
63,235,639 |
Operational activities expose the Company and its subsidiaries to market risk (fuel prices, foreign currency and interest rate), credit risk and liquidity risk. These risks can be mitigated by using swaps, futures and options contracts based on oil, U.S. dollar and interest markets.
Financial instruments are managed by the Financial Policy Committee (“CPF”) in line with the Risk Management Policy approved by the Risk Policy Committee (“CPR”) and submitted to the Board of Directors. The description on how the Company conducts its risk management was detailed and widely presented in the financial statements for the year ended December 31, 2018, and there have been no changes since then.
60
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
The accounting classifications of the Company’s financial instruments for the nine-month period ended 09/30/2019 and December 31, 2018 are as follows:
Parent Company |
Consolidated | |||||||
Measured at fair value through profit or loss |
Amortized cost (d) |
Measured at fair value through profit or loss |
Amortized Cost (d) | |||||
|
09/30/2019 |
12/31/2018 |
09/30/2019 |
12/31/2018 |
09/30/2019 |
12/31/2018 |
09/30/2019 |
12/31/2018 |
Assets |
||||||||
Cash and cash equivalents (a) |
- |
2,217 |
962,347 |
280,248 |
- |
307,538 |
1,259,465 |
518,649 |
Short-term investments (a) |
- |
92,015 |
- |
- |
973,211 |
478,364 |
- |
- |
Restricted cash |
42,138 |
39,784 |
- |
- |
623,939 |
822,132 |
- |
- |
Derivatives assets |
128,506 |
- |
- |
- |
128,506 |
- |
- |
- |
Trade receivables |
- |
- |
- |
- |
- |
- |
1,177,986 |
853,328 |
Deposits (b) |
- |
- |
52,749 |
49,081 |
- |
- |
1,103,465 |
885,804 |
Advance to suppliers and third parties |
- |
- |
166,576 |
|
- |
- |
340,981 |
68,394 |
Related parties |
- |
- |
3,508,420 |
2,294,143 |
- |
- |
- |
- |
Other assets |
- |
- |
5,459 |
425,913 |
- |
- |
154,438 |
410,234 |
|
|
|
|
|||||
Liabilities |
|
|
|
|
||||
Debt (c) |
525,669 |
- |
6,048,276 |
4,659,102 |
525,669 |
- |
7,770,365 |
6,443,807 |
Advances from customers |
- |
- |
- |
- |
- |
- |
14,540 |
169,967 |
Suppliers |
- |
- |
26,593 |
10,765 |
- |
- |
1,320,063 |
1,523,952 |
Suppliers - Forfaiting |
- |
- |
- |
- |
- |
- |
559,503 |
365,696 |
Derivatives |
- |
- |
- |
- |
239,370 |
409,662 |
- |
- |
Leases |
- |
- |
- |
- |
- |
- |
6,218,054 |
912,145 |
Other liabilities |
- |
- |
24,504 |
35,642 |
- |
- |
60,816 |
147,239 |
(a) The Company manages its financial investments to pay its short-term operational expenses.
(b) Excludes judicial deposits, as described in Note 14.
(c) The amount as of September 30, 2019, classified as measured at fair value through profit or loss, is related to the derivative contracted through Exchange Senior Notes. For further information, see Note 18.1.1.
(d) Items classified as amortized cost refer to credits, debt with private institutions which, in any early settlement, there are no substantial alterations in relation to the values recorded, except the amounts related to Perpetual Notes and Senior Notes, as disclosed in Note 18. The fair values approximate the book values, according to the short-term maturity period of these assets and liabilities. During the period ended September 30, 2019, there was no change on the classification between categories of the financial instruments.
61
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
Derivatives |
Non derivative |
| ||||||
|
Fuel |
Interest rate risk |
Foreign currency risk |
Capped Call |
ESN (**) |
Revenue Hedge |
Total | |
Fair value variations: |
||||||||
Derivative rights (obligations) as of December 31, 2018 |
(363,268) |
(46,394) |
- |
- |
- |
- |
(409,662) | |
Gains (losses) recognized in profit or loss |
- |
- |
1,793 |
(41,582) |
134,079 |
- |
94,290 | |
Gains (losses) recognized as exchange variation |
- |
- |
- |
17,050 |
(60,891) |
- |
(43,841) | |
Gains (losses) recognized in other comprehensive income (loss) |
106,271 |
(205,384) |
- |
- |
- |
- |
(99,113) | |
Settlements (payments received) during the period |
17,627 |
251,778 |
(1,793) |
153,038 |
(598,857) |
- |
(178,207) | |
Derivative assets (liabilities) at September 30, 2019 |
(239,370) |
- |
- |
128,506 |
(525,669) |
- |
(636,533) | |
Changes in other comprehensive income (loss) |
||||||||
Balances as of December 31, 2018 |
(378,702) |
(121,320) |
- |
- |
- |
- |
(500,022) | |
Fair value adjustments during the period |
106,271 |
(205,384) |
- |
- |
- |
- |
(99,113) | |
Adjustments of hedge accounting of Revenue |
- |
- |
- |
- |
- |
(301,924) |
(301,924) | |
Net reversal to profit or loss |
60,027 |
13,231 |
- |
- |
- |
10,802 |
84,060 | |
Balances of September 30, 2019 |
(212,404) |
(313,473) |
- |
- |
- |
(291,122) |
(816,999) | |
Effect on profit or loss |
(60,027) |
(13,231) |
1,793 |
(24,532) |
73,188 |
(10,802) |
(33,611) | |
Classification of effects on income |
09/30/2019 | |||||||
Net Revenue |
(5,283) | |||||||
Fuel |
(18,624) | |||||||
Lease |
(7,213) | |||||||
Unrealized losses with conversion right |
134,079 | |||||||
Derivative losses - capped call |
(41,582) | |||||||
Derivative gains and losses |
(45,629) | |||||||
Foreign exchange rate variation, net |
(49,359) | |||||||
Total |
(33,611) | |||||||
(*) Classified as “Derivatives” rights or obligations, if assets or liabilities.
(**) Recorded under “Short and Long-term Debt” - funding.
The Company may adopt hedge accounting for derivatives contracted to hedge cash flow and that qualify for this classification as per CPC 48 - “Financial Instruments” (IFRS 9). As of September 30, 2019, the Company adopts cash flow hedge for aeronautical fuel protection and future foreign currency revenues.
The aircraft fuel prices fluctuate due to the volatility of the price of crude oil by product price fluctuations. To mitigate the risk of fuel price, as of September 30, 2019, the Company held call options and WTI, Brent and Collar derivatives. In the period ended September 30, 2019, the Company recognized total losses of R$60,027 related to derivatives operations in the statement of operations (gains of R$53,417 in the period ended September 30, 2018).
In the periods ended September 30, 2019 and December 31, 2018, the Company held derivatives operations designated and not designated as “hedge accounting”.
62
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
The Company is mainly exposed to lease transactions indexed to variations in the Libor rate until the aircraft is received. To mitigate such risks, the Company has derivative financial instruments of interest rate (Libor) swaps. During the period ended September 30, 2019, the Company recognized total losses with interest hedging transactions in the amount of R$12,112 (loss of R$13,231 in the period ended September 30, 2018).
Foreign currency risk derives from the possibility of unfavorable fluctuation of foreign currencies to which the Company’s liabilities or cash flows are exposed. During the period ended September 30, 2019, the Company recognized a total gain with foreign exchange hedge operations in the amount of R$1,793 (there were no foreign exchange hedge operations in the period ended September 30, 2018).
The Company’s foreign currency exposure is summarized below:
|
Parent Company |
Consolidated | ||
|
09/30/2019 |
12/31/2018 |
09/30/2019 |
12/31/2018 |
Assets |
|
|
|
|
Cash, equivalents, short-term investments and restricted cash |
5,493 |
373,431 |
289,774 |
963,973 |
Trade receivables |
- |
- |
171,609 |
148,538 |
Deposits |
52,749 |
- |
1,103,465 |
885,804 |
Derivatives assets |
128,506 |
- |
128,506 |
- |
Other assets |
- |
352,437 |
- |
352,437 |
Total assets |
186,748 |
725,868 |
1,693,354 |
2,350,752 |
|
|
|
|
|
Liabilities |
|
|
|
|
Short and long-term debt |
6,573,945 |
4,659,102 |
7,719,298 |
5,576,835 |
Leases |
- |
- |
6,172,236 |
912,145 |
Foreign currency suppliers |
25,150 |
10,378 |
427,932 |
903,287 |
Derivatives |
- |
- |
239,370 |
409,662 |
Total liabilities |
6,599,095 |
4,669,480 |
14,558,836 |
7,801,929 |
|
|
|
|
|
Exchange exposure |
6,412,347 |
3,943,612 |
12,865,481 |
5,451,177 |
|
|
|
|
|
Commitments not recorded in the statements of financial position |
|
|
|
|
Future commitments resulting from operating leases (*) |
- |
- |
- |
7,135,784 |
Future commitments resulting from firm aircraft orders |
67,961,829 |
63,235,639 |
67,961,829 |
63,235,639 |
Total |
67,961,829 |
63,235,639 |
67,961,829 |
70,371,423 |
|
|
|
|
|
Total foreign currency exposure - R$ |
74,374,176 |
67,179,251 |
80,827,310 |
75,822,600 |
Total foreign currency exposure - US$ |
17,859,518 |
17,337,476 |
19,409,113 |
19,568,133 |
Exchange rate (R$/US$) |
4.1644 |
3.8748 |
4.1644 |
3.8748 |
(*) On January 1, 2019, as a result of the initial adoption of IFRS 16, the obligations corresponding to the operating leases were recognized in the Company’s statement of financial position, as per Note 4.1.1, as well as the corresponding right of use associated with this obligation.
The company’s transactions in foreing currency are mainly indexed to the U.S. dollar.
63
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
The Company, through Gol Equity Finance, in the context of the pricing of the ESN issued on March 26, 2019, April 17, 2019 and July 17, 2019, as detailed in Note 18.1.1, contracted private derivative operations (“capped call”) with part of the Note subscribers with the purpose of minimizing the potential dilution of the Company’s preferred shares and ADSs.
The Company recognized a total capped call expense of R$41,582 for the nine-month period ended September 30, 2019.
The credit risk is inherent in the Company’s operating and financing activities, mainly represented by cash and cash equivalents, short-term investments and trade receivables. Financial assets classified as cash, cash equivalents and short-term investments are deposited with counterparties rated investment grade or higher by S&P or Moody's (between AAA and AA-), pursuant to risk management policies.
Credit limits are set for all customers based on internal credit rating criteria and carrying amounts represent the maximum credit risk exposure. Customer creditworthiness is assessed based on an internal system of extensive credit rating. Outstanding trade receivables are frequently monitored by the Company.
Derivative financial instruments are contracted in the over-the-counter market (OTC) with counterparties rated investment grade or higher, or in a commodities and futures exchange (B3 or NYMEX), thus substantially mitigating credit risk. The Company's obligation is to evaluate counterparty risk involved in financial instruments and periodically diversify its exposure.
The contractual maturity schedules of financial liabilities that impact the Company’s liquidity are as follows:
|
Parent Company | |||||
|
Less than |
6 to 12 months |
1 to 5 years |
More than |
Total | |
Short and long-term debt |
205,679 |
1,460,538 |
6,060,605 |
2,000,826 |
9,727,648 | |
Suppliers |
26,593 |
- |
- |
- |
26,593 | |
On September 30, 2019 |
232,272 |
1,460,538 |
6,060,605 |
2,000,826 |
9,791,472 | |
Short and long-term debt |
154,197 |
168,070 |
2,795,870 |
4,345,409 |
7,463,546 | |
Suppliers |
10,765 |
- |
- |
- |
10,765 | |
As of December 31, 2018 |
164,962 |
168,070 |
2,795,870 |
4,345,409 |
7,474,311 | |
64
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
|
Consolidated | ||||
|
Less than 6 months |
6 - 12 months |
1 - 5 years |
More than 5 years |
Total |
Short and long-term debt |
894,123 |
2,009,500 |
6,697,471 |
1,973,748 |
11,574,842 |
Leases |
720,282 |
630,482 |
3,697,724 |
1,223,160 |
6,271,648 |
Suppliers |
1,294,680 |
- |
25,383 |
- |
1,320,063 |
Suppliers - Forfaiting |
559,503 |
- |
- |
- |
559,503 |
Derivatives |
193,081 |
- |
46,289 |
- |
239,370 |
On September 30, 2019 |
3,661,669 |
2,639,982 |
10,466,867 |
3,196,908 |
19,965,426 |
|
|
|
|
|
|
Short and long-term debt |
901,588 |
438,386 |
3,692,463 |
4,394,544 |
9,426,981 |
Leases |
227,985 |
227,879 |
1,452,842 |
8,965 |
1,917,671 |
Suppliers |
1,403,793 |
22 |
120,137 |
- |
1,523,952 |
Suppliers - Forfaiting |
365,696 |
- |
- |
- |
365,696 |
Derivatives liabilities |
95,773 |
99,671 |
214,218 |
- |
409,662 |
As of December 31, 2018 |
2,994,835 |
765,958 |
5,479,660 |
4,403,509 |
13,643,962 |
As of September 30, 2019, the Company considered the closing exchange rate of R$4.1644/US$1.00 as the likely scenario. The table below shows the sensitivity analysis and the effect on profit or loss of exchange rate fluctuations in the exposure as of September 30, 2019:
|
|
Parent Company |
Consolidated |
Exchange rate |
Effect on profit or loss |
Effect on profit or loss | |
Net liabilities exposed to the risk of appreciation of the U.S. dollar |
4.1644 |
(6,412,347) |
(12,865,480) |
Dollar depreciation (-50%) |
2.0822 |
3,206,174 |
6,432,740 |
Dollar depreciation (-25%) |
3.1233 |
1,603,087 |
3,216,370 |
Dollar appreciation (+25%) |
5.2055 |
(1,603,087) |
(3,216,370) |
Dollar appreciation (+50%) |
6.2466 |
(3,206,174) |
(6,432,740) |
As of September 30, 2019, the Company, through its subsidiary GLA, has oil derivative contracts for protection equivalent to 71% of 12-month consumption, protection equivalent to 49% of 24-month consumption and 44% for 27 months. The probable scenarios used by the Company are the market curves at the close of September 30, 2019, for derivatives that hedge the fuel price risk.
The table below shows the sensitivity analysis in U.S. dollars of the fluctuations in jet fuel barrel prices:
|
Fuel | |
Reference factor: WTI 51.86 |
US$/bbl (WTI) |
R$ (000) |
Decline in prices/barrel (-50%) |
25.93 |
(1,260,871) |
Decline in prices/barrel (-25%) |
38.90 |
(728,472) |
Increase in prices/barrel (+25%) |
64.83 |
236,823 |
Increase in prices/barrel (+50%) |
77.79 |
772,824 |
65
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
As of September 30, 2019, the Company holds financial investments and financial liabilities indexed to several rates, and position in Libor derivatives. In its sensitivity analysis of non-derivative financial instruments, it was considered the impacts on yearly interest of the exposed values as of September 30, 2019 (see Note 19) that were exposed to fluctuations in interest rates, as the scenarios below show. The amounts show the impacts on profit or loss according to the scenarios presented below:
|
| |
|
Short-term investments net of financial debt (a) | |
Risk |
Increase in the CDI rate |
Decrease in the Libor rate |
Reference rates |
5.40% |
2.09% |
Exposure amount (probable scenario) (b) |
(1,374,288) |
379,607 |
Remote favorable scenario (-50%) |
36,115 |
(4,042) |
Possible favorable scenario (-25%) |
18,057 |
(2,021) |
Possible adverse scenario (+25%) |
(18,057) |
2,021 |
Remote adverse scenario (+50%) |
(36,115) |
4,042 |
(a) Total invested and raised in the financial market at the CDI rate and Libor interest rate.
(b) Book balances recorded as of September 30, 2019.
(c) Derivatives contracted to hedge the Libor rate variation embedded in the agreements for future delivery of aircraft.
The following table shows a summary of the Company’s and its subsidiaries’ financial instruments measured at fair value, including their related classifications of the valuation method, as of September 30, 2019 and December 31, 2018:
|
Parent Company | ||||
|
09/30/2019 |
12/31/2018 | |||
Fair value level |
Book value |
Fair value |
Book value |
Fair value | |
Cash and cash equivalents |
Level 1 |
158,460 |
158,460 |
- |
- |
Cash and cash equivalents |
Level 2 |
- |
- |
2,217 |
2,217 |
Short-term investments |
Level 2 |
- |
- |
92,015 |
92,015 |
Restricted cash |
Level 2 |
42,138 |
42,138 |
39,784 |
39,784 |
Fair value adjustment of derivatives |
Level 1 |
(525,669) |
(525,669) |
- |
- |
|
Consolidated | ||||
|
09/30/2019 |
12/31/2018 | |||
Fair value level |
Book value |
Fair value |
Book value |
Fair value | |
Cash and cash equivalents |
Level 1 |
162,106 |
162,106 |
- |
- |
Cash and cash equivalents |
Level 2 |
- |
- |
307,538 |
307,538 |
Short-term investments |
Level 1 |
973,211 |
973,211 |
21,100 |
21,100 |
Short-term investments |
Level 2 |
- |
- |
457,264 |
457,264 |
Restricted cash |
Level 2 |
623,939 |
623,939 |
822,132 |
822,132 |
Derivatives assets |
Level 2 |
135,000 |
135,000 |
- |
- |
Fair value adjustment of derivatives |
Level 1 |
(525,669) |
(525,669) |
- |
- |
Derivatives liabilities |
Level 1 |
(245,865) |
(245,865) |
(409,662) |
(409,662) |
66
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
The changes in and equity instruments issued liabilities from the Company’s financing activities in the periods ended September 30, 2019 and 2018 are as follows:
|
09/30/2019 | ||||||||
|
Non-cash changes |
||||||||
Opening balance |
Cash flow |
Interest paid |
Capital increase |
Exchange variations, net |
Provision for interest and cost amortization |
Unrealized hedge results |
Other |
Closing Balance | |
Short and long-term debt |
4,659,102 |
1,587,259 |
(319,223) |
- |
472,992 |
324,984 |
(151,169) |
|
6,573,945 |
Capital stock |
3,055,940 |
2,583 |
- |
2,818 |
- |
- |
- |
|
3,061,341 |
Capital reserves |
88,476 |
9,134 |
- |
- |
- |
- |
- |
|
97,610 |
Shares to be issued |
2,818 |
28,343 |
- |
(2,818) |
- |
- |
- |
|
28,343 |
09/30/2018 | ||||||||
Non-cash changes |
||||||||
Opening balance |
Cash flow |
Payments and loan costs |
Sale of treasury shares |
Exchange variations, net |
Provision for Interests |
Other |
Closing Balance | |
Short and long-term debt |
4,034,975 |
(150,037) |
(274,086) |
- |
852,651 |
279,409 |
- |
4,742,912 |
Treasury shares |
(4,168) |
(15,929) |
- |
19,971 |
- |
- |
- |
(126) |
Shares to be issued |
- |
167 |
- |
- |
- |
- |
- |
167 |
Capital stock |
3,082,802 |
9,770 |
- |
- |
- |
- |
- |
3,092,572 |
Obligations to related parties |
135,010 |
17,958 |
- |
- |
4,589 |
7,112 |
1,403 |
166,072 |
67
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
09/30/2019 | ||||||||||||||
Non-cash changes |
||||||||||||||
Opening balance |
Cash flow |
Initial adoption adjustment – CPC 06 (R2) |
Capital increase |
Profit for the period |
Provision Property, plant and equipment |
Dividends and JSCP paid through subsidiary Smiles |
Interest payments and loan costs |
Gains on change in investment |
Exchange variation net |
Provision for Interests |
Unrealized hedge results |
Other |
Closing balance | |
Short and long-term debt |
6,443,807 |
1,302,545 |
- |
- |
- |
130,787 |
- |
(378,072) |
- |
557,493 |
390,643 |
(151,169) |
- |
8,296,034 |
Leases |
912,145 |
(1,223,685) |
5,370,868 |
- |
- |
630,858 |
- |
(21,135) |
- |
446,397 |
377,323 |
- |
(274,717) |
6,218,054 |
Derivatives |
409,662 |
- |
- |
- |
- |
- |
- |
- |
- |
153,615 |
(323,907) |
239,370 | ||
Other liabilities |
147,239 |
- |
- |
- |
- |
- |
(66,015) |
- |
- |
- |
- |
- |
(20,409) |
60,815 |
Capital stock |
3,055,940 |
- |
- |
5,401 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
3,061,341 |
Capital reserves |
88,476 |
9,134 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
97,610 |
Shares to be issued |
2,818 |
28,343 |
- |
(2,818) |
- |
- |
- |
- |
- |
- |
- |
- |
- |
28,343 |
Non-controlling interests |
480,061 |
- |
(256) |
- |
212,244 |
- |
(143,136) |
- |
649 |
- |
- |
- |
1,110 |
550,672 |
09/30/2018 | ||||||||||||
|
|
Non-cash changes |
|
|||||||||
Opening balance |
Cash flow |
Dividends accrued in the previous period |
Income for the period |
Interest payments and loan costs |
Disposal of treasury shares |
Share-based payments |
Exchange variations, net |
Provision for Interests |
Other |
Write-off of property, plant and equipment and intangible assets
|
Closing balance | |
Short and long-term debt |
7,105,667 |
(201,128) |
- |
- |
(384,605) |
- |
- |
1,269,038 |
428,196 |
45,845 |
(258,769) |
8,004,244 |
Treasury shares |
(4,168) |
(15,929) |
- |
- |
- |
19,971 |
- |
- |
- |
- |
- |
(126) |
Shares to be issued |
- |
167 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
167 |
Capital stock |
3,082,802 |
9,770 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
3,092,572 |
Non-controlling interests |
412,013 |
(218,618) |
46,930 |
227,784 |
- |
- |
385 |
- |
- |
600 |
- |
469,094 |
68
|
Notes to the interim financial informationSeptember 30, 2019 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
|
Consolidated | |
|
09/30/2019 |
09/30/2018 |
|
|
|
Deposits in guarantee for lease agreements |
(476) |
- |
Maintenance reserve |
(4,888) |
- |
Right of use of flight equipment |
630,858 |
- |
Property, plant and equipment acquisition through financing |
130,787 |
48,836 |
As of September 30, 2019, insurance coverage by nature, considering the aircraft fleet in relation to the maximum reimbursable amounts indicated in U.S. dollars, along with Smiles’ insurance coverage, is as follows:
|
In thousands of R$ |
In thousands of US$ |
GLA |
|
|
Warranty - Hull/War |
353,974 |
85,000 |
Civil liability per event/aircraft (a) |
3,123,300 |
750,000 |
Inventories (local) (b) |
1,041,100 |
250,000 |
|
|
|
Smiles |
|
|
Rent Guarantee (Cond. Rio Negro - Alphaville) |
1,238 |
- |
D&O liability insurance |
100,000 |
- |
Fire (Property Insurance Cond. Rio Negro - Alphaville) |
12,747 |
- |
(a) In accordance with the agreed amount for each aircraft up to the maximum limit indicated.
(b) Values per incident and annual aggregate.
Pursuant to Law No. 10,744 of October 9, 2003, the Brazilian government assumed the commitment to complement any civil-liability expenses related to third parties caused by war or terrorist events, in Brazil or abroad, which GLA may be required to pay, for amounts exceeding the limit of the insurance policies effective since September 10, 2001, limited to the amount in Brazilian Reais equivalent to US$1.0 billion.
On October 3, 2019 ended the preemptive right period for shareholders to exercise the right to acquired subscription bonus issued by the Company's book-entry subscription bonus, all book-entry and in a single series, which was approved by the Company, all of them deed in single series, which was approved by the Company’s Board of Directors on August 26, 2019.
In total 8,032,400 bonus were exercised, from which 7,901,232 were exercised by Gol Equity Finance. The total of 7,160,039 bonus were not exercised.
The subscription bonus may be negotiated in B3, once the period for exercising bonus surplus will be ended, from October 31, 2019.
On October 30, 2019 the Board of Directors approved a capital increase of R$ 60,164,709.01 with the issuance of 5,391,373 preferred shares related to the exercise of stock option granted in the scope of the Option Plan.
69
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: October 29, 2019
GOL LINHAS AÉREAS INTELIGENTES S.A. | |
By: |
/s/ Richard F. Lark, Jr. |
|
Name: Richard F. Lark, Jr. Title: Investor Relations Officer |
FORWARD-LOOKING STATEMENTS
This press release may contain forward-looking statements. These statements are statements that are not historical facts, and are based on management’s current view and estimates of future economic circumstances, industry conditions, company performance and financial results. The words “anticipates,” “believes,” “estimates,” “expects,” “plans” and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.
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