SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K/A
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the month of April, 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 Regristrant'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___
If "Yes" is marked, indicated below the file number assigned to the
registrant in connection with Rule 12g3-2(b):
(Free translation into English from original previously issued in Portuguese)
Individual and consolidated
Financial Statements
GOL Linhas Aéreas Inteligentes S.A.
December 31, 2018
with review report of independent auditors
Gol Linhas Aéreas Inteligentes S.A.
Individual and consolidated financial statements
December 31, 2018
Contents
|
|
Management report
|
01
|
Comments on business projection trends
|
09
|
Report of the Statutory Audit Committee (CAE)
|
10
|
Fiscal Council’s Report
|
12
|
Declaration of the officers on the financial statements
|
13
|
Statement of Executive officers on the independent auditors’ review report on the
financial statements
|
14
|
Independent Auditors’ report on the individual and consolidated financial statements
|
15
|
|
|
Statements of financial position
|
21
|
Statements of operations
|
23
|
Statements of comprehensive income
|
24
|
Statements of changes in equity
|
25
|
Statements of cash flows
|
27
|
Statements of value added
|
29
|
Notes to the financial statements
|
30
|
Management report
On January 15, 2019, GOL completed 18 years of operation and, since its foundation, the Company has transported over 450 million passengers on over 3.8 million flights to destinations in Brazil, Latin America, the Caribbean and the U.S. During these 18 years GOL has constantly evolved and achieved significant results, consolidating itself as Brazil’s main domestic airline, becoming the leader in the corporate segment and in the domestic market, with a market share of 36%. The pioneers solutions brought by the Company have simplified the process of air travel. We continue to work and innovate even more to offer the best service, with low cost and completely focused on our Client’s satisfaction. Today the Company already offers Wi-Fi on board in 90% of the fleet, and plans to offer Wi-Fi on all our aircraft by April 2019. GOL will be the first airline in the world with high speed internet on board all flights .
The arrival of the MAX 8 aircraft into our standardized fleet improves our competitive advantage with the lowest cost structure and highest operational efficiency in the Brazilian airline market. GOL continues its focus on modernization by replacing NGs for MAX 8 aircraft. In addition to providing us lower operating expenses, such as approximately 15% reduction in fuel consumption per ASK, this new technology of the MAX 8 also extends the reach of our network, allowing us to serve new destinations. The renewal plan will allow GOL to finish 2019 and 2020 with 24 and 34 MAX aircraft in its fleet, while maintaining discipline in capacity management.
In line with the international expansion strategy towards new markets, during the last quarter of 2018 GOL started nonstop flights from Brasília and Fortaleza to Miami and Orlando, and additionally, opened regular operations from São Paulo to Quito, Ecuador, being the only airline to operate this route without stops. In the year of 2019, direct flights from Brasília to Cancun, Mexico, will be launched, as well as the new routes from Vitória to Buenos Aires, both in the first semester. GOL will also start regular operations from Recife to Santiago in Chile during the second half of this year. The MAX 8 will allow for the continuous international expansion of the network, with less overlap in relation to other airlines.
GOL is the only airline that offers flights from Congonhas (Metro São Paulo’s downtown Airport) to the markets with the highest demand in the U.S. and Latin America, utilizing an efficient capacity and flight management system intelligently connecting the Company’s network and offering the best flight experience and comfort to Clients.
The Company has followed a disciplined strategy of deleveraging its balance sheet and improving its liquidity profile, through the amortization of short and long-term debt using funds from operating cash flow and new issues. We finalized a series of liability management initiatives throughout 2018: the repurchase of bonds maturing in 2018, 2020, 2021, 2023 and 2028, and the amortization of debentures. In 2019, we remain focused on the deleveraging and on February 1, we concluded a tender offer for the acquisition of our Senior Notes due 2022. The participation in the tender offer of holders representing around 15% of the 2022 Notes showed that the market is very comfortable with GOL’s risk, as well as has a very positive perception regarding the Company's future developments.
In 2018 the Real once again depreciated against the US Dollar and the average prices of Jet Fuel increased in comparison to the previous year, which led to significant cost pressures. Despite this challenging scenario, GOL posted results consistent with guidance. In 4Q18, we achieved the tenth consecutive quarter with positive operating results and the highest operating margin since 2006: operating income of R$672.4 million and EBIT margin of 21.0%. GOL is hedged for approximately 59% of its fuel consumption for the remainder of 2019, at an average cost of US$60.5. This quarter’s solid result reflects GOL’s success in managing its business portfolio through the cycle.
1
For 2019, Brazil’s GDP is expected to grow 2.5% (according to the Central Bank FOCUS Report), while industry demand is estimated to grow between 6% and 7% (according to ABEAR). In addition, the Company, by accelerating the incorporation of new MAX 8 aircraft, is structured and prepared to serve additional demand.
2
Operating and Financial Indicators
Traffic data – GOL
(in millions)
|
4Q18
|
4Q17
|
% Var.
|
2018
|
2017
|
% Var.
|
RPK GOL – Total
|
10,244
|
9,896
|
3.5%
|
38,423
|
37,231
|
3.2%
|
RPK GOL – Domestic
|
9,037
|
8,879
|
1.8%
|
34,266
|
33,250
|
3.1%
|
RPK GOL – International
|
1,207
|
1,017
|
18.7%
|
4,158
|
3,981
|
4.4%
|
ASK GOL – Total
|
12,506
|
12,214
|
2.4%
|
48,058
|
46,695
|
2.9%
|
ASK GOL – Domestic
|
10,901
|
10,863
|
0.4%
|
42,428
|
41,463
|
2.3%
|
ASK GOL – International
|
1,605
|
1,351
|
18.8%
|
5,630
|
5,232
|
7.6%
|
GOL Load Factor – Total
|
81.9%
|
81.0%
|
0.9 p.p
|
80.0%
|
79.7%
|
0.3 p.p
|
GOL Load Factor – Domestic
|
82.9%
|
81.7%
|
1.2 p.p
|
80.8%
|
80.2%
|
0.6 p.p
|
GOL Load Factor – International
|
75.2%
|
75.3%
|
-0.1 p.p
|
73.9%
|
76.1%
|
-2.2 p.p
|
Operating data
|
4Q18
|
4Q17
|
% Var.
|
2018
|
2017
|
% Var.
|
Average Fare (R$)
|
334
|
313
|
6.7%
|
318
|
294
|
8.1%
|
Revenue Passengers - Pax on board ('000)
|
8,944
|
8,652
|
3.4%
|
33,446
|
32,507
|
2.9%
|
Aircraft Utilization (block hours/day)
|
11.5
|
12.4
|
-7.0%
|
11.8
|
12.1
|
-2.5%
|
Departures
|
63,431
|
64,910
|
-2.3%
|
250,040
|
250,654
|
-0.2%
|
Total Seats (‘000)
|
11,079
|
10,872
|
1.9%
|
42,968
|
41,953
|
2.4%
|
Average Stage Length (km)
|
1,108
|
1,103
|
0.4%
|
1,098
|
1,094
|
0.3%
|
Fuel Consumption (mm liters)
|
365
|
364
|
0.4%
|
1,403
|
1,379
|
1.8%
|
Full-time Employees (at period end)
|
15,294
|
14,532
|
5.2%
|
15,294
|
14,532
|
5.2%
|
Average Operating Fleet
6
|
116
|
111
|
5.1%
|
112
|
109
|
2.7%
|
On-time Departures
|
87.5%
|
92.5%
|
-5.0 p.p
|
91.8%
|
94.7%
|
-2.9 p.p
|
Flight Completion
|
98.6%
|
98.8%
|
-0.2 p.p
|
98.5%
|
98.5%
|
0.0 p.p
|
Passenger Complaints (per 1000 pax)
|
1.31
|
1.62
|
-19.3%
|
1.75
|
1.45
|
20.9%
|
Lost Baggage (per 1000 pax)
|
2.19
|
2.09
|
5.0%
|
2.03
|
2.06
|
-1.3%
|
Financial data
|
4Q18
|
4Q17
|
% Var.
|
2018
|
2017
|
% Var.
|
Net YIELD (R$ cents)
|
29.14
|
27.35
|
6.6%
|
27.67
|
25.69
|
7.7%
|
Net PRASK (R$ cents)
|
23.87
|
22.16
|
7.7%
|
22.13
|
20.48
|
8.0%
|
Net RASK (R$ cents)
|
25.59
|
23.80
|
7.5%
|
23.75
|
22.12
|
7.3%
|
CASK (R$ cents)
|
20.22
|
20.64
|
-2.0%
|
20.83
|
20.00
|
4.2%
|
CASK ex-fuel (R$ cents)
|
11.20
|
13.90
|
-19.4%
|
12.78
|
13.82
|
-7.5%
|
CASK ex-fuel
4
(R$ cents)
|
16.28
|
13.90
|
17.1%
|
14.69
|
13.82
|
6.3%
|
CASK ex-fuel
5
(R$ cents)
|
14.45
|
13.90
|
3.9%
|
14.14
|
13.82
|
2.4%
|
Breakeven Load Factor
|
64.7%
|
70.3%
|
-5.6 p.p
|
70.1%
|
72.1%
|
-2.0 p.p
|
Average Exchange Rate
1
|
3.8084
|
3.2466
|
17.3%
|
3.6558
|
3.1925
|
14.5%
|
End of period Exchange Rate
1
|
3.8748
|
3.3080
|
17.1%
|
3.8748
|
3.3080
|
17.1%
|
WTI (avg. per barrel. US$)
2
|
59.34
|
55.30
|
7.3%
|
64.90
|
50.85
|
27.6%
|
Price per liter Fuel (R$)
3
|
3.28
|
2.34
|
40.3%
|
2.91
|
2.15
|
35.2%
|
Gulf Coast Jet Fuel (avg. per liter. US$)
2
|
0.52
|
0.46
|
13.5%
|
0.47
|
0.41
|
15.0%
|
1. Source: Brazilian Central Bank; 2. Source: Bloomberg; 3. Fuel expenses excluding hedge results and PIS/COFINS credits/liters consumed; 4. Excluding gains results of sale and sale-leaseback transactions; 5. Excluding gains results of sale and sale-leaseback transactions, and costs from maintenance of aircraft to the execution of the fleet renewal plan; 6. Average operating fleet excluding aircraft in sub-leasing and MRO. *4Q17 and 12M17 results have been restated based on IFRS 15. Certain calculations may not match with the information in the quarterly financials due to rounding.
Domestic market – GOL
GOL’s domestic supply increased by 0.4%, and demand increased by 1.8% in 4Q18. As a result, the Company’s domestic load factor reached 82.9%, an increase of 1.2 p.p. when compared to 4Q17. GOL transported 8.4 million domestic passengers in the quarter, an increase of 3.2%, when compared with the same period in 2017. The Company is the leader in transported passengers in Brazil’s domestic airline market.
3
International market - GOL
GOL’s international supply increased by 18.8%, and international demand increased 18.7% in 4Q18 compared to 4Q17. The Company’s international load factor in 4Q18 was 75.2%, reducing 0.1 p.p. over 4Q17. During the quarter, GOL transported 0.5 million passengers in the international market, a decrease of 0.9% when compared to the fourth quarter of 2017.
Volume of Departures and Total seats - GOL
The total volume of GOL departures was 63,431, a decrease of 2.3% in 4Q18 over 4Q17. The total number of seats available to the market was 11.0 million in the fourth quarter of 2018, increase of 1.9% quarter-over-quarter.
PRASK, Yield and RASK
Net PRASK increased by 7.7% in the quarter when compared to 4Q17, reaching 23.87 cents (R$), driven by a growth in net passenger revenue of 10.3% in the quarter. GOL’s Net RASK was 25.59 cents in (R$) 4Q18, an increase of 7.5% over 4Q17. Net yield
increased by 6.6% in 4Q18 over 4Q17, reaching 29.14 cents (R$), consequence of a 6.7% increase in GOL’s average fare.
For reference, below is a comparison of passenger and ancillary (cargo and other) revenue for the quarterly periods in 2017 and 2018 in accordance with IFRS15.
Net Operating Revenue/ASK (R$ cents)
|
|
1Q
|
2Q
|
3Q
|
4Q
|
Passenger
|
2018
|
22.53
|
20.11
|
21.70
|
23.87
|
2017
|
20.21
|
18.63
|
20.66
|
22.16
|
Cargo and Other
|
2018
|
1.33
|
1.95
|
1.52
|
1.72
|
2017
|
1.35
|
2.04
|
1.57
|
1.64
|
4
Operating result
Operating income (EBIT) in the fourth quarter was R$672.4 million, increase of 74.0% compared to the same period in 2017. 4Q18 operating margin was 21.0%, increase of 7.7 p.p. in relation to 4Q17. On a per available seat-kilometer basis, EBIT was 5.38 cents (R$) in 4Q18, compared to 3.16 cents (R$) in 4Q17 (increase of 70.2%)
.
EBITDA in 4Q18 totaled R$851.0 million in the period, increase of 60.6% over 4Q17. The impact of the increase in RASK of 1.79 cent (R$) and the decrease in CASK ex-depreciation of 0.67 cent (R$) resulted in an EBITDA per available seat-kilometer of 6.80 cents (R$) in 4Q18, increase of 2.47 cents (R$) compared to 4Q17.
EBITDAR in 4Q18 totaled R$1,162.9 million in the period, increase of 53.6% over 4Q17. On a per available seat-kilometer basis, EBITDAR was 9.30 cents (R$) in 4Q18, compared to 6.19 cents (R$) in 4Q17 (increase of 50.1%).
EBITDAR Calculation (R$ cents/ASK)
|
4Q18
|
4Q17
|
% Var.
|
2018
|
2017
|
% Var.
|
Net Revenues
|
25.59
|
23.80
|
7.5%
|
23.75
|
22.12
|
7.3%
|
Operating Expenses
|
(20.22)
|
(20.64)
|
-2.0%
|
(20.83)
|
(20.00)
|
4.2%
|
EBIT
|
5.38
|
3.16
|
70.2%
|
2.91
|
2.12
|
37.5%
|
Depreciation and Amortization
|
(1.43)
|
(1.18)
|
21.6%
|
(1.39)
|
(1.08)
|
28.5%
|
EBITDA
|
6.80
|
4.33
|
57.0%
|
4.30
|
3.20
|
34.5%
|
EBITDA Margin
|
26.6%
|
18.2%
|
8.4 p.p
|
18.1%
|
14.5%
|
3.6 p.p
|
Aircraft Rent
|
(2.49)
|
(1.86)
|
34.1%
|
(2.32)
|
(2.01)
|
15.1%
|
EBITDAR
|
9.30
|
6.19
|
50.1%
|
6.62
|
5.21
|
27.0%
|
EBITDAR Margin
|
36.3%
|
26.0%
|
10.3 p.p
|
27.9%
|
23.6%
|
4.3 p.p
|
*
4Q17
and 12M17
results have been restated based on IFRS 15
. Certain calculations may not match with the information in the quarterly financials due to rounding.
Operating Margins (R$ MM)
|
4Q18
|
4Q17
|
% Var.
|
2018
|
2017
|
% Var.
|
EBIT
|
672.4
|
386.3
|
74.0%
|
1,400.0
|
989.4
|
41.5%
|
EBIT Margin
|
21.0%
|
13.3%
|
7.7 p.p
|
12.3%
|
9.6%
|
2.7 p.p
|
EBITDA
|
851.0
|
529.9
|
60.6%
|
2,068.5
|
1,494.8
|
38.4%
|
EBITDA Margin
|
26.6%
|
18.2%
|
8.4 p.p
|
18.1%
|
14.5%
|
3.6 p.p
|
EBITDAR
|
1,162.9
|
757.0
|
53.6%
|
3,181.3
|
2,434.5
|
30.7%
|
EBITDAR Margin
|
36.3%
|
26.0%
|
10.3 p.p
|
27.9%
|
23.6%
|
4.3 p.p
|
*4
Q17
and 12M17
results have been restated based on IFRS 15
. Certain calculations may not match with the information in the quarterly financials due to rounding.
5
EBIT, EBITDA and EBITDAR reconciliation
(R$ MM)*
|
4Q18
|
4Q17
|
% Var.
|
2018
|
2017
|
% Var.
|
Net income (loss)¹
|
580.2
|
62.2
|
832.8%
|
(779.7)
|
377.8
|
NM
|
(-) Income taxes
|
(74.6)
|
98.5
|
NM
|
(297.1)
|
307.2
|
NM
|
(-) Net financial result
|
(17.6)
|
(422.6)
|
-95.8%
|
(1,882.6)
|
(918.8)
|
104.9%
|
EBIT
|
672.4
|
386.3
|
74.0%
|
1,400.0
|
989.4
|
41.5%
|
(-) Depreciation and amortization
|
(178.7)
|
(143.6)
|
24.5%
|
(668.5)
|
(505.4)
|
32.3%
|
EBITDA
|
851.0
|
529.9
|
60.6%
|
2,068.5
|
1,494.8
|
38.4%
|
(-) Aircraft rent
|
(311.9)
|
(227.1)
|
37.3%
|
(1,112.8)
|
(939.7)
|
18.4%
|
EBITDAR
|
1,162.9
|
757.0
|
53.6%
|
3,181.3
|
2,434.5
|
30.7%
|
*In accordance with CVM Instruction 527, the Company presents the reconciliation of EBIT and EBITDA, whereby: EBIT = net income (loss) plus income and social contribution taxes and net financial result; and EBITDA = net income (loss) plus income and social contribution taxes, net financial result, and depreciation and amortization. GOL also shows the reconciliation of EBITDAR, given its importance as a specific aviation industry indicator, whereby: EBITDAR = net income (loss) plus income and social contribution taxes, the net financial result, depreciation and amortization, and aircraft operating lease expenses;
*4Q17
and 12M17
results has been restated based on IFRS 15.
Certain calculations may not match with the information in the quarterly financials due to rounding.
¹ Net income (loss) before minority interest
Fleet
Final
|
4Q18
|
4Q17
|
% Var.
|
3Q18
|
% Var.
|
Boeing 737s
|
121
|
119
|
+2
|
120
|
+1
|
800 NG
|
91
|
92
|
-1
|
92
|
-1
|
700 NG
|
24
|
27
|
-3
|
26
|
-2
|
MAX 8
|
6
|
0
|
+6
|
2
|
+4
|
By rental type
|
4Q18
|
4Q17
|
% Var.
|
3Q18
|
% Var.
|
Financial Leases
|
11
|
31
|
-20
|
25
|
-14
|
Operating Leases
|
110
|
88
|
+22
|
95
|
+15
|
¹Considers 13 aircraft in sale and leaseback operation
At the end of 4Q18, GOL’s total fleet was 121 Boeing 737 aircraft with all 121 aircraft in operation,
including
six aircraft MAX 8. At the end of December 2017, GOL’s total fleet was 119 Boeing 737 aircraft with all of them in operation on the Company’s routes.
GOL has 110 aircraft under operating leasing arrangements and 11 aircraft under
financial leases, with a purchase option at the end of their lease contracts.
The average age of the fleet was 9.5 years at the end of 4Q18. On December 31, the
Company
had 130 firm Boeing 737 MAX orders, comprised of 100 737 MAX 8 orders and 30 737 MAX 10 orders.
6
On December 26, 2018, GOL announced its plan to accelerate the modernization of its
fleet
with sale and leaseback agreements for 13 737 NG aircraft that will be exchanged for Boeing 737 MAX 8 aircraft in the fleet between 2019 and 2021.
Fleet plan
|
2018
|
2019E
|
2020E
|
>2020E
|
Total
|
Operating Fleet (End of the year)
|
121
|
126
|
130
|
|
|
Aircraft Commitments (R$ million)*
|
-
|
1,791.7
|
5,047.0
|
56,397.0
|
63,235.7
|
Pre-Delivery Payments (R$ million)
|
-
|
283.6
|
816.8
|
7,726.9
|
8,827.3
|
* Considers aircraft list price.
Relationship with Independent Auditors
When hiring services that are not related to external auditing from its independent auditors, Smiles bases its conduct on principles that preserve the auditor’s independence. Pursuant to internationally accepted standards, these principles consist of: (a) the auditors must not audit their own work, (b) the auditors must not execute managing functions for their clients and (c) the auditors must not represent their clients’ legal interests.
Based on the subparagraph III, article 2 of the CVM Instruction 381/2003, the Company adopts a formal procedure to hire services other than external auditing from our auditors. The procedure consists of consulting its Audit Committee to ensure that those services shall not affect the independence and the objectivity, required for the independent audit performance. Additionally, formal statements are required from the auditors regarding their independence while providing such services.
The Company informs that its independent auditor for the period, Ernst & Young Auditores Independentes (“EY”) did not provide additional services not related to auditing in the 2018 fiscal year.
7
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.
|
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.
|
EBITDAR
:
earnings before interest, taxes, depreciation, amortization and rent. Airlines normally present EBITDAR, since aircraft leasing represents a significant operating expense for their business.
|
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.
|
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.
8
About GOL Linhas Aéreas Inteligentes S.A. (“GOL”)
GOL
serves more than 30 million passengers annually. With Brazil's largest network, GOL offers customers more than 700 daily flights to 69 destinations in Brazil and in South America, the Caribbean and the United States.
GOLLOG
is a leading cargo transportation and logistics business serving more than 3,400 Brazilian municipalities and, through partners, more than 200 international destinations in 95 countries.
SMILES
is one of the largest coalition loyalty programs in Latin America, with over 15 million registered participants, allowing clients to accumulate miles and redeem tickets for more than 700 locations worldwide. Headquartered in São Paulo,
GOL
has a team of more than 15,000 highly skilled aviation professionals and
operates a fleet of 120 Boeing 737 aircraft, with a further 130 Boeing 737 MAX on order, 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, but not yet adopted, 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. The Company's non-financial information and estimates regarding the impact of recently issued, but not yet adopted, accounting standard IFRS 16 were not reviewed by the independent auditors.
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”. “Adjusted Net Debt”. ”total liquidity”. "EBITDA" and EBITDAR”. 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
9
Comments on business projection trends
The Company's financial perspectives are detailed below:
Financial Outlook
|
2019E
(1)
|
|
2020E
(1)
|
(Consolidated, IFRS)
|
Previous
|
Revised
|
|
Previous
|
Revised
|
Total fleet (average)
|
122 to 125
|
122 to 125
|
|
125 to 128
|
125 to 128
|
Total operational fleet (average)
|
~117
|
117
|
|
~120
|
120
|
ASKs, System (% change)
|
6 to 10
|
6 to 10
|
|
7 to 10
|
7 to 10
|
- Domestic
|
2 to 4
|
2 to 4
|
|
3 to 5
|
3 to 5
|
- International
|
35 to 45
|
35 to 45
|
|
10 to 20
|
10 to 20
|
Seats, System (% change)
|
3 to 4
|
3 to 4
|
|
1 to 3
|
1 to 3
|
Departures, System (% change)
|
3 to 5
|
3 to 5
|
|
1 to 3
|
1 to 3
|
Average load factor (%)
|
79 to 81
|
79 to 81
|
|
79 to 81
|
79 to 81
|
Ancillary revenues, net
2
(R$ bn)
|
~ 1.0
|
~ 1.0
|
|
~ 1.1
|
~ 1.1
|
Total net revenues (R$ billion)
|
~ 12.9
|
~ 12.9
|
|
~ 14.2
|
~ 14.2
|
Non-fuel CASK (R$ cents)
|
~ 13
|
~ 13
|
|
~ 13
|
~ 13
|
Fuel liters consumed (mm)
|
~ 1,420
|
~ 1,420
|
|
~ 1,480
|
~ 1,480
|
Fuel price (R$/liter)
|
~ 2.9
|
~ 2.8
|
|
~ 3.0
|
~ 2.9
|
EBITDA margin (%)
|
~ 27
|
~ 28
|
|
~ 28
|
~ 29
|
EBIT margin (%)
|
~ 17
|
~ 18
|
|
~ 18
|
~ 19
|
Net financial expense
3
(R$ billion)
|
~ 1.2
|
~ 1.2
|
|
~ 1.2
|
~ 1.2
|
Pre-tax margin
3
(%)
|
~ 9
|
~ 10
|
|
~ 11
|
~ 12
|
Effective income tax rate (%)
|
~ 20
|
~ 20
|
|
~ 20
|
~ 20
|
Minority interest
4
(R$ mm)
|
~ 300
|
~ 300
|
|
~ 330
|
~ 330
|
Capex, net (R$ mm)
|
~ 650
|
~ 650
|
|
~ 600
|
~ 600
|
Net Debt
5
/ EBITDA (x)
|
~ 3.0x
|
~ 2.9x
|
|
~ 2.5x
|
~ 2.4x
|
Fully-diluted shares out. (million)
|
348.7
|
349.9
|
|
348.7
|
349.9
|
EPS, fully diluted
(R$)
|
2.20 to 2.60
|
2.40 to 2.80
|
|
2.60 to 3.10
|
2.80 to 3.30
|
Fully-diluted ADS out. (million)
|
174.4
|
174.9
|
|
174.4
|
174.9
|
EPADS, fully diluted
(US$)
|
1.20 to 1.40
|
1.30 to 1.50
|
|
1.60 to 1.90
|
1.70 to 2.00
|
|
|
|
|
|
|
(1) Considers adoption of IFRS 16; (2) Net revenue of cargo, loyalty, buy-on-board and other ancillary revenues; (3) Excluding currency gains and losses; (4) Source: average of analyst estimates reported on Bloomberg; (5) Excluding perpetual bonds.
10
Report of the Statutory Audit Committee (CAE)
General Information and Responsibilities
The Statutory Audit Committee (CAE) is a statutory body linked to the Board of Directors of Gol Linhas Aéreas Inteligentes S.A. (“Company”), which is composed of three independent members of the Board of Directors, who are elected by the Board members on annual basis, one of whom must be qualified as a Financial Expert. Pursuant to its internal regulations, the CAE is responsible for overseeing the quality and integrity of financial reports and statements; compliance with legal, regulatory and statutory standards; the suitability of risk management processes, internal control policies and procedures; internal audit activities. It is also responsible for overseeing the independent auditors’ work, including their independence and the quality and appropriateness of the services provided, as well as any differences of opinion with management. It determines the registration and vexercise of the independent audit within the scope of the Brazilian Securities and Exchange Commission (CVM) and performs the function of an Audit Committee, in compliance with the Sarbanes Oxley Act, to which the Company is subject to, since it is registered at the Securities and Exchange Commission – SEC. The CAE is also responsible for overseeing related-party transactions and operating the complaints channel.
CAE’s Activities in 2018:
In order to discuss the matters related to the year ended December 31, 2018, the CAE met eight times and, within its scope, carried out the following activities:
·
Its coordinator established the agendas and presided over the meetings;
·
It assessed the annual work plan and discussed the results of the activities performed by the independent auditors in 2017;
·
It supervised the activities and performance of the Company’s internal audit, analyzing the annual work plan, discussing the result of the activities and reviews. Any issues raised by the internal audit about improvements in the internal control environment are discussed with the respective managers/officers in order to implement continuous improvements. It supervised and analyzed the effectiveness, quality and integrity of internal control mechanisms in order to, among others, monitor compliance with the provisions related to the integrity of the financial statements, including quarterly financial information and other interim financial statements;
·
It supervised, together with management and the internal audit, the different agreements entered into between the Company or its subsidiaries, on the one hand, and the controlling shareholder, on the other hand, in order to verify compliance with the Company’s policies and controls regarding related-party transactions;
·
It met with the independent auditors, Ernst & Young, and addressed the following topics: the relationship and communication between the CAE and the external auditors, the scope of the auditors’ work, and the findings based on the implementation of the independent auditor’s work plan, among others; and
·
It prepared the CAE’s activities and operation report in 2018, in accordance with good corporate governance practices and the applicable regulation.
Internal Control Systems
Based on the agenda defined for 2018, the CAE addressed the main topics related to the Company’s internal controls, assessing risk mitigation initiatives and the senior management’s commitment to its continuous improvement. As a result of the meetings with the Company’s internal areas, the Statutory Audit Committee had the opportunity to make suggestions to the Board of Directors for improvements in the processes, overseeing the results already obtained in 2018.
Based on the work developed during 2018, the CAE considers the internal control system of the Company and its subsidiaries to be suitable for the size and complexity of their businesses and structured in order to ensure the efficiency of their operations and the systems that generate the financial reports, as well as compliance with applicable internal and external regulations.
Corporate Risk Management
CAE members, in the exercise of their duties and legal responsibilities, received information from the Company’s Administration about the relevant corporate risks, including the continuity risks, making evaluations and recommendations to increase the effectiveness of the risk management processes directly at Board of Directors’ meetings, contributing to and ratifying the initiatives implemented in 2018.
Conclusion
The CAE considers that the facts that have been presented to it, based on the works carried out and described in this Report, to be appropriate, and recommended, in its report, the approval of the Company’s audited financial statements for the year ended December 31, 2018.
São Paulo, February 27, 2019.
André Béla Jánszky
Member of the Statutory Audit Committee
Antônio Kandir
Member of the Statutory Audit Committee
Francis James Leahy Meaney
Member of the Statutory Audit Committee
11
Fiscal Council’s Report
The Fiscal Council of Gol Linhas Aéreas Inteligentes S.A., in the exercise of their legal and statutory duties and having reviewed the Company’s Management Report, Statement of Financial Position, Statement of Income, Statement of Comprehensive Income, Statement of Cash Flows, Statement of Changes in Equity, Statement of Value Added and respective Notes, individual and consolidated, for the fiscal year ended December 31, 2018, together with the Independent Auditors’ report, believes that they duly reflect the Company’s equity situation and financial and economic position as of December 31, 2018, recognizing that they are fit to be approved by the Annual Shareholders’ Meeting.
São Paulo, February 27, 2019.
Marcelo Moraes
Chairman of the Fiscal Council
Marcelo Curti
Member of the Fiscal Council
Marcela de Paiva
Member of the Fiscal Council
12
Declaration of the officers on the financial statements
In compliance with CVM Instruction No. 480/09, the Executive officers declare that they have discussed, reviewed and approved the financial statements for the year ended December 31, 2018.
São Paulo, February 27, 2019.
Paulo S. Kakinoff
President and Chief Executive Officer
Richard F. Lark Jr.
Executive Vice President and Chief Financial Officer
13
Declaration of the officers on the report of independent auditors on the interim financial information
In compliance with CVM Instruction No. 480/09, the Executive officers declare that they have discussed, reviewed and approved the opinions expressed in the review report of independent auditors, Ernst & Young Auditores Independentes S.S., on the individual and consolidated financial statements for the year ended December 31, 2018.
São Paulo, February 27, 2019.
Paulo S. Kakinoff
President and Chief Executive Officer
Richard F. Lark Jr.
Executive Vice President and Chief Financial Officer
14
Independent Auditors’ report on the individual and consolidated financial statements
To the shareholders and Board members and Officers of
Gol Linhas Aéreas Inteligentes S.A.
São Paulo - SP
Opinion
We have audited the individual and consolidated financial statements of GOL Linhas Aéreas Inteligentes S.A. (the “Company”), identified as Parent and Consolidated, respectively, which comprise the balance sheets as at December 31, 2018, and the statements of operations, comprehensive income, changes in equity and cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying financial statements present fairly, in all material respects, the individual and consolidated financial position of the Company as at December 31, 2018, and of its individual and consolidated financial performance and cash flows for the year then ended in accordance with the accounting practices adopted in Brazil and with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
Basis for opinion
We conducted our audit in accordance with Brazilian and International Standards on Auditing. Our responsibilities under those standards are further described in the
Auditor’s responsibilities for the audit of the individual and consolidated financial statements
section of our report. We are independent of the Company and its subsidiaries in accordance with the relevant ethical principles set forth in the Code of Professional Ethics for Accountants and the professional standards issued by the Brazil’s National Association of State Boards of Accountancy (CFC), and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the individual and consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter, including any commentary on the findings or outcome of our procedures, is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the individual and consolidated financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial statements.
15
Revenue recognition from passenger transportation
Revenue recognition from passenger transportation is highly dependent on information technology (IT) systems and their internal controls for the revenue recognition from passenger transportation when the air transportation service is provided. This process also takes into consideration other complex aspects that may affect the proper revenue recognition, such as recording of tickets sold but not used, unused tickets recorded as credits to passengers, and subject to expiration, in addition to agreements with other airline companies, interline and codeshare agreements with other airline companies. Revenues recognized by the Company are disclosed in Note 24, the recognition criteria are described in Note 4.17.1.
This subject was considered significant to our audit due to the complexity of the technology environment and its respective controls related to revenue recognition, including ticket prices in different currencies, as well as, the acquisition of tickets through miles programs.
How our audit addressed this matter:
Our audit procedures included, among others, the involvement of systems specialists to support us in assessing the operational design and effectiveness of IT controls and internal controls that comprise the process of ticket sales, registration, execution of passenger transportation and revenue recognition; the execution of audit tests with the purpose of assessing the integrity of the data in the IT systems involved in the revenue recognition process, through selection of tickets samples for each revenue group and tests on tickets used and unused; other passenger revenues, and passenger no-show, rebooking and cancellation charges; tests of internal controls on the tickets sales process and revenue recognition; discussion with Management the assessment of the audit differences identified, review of the audit differences recorded by the Company, as well as, the assessment on the internal controls impacted by the audit differences identified.
Based on the results of our audit procedures performed on the revenue recognition for passenger transportation, we consider acceptable the assumptions and criteria related to the revenue recognition process prepared by Management, and the related disclosures, in the context of the financial statement taken as a whole.
Breakage revenue
The Company’s revenues take into consideration the estimated number of tickets and miles that are not expected to be used or redeemed up to their expiration date, and are recognized as breakage revenue based on a calculation of tickets and miles with high potential for expiration due to their expiration or no use. The analyses and assumptions for the revenue recognition of breakage is reviewed annually by the Company’s Management to take into consideration the historical trend of tickets and miles expired, as well, as those with high potential to expire.
This matter was considered significant to our audit, considering the subjectivity involved in this analysis and the high level of judgment adopted by Management to determine the assumptions used to determine the expected number of tickets and miles that will expire.
16
How our audit addressed this matter:
Our audit procedures included, among others, the assessment of the design and operational effectiveness of controls implemented by Management for the revenue recognition of breakage; assessment of the reasonableness of assumptions related to the tickets and miles expected to expire, based on the historical data of tickets and miles expired; tests on a sampling based of miles earned, redeemed and expired; and analysis of the reasonableness of the other assumptions and methodology adopted by Management to determine the breakage rate used to recognize revenue.
Additionally, we assessed the adequacy of disclosures made by the Company on this matter, included in Notes 4.17.1 and 4.17.2
to the financial statements.
Based on the results of the audit procedures performed on the recognition of breakage revenue, which is consistent with Management’s assessment, re acceptable, in the context of the financial statement taken as a whole.
Other matters
Statements of value added
The individual and consolidated statements of value added (SVA) for year ended December 31, 2018, prepared under the responsibility of Company management, and presented as supplementary information for purposes of IFRS, were submitted to audit procedures conducted together with the audit of the Company’s financial statements. To form our opinion, we evaluated if these statements are reconciled to the financial statements and accounting records, as applicable, and if their form and content comply with the criteria defined by CPC 09 – Statement of Value Added. In our opinion, these statements of value added were prepared fairly, in all material respects, in accordance with the criteria defined in abovementioned accounting pronouncement, and are consistent in relation to the overall individual and consolidated financial statements.
Emphasis
Restatement of corresponding values
As mentioned in Note
24.17.1
, as a result of the adoption of the new accounting standards,
CPC 47 and IFRS 15 – Revenue from Contracts with Customers,
the individual and consolidated corresponding amounts related to the financial position as of December 31, 2017 and related to the
statements of operations, comprehensive income, the statements of changes in equity, cash flows
and value added
for the year ended
December 31, 2017 presented for comparison purposes have been adjusted and are being restated as provided for in CPC 23 - Accounting Policies, Change in Estimate and Correction of Error and CPC 26 (R1) - Presentation of Financial Statements. Our conclusion does not contain a modification in relation to this matter.
17
Other information accompanying the individual and consolidated financial statements and the auditor’s report
Management is responsible for such other information, which comprise the Management Report.
Our opinion on the individual and consolidated financial statements does not cover the Management Report and we do not express any form of assurance conclusion thereon.
In connection with our audit of the individual and consolidated financial statements, our responsibility is to read the Management Report and, in doing so, consider whether this report is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of the Management Report, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of management and those charged with governance for the
individual
and consolidated financial statements
Management is responsible for the preparation and fair presentation of the individual and consolidated financial statements in accordance with the accounting practices adopted in Brazil and with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), and for such internal control as management determines is necessary to enable the preparation of financial statements that are free of material misstatement, whether due to fraud or error.
In preparing the individual and consolidated financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company and its subsidiaries or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s and its subsidiaries’ financial reporting process.
Auditor’s responsibilities for the audit of the individual and consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the individual and consolidated financial statements as a whole are free of material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Brazilian and International standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
18
As part of an audit in accordance with Brazilian and International Standards on Auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
·
Identify and assess the risks of material misstatement of the individual and consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
·
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s and its subsidiaries’ internal control.
·
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
·
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s and its subsidiaries’ ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the individual and consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company and its subsidiaries to cease to continue as a going concern.
·
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the individual and consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
·
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements, including applicable independence requirements, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
19
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
São Paulo, February 27, 2019
ERNST & YOUNG
Auditores Independentes S.S.
CRC- 2SP034519/O-6
Vanessa Martins Bernardi
Accountant CRC-1SP244569/O-3
20
Statement of financial position
|
|
Parent Company
|
Consolidated
|
Assets
|
Note
|
2018
|
2017
|
2018
|
2017
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
Cash and cash equivalents
|
5
|
282,465
|
103,727
|
826,187
|
1,026,862
|
Short-term investments
|
6
|
92,015
|
730,900
|
478,364
|
955,589
|
Restricted cash
|
7
|
-
|
-
|
133,391
|
-
|
Trade receivables
|
8
|
-
|
-
|
853,328
|
936,478
|
Inventories
|
9
|
-
|
-
|
180,141
|
178,491
|
Recoverable taxes
|
10.1
|
5,279
|
19,446
|
360,796
|
83,210
|
Derivatives
|
29
|
-
|
-
|
-
|
40,647
|
Other current assets
|
|
425,913
|
55,563
|
478,628
|
123,721
|
Total current assets
|
|
805,672
|
909,636
|
3,310,835
|
3,344,998
|
|
|
|
|
|
|
Noncurrent assets
|
|
|
|
|
|
Deposits
|
11
|
108,386
|
64,736
|
1,612,295
|
1,163,759
|
Restricted cash
|
7
|
39,784
|
38,432
|
688,741
|
268,047
|
Recoverable taxes
|
10.1
|
24,789
|
6,163
|
95,873
|
7,045
|
Deferred taxes
|
10.2
|
24,209
|
27,703
|
73,822
|
276,514
|
Related parties
|
12
|
2,294,143
|
1,570,591
|
-
|
-
|
Investments
|
13
|
437,875
|
388,235
|
1,177
|
1,333
|
Property, plant and equipment
|
14
|
202,698
|
323,013
|
2,818,057
|
3,195,767
|
Intangible assets
|
15
|
-
|
-
|
1,777,466
|
1,747,285
|
Total noncurrent assets
|
|
3,131,884
|
2,418,873
|
7,067,431
|
6,659,750
|
|
|
|
|
|
|
Total
|
|
3,937,556
|
3,328,509
|
10,378,266
|
10,004,748
|
The accompanying notes are an integral part of the individual and consolidated financial statements.
21
|
|
Parent Company
|
Consolidated
|
Liabilities and equity
|
Note
|
2018
|
2017
|
2018
|
2017
|
|
|
|
(Restated)
|
|
(Restated)
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
Short-term debt
|
16
|
123,873
|
95,027
|
1,223,324
|
1,162,872
|
Suppliers
|
|
10,765
|
13,473
|
1,403,815
|
1,249,124
|
Suppliers - Forfaiting
|
17
|
-
|
-
|
365,696
|
78,416
|
Salaries
|
|
478
|
311
|
368,764
|
305,454
|
Taxes payable
|
18
|
8,944
|
7,856
|
111,702
|
134,951
|
Landing fees
|
|
-
|
-
|
556,300
|
365,651
|
Advance ticket sales
|
19
|
-
|
-
|
1,673,987
|
1,476,514
|
Mileage program
|
|
-
|
-
|
826,284
|
765,114
|
Advances from customers
|
|
-
|
-
|
169,967
|
21,718
|
Provisions
|
20
|
-
|
-
|
70,396
|
46,561
|
Derivatives
|
29
|
-
|
-
|
195,444
|
34,457
|
Operating leases
|
28
|
-
|
-
|
135,799
|
28,387
|
Other current liabilities
|
|
5,263
|
2,357
|
99,078
|
100,401
|
Total current liabilities
|
|
149,323
|
119,024
|
7,200,556
|
5,769,620
|
|
|
|
|
|
|
Noncurrent liabilities
|
|
|
|
|
|
Long-term debt
|
16
|
4,535,229
|
3,939,948
|
5,861,143
|
5,942,795
|
Suppliers
|
|
-
|
-
|
120,137
|
222,026
|
Provisions
|
20
|
-
|
-
|
829,198
|
562,628
|
Mileage program
|
|
-
|
-
|
192,569
|
188,204
|
Deferred taxes
|
10.2
|
-
|
-
|
227,290
|
188,005
|
Taxes payable
|
18
|
7,794
|
14,678
|
54,659
|
66,196
|
Related companies
|
12
|
-
|
135,010
|
-
|
-
|
Derivatives
|
29
|
-
|
-
|
214,218
|
-
|
Provision for loss on
investment
|
13
|
4,200,243
|
2,610,078
|
-
|
-
|
Operating leases
|
28
|
-
|
-
|
135,686
|
110,723
|
Other noncurrent liabilities
|
|
30,379
|
10,305
|
48,161
|
43,072
|
Total noncurrent
liabilities
|
|
8,773,645
|
6,710,019
|
7,683,061
|
7,323,649
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
Capital stock
|
21.1
|
3,055,940
|
3,040,512
|
2,942,612
|
2,927,184
|
Advance for future capital
increase
|
21.1
|
2,818
|
-
|
2,818
|
-
|
Treasury shares
|
21.2
|
(126)
|
(4,168)
|
(126)
|
(4,168)
|
Capital reserves
|
|
88,476
|
88,762
|
88,476
|
88,762
|
Equity valuation adjustments
|
|
(500,022)
|
(79,316)
|
(500,022)
|
(79,316)
|
Share-based payments reserve
|
23
|
117,413
|
119,308
|
117,413
|
119,308
|
Gains on change in investment
|
|
759,984
|
760,545
|
759,984
|
760,545
|
Accumulated losses
|
|
(8,509,895)
|
(7,426,177)
|
(8,396,567)
|
(7,312,849)
|
Deficit attributable to equity holders of
the parent
|
|
(4,985,412)
|
(3,500,534)
|
(4,985,412)
|
(3,500,534)
|
|
|
|
|
|
|
Non-controlling interests
from Smiles
|
|
-
|
-
|
480,061
|
412,013
|
Total equity (deficit)
|
|
(4,985,412)
|
(3,500,534)
|
(4,505,351)
|
(3,088,521)
|
|
|
|
|
|
|
Total liabilities and deficit
|
|
3,937,556
|
3,328,509
|
10,378,266
|
10,004,748
|
The accompanying notes are an integral part of
the individual and consolidated financial statements.
22
DRE
|
|
Parent Company
|
Consolidated
|
|
Note
|
2018
|
2017
|
2018
|
2017
|
|
|
|
(Restated)
|
|
(Restated)
|
Net revenue
|
|
|
|
|
|
Passenger
|
|
-
|
-
|
10,633,488
|
9,564,041
|
Cargo and other
|
|
-
|
-
|
777,866
|
764,993
|
Total net revenue
|
24
|
-
|
-
|
11,411,354
|
10,329,034
|
|
|
|
|
|
|
Cost of services provided
|
25
|
-
|
-
|
(9,135,311)
|
(7,434,780)
|
Gross profit
|
|
-
|
-
|
2,276,043
|
2,894,254
|
|
|
|
|
|
|
Operating income
(expenses)
|
|
|
|
|
|
Selling expenses
|
25
|
-
|
-
|
(761,926)
|
(922,298)
|
Administrative expenses
|
25
|
(25,551)
|
(25,996)
|
(1,028,709)
|
(976,065)
|
Other operating (expenses) income,
net
|
25
|
562,571
|
(12,768)
|
914,167
|
(7,072)
|
Total operating (expenses)
income
|
|
537,020
|
(38,764)
|
(876,468)
|
(1,905,435)
|
|
|
|
|
|
|
Equity results
|
13
|
(852,866)
|
365,545
|
387
|
544
|
|
|
|
|
|
|
Income (loss) before financial result, net
and income taxes
|
|
(315,846)
|
326,781
|
1,399,962
|
989,363
|
|
|
|
|
|
|
Financial result
|
|
|
|
|
|
Financial income
|
|
108,969
|
89,153
|
259,728
|
213,446
|
Financial expenses
|
|
(440,119)
|
(389,509)
|
(1,061,089)
|
(1,050,461)
|
Exchange rate variation, net
|
|
(433,239)
|
(24,612)
|
(1,081,197)
|
(81,744)
|
Total financial result
|
26
|
(764,389)
|
(324,968)
|
(1,882,558)
|
(918,759)
|
|
|
|
|
|
|
Income (loss) before income
taxes
|
|
(1,080,235)
|
1,813
|
(482,596)
|
70,604
|
|
|
|
|
|
|
Income and social contribution
taxes
|
|
|
|
|
|
Current
|
|
(1,664)
|
-
|
(52,139)
|
(239,846)
|
Deferred
|
|
(3,494)
|
16,979
|
(244,989)
|
547,059
|
Total income and social contribution
taxes
|
10.2
|
(5,158)
|
16,979
|
(297,128)
|
307,213
|
|
|
|
|
|
|
Net income (loss) for the year before
non-controlling interests
|
|
(1,085,393)
|
18,792
|
(779,724)
|
377,817
|
|
|
|
|
|
|
Net income (loss) attributable
to:
|
|
|
|
|
|
Equity holders of the parent
|
|
(1,085,393)
|
18,792
|
(1,085,393)
|
18,792
|
Non-controlling interests from
Smiles
|
|
-
|
-
|
305,669
|
359,025
|
|
|
|
|
|
|
Basic earnings (loss) per
share
|
|
|
|
|
|
Per common share
|
22
|
(0.089)
|
0.002
|
(0.089)
|
0.002
|
Per preferred share
|
22
|
(3.115)
|
0.054
|
(3.115)
|
0.054
|
|
|
|
|
|
|
Diluted earnings (loss) per
share
|
|
|
|
|
|
Per common share
|
22
|
(0.089)
|
0.002
|
(0.089)
|
0.002
|
Per preferred share
|
22
|
(3.115)
|
0.053
|
(3.115)
|
0.053
|
The
accompanying notes are an integral part of the individual and consolidated
financial statements.
23
OCI
|
|
Parent Company
|
Consolidated
|
|
Note
|
2018
|
2017
|
2018
|
2017
|
|
|
|
(Restated)
|
|
(Restated)
|
|
|
|
|
|
|
Net income (loss) for the
year
|
|
(1,085,393)
|
18,792
|
(779,724)
|
377,817
|
|
|
|
|
|
|
Other comprehensive income
reverted to income
|
|
|
|
|
|
Cash flow hedges
|
29
|
(420,706)
|
67,913
|
(420,706)
|
67,913
|
|
|
|
|
|
|
Total comprehensive income for the
year
|
|
(1,506,099)
|
86,705
|
(1,200,430)
|
445,730
|
|
|
|
|
|
|
Comprehensive income attributable
to:
|
|
|
|
|
|
Equity holders of the parent
|
|
(1,506,099)
|
86,705
|
(1,506,099)
|
86,705
|
Non-controlling interests from
Smiles
|
|
-
|
-
|
305,669
|
359,025
|
The accompanying notes are an
integral part of the individual and consolidated financial
statements.
24
|
|
|
|
|
Capital reserves
|
Equity valuation adjustments
|
|
|
|
|
|
Note
|
Capital
stock
|
Advance for future capital
increase
|
Treasury shares
|
Goodwill on transfer
of shares
|
Special
goodwill
reserve of subsidiary
|
Unrealized
hedge
gain
(losses)
|
Share-
based
payments
|
Gains on change in
investment
|
Accumulated losses
|
Total
|
Balances as of December 31, 2016
(Restated)
|
4.26.1
|
3,037,820
|
-
|
(13,371)
|
20,420
|
70,979
|
(147,229)
|
113,918
|
693,251
|
(7,444,969)
|
(3,669,181)
|
Stock options
exercised
|
|
2,692
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
2,692
|
Other comprehensive income,
net
|
|
-
|
-
|
-
|
-
|
-
|
67,913
|
-
|
-
|
-
|
67,913
|
Share-based payments
|
23
|
-
|
-
|
-
|
-
|
-
|
-
|
11,956
|
-
|
-
|
11,956
|
Gains on change in investment
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
3,994
|
-
|
3,994
|
Sale of interest in
subsidiary
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
63,300
|
-
|
63,300
|
Treasury shares transferred
|
|
-
|
-
|
9,203
|
(2,637)
|
-
|
-
|
(6,566)
|
-
|
-
|
-
|
Net income for the year
(Restated)
|
4.26.1
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
18,792
|
18,792
|
Balances as of December 31, 2017
(Restated)
|
4.26.1
|
3,040,512
|
-
|
(4,168)
|
17,783
|
70,979
|
(79,316)
|
119,308
|
760,545
|
(7,426,177)
|
(3,500,534)
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial adoption of accounting standard –
CPC 48 (IFRS 9) (*)
|
4.26.2
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
1,675
|
1,675
|
Other comprehensive income,
net
|
|
-
|
-
|
-
|
-
|
-
|
(420,706)
|
-
|
-
|
-
|
(420,706)
|
Stock options
exercised
|
21.1
|
15,428
|
2,818
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
18,246
|
Share-based payments
|
23
|
-
|
-
|
-
|
-
|
-
|
-
|
17,790
|
-
|
-
|
17,790
|
Gains on change in investment
|
13
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(561)
|
-
|
(561)
|
Treasury share buyback
|
21.2
|
-
|
-
|
(15,929)
|
-
|
-
|
-
|
-
|
-
|
-
|
(15,929)
|
Treasury shares transferred
|
21.2
|
-
|
-
|
19,971
|
(286)
|
-
|
-
|
(19,685)
|
-
|
-
|
-
|
Net loss for the year
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(1,085,393)
|
(1,085,393)
|
Balances as of December 31,
2018
|
|
3,055,940
|
2,818
|
(126)
|
17,497
|
70,979
|
(500,022)
|
117,413
|
759,984
|
(8,509,895)
|
(4,985,412)
|
(*) On January 1, 2018, the Company adopted IFRS
9 – “Financial instruments”, resulting in an initial adjustment to estimated
losses with doubtful accounts. For further information, see Note
4.26.2.
The accompanying notes are an integral part of
the individual and consolidated financial statements.
25
|
|
|
|
|
Capital
reserves
|
Equity valuation
adjustments
|
|
|
|
|
|
|
|
Note
|
Capital stock
|
Advance for future capital
increase
|
Treasury shares
|
Goodwill on transfer
of shares
|
Special goodwill reserve of
subsidiary
|
Unrealized hedge gains
(losses)
|
Share-
based
payments
|
Gains on change in
investment
|
Accumulated losses
|
Deficit attributable to equity holders of
the parent
|
Smiles’
non-controlling
interests
|
Total
|
Balances as of December 31, 2016
(Restated)
|
4.26.1
|
2,924,492
|
-
|
(13,371)
|
20,420
|
70,979
|
(147,229)
|
113,918
|
693,251
|
(7,331,641)
|
(3,669,181)
|
293,247
|
(3,375,934)
|
Stock options exercised
|
|
2,692
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
2,692
|
-
|
2,692
|
Other comprehensive income (loss),
net
|
|
-
|
-
|
-
|
-
|
-
|
67,913
|
-
|
-
|
-
|
67,913
|
-
|
67,913
|
Capital increase from exercise
of stock option in subsidiary
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
1,988
|
1,988
|
Share issuance costs
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(523)
|
(523)
|
Share-based payments
|
23
|
-
|
-
|
-
|
-
|
-
|
-
|
11,956
|
-
|
-
|
11,956
|
192
|
12,148
|
Gains on change in investment
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
3,994
|
-
|
3,994
|
-
|
3,994
|
Sale of interest in
subsidiary
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
63,300
|
-
|
63,300
|
4,865
|
68,165
|
Treasury shares transferred
|
|
-
|
-
|
9,203
|
(2,637)
|
-
|
-
|
(6,566)
|
-
|
-
|
-
|
-
|
-
|
Net income for the year
(Restated)
|
4.26.1
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
18,792
|
18,792
|
359,025
|
377,817
|
Interest on equity distributed by
Smiles
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(14,071)
|
(14,071)
|
Minimum dividends distributed by
Smiles
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(46,931)
|
(46,931)
|
Dividends distributed by
Smiles
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(185,779)
|
(185,779)
|
Balances as of December 31, 2017
(Restated)
|
|
2,927,184
|
-
|
(4,168)
|
17,783
|
70,979
|
(79,316)
|
119,308
|
760,545
|
(7,312,849)
|
(3,500,534)
|
412,013
|
(3,088,521)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial adoption of accounting standard –
CPC 48 (IFRS 9) (*)
|
4.26.2
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
1,675
|
1,675
|
38
|
1,713
|
Other comprehensive income (loss),
net
|
|
-
|
-
|
-
|
-
|
-
|
(420,706)
|
-
|
-
|
-
|
(420,706)
|
-
|
(420,706)
|
Stock options
exercised
|
21.1
|
15,428
|
2,818
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
18,246
|
-
|
18,246
|
Capital increase from exercise
of stock option in subsidiary
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
875
|
875
|
Share-based payments
|
23
|
-
|
-
|
-
|
-
|
-
|
-
|
17,790
|
-
|
-
|
17,790
|
782
|
18,572
|
Gains on change in investment
|
13
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(561)
|
-
|
(561)
|
561
|
-
|
Treasury share buyback
|
21.2
|
-
|
-
|
(15,929)
|
-
|
-
|
-
|
-
|
-
|
-
|
(15,929)
|
-
|
(15,929)
|
Treasury shares transferred
|
21.2
|
-
|
-
|
19,971
|
(286)
|
-
|
-
|
(19,685)
|
-
|
-
|
-
|
-
|
-
|
Net loss for the year
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(1,085,393)
|
(1,085,393)
|
305,669
|
(779,724)
|
Dividends and interest on equity paid by
Smiles
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(172,865)
|
(172,865)
|
Dividends and interest on equity
distributed by Smiles
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(67,012)
|
(67,012)
|
Balances as of December 31,
2018
|
|
2,942,612
|
2,818
|
(126)
|
17,497
|
70,979
|
(500,022)
|
117,413
|
759,984
|
(8,396,567)
|
(4,985,412)
|
480,061
|
(4,505,351)
|
(*) On January 1, 2018, the Company adopted IFRS
9 – “Financial instruments”, resulting in an initial adjustment to estimated
losses with doubtful accounts. For further information, see Note
4.27.2.
The accompanying notes are an integral part of
the individual and consolidated financial statements.
26
|
Parent Company
|
Consolidated
|
|
2018
|
2017
|
2018
|
2017
|
|
|
(Restated)
|
|
(Restated)
|
|
|
|
|
|
Net income (loss) for the year
|
(1,085,393)
|
18,792
|
(779,724)
|
377,817
|
Adjustment to reconcile net income (loss)
to net cash provided by operating activities
|
|
|
|
|
Depreciation and amortization
|
-
|
-
|
668,516
|
505,425
|
Allowance (reversal) for doubtful
accounts
|
-
|
-
|
(9,789)
|
24,913
|
Provision for legal
proceedings
|
-
|
-
|
243,860
|
158,263
|
Provision for inventory
obsolescence
|
-
|
-
|
5,023
|
3,059
|
Deferred taxes
|
3,494
|
(16,979)
|
244,989
|
(547,059)
|
Equity results
|
852,866
|
(365,545)
|
(387)
|
(544)
|
Share-based payments
|
17,790
|
-
|
18,572
|
14,849
|
Exchange and monetary variations,
net
|
300,778
|
52,588
|
946,732
|
95,132
|
Interest on debt, financial lease and other
liabilities
|
289,343
|
210,639
|
679,985
|
566,902
|
Unrealized hedge results
|
-
|
-
|
(13,239)
|
8,639
|
Provision for profit sharing
|
-
|
-
|
127,618
|
65,573
|
Write-off of property, plant and equipment
and intangible assets
|
214,475
|
-
|
90,639
|
145,855
|
Other provisions
|
-
|
-
|
65,334
|
15,184
|
Adjusted net income
(loss)
|
593,353
|
(100,505)
|
2,288,129
|
1,434,008
|
|
|
|
|
|
Changes in operating assets and
liabilities:
|
|
|
|
|
Trade receivables
|
-
|
-
|
95,844
|
(198,370)
|
Short-term investments
|
694,273
|
(730,851)
|
695,831
|
(353,231)
|
Inventories
|
-
|
-
|
(6,673)
|
1,038
|
Deposits
|
(41,166)
|
(22,500)
|
(402,495)
|
46,388
|
Suppliers
|
(2,787)
|
12,156
|
16,382
|
(202,462)
|
Suppliers – Forfaiting
|
-
|
-
|
267,502
|
76,157
|
Advance ticket sales
|
-
|
-
|
197,473
|
271,386
|
Mileage program
|
-
|
-
|
65,535
|
(47,714)
|
Advances from customers
|
-
|
-
|
148,249
|
4,895
|
Salaries
|
167
|
2
|
(64,308)
|
(43,641)
|
Landing fees
|
-
|
-
|
190,649
|
126,085
|
Taxes payable
|
(5,774)
|
25,099
|
127,663
|
460,980
|
Derivatives
|
-
|
-
|
8,385
|
(32,310)
|
Provisions
|
-
|
-
|
(236,882)
|
(270,970)
|
Operating leases
|
-
|
-
|
103,838
|
131,877
|
Other assets (liabilities)
|
(328,933)
|
21,361
|
(736,638)
|
18,157
|
Interest paid
|
(291,216)
|
(272,597)
|
(508,973)
|
(528,398)
|
Income tax paid
|
(2,532)
|
-
|
(167,642)
|
(221,122)
|
Net cash flows (used in) from operating
activities
|
615,385
|
(1,067,835)
|
2,081,869
|
672,753
|
|
|
|
|
|
Sale of interest in subsidiary, net of
taxes
|
-
|
68,163
|
-
|
68,163
|
Transactions with related
parties
|
(379,223)
|
372,582
|
-
|
-
|
Short-term investments of
Smiles
|
-
|
-
|
(163,218)
|
(171,174)
|
Restricted cash
|
(1,352)
|
(5,776)
|
(548,928)
|
(100,835)
|
Capital increase in subsidiary and
investee
|
-
|
(451,610)
|
-
|
-
|
Dividends and interest on shareholders’
equity received
|
245,178
|
293,651
|
543
|
1,249
|
Advances for property, plant and equipment
acquisition, net
|
(94,160)
|
-
|
(106,628)
|
68,679
|
Property, plant and equipment
acquisition
|
-
|
-
|
(686,946)
|
(370,438)
|
Intangible assets acquisition
|
-
|
-
|
(82,079)
|
(55,449)
|
Net cash flows (used in) from investing
activities
|
(229,557)
|
277,010
|
(1,587,256)
|
(559,805)
|
27
|
Parent Company
|
Consolidated
|
|
2018
|
2017
|
2018
|
2017
|
|
|
|
|
|
Loan funding, net of issuance
costs
|
486,735
|
1,654,000
|
1,703,933
|
1,898,738
|
Loan funding and exchange offer
costs
|
(8,578)
|
(56,950)
|
(39,926)
|
(65,628)
|
Loan payments
|
-
|
(166,752)
|
(1,318,349)
|
(274,480)
|
Early payment of Senior Notes
|
(630,988)
|
(707,142)
|
(630,989)
|
(707,142)
|
Finance lease payments
|
-
|
-
|
(251,557)
|
(239,092)
|
Treasury share buyback
|
(15,929)
|
-
|
(15,929)
|
-
|
Dividends and interest on equity paid to
non-controlling interests of Smiles
|
-
|
-
|
(219,493)
|
(254,892)
|
Capital increase
|
15,428
|
2,692
|
15,428
|
2,692
|
Capital increase from non-controlling
interests
|
-
|
-
|
875
|
-
|
Share issuance costs
|
-
|
-
|
-
|
(523)
|
Advance for future capital
increase
|
2,818
|
-
|
2,818
|
-
|
Transactions with related
parties
|
(136,420)
|
111,551
|
-
|
-
|
Net cash flows (used in) from financing
activities
|
(286,934)
|
837,399
|
(753,189)
|
359,673
|
|
|
|
|
|
Foreign exchange variation on cash held in
foreign currencies
|
79,844
|
(225)
|
57,901
|
(7,966)
|
|
|
|
|
|
Net (decrease) increase
in cash and cash
equivalents
|
178,738
|
46,349
|
(200,675)
|
464,655
|
|
|
|
|
|
Cash and cash equivalents at the beginning
of the year
|
103,727
|
57,378
|
1,026,862
|
562,207
|
Cash and cash equivalents at the end of the
year
|
282,465
|
103,727
|
826,187
|
1,026,862
|
|
|
|
|
|
|
|
|
|
|
Non-cash transactions:
|
|
|
|
|
Interest on shareholders’ equity for
distribution, net of taxes
|
9,651
|
55,343
|
(8,672)
|
(49,602)
|
Dividends
|
65,247
|
-
|
(58,632)
|
-
|
Costs on sale in subsidiary’s
interest
|
-
|
4,865
|
-
|
-
|
Escrow deposits on leasing
agreements
|
-
|
10,307
|
-
|
10,307
|
Write-off of finance lease
agreements
|
-
|
-
|
(805,081)
|
(15,334)
|
Provision for aircraft return
|
-
|
-
|
147,548
|
-
|
Property, plant and equipment acquisition
through financing
|
-
|
-
|
193,506
|
63,066
|
28
|
Parent Company
|
Consolidated
|
|
2018
|
2017
|
2018
|
2017
|
Revenues
|
|
(Restated)
|
|
(Restated)
|
Passengers, cargo, mileage revenue and
other
|
-
|
-
|
12,091,380
|
11,676,442
|
Other operating income
|
956,261
|
268
|
1,203,364
|
40,607
|
Allowance for doubtful
accounts
|
-
|
-
|
24,804
|
(4,499)
|
|
956,261
|
268
|
13,319,548
|
11,712,550
|
Inputs acquired from third parties
(including ICMS and IPI)
|
|
|
|
|
Suppliers of aircraft fuel
|
-
|
-
|
(3,958,158)
|
(2,930,442)
|
Material, electricity, third-party services
and others
|
(415,129)
|
(32,795)
|
(2,952,394)
|
(3,256,072)
|
Aircraft insurance
|
-
|
-
|
(20,543)
|
(12,495)
|
Sales and marketing
|
(307)
|
(326)
|
(607,772)
|
(586,513)
|
Gross value added (used)
|
540,825
|
(32,853)
|
5,780,681
|
4,927,028
|
|
|
|
|
|
Depreciation and amortization
|
-
|
-
|
(668,516)
|
(505,442)
|
Value added produced
(used)
|
540,825
|
(32,853)
|
5,112,165
|
4,421,586
|
|
|
|
|
|
Value added received in
transfer
|
|
|
|
|
Equity results
|
(852,866)
|
365,545
|
387
|
544
|
Financial income
|
35,983
|
88,451
|
2,143,254
|
1,032,894
|
Value added for distribution
(distributed)
|
(276,058)
|
421,143
|
7,255,806
|
5,455,024
|
|
|
|
|
|
Distribution of value
added:
|
|
|
|
|
Salaries
|
3,439
|
5,152
|
1,516,591
|
1,338,986
|
Benefits
|
-
|
-
|
165,316
|
161,236
|
FGTS
|
(309)
|
-
|
103,354
|
104,888
|
Personnel
|
3,130
|
5,152
|
1,785,261
|
1,605,110
|
|
|
|
|
|
Federal taxes
|
11,991
|
10,907
|
1,035,625
|
531,404
|
State taxes
|
-
|
-
|
20,762
|
26,436
|
Municipal taxes
|
-
|
-
|
3,752
|
3,159
|
Tax, charges and
contributions
|
11,991
|
10,907
|
1,060,139
|
560,999
|
|
|
|
|
|
Interest
|
794,173
|
371,823
|
4,007,639
|
1,893,183
|
Rent
|
-
|
-
|
1,182,325
|
1,003,296
|
Other
|
41
|
14,469
|
166
|
14,619
|
Third-party capital
remuneration
|
794,214
|
386,292
|
5,190,130
|
2,911,098
|
|
|
|
|
|
Net income (loss) for the
year
|
(1,085,393)
|
18,792
|
(1,085,393)
|
18,792
|
Net income (loss) for the period
attributable to non-controlling interests of Smiles
|
-
|
-
|
305,669
|
359,025
|
Remuneration of own
capital
|
(1,085,393)
|
18,792
|
(779,724)
|
377,817
|
|
|
|
|
|
Value added distributed
|
(276,058)
|
421,143
|
7,255,806
|
5,455,024
|
29
1.
General information
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”), formerly VRG Linhas Aéreas S.A., or its successor, and,
through its subsidiaries or associates, also explore:
·
the regular and non-regular flight transportation
services of passengers, cargo and mailbags, domestically or internationally,
according to the concessions granted by the regulator;
·
other activities in relation to flight
transportation services of passengers, cargo and mailbags;
·
services to maintain and repair its own or
third-party’s aircraft, engines and parts;
·
airplane hangaring services;
·
services to manage aprons and runways, contract
crew members and clean aircraft;
·
the development of other activities related or
supplementary to flight transportation and other above-mentioned
activities;
·
the development of loyalty programs;
and
·
holding shares of other companies’ capital stock,
as a shareholder, partner or member.
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 the 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.
1.1.
Capital structure and net working
capital
As of December
31, 2018, the Company’s negative equity totaled R$4,505,351 (R$3,088,521 as of
December 31, 2017) and consolidated net working capital was negative by
R$3,889,721 (R$2,424,622 as of December 31, 2017). Both positions are mainly due
to the depreciation on the difference between assets and liabilities, of the
Brazilian Real in 2015 and 2018 of 47.0% and 17.1%, respectively, against the
U.S. dollar (“US$”). Net working capital was also impacted by payment terms with
suppliers and increase the number of suppliers - forfaiting
operations.
GLA’s
operations are sensitive to economic variations and fluctuations in the
Brazilian Real, since approximately 50% of its costs are pegged to the U.S.
dollar. The Company’s ability to adjust the price of fees charged from customers
to offset the variation of the U.S. dollar depends on the rational capacity
(offer) and competitors’ behavior.
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.
At the end of
2017, the Company implemented several initiatives to restructure its statement
of financial position, extending terms and reducing the financial cost of its
debt structure, as a result of an issue carried out on December 11, 2017, which
raised US$500 million, at
interest rates
of 7.1% p.a., partially used to amortize debt at an average rate of 9.8%
p.a.
30
In October
2018, the Company refinanced the 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
net 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
additionally deleveraged the Company’s statement of financial position and
better adjusted GLA’s operating cash flow generation by amortizing its
liabilities.
The Company
will continue to manage its results and statements of financial position in
order to ensure its sustainability, which includes the corporate reorganization
described in Note 1.3 of these financial statements. Management understands that
the business plan prepared, presented and approved by the Board of Directors on
January 17, 2019, shows all the elements necessary to continue as going
concern.
1.2.
Ownership structure
The ownership
structure of the Company and its subsidiaries as of December 31, 2018 is as
follows:
The
subsidiaries GAC Inc., GOL Finance and GOL Finance Inc. are entities created
solely to act as an extension of the Company’s operations or which represent
rights and/or obligations established solely to meet the Company’s needs. In
addition, they do not have an independent management structure and are unable to
make independent decisions. The assets and liabilities of these companies are
consolidated line by line in the Parent Company’s financial
statements.
As of November
7 and 20, 2018, through the subsidiary Smiles Fidelidade S.A. (“Smiles
Fidelidade”, formerly Webjet Participações S.A. prior to the change in the
corporate name on July 1, 2017), the companies, which are currently
subsidiaries, Smiles Fidelidade S.A. and Smiles Viajes Y Turismo S.A. were
respectively established, both headquartered in Buenos
Aires,
Argentina, with the purpose of promoting the operations of the Smiles Program
and airline ticket sales in that country.
31
The Company
was also the direct parent company of Gol Dominicana Lineas Aereas SAS (“Gol
Dominicana”) until September 14, 2018.
On August 10,
2017, the subsidiary Smiles Fidelidade acquired all the shares of Smiles Viagens
e Turismo S.A. (“Smiles Viagens”), whose main purpose is to provide travel
arrangement services, including the booking or sale of airline tickets,
accommodations and vacation packages, among others. Smiles Viagens began its
operations in January 2018.
1.3.
Corporate reorganization plan -
2018
On October 15,
2018, through a Material Fact, the Company and its subsidiary Smiles Fidelidade
disclosed the plans for a corporate reorganization whose main purpose is to
ensure the long-term competitiveness of the Group (“GOL”), aligning the
interests of all stakeholders, reinforcing a combined capital structure,
simplifying the corporate governance of Group companies, reducing operating,
administrative and financing costs and expenses, and increasing the market
liquidity for all of GOL’s shareholders, though the merger of Smiles Fidelidade
into GLA.
Historically
and globally, the leading loyalty programs in the world are controlled and
managed by airlines. Airline tickets are, consistently, the most relevant reward
category demanded by loyalty programs members. GOL is comprised of the leading
domestic players, with a current share of approximately 36% of the Brazilian
flight transportation market and a share greater than 50% of the Brazilian
market for loyalty programs. In Brazil, competition in both the flight
transportation and loyalty program markets has become increasingly challenging
in recent years. GOL has made strong and coordinated efforts to increase the
attractiveness of GLA’s flight transportation products and the attractiveness of
the Company’s loyalty program for its clients and partners.
Regardless of
such efforts, limitations in the Operating Agreement and the existence of
distinctive governance structures and shareholder bases have revealed obstacles
to the capacity for necessary investments and the optimization in the
coordination of the development of offers and products. In the context of this
scenario, the parent company GLAI has concluded that:
(i)
having separate corporate structures for GOL’s
two key businesses is not in the best interest of GOL’s shareholders,
(ii)
that it does not intend to renew the Operating
Agreement with Smiles Fidelidade, whose termination was expected for 2032, and
(iii)
that the Reorganization is the path that will
generate the highest value for the companies and their respective shareholders,
among other factors, by:
32
·
ensuring the long-term competitiveness in both of
its key markets (airline travel and loyalty programs);
·
simplifying GOL’s shareholding structure,
aligning the interests of all shareholders and increasing the market liquidity
of the traded shares;
·
improving and developing more efficient
governance and decision making, through increased management coordination and a
shared business plan and objective setting for all GOL companies;
·
fully integrating (as opposed to mere
consolidating) the financial and operational results of operations, balance
sheets and cash flows of Smiles Fidelidade and GLA to permit GOL to optimize its
capital structure, cost of capital, and financing sources, allowing the airline
to compete more effectively and the loyalty program to benefit from the improved
positioning of its key business partner;
·
improving the offering of products for GLA’s
passengers and Smiles Program’s members and partners.
In view of the
decision not to admit the Company’s listing on the B3’s Novo Mercado, as well as
the new structuring opportunities now available for the airline industry in
Brazil, authorized by means of the Provisional Measure No. 863, published on
December 13, 2018, which eliminated all restrictions on foreign ownership of the
voting stock of Brazilian airlines, the Company informed, through the Material
Fact of December 17, 2018, that it is evaluating its additional options
available for the implementation of the potential merger of Smiles Fidelidade,
in light of the new scenario of the Brazilian airline industry that, in the
opinion of Management, potentializes value creation for the Company’s
shareholders, with the authorization of foreign control of GLA, and the other
existing structures on the Brazilian stock exchange.
1.4.
Corporate reorganization - 2017
On July 1,
2017, in order to optimize and simplify GOL’s organizational structure, and to
generate tax savings from the use of accumulated tax losses, the Company
approved a corporate restructuring through the merger of Smiles S.A. and Smiles
Fidelidade S.A. As a result of the merger, Smiles S.A. was dissolved and all its
assets, rights and obligations were transferred to Smiles Fidelidade, pursuant
to articles 224, 225, 227 and 264 of Brazilian Corporation Law.
1.5.
Compliance program
Since 2016,
the Company has taken several steps to strengthen and expand its internal
control and compliance programs, including:
·
hiring specialized companies for risk assessment
and review of internal controls related to fraud and corruption;
·
Integration of risk, compliance and internal
control functions through the Executive Board of Corporate Risks, Compliance and
Internal Controls, with direct reporting to the Presidency and independent
access to the Board of Directors and to the Statutory Audit
Committee;
·
monitoring of transactions with politically
exposed persons;
·
improvement of the procedures for supervising the
execution of contracted services;
·
updating procurement policies and contract
management flow;
·
review of the code of ethics, manual of conduct
and various compliance policies including mandatory compulsory
training.
33
The senior
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, 2017, in
December 2016, the Company entered into an agreement with the Brazilian Federal
Public Ministry (the “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 to the Agreement. In addition, the Company paid R$4.2
million in fines to the Brazilian tax authorities.
The Company
voluntarily informed the U.S. Department of Justice (“DOJ”), the Securities and
Exchange Commission (“SEC”) and the Brazilian Securities and Exchange Commission
(“CVM”) of the external independent investigation that was contracted by the
Company and the Agreement. The external independent investigation was concluded
in April 2017. It revealed that certain immaterial payments were made to
politically exposed persons; however, none of our current employees,
representatives or members of our board or Management was knowledgeable of any
illegal purpose behind any of the identified transactions or of any illicit
benefit to the Company arising from the investigated transactions.
The Company
reported the conclusions of the investigation to the relevant authorities and
will keep them informed of the developments regarding this issue, as well as
keep watch on the analyses initiated by these bodies. These authorities may
impose fines and possibly other sanctions to the Company.
2.
Message from Management, basis of preparation and
presentation of the financial statements
The Company’s
individual and consolidated financial statements have been prepared in
accordance with the accounting practices adopted in Brazil and the International
Financial Reporting Standards (“IFRS”), issued by the International Accounting
Standards Board (“IASB”). The accounting practices generally accepted in Brazil
comprise the policies set out in Brazilian Corporate Law and the pronouncements,
guidelines and technical interpretations issued by the Accounting Pronouncements
Committee (“CPC”) and approved by the Federal Accounting Council (“CFC”) and the
Brazilian Securities and Exchange Commission (“CVM”).
The individual
and consolidated financial statements were prepared using the Brazilian real
(“R$”) as the functional and presentation currency. Figures are expressed in
thousands of Brazilian reais, and the amounts disclosed in other currencies,
when necessary, 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 financial statements
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.
When preparing
the financial statements, Management used the following disclosure criteria: (i)
regulatory requirements; (ii) the relevance and specificity of the information
on the Company’s operations provided to users; (iii) the information needs of
the users of the
financial
statements; and (iv) information from other entities in the same sector, mainly
in the international market.
34
Management
confirms that all the material information in these individual and consolidated
financial statements is being demonstrated and corresponds to the information
used by Management in the development of its business management
activities.
The individual
and consolidated financial statements were prepared based on the historical
cost, except for the following relevant items recorded in the statements of
financial position:
·
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
·
investments assessed by the equity
method.
The Company’s
individual and consolidated financial statements for the years ended December
31, 2018 and 2017 have 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.
3.
Approval of individual and consolidated financial
statements
These
individual and consolidated financial statements were authorized for issue at
the Board of Directors’ meeting of February 27, 2019, and are still subject for
approval by the shareholders at the Annual Shareholders’ Meeting that will take
place on April 17, 2019.
4.
Summary of significant accounting
practices
4.1.
Consolidation
The
consolidated financial statements include the financial statements of the
Company and the subsidiaries in which it holds direct or indirect control. All
transactions and balances between GLAI and its subsidiaries were eliminated from
the consolidation, as well as unrealized earnings or losses from those
transactions, including taxes and charges.
|
Entity
|
Date of
constitution
|
Location
|
Operational
activity
|
Type of control
|
% equity interest
|
2018
|
2017
|
Offshore subsidiaries:
|
|
|
|
|
|
|
GAC
|
03/23/2006
|
Cayman Islands
|
Aircraft acquisition
|
Direct
|
100.0
|
100.0
|
Gol Finance Inc.
|
03/16/2006
|
Cayman Islands
|
Financial funding
|
Direct
|
100.0
|
100.0
|
Gol Finance
|
06/21/2013
|
Luxembourg
|
Financial funding
|
Direct
|
100.0
|
100.0
|
Subsidiaries:
|
|
|
|
|
|
|
GLA
|
04/09/2007
|
Brazil
|
Flight transportation
|
Direct
|
100.0
|
100.0
|
AirFim (a)
|
11/07/2003
|
Brazil
|
Investment funds
|
Indirect
|
100.0
|
100.0
|
Sul América Gol Max (a)
|
03/14/2014
|
Brazil
|
Investment fund
|
Indirect
|
100.0
|
100.0
|
Smiles Fidelidade
|
08/01/2011
|
Brazil
|
Loyalty program
|
Direct
|
52.7
|
53.8
|
Smiles Viagens
|
08/10/2017
|
Brazil
|
Travel agency
|
Indirect
|
100.0
|
100.0
|
Smiles Fidelidade Argentina
(b)
|
11/07/2018
|
Argentina
|
Loyalty program
|
Indirect
|
100.0
|
-
|
Smiles Viagens Argentina (b)
|
11/20/2018
|
Argentina
|
Travel agency
|
Indirect
|
98.0
|
-
|
Fundo Sorriso (a)
|
07/14/2014
|
Brazil
|
Investment fund
|
Indirect
|
100.0
|
100.0
|
Jointly controlled:
|
|
|
|
|
|
SCP Trip
|
04/27/2012
|
Brazil
|
Flight magazine
|
Indirect
|
60.0
|
60.0
|
Associate:
|
|
|
|
|
|
|
Netpoints
|
11/08/2013
|
Brazil
|
Loyalty program
|
Indirect
|
25.4
|
25.4
|
(a)
These comprise exclusive
investment funds and, pursuant to CVM Instructions 247/1996 and 408/2004, those
funds’ assets are consolidated in the financial statements of the parent
company.
(b)
Companies in
pre-operational phase.
35
The accounting
policies have been applied consistently in all consolidated companies and in
accordance with those used in the parent company and adopted in the previous
year, except for CPC 47, equivalent to IFRS 15, and CPC 48, equivalent to IFRS
9. For further information, see Notes 4.26.1 and 4.26.2,
respectively.
4.2.
Investments
Investments in
associates are initially recognized at their cost and subsequently adjusted by
the equity method. In the case an investee records operating losses that lead to
negative equity, the Company shall adopt the provisions of CPC 18 - “Investments
in Associates and Joint Ventures”, equivalent to IAS 28, and shall not record
additional losses. The Company will resume recording equity results when the
investee fully recovers the accumulated losses.
4.3.
Cash and cash equivalents
The Company
classifies under this group balances of cash, banks and short-term investments
of investment funds and securities with immediate liquidity, which, pursuant to
the Company’s assessments, are considered readily convertible to a known amount
of cash with insignificant risk of change in value. Short-term investments
classified under this group, due to their own nature, are measured at fair value
through profit or loss and will be used by the Company in the
short-term.
4.4.
Short-term investments
In the
presentation and measurement of financial assets, the Company considers CPC 48 –
“Financial Instruments”, equivalent to IFRS 9, which requires financial assets
to be initially measured at fair value, less costs directly attributable to
their acquisition. In addition, subsequent measurements are divided in two
categories:
4.4.1.
Amortized cost
Short-term
investments are measured at amortized cost when the following conditions are
met:
·
the Company plans to hold the financial asset in
order to collect the contractual cash flows;
·
the contractual cash flows represent solely
payments of principal and interest (“SPPI”); and
·
the Company did not adopt the fair value
methodology in order to eliminate measurement inconsistencies known as
“accounting mismatch”.
4.4.2.
Fair value
·
through other comprehensive
income
: short-term investments are measured at fair
value through other comprehensive income (“FVTOCI”) when both of the following
conditions are met: (i) the Company plans to hold the financial asset in order
to collect the contractual cash flows and sell the asset; and (ii) the
contractual cash flows represent SPPI;
·
through profit or loss
: it is considered a
residual category, i.e. if the Company does not plan to hold the financial asset
in order to collect the contractual cash flows
and/or sell
the asset, the financial asset should be measured at fair value through profit
or loss (“FVTPL”).
36
4.5.
Restricted cash
Restricted
cash comprises mainly short-term investments measured at fair value through
profit or loss, used as guarantees linked to financial instruments and short and
long-term financing.
4.6.
Trade receivables
Trade
receivables are measured based on the billed amount, net of estimated losses
from doubtful accounts and approximate their fair value, given their short-term
nature. With the adoption of CPC 48 – “Financial Instruments”, equivalent to
IFRS 9, since January 1, 2018, the allowance for doubtful accounts has been
measured using the simplified approach, through the use of historical data,
projecting the estimated loss over the life of the contract, and no longer on
the historical loss incurred, through the segmentation of the receivables
portfolio into groups that have the same receipt pattern, based on the maturity
dates. Additionally, the Company carries out a case-by-case analysis to assess
risks of default in specific cases.
4.7.
Inventories
Inventory
balances mainly comprise spare parts maintenance and replacement materials.
Inventories are measured at average acquisition cost plus expenses, such as
non-recoverable taxes, custom expenses incurred with the acquisition and costs
from the transport to the current location of items. Provisions for inventory
obsolescence are recorded for items that are not expected to be realized.
4.8.
Income and social contribution
taxes
4.8.1.
Current taxes
In Brazil,
current taxes comprise income and social contribution taxes, which are
calculated on a monthly basis based on taxable income, after offsetting tax
losses and negative basis of social contribution, limited to 30% of taxable
income, applying to that base a tax rate of 15% plus an additional 10% for
income taxes and 9% for social contribution taxes.
4.8.2.
Deferred taxes
Deferred taxes
represent income and social contribution tax loss carryforwards credits and
debits, as well as temporary differences between the fiscal and accounting
bases. Deferred income and social contribution tax assets and liabilities are
classified as noncurrent. Losses are recorded when the Company’s internal
studies indicate that the future use of those credits is not
probable.
Deferred tax
assets and liabilities are presented net if there is a legal right to offset tax
liabilities with tax assets and if they are related to taxes recorded by the
same tax authority under the same tax entity; therefore, for presentation
purposes, tax asset and liability balances that do not comply with the legal
criterion are being disclosed separately. Deferred tax assets and liabilities
should be measured by the tax rates expected to be applicable in the period the
asset is realized or the liability is settled, based on the tax rates and tax
legislation prevailing at the date of the financial statements.
37
The
projections of future taxable income on tax losses and negative basis of social
contribution are prepared based on the business plans, annually reviewed and
approved by the Company’s Board of Directors.
4.9.
Rights and obligations from derivative
financial instruments
Changes in
interest rates, exchange rates and fuel prices expose the Company and its
subsidiaries to risks that may affect their financial performance. In order to
mitigate said risks, the Company contracts, through its subsidiaries, derivative
financial instruments that may or may not be designated for hedge accounting. If
they are designated for hedge accounting, they are classified as cash flow
hedge.
4.9.1.
Derivative financial instruments not designated
for hedge accounting
The Company
can contract derivative financial instruments not designated for hedge
accounting when the Risk Management goals do not require this classification.
Changes in the fair value of operations not designated for hedge accounting are
booked directly in the financial result.
4.9.2.
Derivative financial instruments designated as
cash flow hedge
The purpose of
instruments designated as cash flow hedge is to hedge future results arising
from interest rate and oil variations. The effectiveness of said variations is
estimated based on statistical methods of correlation and on the ratio between
hedging gains and losses and the variation of hedged costs and expenses.
Effective fair value variations are booked in equity under “Other comprehensive
income” until the hedged result is recognized in the same line of the statement
of income in which said item is recognized. The ineffectiveness identified in
each reporting period are recognized in the financial result. Hedge transactions
recorded under “Other comprehensive income” are net of tax effects, and related
tax credits are only recognized when these are expected to be
realized.
4.9.3.
Derecognition and write-off of derivative
financial instruments
Hedge
accounting is likely to be discontinued prospectively when (i) the Company and
its subsidiaries cancel the hedge relationship; (ii) the derivative instrument
matures or is sold, terminated or executed; (iii) the hedged object is unlikely
to be realized; or (iv) it no longer qualifies as hedge accounting. If the
operation is discontinued, any gains or losses previously recognized under
“Other comprehensive income” and accrued in equity until that date are
immediately recognized in profit or loss for the year.
4.10.
Deposits
4.10.1.
Deposits for aircraft and engine
maintenance
Refer to
payments made in U.S. dollars to lessors for the future maintenance of aircraft
and engines. These assets are substantially realized when the deposits are used
to pay workshops for maintenance services or through the receipt of funds, in
accordance with the negotiations carried out with the lessors. The exchange
variation of those payments is recognized as revenue or expense in the financial
result. Management carries out periodical analyses of the recovery of said
deposits based on the eligibility of application of said amounts to future
maintenance events and believes that the amounts recorded in the statement of
financial
position are
realizable.
38
Some
agreements establish that the amounts deposited for said operation are not
refundable if maintenance is not carried out and said deposits are not used.
These amounts are withheld by the lessor and represent payments made for the use
of the parts until the date of return. Amounts classified in this category are
directly recognized in profit or loss, based on the payments made, under
“Maintenance, material and repairs”.
Additionally,
the Company maintains agreements with some lessors to replace deposits with
letters of credit, which can be executed by the lessors if aircraft and engine
maintenance does not occur in accordance with the inspection schedule. Several
aircraft lease agreements do not require maintenance deposits and have the
letters of credit to ensure that maintenance occurs in the scheduled periods
(see Note 11). Until December 31, 2018, no letter of credit had been executed
against the Company.
4.10.2.
Deposits and guarantees for lease agreements
Deposits and
guarantees are denominated in U.S. dollars and monthly adjusted for the exchange
variation, without interest income, and refundable to the Company at the end of
the lease agreements.
4.11.
Property, plant and
equipment
Property,
plant and equipment items, including rotables, are recorded at the acquisition
or construction cost and include interest and other financial charges. Each
component of the property, plant and equipment item that has a significant cost
in relation to the total amount of the asset is depreciated separately. The
estimated economic useful life of property, plant and equipment items, for
depreciation purposes, is shown in Note 14.
The estimated
market value at the end of the useful life of the item is used as an assumption
to calculate the residual value of the Company’s property, plant and equipment
items. Except for aircraft classified as finance leases, other items do not have
a residual value. The assets’ residual value and useful lives are annually
reviewed by the Company. Any variations arising from changes in the expected
realization of these items result in prospective changes.
Property,
plant and equipment is tested for impairment when facts or changes in the
circumstances show that the carrying amount is higher than the estimated
recoverable value.
The carrying amount of aircraft is annually
tested for impairment, even when there is no indication of loss.
A property,
plant and equipment item is written off after sale or when there are no future
economic benefits resulting from the asset’s continuous use. Any gain or loss
from the sale or write-off of an item is determined by the difference between
the amount received for the sale and the carrying amount of the asset and is
recognized in profit or loss.
Additionally,
the Company adopts the following treatment for the groups below:
4.11.1.
Advances for aircraft acquisition
Refer to
prepayments in U.S. dollars to Boeing for the acquisition of 737-MAX aircraft.
The advances are converted at the historical rate.
39
4.11.2.
Lease agreements
In cases of
lease agreements, in which the risks and benefits of the leased asset are
transferred to the Company, the asset is recognized in the statement of
financial position, with a counter entry in financial liabilities, at the
beginning of the lease term at amounts equivalent to the fair value of the
leased asset, or, if lower, at the present value of the minimum lease
payment.
Leased assets
are depreciated throughout their useful lives. However, when there is no
reasonable certainty that the Company will obtain ownership at the end of the
lease, the asset is depreciated throughout its estimated useful life or during
the lease term, whichever is lower.
Other aircraft
and engine leases are classified as operating lease and payments are recognized
as an expense on a straight-line basis during the term of the agreement, under
“Operating leases”. The future payments of these agreements do not represent an
obligation recorded in the statement of financial position; however, the
commitments assumed are presented in Note 28.
4.11.3.
Sale-leaseback transactions
Gains or
losses arising from the Company’s sale-leaseback transactions classified after
the sale of rights as operating lease are recognized as follows:
•
Immediately in profit or loss when the transaction was measured at fair value;
• If the
transaction price was established below or above the fair value, gains or losses
are immediately recognized in profit or loss, unless the result is offset by
future lease payments below market value (gains or losses are deferred and
amortized in proportion to the lease payments during the year the asset is
expected to be used).
The balance of
deferred losses is recognized as a prepaid expense, while the balance of
deferred gains is recognized as other obligations. The segregation between short
and long term is recognized in accordance with the contractual term of the lease
that originated such transaction.
4.11.4.
Capitalization of contractual obligations with
aircraft return conditions
The Company
records estimated expenses at the beginning of the lease agreements to comply
with aircraft and engine return conditions as part of asset costs, with a
counter entry in the provision for liabilities, as per Note 20. After initial
recognition, the asset is depreciated on a straight-line basis for the term of
the agreement and the adjusted provision in accordance with the current capital
remuneration rates.
4.11.5.
Capitalization of major engine, aircraft, landing
gear and APU (Auxiliary Power Unit) maintenance expenses
Major
maintenance expenses, including labor and replacement parts, are only
capitalized when the estimated useful life of the asset is extended. These costs
are capitalized and depreciated by the estimated term to be incurred until the
next major maintenance date. Any incurred expenses that do not extend the useful
life of the asset are directly recognized in profit or loss.
40
4.12.
Intangible assets
4.12.1.
Finite useful life
Intangible
assets acquired are measured at cost upon initial recognition. Subsequent to
initial recognition, intangible assets with finite useful lives, mainly
software, are presented at cost, less accumulated amortization and impairment
losses, when applicable. Intangible assets generated internally, excluding
development costs, are not capitalized and the expense is reflected in the
statement of income in the year it is incurred.
The useful
life of intangible assets is classified as finite or indefinite. Intangible
assets with finite useful lives are amortized throughout their economic useful
life and tested for impairment whenever there is any indication of loss in their
economic value. The period and method of amortization for intangible assets with
finite useful lives are reviewed at least at the end of each fiscal year. The
amortization of intangible assets with finite useful lives is recognized in the
statement of income under expenses, consistently with the economic useful life
of intangible assets.
4.12.2.
Indefinite useful life
4.12.2.1.
Goodwill based on expected future
profitability
This category
includes amounts related to goodwill from business combinations of the
subsidiaries GLA and Smiles Fidelidade. Goodwill is annually tested for
impairment by comparing the carrying amount with the recoverable fair value of
the cash-generating units. Management makes judgments and assumptions to assess
the impact of macroeconomic and operational changes in order to estimate future
cash flows and measure the recoverable value of assets.
4.12.2.2.
Airport operating rights
(“slots”)
Within the
business combination GLA and Webjet, slots were acquired, which were recognized
at their fair value on the acquisition date and are not amortized. The estimated
useful life of these rights was considered indefinite due to several factors and
considerations, including permission authorizations and requirements to operate
in Brazil and the limited availability of use rights in major airports in terms
of air traffic volume. These rights, based on GLA’s cash-generating unit, are
tested for impairment on an annual basis or when there are changes in the
circumstances that indicate that the carrying amount may not be recovered. No
impairment losses have been recorded until now.
4.13.
Short and long-term
debt
Short and
long-term debt is initially recognized at fair value less any directly
attributable transaction costs. After initial recognition, these financial
liabilities are measured at amortized cost using the effective interest
method.
4.14.
Suppliers and other
liabilities
Suppliers and
other liabilities are initially recognized at fair value and subsequently added,
when applicable, of relevant charges and monetary and exchange variations
incurred up to the date the financial statements were prepared.
41
4.14.1.
Suppliers - Forfaiting
Management
negotiated with suppliers to extend payment terms. As a result, the Company
signed an agreement with financial institutions to allow the anticipation of
trade receivables from its suppliers. Taking into account that the early receipt
with financial institutions is an option for suppliers, this does not generate
financial expenses for the Company, it does not require the mandatory
participation of suppliers, and the Company is neither refunded and/nor
benefited with discounts from the financial institution due to prepayment before
the maturity date agreed upon with the supplier. There is no change in the bill
subordination level in the event of judicial execution. As of December 31, 2018,
the balance of suppliers benefited from such agreement totaled R$365,696
(R$78,416 as of December 31, 2017), as per Note 17.
4.15.
Advance ticket
sales
Advance ticket
sales represent the Company’s obligation to provide flight transportation
services and other services in addition to the main obligation with its
customers, net of breakage revenue, which is already recognized in profit or
loss, as per Note 4.17.1.
4.16.
Provisions
4.16.1.
Provision for aircraft return
Aircraft
negotiated under operating lease agreements normally include contractual
obligations establishing return conditions. In these cases, the Company records
provisions for return costs, since these are present obligations arising from
past events that will generate future disbursements, which are measured with
reasonable certainty. These expenses refer mainly to aircraft reconfiguration
(interior and exterior), the obtaining of licenses and technical certifications,
return checks, painting, etc., as set forth in the contract. The estimated cost
is initially recorded at present value in property, plant and equipment. The
corresponding entry for the provision for aircraft return is recorded under
“Provision for aircraft return”. After initial recognition, liabilities are
restated using the capital remuneration rate estimated by the Company by
crediting the financial result. Changes in the estimate of expenses to be
incurred are recorded prospectively.
4.16.2.
Provision for engine return
Provisions for
engine return are estimated based on the minimum contractual conditions in which
the equipment must be returned to the lessor, observing the historical costs
incurred and the equipment conditions at the moment of the evaluation. Said
provisions are recorded in profit or loss as of the time the contractual
requirements are met and the next maintenance is scheduled for a date after the
engines are expected to be returned. The Company estimates the provision
for engine return in accordance with the costs to be incurred whenever the
amount can be reliably estimated. The amount of a provision will be the present
value of the expenses expected to be required to settle the minimum obligation.
The term will be based on the expected date of return of the leased engine, i.e.
the duration of the lease agreement.
42
4.16.3.
Provision for tax, fiscal and labor
risks
Provisions are
recognized when the Company has a present legal or constructive obligation as a
result of past events and it is probable that an outflow of resources will be
required to settle the obligation, and the amount can be reliably
estimated.
The Company is
a party to various legal and administrative litigations, mainly in Brazil. The
assessments of the likelihood of losses from these litigations include the
analysis of existing evidence, the hierarchy of laws, previous court decisions,
most recent court decisions and their relevance in the judicial context, as well
as the opinion of outside legal advisors. The provisions are reviewed and
adjusted to account for changes in circumstances, such as the applicable statute
of limitations, completion of tax inspections, or additional exposure identified
on the basis of new matters or court decisions.
4.17.
Revenue recognition
4.17.1.
Revenue from passengers, cargo and additional
services
Passenger
revenue is recognized when air transportation services are effectively provided.
Tickets sold but not yet used are recorded under “Advance ticket sales” and
represent deferred revenue of tickets sold to be used on a future date, net of
estimated breakage revenue.
Breakage
revenue is the calculation, based on historical figures, of issued tickets that
will expire without being used, i.e. passengers who acquired tickets and are not
likely to use them. The calculation is reviewed at least on an annual basis in
order to reflect and capture changes in customers’ behavior in relation to
expired tickets.
From the
perspective of the consolidated financial statements, the revenue recognition
cycle related to miles exchanged for flight tickets is only complete when the
passengers are effectively transported.
Cargo revenue
is recognized when transportation is provided. Other revenues, including charter
services, sales on board, reissued tickets, checked luggage and other additional
services are recognized together with the main obligation of transporting
passengers.
4.17.2.
Mileage revenue
The purpose of
the Smiles Program is to increase customer loyalty by granting mileage credit to
its members. The obligation generated by the issue of miles is measured based on
the price at which miles are sold to airline and non-airline partners of Smiles,
classified as the fair value of the transaction. Revenue is recognized in profit
or loss for the year when miles are redeemed by the members of the Smiles
Program in exchange for rewards with its partners.
According to
CPC 47, equivalent to IFRS 15, the Company acts as an agent and fulfills its
performance obligation when miles are redeemed by the members of the Smiles
Program in exchange for rewards with its partners, and revenue is recognized in
profit or loss. Therefore, gross profit is presented net of its respective
direct variable costs associated with the availability of goods and services to
participants.
Due to its
characteristics, the mileage program also allows for the possibility of
recognizing
breakage
revenue, which, in turn, is calculated based on the calculation of miles with a
high potential to expire without being used by Smiles Program members. The
calculation is applied to miles issued in the period, originating breakage
revenue.
43
It is worth
mentioning that future events may significantly change the profile of customers
and their historical pattern of miles redeemed, which in turn may result in
material changes to the deferred revenue balance and the recognition of breakage
revenue. According to the Smiles loyalty program’s policy, all miles in the
customers’ accounts are cancelled after 36 months, with the exception of Ouro
and Diamante (Gold and Diamond) customers, whose miles expire after 48 and 120
months, respectively. The miles of the Smiles Club’s members are valid for 120
months. The Company reviews the statistical calculation on an annual
basis.
4.18.
Share-based
payments
4.18.1.
Stock options
The Company
offers its executives stock option plans. The Company recognizes as expenses, on
a straight-line basis, the fair value of options or shares, recorded on the
grant date, during the service period required by the plan, with a counter entry
in equity. Accrued expenses recognized reflect the vesting period and the
Company’s best estimate of the number of shares to be acquired. Expenses or
revenues from changes that occurred in the year are recognized in the statement
of income. The expense is reverted if a vesting condition is not complied
with.
The effect of
outstanding options is reflected as additional dilution when calculating diluted
earnings per share.
4.18.2.
Restricted shares
The Company
also offers its executives a restricted share transfer plan, the shares of which
are transferred three years after the grant date, provided that the beneficiary
maintains its employment relationship up to the end of this period. The transfer
occurs through shares held in treasury, whose value per share is determined by
the market price on the date they are transferred to the beneficiary. Gains from
changes in the fair value of the share between the grant date and the transfer
date of the restricted shares are recorded in equity, under “Goodwill on
transfer of shares”.
The impact of
the revision of the number of stock options or restricted shares that will not
be acquired in relation to the original estimates, if any, is recognized in
profit or loss so that the accrued expense reflects the revised estimates with
the corresponding adjustment in equity.
4.19.
Profit sharing for employees
and management
Profit sharing
is granted to the Company’s employees, based on certain goals annually
established, and management, based on statutory provisions proposed by the Board
of Directors and approved by shareholders. The amount of profit sharing is
recognized in profit or loss for the period when the goals are met.
4.20.
Financial income and
expenses
Financial
income and expenses include revenues from interest on amounts invested, exchange
variations on assets and liabilities, variations in the fair value of financial
assets measured at
fair value
through profit or loss, gains and losses from hedge instruments recognized in
profit or loss, interest on short and long-term debt and interest on loans and
bank charges and expenses, among others. Interest income and expenses are
recognized in profit or loss through the method of effective
interest.
44
4.21.
Earnings (loss) per
share
Earnings
(loss) per share are calculated by dividing the net income or loss by the
weighted average number of all classes of shares outstanding during the year.
Diluted
earnings (loss) per share are calculated by adjusting the weighted average
number of shares outstanding by instruments potentially convertible into shares.
The Company has only the stock option plan in the category of potentially
dilutive shares.
4.22.
Segments
An operating
segment is a component of the Company that develops business activities in order
to earn revenues and incur expenses. Operating segments reflect the way the
Company’s Management reviews financial information in order to make decisions.
The Company’s Management identified the following operating segments that comply
with quantitative and qualitative disclosure parameters and represent the main
types of business: flight transportation and mileage program.
4.22.1.
Air transportation segment
Operations
from this segment originate primarily from its subsidiary GLA for the provision
of air transportation services and the main assets that generate revenue are the
company’s aircraft. Other revenues are mainly originated from cargo operations
and related services, such as checked luggage, reissued tickets and cancellation
of flight tickets.
4.22.2.
Loyalty program segment
The operations
of this segment are represented by the sale of mileage to airline and
non-airline partners. This includes the management of the program, the sale of
product and service redemption rights and the creation and management of an
individual and corporate database. The main cash-generating asset is the
program’s member portfolio.
4.23.
Foreign currency transactions
Transactions
in foreign currency are recorded at the exchange rate in effect on the
transaction date. Monetary assets and liabilities designated in foreign
currency are calculated based on the exchange rate in effect on the reporting
date and any difference arising from currency translation is recorded under
“Exchange rate variation, net” in the statement of income.
4.24.
Statement of value added
(“DVA”)
Its goal is to
demonstrate the wealth generated by the Company and its distribution in a given
year; it is presented by the Company as required by Brazilian Corporation Law as
part of its individual financial statements and as supplementary information to
the consolidated financial statements, since it is not provided for or required
by IFRS. The statements of value added were prepared based on information
obtained in the accounting records, pursuant to
CPC 09 –
“Statement of value added”.
45
4.25.
Main accounting estimates and
assumptions adopted
As disclosed
in Note 2, Management made the following judgments with significant effect on
the amounts recognized in the financial statements:
• breakage
revenue from tickets and miles (Note 4.17.2);
• estimated
losses from doubtful accounts (Note 8);
• annual
analysis of the recoverable amount of recoverable and deferred taxes (Note
10);
• recovery
analysis of maintenance deposits (Note 11);
• useful life
of fixed and intangible assets with finite useful lives (Notes 14 and 15);
• annual
analysis of the recoverable amount of goodwill (Note 15);
• analysis of
the recovery of slots (Note 15);
• provision
for tax, civil and labor risks (Note 20);
• provision
for aircraft and engine return (Note 20);
• transactions
with share-based payments (Note 23);
• testing for
impairment of financial assets (Note 29);
• derivative
assets and liabilities (Note 29); and
• fair value
of financial instruments (Note 29).
The Company is
continually reviewing the assumptions used in its accounting estimates. The
effect of revisions to the accounting estimates is recognized in the financial
statements in the period these revisions are carried out.
4.26.
New accounting standards and
pronouncements adopted in the year
4.26.1.
CPC 47 - “Revenue of Contract with Customers”,
equivalent to IFRS 15
This standard
establishes a new five-step model to be applied to all revenue from contracts
with customers, in accordance with the entity’s performance obligations. The
Company adopted the new standard on the date it became effective, as of January
1, 2018, using the full retrospective method. The main impacts from the adoption
of this standard are as follows:
Ancillary
revenue:
comprises all revenue related to flight
transportation services. These revenues were assessed and classified as “related
to the main service”, and will be recognized only when the flight transportation
service is provided. These revenues are now recorded under “Passenger”, instead
of under “Other revenue”.
Mileage
program:
the Company will now present in the statement of
income revenue from mileage redemption under the Smiles Fidelidade Program as
“agent”, and will recognize gross revenue from reward redemption net of the
respective variable direct costs related to the availability of goods and
services to its members.
46
Restatement of correspondent amounts
For comparison purposes in relation to the financial statements herein, the Company presents below the effects from the adoption of CPC 47 – “Revenue from Contract with Customer”, equivalent to IFRS 15, as if this standard had been adopted as of December 31, 2017:
(i)
adjustment of R$19,575 in “Advance ticket sales”, against
Accumulated Losses under Equity, related to Ancillary Revenues whose timing of recognition changed. In the parent company statement of financial position, the adoption of this standard increased the “Provision for loss on investment” by the same amount;
(ii)
the reclassification of R$548,564 in ancillary revenue from “Other revenue” to “Passenger” in the subsidiary GLA;
(iii)
reduction of R$392 in ancillary revenue, whose timing of recognition changed in the subsidiary GLA. The impact on the parent company statement of income led to a reduction by the same amount in the “Equity results” line;
(iv)
due to the classification of Smiles Fidelidade as an agent, the consolidated statement of income, excluding transactions with GLA, was impacted by R$246,596 in the year ended December 31, 2017, due to the reclassification of variable direct costs from “Cost of services provided” to “Mileage revenue”, with no impact on the parent company statement of income.
(
v
)
The effects arising from the adoption of IFRS 15 on January 1, 2017 were not material and, for this reason, the Company opted not to present the opening balance sheet showing such impacts.
|
Consolidated
|
|
Previously disclosed
|
Deferred revenue
adjustment
(IFRS 15) (i)
|
Restated
balances
|
Statement of financial position
|
|
|
|
As of December 31, 2017
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
Advance ticket sales
|
1,456,939
|
19,575
|
1,476,514
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
Accumulated losses
|
(7,293,274)
|
(19,575)
|
(7,312,849)
|
Deficit attributable to equity holders of the parent
|
(3,480,959)
|
(19,575)
|
(3,500,534)
|
47
|
|
|
Consolidated
|
|
Previously
disclosed
|
Restated
net revenue (agent) (iv)
|
Restated
ancillary
revenue (ii)
|
Deferred TAE (iii)
|
Restated
balances
|
Statement of income
|
|
|
|
|
|
Fiscal year ended December 31,
2017
|
|
|
|
|
|
|
|
|
|
|
|
Passenger
|
9,479,242
|
-
|
548,564
|
(392)
|
10,027,414
|
Cargo
|
354,561
|
-
|
-
|
-
|
354,561
|
Mileage revenue
|
800,976
|
(246,596)
|
-
|
-
|
554,380
|
Other revenue
|
657,609
|
-
|
(548,564)
|
-
|
109,045
|
Gross revenue
|
11,292,388
|
(246,596)
|
-
|
(392)
|
11,045,400
|
|
|
|
|
|
|
Related tax
|
(716,366)
|
-
|
-
|
-
|
(716,366)
|
Net revenue
|
10,576,022
|
(246,596)
|
-
|
(392)
|
10,329,034
|
|
|
|
|
|
|
Cost of services provided
|
(7,681,376)
|
246,596
|
-
|
-
|
(7,434,780)
|
Gross profit
|
2,894,646
|
-
|
-
|
(392)
|
2,894,254
|
|
|
|
|
|
|
Net income for the period before
non-controlling interests
|
378,209
|
-
|
-
|
(392)
|
377,817
|
|
|
|
|
|
|
Net income (loss) attributable to equity
holders of the parent
|
19,184
|
-
|
-
|
(392)
|
18,792
|
|
|
|
|
|
|
Basic earnings per share
|
|
|
|
|
|
Per common share
|
0.002
|
-
|
-
|
(0.000)
|
0.002
|
Per preferred share
|
0.055
|
-
|
-
|
(0.001)
|
0.054
|
|
|
|
|
|
|
Diluted earnings per
share
|
|
|
|
|
|
Per common share
|
0.002
|
-
|
-
|
(0.000)
|
0.002
|
Per preferred share
|
0.055
|
-
|
-
|
(0.002)
|
0.053
|
48
4.26.2.
CPC – 48 “Financial Instruments”, equivalent to
IFRS 9
In
July 2014, the International Accounting Standards Board (IASB) issued the final
version of IFRS 9 – “Financial Instruments”, which replaces IAS 39 – “Financial
Instruments: Recognition and Measurement” and all previous versions of IFRS 9.
The standard introduces new requirements for classification and measurement,
impairment and hedge accounting.
Due to the adoption of this standard, the Company
now measures estimated losses from the allowance for doubtful accounts based on
expected losses instead of incurred losses. The Company used the practical
expedient provided for in the standard and applied the simplified model to the
measurement of the expected loss during the contract lifecycle, through the use
of historical data and the segmentation of the receivables portfolio into groups
that have the same receipt pattern and maturity dates. IFRS 9 was applied
retrospectively; however, it did not result in changes from the expected loss to
the allowance for doubtful accounts for the comparative periods presented. The
Company recognized the difference between the previous book balance and the book
value, on the adoption date, corresponding to R$1,675, as an adjustment to the
opening balance of retained earnings, net of tax effects.
4.26.3.
ICPC 21 - “Foreign currency transactions and
advance consideration”, equivalent to IFRIC 22
In
December 2016, the IASB issued IFRIC 22, which deals with the exchange rate to
be used in transactions that involve consideration paid or received in advance
denominated in foreign currency.
The interpretation clarifies that the date of
transaction is the date on which the company recognizes the non-monetary asset
or liability.
IFRIC 22 became effective on January 1,
2018.
The adoption of this standard did not impact the
Company.
4.27.
New accounting standards and
pronouncements not yet adopted
4.27.1.
CPC 06 - “Leases”, equivalent to IFRS
16
In
January 2016, the IASB issued accounting pronouncement IFRS 16 – “Leases”,
adopted in Brazil through CPC 06 (R2). This new standard will be effective for
annual periods beginning on or after January 1, 2019.
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
fewer. 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
re-measurement 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 will not restate
comparative information and balances. Within the
modified retrospective approach, the Company chose to adopt the following
transition practical expedients and exemptions:
49
·
the Company will use hindsight, such as in
determining the lease term and considering extensions and renegotiations
throughout the agreement; and
·
the Company will apply 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 estimated 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, as shown in the table below:
|
Assets (a)
|
Liabilities (b)
|
Equity (a-b)
|
Operating lease agreements
(*)
|
|
(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
|
(8,554)
|
Total
|
2,934,256
|
5,370,868
|
(2,436,611)
|
The Company assessed the impacts related to the
recognition of deferred taxes for the adoption adjustments of IFRS 16 under
accumulated losses and, on January 1, 2019, it should not reflect corresponding
tax effects, given that GLA does not have a history of taxable income and
currently recognizes tax credit assets limited to the amount of tax credit
liabilities, pursuant to item 35 of CPC 32 – “Income Taxes”.
For aircraft agreements, the Company is still
assessing the impacts of the initial estimate of return costs, which should be
included in the measurement of the right-of-use.
With the adoption of CPC 06 (R2), the operating
margin will be impacted by the elimination of lease expenses and the increase in
depreciation expenses. In addition, the financial result will be impacted by the
increase in interest expenses.
4.27.2.
ICPC 22 - “Uncertainty Over Income Tax
Treatments”, equivalent to IFRIC 23
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 is
effective for annual periods beginning on or after January 1, 2019. The Company
assessed the impacts from the adoption of the standard and concluded that there
are no other disclosures in addition to those presented.
The Company will adopt these standards when they
become effective, disclosing and recognizing potential impacts on its financial
statements as they are applied.
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.
50
5.
Cash and cash equivalents
|
Parent Company
|
Consolidated
|
|
2018
|
2017
|
2018
|
2017
|
Cash and bank deposits
|
6,587
|
103,268
|
157,970
|
427,608
|
Cash equivalents
|
275,878
|
459
|
668,217
|
599,254
|
Total
|
282,465
|
103,727
|
826,187
|
1,026,862
|
From the total
consolidated cash and cash equivalents balance, R$438,654 is related to cash,
cash equivalents and bank deposits in foreign currency as of December 31, 2018
(R$462,776 as of December 31, 2017).
The breakdown
of cash equivalents is as follows:
|
Parent Company
|
Consolidated
|
|
2018
|
2017
|
2018
|
2017
|
Private bonds
|
273,661
|
14
|
360,679
|
164,959
|
Government bonds
|
-
|
-
|
39
|
14,039
|
Investment funds
|
2,217
|
445
|
307,499
|
420,256
|
Total
|
275,878
|
459
|
668,217
|
599,254
|
As of December
31, 2018, the private securities were comprised by buy-back transactions,
private bonds (Bank Deposit Certificates - “CDBs”) and time deposits,
remunerated at a weighted average rate equivalent to 82.9% of the CDI rate
(77.6% of the CDI rate as of December 31, 2017) for domestic short-term
investments and 2.3% p.a. for time deposits denominated in U.S.
dollar.
As of December
31, 2018, the Company had short-term investments in government bonds, at an
average rate of 90.6% of the CDI rate (average rate of 116.3% of the CDI rate as
of December 31, 2017).
The investment
funds classified as cash equivalents have high liquidity and, according to the
Company’s assessment, are readily convertible to a known amount of cash with
insignificant risk of change in value. As of December 31, 2018, investment funds
were remunerated at a weighted average rate equivalent to 94.5% of the CDI rate
(99.8% of the CDI rate as of December 31, 2017).
6.
Short-term investments
|
Parent Company
|
Consolidated
|
|
2018
|
2017
|
2018
|
2017
|
Private bonds
|
92,015
|
730,900
|
92,015
|
731,061
|
Government bonds
|
-
|
-
|
21,100
|
32,701
|
Investment funds
|
-
|
-
|
365,249
|
191,827
|
Total
|
92,015
|
730,900
|
478,364
|
955,589
|
From the total
consolidated amount of short-term investments, R$92,015 as of December 31, 2018
refers to short-term investments in foreign currency (R$730,846 as of December
31, 2017).
As of December
31, 2018, private bonds were represented by time deposits, at a weighted average
rate equivalent to 97.6% of the CDI rate (98.0% of the CDI rate as of December
31, 2017).
Government
bonds were primarily represented by Financial Treasury Bills (“LFT”) and
National Treasury Bills (“LTN”), accruing interest at a weighted average rate of
99.7% of the
CDI rate
(107.7% of the CDI rate as of December 31,
2017).
51
Investment
funds include private funds and bonds accruing interest at a weighted average
rate of 105.4% of the CDI rate (98.9% of the CDI rate as of December 31, 2017),
and are exposed to the risk of significant changes in value.
7.
Restricted cash
|
Parent Company
|
Consolidated
|
|
2018
|
2017
|
2018
|
2017
|
Deposits in guarantee of letter of
credit
|
2,318
|
2,211
|
100,394
|
60,423
|
Escrow deposits (a)
|
33,928
|
32,120
|
72,089
|
71,110
|
Escrow deposits for hedge
margin
|
-
|
-
|
433,322
|
-
|
Escrow deposits - leases (b)
|
-
|
-
|
102,880
|
116,131
|
Other deposits (c)
|
3,538
|
4,101
|
113,447
|
20,383
|
Total
|
39,784
|
38,432
|
822,132
|
268,047
|
|
|
|
|
|
Current
|
-
|
-
|
133,391
|
-
|
Noncurrent
|
39,784
|
38,432
|
688,741
|
268,047
|
(a)
The amount of R$33,928 (parent company and
consolidated) refers to a guarantee for GLAI’s legal proceedings. The other
amounts relate to guarantees of GLA letters of credit.
(b)
Related to deposits made to obtain letters of
credit for aircraft operating leases from GLA.
(c)
Refers mainly to bank guarantees.
From the total
consolidated amount, R$433,304 as of December 31, 2018 refers to restricted cash
in foreign currency (R$22,094 as of December 31, 2017).
8.
Trade receivables
|
Consolidated
|
|
2018
|
2017
|
|
|
(Restated)
|
Local currency
|
|
|
Credit card administrators
|
393,557
|
450,823
|
Travel agencies
|
226,627
|
296,860
|
Cargo agencies
|
40,431
|
38,460
|
Airline partner companies
|
3,243
|
6,439
|
Other
|
52,216
|
41,861
|
Total local currency
|
716,074
|
834,443
|
|
|
|
Foreign currency
|
|
|
Credit card administrators
|
97,488
|
71,630
|
Travel agencies
|
21,005
|
20,118
|
Cargo agencies
|
1,378
|
1,588
|
Airline partner companies
|
23,294
|
44,869
|
Other
|
5,373
|
2,511
|
Total foreign currency
|
148,538
|
140,716
|
|
|
|
Total
|
864,612
|
975,159
|
|
|
|
Allowance for doubtful
accounts
|
(11,284)
|
(38,681)
|
|
|
|
Total trade receivables
|
853,328
|
936,478
|
52
The aging list
of trade receivables, net of allowance for doubtful accounts, is as
follows:
|
Consolidated
|
|
2018
|
2017
|
Not yet due
|
|
|
Until 30 days
|
527,878
|
594,968
|
31 to 60 days
|
101,226
|
133,438
|
61 to 90 days
|
49,696
|
44,642
|
91 to 180 days
|
83,128
|
71,116
|
181 to 360 days
|
36,801
|
26,541
|
Above 360 days
|
268
|
241
|
Total not yet due
|
798,997
|
870,946
|
|
|
|
Overdue
|
|
|
Until 30 days
|
13,167
|
21,686
|
31 to 60 days
|
4,726
|
8,338
|
61 to 90 days
|
2,672
|
3,559
|
91 to 180 days
|
11,173
|
15,620
|
181 to 360 days
|
9,863
|
8,059
|
Above 360 days
|
12,730
|
8,270
|
Total overdue
|
54,331
|
65,532
|
|
|
|
Total
|
853,328
|
936,478
|
The changes in
allowance for doubtful accounts are as follows:
|
Consolidated
|
|
2018
|
2017
|
Balances at the beginning of the year – CPC
38 (IAS 39)
|
(38,681)
|
(34,182)
|
Initial adoption adjustment – CPC 48 (IFRS
9) (a)
|
2,593
|
-
|
Adjusted balances at the beginning of the
year
|
(36,088)
|
(34,182)
|
Additions (exclusions) (b)
|
9,789
|
(22,148)
|
Unrecoverable amounts
|
15,015
|
17,649
|
Balance at the end of the
year
|
(11,284)
|
(38,681)
|
(a) Due to
the change to the expected loss model used to calculate the allowance for
doubtful accounts resulting from the initial adoption of CPC 48 - “Financial
Instruments”, equivalent to IFRS 9, the balance of December 31, 2017 was
adjusted on January 1, 2018, with a corresponding entry of R$2,593 in equity.
For further information, see Note 4.26.2.
(b)
Recoveries in the year are reflected in the changes to the receivables portfolio
balance and presented under “Additions (exclusions)”.
9.
Inventories
|
Consolidated
|
|
2018
|
2017
|
Consumables
|
22,098
|
28,006
|
Parts and
maintenance materials
|
170,851
|
162,409
|
Other
|
-
|
585
|
(-)
Provision for obsolescence
|
(12,808)
|
(12,509)
|
Total
|
180,141
|
178,491
|
53
The changes in
provision for obsolescence are as follows:
|
Consolidated
|
|
2018
|
2017
|
Balances at the beginning of the
year
|
(12,509)
|
(12,444)
|
Addition
|
(5,023)
|
(3,059)
|
Write-off
|
4,724
|
2,994
|
Balances at the end of the
year
|
(12,808)
|
(12,509)
|
10.Deferred and recoverable taxes
10.1.
Recoverable taxes
|
Parent Company
|
Consolidated
|
|
2018
|
2017
|
2018
|
2017
|
Prepaid and recoverable income taxes
(*)
|
29,892
|
22,416
|
268,428
|
66,786
|
Withholding income tax (IRRF)
|
119
|
2,750
|
4,744
|
7,308
|
PIS and COFINS (*)
|
-
|
-
|
163,921
|
408
|
Withholding tax of public
institutions
|
-
|
-
|
6,812
|
6,127
|
Value added tax (IVA)
|
-
|
-
|
5,649
|
5,431
|
Other
|
57
|
443
|
7,115
|
4,195
|
Total
|
30,068
|
25,609
|
456,669
|
90,255
|
|
|
|
|
|
Current
|
5,279
|
19,446
|
360,796
|
83,210
|
Noncurrent
|
24,789
|
6,163
|
95,873
|
7,045
|
(*) In the year, the subsidiaries Smiles
Fidelidade and GLA recorded extemporaneous tax credits of income tax, social
contribution, PIS and COFINS related to the last five fiscal years in the
amounts of R$262,252 and R$128,942, respectively, of which R$43,222 was offset
in the year ended December 31, 2018, until the disclosure of these financial
statements.
54
10.2.
Deferred tax assets (liabilities)
The positions
of deferred assets and liabilities presented below comply with the legal rights
of compensation, which consider taxes recorded by the same tax authority under
the same tax entity.
|
GLAI
|
GLA
|
Smiles
|
Consolidated
|
|
2018
|
2017
|
2018
|
2017
|
2018
|
2017
|
2018
|
2017
|
Income tax losses
|
16,983
|
17,515
|
5,469
|
-
|
52,915
|
111,801
|
75,367
|
129,316
|
Negative basis of social
contribution
|
6,114
|
6,306
|
1,969
|
-
|
19,049
|
40,249
|
27,132
|
46,555
|
Temporary differences
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts and other
credits
|
196
|
2,944
|
72,646
|
60,586
|
3
|
55
|
72,845
|
63,585
|
Breakage provision
|
-
|
-
|
-
|
-
|
(172,869)
|
-
|
(172,869)
|
-
|
Provision for losses on GLA’s
acquisition
|
-
|
-
|
143,350
|
143,350
|
-
|
-
|
143,350
|
143,350
|
Provision for contingencies
|
916
|
938
|
86,623
|
77,914
|
6,598
|
4,411
|
94,137
|
83,263
|
Provision for aircraft return
|
-
|
-
|
62,642
|
68,438
|
-
|
-
|
62,642
|
68,438
|
Derivative transactions
|
-
|
-
|
5,335
|
9,603
|
-
|
-
|
5,335
|
9,603
|
Tax benefit due to goodwill amortization
(a)
|
-
|
-
|
-
|
-
|
-
|
14,588
|
-
|
14,588
|
Slots
|
-
|
-
|
(353,226)
|
(353,226)
|
-
|
-
|
(353,226)
|
(353,226)
|
Depreciation of engines and parts for
aircraft maintenance
|
-
|
-
|
(174,129)
|
(167,913)
|
-
|
-
|
(174,129)
|
(167,913)
|
Reversal of goodwill amortization on GLA’s
acquisition
|
-
|
-
|
(127,659)
|
(127,659)
|
-
|
-
|
(127,659)
|
(127,659)
|
Aircraft leases
|
-
|
-
|
30,956
|
34,660
|
-
|
-
|
30,956
|
34,660
|
Other (b)
|
-
|
-
|
76,001
|
66,242
|
37,037
|
40,889
|
162,651
|
143,949
|
Total deferred taxes -
Noncurrent
|
24,209
|
27,703
|
(170,023)
|
(188,005)
|
(57,267)
|
211,993
|
(153,468)
|
88,509
|
(a)
Related to the tax
benefit from the amortization of goodwill from the reverse merger of G.A. Smiles
Participações by the subsidiary Smiles S.A. Under the terms of the current tax
legislation, goodwill arising from the transaction will be a deductible expense
when calculating income and social contribution taxes.
(b)
The R$49,613 portion of
taxes on unrealized profits from transactions between GLA and Smiles Fidelidade
is recognized directly in Consolidated (R$36,818 as of December 31,
2017).
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
|
|
2018
|
2017
|
2018
|
2017
|
2018
|
2017
|
Accumulated income tax losses
|
170,418
|
172,547
|
5,631,209
|
4,134,099
|
522,743
|
758,289
|
Negative basis of social
contribution
|
170,418
|
172,547
|
5,631,209
|
4,134,099
|
522,743
|
758,289
|
The Company’s
Management considers that the deferred assets and liabilities recognized as of
December 31, 2018 arising from temporary differences will be realized in
proportion to realization of their bases and the expectation of future results.
The analysis
of the realization of deferred tax assets was prepared on a company basis, as
follows:
GLAI:
the Company has tax
credits of R$59,054, of which R$57,942 is related to net operating loss
carryforwards and R$1,112 is related to temporary differences, with realization
supported by the Company’s long-term plan. The Company reassessed its
projections and did not recognize deferred tax assets for an amount of R$34,845
related to net operating loss carryforwards.
GLA:
GLA has tax credits on
net operating loss carryforwards of R$1,914,611. The Company’s Management
reviewed the projections of tax loss carryforwards and recorded deferred taxes
on tax loss carryforwards in the amount of R$7,438 in the year ended December
31, 2018. In
view of
instability of the political and economic environments, fluctuations in the U.S.
dollar exchange rate and other variables that may affect the projections of
future results, as well as the history of losses in recent years, the company
did not recognize a deferred tax asset for an amount of R$1,907,173 related to
net operating loss carryforwards. The Company expects to partially realize this
amount over the next 10 years, according to the projections of future results in
line with its business plan.
55
Smiles
Fidelidade:
As of July 1, 2017, Smiles Fidelidade S.A.
incorporated Smiles S.A. and, based on the projections of future taxable income,
recognized a deferred tax asset on income and social contribution tax on tax
loss carryforward in the amount of R$193,020. The reported amount corresponds
exclusively to the amounts expected to be realized, pursuant to internal
assessments carried out by the Company’s Management. As of December 31, 2018,
the amount came to R$71,964 and will be realized within the next 12
months.
The
reconciliations of effective income tax and social contribution rates for the
years ended December 31, 2018 and 2017 are as follows:
|
Parent Company
|
Consolidated
|
|
2018
|
2017
|
2018
|
2017
|
|
|
(Restated)
|
|
(Restated)
|
|
|
|
|
|
Income (loss) before income
taxes
|
(1,080,235)
|
1,813
|
(482,596)
|
70,604
|
Combined nominal tax rate
|
34%
|
34%
|
34%
|
34%
|
Income at the statutory combined nominal
tax rate
|
367,280
|
(616)
|
164,083
|
(24,005)
|
|
|
|
|
|
Adjustments to calculate the effective tax
rate:
|
|
|
|
|
Equity results
|
(289,974)
|
124,285
|
132
|
185
|
Tax income (losses) from wholly-owned
subsidiaries
|
56,008
|
(94,462)
|
201,043
|
(106,533)
|
Income tax on permanent differences
and others
|
(76,309)
|
(16,866)
|
161,815
|
(65,718)
|
Exchange variation on foreign
investments
|
(54,375)
|
(7,283)
|
(173,964)
|
(20,225)
|
Interest on shareholders’
equity
|
(7,788)
|
(5,374)
|
6,998
|
4,817
|
Benefit on tax losses and temporary
differences constituted (not constituted)
|
-
|
14,610
|
(653,343)
|
291,002
|
Use of tax credits in non-recurring
installment payments (*)
|
-
|
2,685
|
(3,892)
|
227,690
|
Total income tax
|
(5,158)
|
16,979
|
(297,128)
|
307,213
|
|
|
|
|
|
Income taxes
|
|
|
|
|
Current
|
(1,664)
|
-
|
(52,139)
|
(239,846)
|
Deferred
|
(3,494)
|
16,979
|
(244,989)
|
547,059
|
Total income taxes
|
(5,158)
|
16,979
|
(297,128)
|
307,213
|
|
|
|
|
|
(*) On March
10, 2017, the subsidiary GLA adhered to the Tax Regularization Program (“PRT”),
including tax debts that matured on November 30, 2016. The PRT program was
consolidated on June 29, 2018, which resulted in reduced debt and lower use of
tax credit.
On January 1,
2018, the Company recorded a tax effect of R$880 related to the initial adoption
of IFRS 9 on the allowance for doubtful accounts under equity. For further
information, see Note 4.26.2.
56
11.Deposits
|
Parent Company
|
Consolidated
|
|
2018
|
2017
|
2018
|
2017
|
Judicial deposits
|
59,305
|
50,953
|
726,491
|
508,515
|
Maintenance deposits
|
-
|
-
|
647,057
|
484,565
|
Deposits in guarantee for lease agreements
|
49,081
|
13,783
|
238,747
|
170,679
|
Total
|
108,386
|
64,736
|
1,612,295
|
1,163,759
|
11.1.
Judicial deposits
Judicial
deposits and escrow accounts represent guarantees of lawsuits related to tax,
civil and labor claims deposited in escrow until the resolution of the related
claims. Part of the amount in escrow accounts is related to civil and labor
claims arising from the succession orders on claims against Varig S.A. and
proceedings filed by employees that are not related to the Company or any
related party. As the Company is not correctly classified as the defendant of
these lawsuits, whenever such blockages occur, the exclusion of such is
requested in order to release the resources. As of December 31, 2018, the
blocked amounts regarding Varig S.A.’s succession lawsuits and third-party
lawsuits were R$113,979 and R$76,415, respectively (R$108,860 and R$74,300 as of
December 31, 2017, respectively).
The Company
also has judicial deposits due to the lawsuit filed by the National Union of
Airline Companies (“SNEA”) against the 72% increase in landing fees proposed by
the Department of Airspace Control (“DECEA”). As of December 31, 2018, deposits
amounted to R$153,128. The same amount was recorder under “Landing
fees”.
11.2.
Maintenance deposits
The Company
makes deposits in U.S. dollars for maintenance of aircraft and engines that will
be used in future events as set forth in some lease contracts.
The
maintenance deposits do not exempt the Company, as lessee, neither from the
contractual obligations relating to maintenance nor from risk associated with
operating activities. The Company holds the right to select any of the
maintenance service providers or to perform such services internally.
The Company
has two categories of maintenance deposits:
·
Maintenance guarantee:
related to individual
deposits refundable at the end of the lease agreement, which may also be used in
maintenance events, depending on negotiations with lessors. The balance of these
deposits as of December 31, 2018 was R$249,080 (R$218,361 as of December 31,
2017).
·
Maintenance reserve:
related to amounts paid
monthly based on the utilization of aircraft components, which may be used in
maintenance events, according to the lease agreement. As of December 31, 2018,
the balance of this reserve was R$397,977 (R$266,204 as of December 31,
2017).
11.3.
Deposits in guarantee for lease
agreements
As required by
its lease agreements, the Company holds guarantee deposits (in U.S. dollars) on
behalf of the leasing companies, fully refunded upon the contract expiration
date.
57
12.Transactions with related parties
12.1.
Loan agreements - noncurrent assets and
liabilities
The parent
company maintains assets and liabilities from loan agreements with its
subsidiary GLA without interest, as shown in the table below:
|
|
|
|
Assets
|
Liabilities (*)
|
Creditor
|
Debtor
|
Type of transaction
|
Interest
rate (p.a.)
|
2018
|
2017
|
2017
|
|
|
|
|
|
|
|
GLAI
|
GLA
|
Loan
|
6.50%
|
82,655
|
36,876
|
112,869
|
GAC
|
GLA
|
Loan
|
0.00%(*)
|
232,488
|
-
|
21,813
|
Gol Finance
|
GLA
|
Loan
|
4.32%
|
1,979,000
|
1,533,715
|
328
|
Total
|
|
|
|
2,294,143
|
1,570,591
|
135,010
|
(*) Pursuant
to the local legislation, the Company applies symbolic interest
rates.
(**) All loan
liabilities were settled during the fiscal year ended December 31,
2018.
The table
below shows the amounts between the companies, eliminated in the consolidated:
|
|
|
|
Assets
|
Liabilities
|
Creditor
|
Debtor
|
Type of transaction
|
Interest
rate (p.a.)
|
2018
|
2017
|
2018
|
2017
|
|
|
|
|
|
|
|
|
GAC
|
GLAI
|
Loan
|
0.00%(*)
|
-
|
-
|
-
|
125,148
|
GAC
|
Gol Finance Inc.
|
Loan
|
8.64%
|
-
|
32,238
|
1,128,845
|
961,212
|
Gol Finance
|
GAC
|
Loan
|
5.85%
|
596,204
|
434,418
|
-
|
-
|
Gol Finance
|
GLAI
|
Loan
|
0.00%(*)
|
-
|
-
|
-
|
24,313
|
Gol Finance
|
Gol Finance Inc.
|
Loan
|
11.70%
|
887,395
|
845,852
|
250,950
|
560,472
|
Smiles Fidelidade
|
GLA
|
Advance ticket purchases
|
8.97%
|
1,296,077
|
866,341
|
-
|
-
|
Smiles Fidelidade
|
GLA
|
Sale of miles
|
-
|
24,035
|
18,950
|
-
|
-
|
Smiles Fidelidade
|
GLA
|
Management fees
|
-
|
803
|
1,124
|
-
|
-
|
Smiles Fidelidade
|
GLA
|
Letter of indemnity agreement
|
-
|
10,559
|
-
|
-
|
-
|
Smiles Fidelidade
|
GLA
|
Shared services
|
-
|
-
|
-
|
5,439
|
3,964
|
Smiles Fidelidade / Smiles
Viagens
|
GLA
|
Transfer - GLA
|
-
|
-
|
-
|
38,144
|
31,250
|
Smiles Fidelidade
|
GLA
|
Share-based payments
|
-
|
856
|
856
|
-
|
-
|
Smiles Fidelidade
|
Netpoints
|
Conversion of miles (**)
|
-
|
48
|
6,900
|
-
|
-
|
Total
|
|
|
|
2,815,977
|
2,206,679
|
1,423,378
|
1,706,359
|
(*) Pursuant
to the local legislation, the Company applies symbolic interest
rates.
(**) Balance
not eliminated in the consolidated financial statements because it is a
transaction with associate.
12.2.
Transportation and consulting
services
All agreements
related to transportation and consulting services are held by GLA. The related
parties for these services are listed below, together with the object of the
agreements and their main contractual conditions:
·
Viação Piracicabana Ltda.:
provides
airport shuttle services for passengers, luggage and employees. As of July 1,
2017, an Assignment Agreement was entered into between Breda Transportes e
Serviços S.A. (“Assignor”) and Viação Piracicabana Ltda. (“Assignee”),
through which
the Assignee will be responsible for the rights and obligations as of the
execution of the Assignment Agreement.
58
·
Expresso União:
provides transportation
to employees. This agreement was terminated in March 2017.
·
Pax Consultoria Empresarial e Participações
Ltda.:
provides consulting and advisory services, and
the agreement has no expiration date. Pax Consultoria Empresarial e
Participações Ltda. assigned to Mobitrans Administração e Participações S.A. the
right to provide consulting and advisory services on a final and non-onerous
basis.
·
Aller Participações:
provides consulting and
advisory services, and the agreement has no expiration date.
·
Limmat Participações S.A.:
provides
consulting and advisory services, and the agreement has no expiration
date.
·
Expresso Caxiense S.A.:
provides
airport shuttle services for passengers, luggage and employees, and the
agreement expires on September 26, 2019.
As of December
31, 2018, GLA recognized total expenses related to these services of R$9,358
(R$8,583 as of December 31, 2017). On the same date, the balance payable to the
related companies was R$1,107 (R$769 as of December 31, 2017), and was mainly
related to services provided by Viação Piracicabana Ltda.
12.3.
Contracts account opening UATP (“Universal Air
Transportation Plan”) to grant credit limit
In September
2011, GLA entered into agreements with the related parties Empresa de Ônibus
Pássaro Marrom 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., Breda Transporte e Serviços S.A.,
Oeste Sul Empreendimentos Imobiliários S.A. SPE., Empresa Cruz De Transportes
Ltda., Expresso Maringá do Vale S.A., Glarus Serviços Tecnologia e Participações
LTDA., Expresso Itamarati S.A., Transporte Coletivo Cidade Canção Ltda., Limmat
Participações S.A., 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.
12.4.
Agreement to use the VIP lounge
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 between
the companies of 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$3,000. As of December 31, 2018, the outstanding balance was
R$4,741, recorded under “Advances from customers” (R$6,779 as of December 31,
2017).
12.5.
Contract for maintenance of parts and financing
engine maintenance
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 year ended December 31, 2018, expenses incurred
for components maintenance services provided by Delta Air Lines amounted to
R$357,619 (R$403,195 as of December 31, 2017). As of December 31, 2018, the
outstanding balance with Delta Air Lines recorded under “Suppliers” totaled
R$211,087 (R$372,511 as of December 31, 2017).
59
12.6.
Handling services agreement
On November 4,
2018, the subsidiary GLA entered into an agreement with Delta Air Lines
regarding handling services at the Miami and Orlando airports, with maturity on
November, 2021. During the year ended December 31, 2018, the expenses related to
this agreement totaled R$1,433, recorded under “Services provided”.
12.7.
Term loan guarantee
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.
In the year ended December 31, 2018, the Company recorded R$11,765 in the
financial result under “Bank charges and expenses”, related to “Additional
guarantee”, equivalent to 1.0% p.a., as established in the agreement. For
additional information, see Note 16.
12.8.
Commercial partnership and maintenance
agreement
On February
19, 2014, the Company signed an exclusive strategic partnership agreement for
long-term business cooperation with Airfrance-KLM with the purpose of sales
activities improvements and codeshare expansion and mileage programs benefits
between the companies for the customers in the Brazilian and European markets.
The agreement provides for the incentive investment in the Company in the amount
of R$112,152, already fully received by the Company. The agreement will mature
within 5 years and the installments will be amortized on a monthly basis. As of
December 31, 2018, the Company had deferred revenue in the amount of R$8,565
recorded as "Other liabilities" in current liabilities (R$20,557 and R$3,426 as
of December 31, 2017, recorded in current and noncurrent liabilities,
respectively).
On January 1,
2017, the Company entered into an agreement to expand its strategic partnership
with Airfrance-KLM in order to include engine maintenance and repair services.
In the year ended December 31, 2018, expenses incurred for components
maintenance services provided by AirFrance-KLM amounted to R$128,569 (R$159,562
as of December 31, 2017). As of December 31, 2018, the Company had an
outstanding balance with AirFrance-KLM recorded under suppliers in the amount of
R$170,673 (R$157,264 as of December 31, 2017).
60
12.9.
Remuneration of key management
personnel
|
Consolidated
|
|
2018
|
2017
|
Salaries, bonus and benefits
(*)
|
75,979
|
47,705
|
Related taxes and charges
|
11,062
|
5,232
|
Share-based payments
|
10,234
|
11,005
|
Total
|
97,275
|
63,942
|
(*) Includes the Board of Directors’ and Audit
Committee’s compensation.
As of December
31, 2018 and 2017, the Company did not offer post-employment benefits, and there
were no severance benefits or other long-term benefits for the management and
other employees. Specific benefits can be provided to the Company’s key
management personnel, limited to a short-term period.
13.Investments
13.1.
Breakdown of investments
The financial information of the Company’s
investees and the changes in the investments balance for the year ended December
31, 2018 are as follows:
|
Parent Company
|
|
Consolidated
|
|
GLA
|
Smiles Fidelidade
|
|
Trip
|
Netpoints
|
Relevant information of the
subsidiaries
|
|
|
|
|
|
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%
|
52.67%
|
|
60.0%
|
25.4%
|
Total equity (deficit)
|
(4,200,243)
|
1,014,230
|
|
1,962
|
(20,758)
|
Unrealized profits (a)
|
-
|
(96,332)
|
|
-
|
-
|
|
|
|
|
|
|
Adjusted equity (deficit) (b)
|
(4,200,243)
|
437,875
|
|
1,177
|
(5,273)
|
Net income (loss) for the
year
|
(1,168,201)
|
645,842
|
|
644
|
(3,613)
|
Unrealized profits in the year
(a)
|
-
|
(24,837)
|
|
-
|
-
|
Adjusted net income (loss) for the year
attributable to the Company’s interest
|
(1,168,201)
|
315,335
|
|
387
|
(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.
13.2.
Changes in investments
|
Parent Company
|
|
Consolidated
|
|
GLA
|
Smiles
Fidelidade
|
Total
|
|
Trip
|
Changes in investments
|
|
|
|
|
|
Balances as of December 31,
2017
|
(2,590,503)
|
388,235
|
(2,202,268)
|
|
1,333
|
Adoption of accounting standard
(a)
|
(19,575)
|
-
|
(19,575)
|
|
-
|
Balances as of December 31, 2017
(Restated)
|
(2,610,078)
|
388,235
|
(2,221,843)
|
|
1,333
|
Adoption of accounting standard
(b)
|
1,632
|
43
|
1,675
|
|
-
|
Equity results
|
(1,168,201)
|
315,335
|
(852,866)
|
|
387
|
Unrealized gains on hedges
|
(420,706)
|
-
|
(420,706)
|
|
-
|
Equity interest dilution
effects
|
-
|
(561)
|
(561)
|
|
-
|
Dividends and interest on shareholders’
equity
|
-
|
(265,136)
|
(265,136)
|
|
(543)
|
Other equity changes in
investments
|
-
|
(41)
|
(41)
|
|
-
|
Amortization of losses on
sale-leaseback transactions
(c)
|
(2,890)
|
-
|
(2,890)
|
|
-
|
Balances as of December 31,
2018
|
(4,200,243)
|
437,875
|
(3,762,368)
|
|
1,177
|
61
(a)
On January 1, 2018, the subsidiary adopted CPC 47
– “Revenue from Contracts with Customers”, equivalent to IFRS 15, which resulted
in the recording of R$19,575 directly in GLA’s equity. For further information,
see Note 4.26.1.
(b)
On January 1, 2018, the subsidiary adopted CPC 48
– “Financial Instruments”, equivalent to IFRS 9. For further information, see
Note 4.26.2.
(c)
The subsidiary GAC has a net balance of deferred
losses and gains on sale-leaseback, whose deferral is subject to the payment of
contractual installments made by the subsidiary GLA. Accordingly, the net
balance to be deferred is essentially part of the net investment of the Parent
Company in GLA. As of December 31, 2018, the net balance was fully deferred
(R$2,887 for the year ended December 31, 2017). For further information, see
Note 28.2.
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 investments in the GLAI parent company.
As of December 31, 2018, the consolidated
investment balance comprised SCP Trip, held by GLA.
As of December 31, 2018, our investee Netpoints
Fidelidade recorded negative equity. As a result, Smiles Fidelidade (holder of
25.4% of Netpoints’ capital stock) did not recognize additional losses based on
CPC 18 - “Investments in Associates and Joint Ventures”. The company will resume
recording equity results when Netpoints’ equity fully recovers its accumulated
losses.
In the year ended December 31, 2018, GLAI made an
advance payment for future capital increase to the subsidiary GLA in the amount
of R$220,000. In the same period, GLA returned said amount to GLAI, with no
impact to the subsidiary’s capital stock.
14.Property, plant and equipment
14.1.
Parent Company
As of December
31, 2018, the balance of advances for the acquisition of aircraft totaled
R$94,159 corresponding to prepayments made based on the agreements, as described
in Note 28 (as of December 31, 2017, the Company did not have balances of
advances for the acquisition of aircraft related to contract renegotiations
carried out throughout 2016). In addition, the residual value of the ownership
rights on the aircraft totaled R$108,539 as of December 31, 2018 (R$323,013 as
of December 31, 2017), both recorded in the subsidiary GAC.
62
|
|
14.2.
Consolidated
|
2018
|
2017
|
|
Average annual depreciation
rate
|
Cost
|
Accumulated
depreciation
|
Net
amount
|
Net
amount
|
|
Flight equipment
|
|
|
|
|
|
Aircraft held under finance leases
(a)
|
5.8%
|
673,675
|
(222,240)
|
451,435
|
1,351,436
|
Sets of replacement parts and spare
engines
|
6.9%
|
1,583,865
|
(590,239)
|
993,626
|
850,477
|
Aircraft reconfigurations/overhauling
|
30.4%
|
2,443,747
|
(1,275,298)
|
1,168,449
|
865,761
|
Aircraft and safety equipment
|
10.0%
|
856
|
(533)
|
323
|
405
|
Tools
|
10.0%
|
44,121
|
(21,153)
|
22,968
|
18,075
|
Total
|
|
4,746,264
|
(2,109,463)
|
2,636,801
|
3,086,154
|
|
|
|
|
|
|
Impairment losses (b)
|
-
|
(48,839)
|
-
|
(48,839)
|
(26,076)
|
Total flight equipment
|
|
4,697,425
|
(2,109,463)
|
2,587,962
|
3,060,078
|
|
|
|
|
|
|
Property, plant and equipment in
use
|
|
|
|
|
|
Vehicles
|
20.0%
|
11,513
|
(9,609)
|
1,904
|
1,448
|
Machinery and equipment
|
10.0%
|
59,404
|
(41,619)
|
17,785
|
20,042
|
Furniture and fixtures
|
10.0%
|
30,698
|
(18,188)
|
12,510
|
11,509
|
Computers and peripherals
|
20.0%
|
40,813
|
(31,314)
|
9,499
|
8,994
|
Communication equipment
|
10.0%
|
2,692
|
(2,089)
|
603
|
703
|
Maintenance center - Confins
|
10.4%
|
107,637
|
(91,395)
|
16,242
|
26,918
|
Leasehold improvements
|
19.0%
|
60,115
|
(29,354)
|
30,761
|
13,852
|
Construction in progress
|
-
|
15,443
|
-
|
15,443
|
33,503
|
Total property, plant and equipment in
use
|
|
328,315
|
(223,568)
|
104,747
|
116,969
|
|
|
|
|
|
|
Total
|
|
5,025,740
|
(2,333,031)
|
2,692,709
|
3,177,047
|
|
|
|
|
|
|
Advances for property, plant and equipment
acquisition
|
-
|
125,348
|
-
|
125,348
|
18,720
|
|
|
|
|
|
|
Total property, plant and
equipment
|
|
5,151,088
|
(2,333,031)
|
2,818,057
|
3,195,767
|
(a)
In the year ended
December 31, 2018, the Company entered in sale-leaseback transactions for 25
aircraft. For more information, see Note 28.
(b)
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.
Changes in
property, plant and equipment balances are as follows:
|
Property, plant and equipment under finance
lease
|
Other
flight equipment
|
Advances for property, plant and equipment
acquisition
|
Other
|
Total
|
Balances as of December 31,
2016
|
1,411,932
|
1,405,144
|
87,399
|
120,535
|
3,025,010
|
Additions
|
-
|
827,658
|
263,328
|
30,511
|
1,121,497
|
Disposals
|
(5,639)
|
(135,381)
|
(332,007)
|
(10,506)
|
(483,533)
|
Depreciation
|
(54,857)
|
(388,779)
|
-
|
(23,571)
|
(467,207)
|
Balances as of December 31,
2017
|
1,351,436
|
1,708,642
|
18,720
|
116,969
|
3,195,767
|
Additions
|
-
|
1,010,216
|
273,389
|
17,784
|
1,301,389
|
Disposals
|
(855,423)
|
(40,297)
|
(166,761)
|
-
|
(1,062,481)
|
Depreciation
|
(44,578)
|
(542,034)
|
-
|
(30,006)
|
(616,618)
|
Balances as of December 31,
2018
|
451,435
|
2,136,527
|
125,348
|
104,747
|
2,818,057
|
63
15.Intangible assets
The breakdown
of and changes in intangible assets is as follows:
|
Consolidated
|
|
Goodwill
|
Slots
|
Software
|
Total
|
Balances as of December 31,
2016
|
542,302
|
1,038,900
|
158,514
|
1,739,716
|
Additions
|
-
|
-
|
55,449
|
55,449
|
Disposals
|
-
|
-
|
(9,662)
|
(9,662)
|
Amortization
|
-
|
-
|
(38,218)
|
(38,218)
|
Balances as of December 31,
2017
|
542,302
|
1,038,900
|
166,083
|
1,747,285
|
Additions
|
-
|
-
|
82,079
|
82,079
|
Amortization (*)
|
-
|
-
|
(51,898)
|
(51,898)
|
Balances as of December 31,
2018
|
542,302
|
1,038,900
|
196,264
|
1,777,466
|
(*) The
weighted average rate of amortizations is 22.03% p.a.
As of December
31, 2018 and 2017, the balances of goodwill and slots were tested for impairment
using the discounted cash flow of each cash-generating unit, originating the
value in use.
In order to
assess the recoverable value, assets are grouped at the lowest levels for which
there are separately identifiable cash flows (Cash-Generating Units – “CGUs”).
In order to determine the carrying amount of each cash-generating unit, the
Company considers the intangible assets recorded and all tangible assets
necessary to conduct its business, given that it will only generate economic
benefits by using the combination of both.
The Company
allocates goodwill to two cash-generating units: GLA and Smiles, and the airport
operating rights are fully allocated to GLA’s cash-generating unit, as shown
below:
64
|
Goodwill
GLA
|
Goodwill
Smiles
|
Airport operating
rights
|
December 31, 2018
|
|
|
|
Book value
|
325,381
|
216,921
|
1,038,900
|
Book value - CGU
|
(275,500)
|
602,740
|
-
|
Value in use
|
23,058,697
|
7,005,622
|
15,158,551
|
|
|
|
|
Discount rate
|
14.91%
|
16.95%
|
13.94%
|
Perpetuity growth rate
|
3.50%
|
3.50%
|
3.50%
|
|
|
|
|
December 31, 2017
|
|
|
|
Book value
|
325,381
|
216,921
|
1,038,900
|
Book value - CGU
|
1,061,177
|
395,105
|
-
|
Value in use
|
15,206,092
|
5,464,287
|
5,069,156
|
|
|
|
|
Discount rate
|
15.46%
|
19.26%
|
14.50%
|
Perpetuity growth rate
|
3.50%
|
3.50%
|
3.50%
|
The results
obtained were compared with the carrying amount of each cash-generating unit
and, as a result, the Company did not recognize impairment losses on its
CGUs.
The
assumptions adopted in the impairment testing of intangible assets are based on
internal projections for a five-year period. For longer periods, the Company
uses the perpetuity growth rate. The discounted cash flow that determined the
value in use of the cash-generating units was prepared in accordance with the
Company’s business plan, which was approved on January 17, 2019.
The main
assumptions taken into consideration by the Company to determine the value in
use of the cash-generating units are:
·
Capacity and fleet: considers the use, the
aircraft capacity used in each flight and the projected size of the fleet in
use.
·
Demand: market efficiency is the main input to
estimate the Company’s demand growth. Management considers market efficiency to
be the ratio between its market share
and its seat
share. This indicator reflects how efficiently the Company uses its share of the
market’s total supply based on how much demand for air transportation it
absorbs.
·
Revenue per passenger: considers the average
price charged by GLA and the effects of market variables (see the variables used
below).
·
Operating costs related to the business: based on
the historical cost and adjusted by indicators, such as inflation, supply,
demand and variation of the U.S. dollar.
The Company
also considered market variables, including the GDP (source: Brazilian Central
Bank), the U.S. dollar (source: Brazilian Central Bank), kerosene prices (per
barrel) (source: Brazilian National Agency of Petroleum, Natural Gas and
Biofuels - ANP) and interest rates (source: Bloomberg).
65
16.Short and long-term debt
|
|
|
Parent Company
|
Consolidated
|
|
Maturity of
the
contract
|
Interest rate
|
2018
|
2017
|
2018
|
2017
|
Short-term debt
|
|
|
|
|
|
|
Local currency
|
|
|
|
|
|
|
Debentures VI (a)
|
09/2019
|
132% of CDI
|
-
|
-
|
-
|
395,093
|
Debentures VII (b)
|
09/2021
|
120% of CDI
|
-
|
-
|
288,991
|
-
|
Interest accrued
|
-
|
-
|
-
|
-
|
-
|
23,921
|
Foreign currency (US$)
|
|
|
|
|
|
|
Senior Notes V (c)
|
12/2018
|
9.71% p.a.
|
-
|
23,258
|
-
|
23,258
|
Engine maintenance (d)
|
08/2019
|
Libor 3m+0.75% p.a.
|
-
|
-
|
14,665
|
43,909
|
Import financing (e)
|
11/2019
|
5.46% p.a.
|
-
|
-
|
495,458
|
240,973
|
Credit line - engines (f)
|
09/2020
|
Libor 3m+0.75% p.a.
|
-
|
-
|
138,024
|
47,507
|
Credit line - engines (g)
|
06/2021
|
Libor 3m+2.25% p.a.
|
-
|
-
|
20,115
|
17,145
|
Loan with guarantee of engines
(h)
|
08/2026
|
6.65% p.a.
|
-
|
-
|
13,053
|
7,883
|
Interest accrued
|
-
|
-
|
123,873
|
71,769
|
132,900
|
74,989
|
|
|
|
123,873
|
95,027
|
1,103,206
|
874,678
|
|
|
|
|
|
|
|
Finance leases
|
06/2025
|
3.72% p.a.
|
-
|
-
|
120,118
|
288,194
|
|
|
|
|
|
|
|
Total short-term debt
|
|
|
123,873
|
95,027
|
1,223,324
|
1,162,872
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
|
|
|
|
Local currency
|
|
|
|
|
|
|
Debentures VI (a)
|
09/2019
|
132% of DI
|
-
|
-
|
-
|
617,333
|
Debentures VII (b)
|
09/2021
|
120% of DI
|
-
|
-
|
577,981
|
-
|
Foreign currency (US$)
|
|
|
|
|
|
|
Engine maintenance (d)
|
08/2019
|
Libor 3m+0.75% p.a.
|
-
|
-
|
-
|
12,451
|
Senior Notes II (i)
|
07/2020
|
9.64% p.a.
|
-
|
314,589
|
-
|
314,589
|
Term Loan (j)
|
08/2020
|
6.70% p.a.
|
1,147,196
|
968,010
|
1,147,196
|
968,010
|
Credit line - engines (f)
|
09/2020
|
Libor 3m+0.75% p.a.
|
-
|
-
|
43,431
|
35,634
|
Engine maintenance (g)
|
06/2021
|
Libor 3m+2.25% p.a.
|
-
|
-
|
146,457
|
142,137
|
Senior Notes VI (k)
|
12/2021
|
9.87% p.a.
|
-
|
127,181
|
-
|
127,181
|
Senior Notes IV (l)
|
01/2022
|
9.24% p.a.
|
352,205
|
299,524
|
352,205
|
299,524
|
Senior Notes III (m)
|
02/2023
|
11.30% p.a.
|
-
|
69,074
|
-
|
69,074
|
Senior Notes VIII (n)
|
01/2025
|
7.09% p.a.
|
2,439,492
|
1,597,713
|
2,439,492
|
1,597,713
|
Loan with guarantee of engines
(h)
|
08/2026
|
6.65% p.a.
|
-
|
-
|
120,557
|
78,239
|
Senior Notes VII (o)
|
12/2028
|
9.84% p.a.
|
-
|
54,752
|
-
|
54,752
|
Perpetual Notes (p)
|
-
|
8.75% p.a.
|
596,336
|
509,105
|
513,282
|
438,201
|
|
|
|
4,535,229
|
3,939,948
|
5,340,601
|
4,754,838
|
|
|
|
|
|
|
|
Finance leases
|
06/2025
|
3.72% p.a.
|
-
|
-
|
520,542
|
1,187,957
|
|
|
|
|
|
|
|
Total long-term debt
|
|
|
4,535,229
|
3,939,948
|
5,861,143
|
5,942,795
|
|
|
|
|
|
|
|
Total
|
|
|
4,659,102
|
4,034,975
|
7,084,467
|
7,105,667
|
(a)
Issuance of 105,000
debentures by GLA on September 30, 2015 for early settlement of the Debentures
IV and V.
(b)
Issuance of 88,750
debentures by GLA on October 22, 2018 for early settlement of the Debentures
VI.
(c)
Issuance of Senior Notes
series V by Gol Finance on July 7, 2016, as a result of the private Exchange
Offer of Senior Notes I, II, III, IV and Perpetual Notes. In the year ended
December 31, 2018, the financing was prepaid (for further information, see Note
16.3).
(d)
Issuance of 3 series of
Guaranteed Notes to finance engine maintenance, as described in Note
12.5.
(e)
Credit line with private
banks of import financing for purchase of spare parts and aircraft equipment.
These credit lines will mature throughout 2019. The interest rates negotiated
were Libor 3m+4.40% p.a. and Libor 1m+3.25% p.a.
(f)
Credit line raised
between August 11, 2017 and November 30, 2018.
(g)
Credit line raised on
September 30, 2014.
(h)
Loans obtained on June
28, 2018, with a guarantee of five engines. The interest rates negotiated were
from Libor 6m+2.35% p.a. to Libor 6m+4.25% p.a.
(i)
Issuance of Senior Notes
II by Gol Finance Inc. on July 13, 2010 in order to repay debts held by the
Company. In the year ended December 31, 2018, the financing was prepaid (for
further information, see Note 16.3).
(j)
Term Loan issued by Gol
Finance on August 31, 2016 for aircraft purchases and bank repayment of loans,
with backstop guarantee from Delta Airlines. For additional information, see
Note 12.6.
(k)
Issuance of Senior Notes
series VI by Gol Finance on July 7, 2016, as a result of the private Exchange
Offer of Senior Notes I, II, III, IV and Perpetual Notes. In the year ended
December 31, 2018, the financing was prepaid (for further information, see Note
16.3).
(l)
Issuance of Senior Notes
IV by Gol Finance on September 24, 2014 in order to finance partial repurchase
of Senior Notes I and II.
(m)
Issuance of Senior Notes III by GLA on February
7, 2013 in order to finance the prepayment of debts due within the next 3 years.
The total amount of Senior Notes was transferred to Gol Finance along with the
financial investments acquired on the date of issuance, and the financing was
prepaid (for further information, see Note 16.3).
(n)
Issuances of Senior
Notes series VIII by Gol Finance on December 11, 2017 and February 2, 2018 to
repurchase Senior Notes and for other general purposes.
(o)
Issuance of Senior Notes
series VII by Gol Finance on July 7, 2016, as a result of the private Exchange
Offer of Senior Notes I, II, III, IV and Perpetual Notes. In the year ended
December 31, 2018, the financing was prepaid (for further information, see Note
16.3).
(p)
Issuance of Perpetual
Notes by Gol Finance on April 5, 2006 to finance aircraft purchase and repayment
of loans.
66
Total
consolidated debt includes issuance costs of R$83,684 as of December 31, 2018
(R$101,795 as of December 31, 2017), which are amortized over the term of the
related debt.
As of December
31, 2018, the maturities of long-term debt, except financial lease agreements,
were as follows:
|
2020
|
2021
|
2022
|
2023
|
2023 onwards
|
Without maturity date
|
Total
|
Parent Company
|
|
|
|
|
|
|
|
In US$:
|
|
|
|
|
|
|
|
Term Loan
|
1,147,196
|
-
|
-
|
-
|
-
|
-
|
1,147,196
|
Senior Notes IV
|
-
|
-
|
352,205
|
-
|
-
|
-
|
352,205
|
Senior Notes VIII
|
-
|
-
|
-
|
-
|
2,439,492
|
-
|
2,439,492
|
Perpetual Notes
|
-
|
-
|
-
|
-
|
-
|
596,336
|
596,336
|
Total
|
1,147,196
|
-
|
352,205
|
-
|
2,439,492
|
596,336
|
4,535,229
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
|
|
|
|
|
In local currency:
|
|
|
|
|
|
|
|
Debentures VII
|
288,990
|
288,991
|
-
|
-
|
-
|
-
|
577,981
|
|
|
|
|
|
|
|
|
In US$:
|
|
|
|
|
|
|
|
Term Loan
|
1,147,196
|
-
|
-
|
-
|
-
|
-
|
1,147,196
|
Credit line – engines
|
43,431
|
-
|
-
|
-
|
-
|
-
|
43,431
|
Credit line – engines
|
20,265
|
126,192
|
-
|
-
|
-
|
-
|
146,457
|
Loan with guarantee of
engines
|
3,312
|
13,643
|
14,270
|
14,921
|
74,411
|
-
|
120,557
|
Senior Notes IV
|
-
|
-
|
352,205
|
-
|
-
|
-
|
352,205
|
Senior Notes VIII
|
-
|
-
|
-
|
-
|
2,439,492
|
-
|
2,439,492
|
Perpetual Notes
|
-
|
-
|
-
|
-
|
-
|
513,282
|
513,282
|
Total
|
1,503,194
|
428,826
|
366,475
|
14,921
|
2,513,903
|
513,282
|
5,340,601
|
The fair value
of debt as of December 31, 2018 is as follows:
|
Parent
Company
|
Consolidated
|
|
Book value
(c)
|
Market value
|
Book value
(c)
|
Market
value
|
Senior Notes and Perpetual Notes
(a)
|
3,486,651
|
3,119,375
|
3,320,546
|
3,016,230
|
Term Loan (b)
|
1,172,451
|
1,264,852
|
1,172,451
|
1,264,852
|
Debentures (b)
|
-
|
-
|
866,972
|
901,375
|
Other
|
-
|
-
|
1,083,838
|
1,124,661
|
Total
|
4,659,102
|
4,281,815
|
6,443,807
|
6,307,118
|
(a) Fair
value obtained through current market quotations.
(b) Fair
value obtained through internal method valuation.
(c) The book
value presented is net of interest and issue costs.
16.1.
Covenants
As of December
31, 2018, long-term debt (excluding Perpetual Notes and finance leases) that
amounted to R$4,827,319 (R$4,316,637 as of December 31, 2017) is subject to
restrictive covenants, including but not limited to those that require the
Company to maintain certain levels of liquidity and indebtedness and interest
expenses coverage.
The Company
has restrictive covenants on the Term Loan and Debentures VII. In the Term Loan,
the Company must make deposits for reaching contractual limits of the debt
pegged to the U.S. dollar. As of December 31, 2018, the Company did not have
collateral deposits linked
to the
contractual limits of the Term Loan. As of December 31, 2018, Debentures VII
were not subject to any covenants scheduled for measurement, due to the
renegotiation of the transaction. Pursuant to the agreement, the Company will
resume measuring the following ratios, which are measured half-yearly, as of
June 30, 2019: (i) net debt / earnings before interest, taxes, depreciation,
amortization, and restructuring or rent costs (“EBITDAR”); and (ii) debt
coverage ratio (“ICSD”). Under the indenture, these indicators must be measured
every six months and the next measurement will occur at the end of the first
half of 2019. As a result, as of December 31, 2018, the Company was in
compliance with the Debentures VII’s covenants.
67
16.2.
Restructuring and new issuances of loans and
financing obtained in the year ended December 31, 2018
Import
financing:
The Company, through its subsidiary GLA,
obtained funding in the year and renegotiated the maturities of the agreements,
with the issue of promissory notes as collateral for these transactions, which
are part of a credit line maintained by GLA for import financing in order to
carry out engine maintenance, purchase spare parts and aircraft equipment. The
funding operations are as follows:
Transaction
|
Principal amount
|
Interest
|
Maturity
|
date
|
(US$)
|
(R$)
|
rate (p.a.)
|
Date
|
New issuances
|
|
|
|
|
01/12/2018
|
4,722
|
15,202
|
5.10%
|
01/07/2019
|
03/02/2018
|
6,531
|
21,301
|
5.75%
|
03/01/2019
|
03/09/2018
|
6,731
|
21,874
|
5.44%
|
09/05/2018
|
03/23/2018
|
7,447
|
24,606
|
5.63%
|
09/19/2018
|
04/20/2018
|
7,121
|
24,285
|
5.75%
|
10/17/2018
|
04/27/2018
|
14,395
|
49,919
|
5.76%
|
10/24/2018
|
05/04/2018
|
7,710
|
27,225
|
6.19%
|
10/31/2018
|
10/19/2018
|
6,990
|
27,085
|
6.34%
|
04/19/2019
|
10/31/2018
|
6,053
|
23,453
|
6.50%
|
04/29/2019
|
11/18/2018
|
6,669
|
25,840
|
5.43%
|
11/18/2019
|
12/07/2018
|
7,195
|
27,881
|
6.61%
|
06/05/2019
|
|
|
|
|
|
Renegotiations
|
|
|
|
|
01/05/2018
|
2,694
|
8,731
|
5.10%
|
01/07/2019
|
01/12/2018
|
5,245
|
16,888
|
5.07%
|
12/31/2018
|
01/29/2018
|
8,595
|
27,208
|
5.20%
|
01/24/2019
|
02/05/2018
|
4,815
|
15,579
|
5.48%
|
01/31/2019
|
04/16/2018
|
4,273
|
14,874
|
6.73%
|
04/11/2019
|
05/29/2018
|
5,407
|
20,205
|
5.79%
|
05/24/2019
|
06/21/2018
|
9,683
|
37,335
|
4.99%
|
06/14/2019
|
06/21/2018
|
4,570
|
17,621
|
5.91%
|
06/17/2019
|
06/21/2018
|
10,436
|
40,239
|
4.99%
|
06/14/2019
|
10/24/2018
|
14,395
|
55,781
|
5.08%
|
04/22/2019
|
68
Engine
maintenance:
During the year, the subsidiary GLA obtained new
credit lines by issuing Guaranteed Notes for engine maintenance services with
Delta Air Lines.
Transaction
|
Principal amount
|
Costs
|
Interest
|
Maturity
|
date
|
(US$)
|
(R$)
|
(US$)
|
(R$)
|
rate (p.a.)
|
Date
|
03/27/2018
|
10,503
|
34,928
|
603
|
2,005
|
Libor 3m+0.75% p.a.
|
01/24/2020
|
05/04/2018
|
10,467
|
36,951
|
567
|
2,001
|
Libor 3m+0.75% p.a.
|
03/24/2020
|
06/29/2018
|
10,299
|
39,710
|
399
|
1,538
|
Libor 3m+0.75% p.a.
|
04/29/2020
|
08/29/2018
|
10,301
|
42,597
|
401
|
1,658
|
Libor 3m+0.75% p.a.
|
06/30/2020
|
11/30/2018
|
10,203
|
39,417
|
303
|
1,170
|
Libor 3m+0.75% p.a.
|
09/30/2020
|
Additional
issue of Senior Notes 2025:
On February 2, 2018, the Company, through its
subsidiary Gol Finance, carried out an additional issue of Senior Notes VIII due
in 2025, in the amount of R$486,735 (US$150 million on the transaction date),
with issuance costs totaling R$8,578 (US$2,873 on the transaction date). Senior
Notes are guaranteed by Company sureties, with half-yearly interest payments of
7.0% p.a. The proceeds were used to fully redeem Senior Notes II, III, V, VI and
VII, and pay related costs and expenses.
Loan with
guarantee of engines:
On June 28, 2018, the Company, through its
subsidiary GLA, obtained funding with a guarantee of one own engine in the
amount of R$43,913 (US$11,400 on the transaction date), with issuance costs
amounting to R$578 (US$150 on the transaction date). This type of financing has
monthly interest amortization and payment.
Debentures
VII:
As of October 29, 2018, through its subsidiary
GLA, the Company carried out its 7th issue of simple non-convertible secured
debentures in a single series, with an additional backstop guarantee. A total of
88,750 debentures were issued, at the nominal unit value of R$10,000, totaling
R$887,500 on the issue date, with issuance costs totaling R$28,739. The
debentures will have a maturity of three years as of the issue date, with
interest of 120% of the CDI rate. The debentures will be amortized every six
months in six equal installments as of March 28, 2019 and with quarterly
interest.
The other
existing loans and financing of the Company have not been affected by
contractual alterations during the year ended December 31, 2018.
16.3.
Early termination of debt during the year ended
December 31, 2018
As part of the
debt restructuring process (as per Note 1), the Company used the proceeds from
the issue of Senior Notes VIII on December 11, 2017 by the subsidiary Gol
Finance Inc. totaling US$500 million and the additional issue totaling US$150
million on February 2, 2018 to fully redeem Senior Notes, as shown below:
|
Maturities
|
Transaction
|
Payments
|
Premium paid (*)
|
Senior Notes VI
|
07/2021
|
01/2018
|
42,019
|
5,644
|
Senior Notes V
|
12/2018
|
01/2018
|
7,379
|
-
|
Senior Notes VII
|
12/2028
|
01/2018
|
18,348
|
2,477
|
Senior Notes II
|
07/2020
|
03/2018
|
95,777
|
1,474
|
Senior Notes III
|
02/2023
|
03/2018
|
20,881
|
1,122
|
Total in dollars
|
|
|
184,404
|
10,717
|
|
|
|
|
|
Total in Brazilian reais
|
|
|
610,600
|
34,979
|
(*) Amounts
recorded under “Exchange offer costs” in the financial result.
As part of the
debt restructuring process, as of October 29, 2018, the Company used the
proceeds from the 7th issue of debentures, totaling R$887,500, to pay the
remaining debt from the 6th issue of debentures in 2015.
69
16.4.
Finance leases
The future
payments of finance agreements indexed to U.S. dollars are detailed as
follows:
|
Consolidated
|
|
2018
|
2017
|
2018
|
-
|
333,795
|
2019
|
140,307
|
319,511
|
2020
|
140,080
|
267,477
|
2021
|
139,852
|
224,591
|
2022
|
139,624
|
119,200
|
2023
|
69,985
|
59,748
|
Thereafter
|
65,776
|
267,075
|
Total minimum lease
payments
|
695,624
|
1,591,397
|
Less total interest
|
(54,964)
|
(115,246)
|
Present value of minimum lease
payments
|
640,660
|
1,476,151
|
Less current portion
|
(120,118)
|
(288,194)
|
Noncurrent portion
|
520,542
|
1,187,957
|
The discount
rate used to calculate present value of the minimum lease payments was 3.72% as
of December 31, 2018 (4.04% as of December 31, 2017). There are no significant
differences between the present value of minimum lease payments and the fair
value of these financial liabilities.
The Company
extended the maturity date of the financing for some of its aircraft leased for
15 years using the mechanism for extending financing amortization and repayment
(“SOAR”), which enables the performance of calculated withdrawals to be settled
by payment in full at the end of the lease agreement. As of December 31, 2018,
amounts of withdrawals for the repayment at maturity date of the lease
agreements totaled R$49,635 (R$255,644 as of December 31, 2017) and are recorded
in current and non-current debt.
17.
Suppliers - Forfaiting
The Company
has operations that allow suppliers to receive their rights in advance. This
type of operation does not change the existing commercial conditions between the
Company and its suppliers. As of December 31, 2018, the amount recorded under
current liabilities from forfaiting operations totaled R$365,696 (R$78,416 as of
December 31, 2017).
70
18.
Taxes payable
|
Parent Company
|
Consolidated
|
|
2018
|
2017
|
2018
|
2017
|
PIS and COFINS
|
947
|
392
|
43,237
|
40,036
|
Installment payments - PRT and
PERT
|
15,588
|
22,017
|
23,858
|
68,596
|
Withholding income tax on
salaries
|
133
|
-
|
34,883
|
32,070
|
ICMS
|
-
|
-
|
46,952
|
45,492
|
IRPJ and CSLL payable
|
-
|
-
|
8,991
|
5,299
|
Other
|
70
|
125
|
8,440
|
9,654
|
Total
|
16,738
|
22,534
|
166,361
|
201,147
|
|
|
|
|
|
Current
|
8,944
|
7,856
|
111,702
|
134,951
|
Noncurrent
|
7,794
|
14,678
|
54,659
|
66,196
|
19.Advance ticket sales
As of December
31, 2018, the balance of Advance ticket sales classified in current liabilities
was R$1,673,987 (R$1,476,514 as of December 31, 2017) and is represented by
5,804,941 tickets sold and not yet used (4,964,925 as of December 31, 2017) with
an average use of 57 days (48 days as of December 31, 2017).
20.Provisions
|
Consolidated
|
|
Insurance provision
|
Provision for aircraft and engine return
(a)
|
Provision for legal
proceedings (b)
|
Total
|
Balances as of December 31,
2017
|
741
|
400,851
|
207,597
|
609,189
|
Additional provisions
recognized
|
-
|
214,636
|
243,860
|
458,496
|
Utilized provisions
|
-
|
(33,591)
|
(203,291)
|
(236,882)
|
Foreign exchange rate variation,
net
|
(741)
|
70,238
|
(706)
|
68,791
|
Balances as of December 31,
2018
|
-
|
652,134
|
247,460
|
899,594
|
|
|
|
|
|
As of December 31, 2018
|
|
|
|
|
Current
|
-
|
70,396
|
-
|
70,396
|
Noncurrent
|
-
|
581,738
|
247,460
|
829,198
|
Total
|
-
|
652,134
|
247,460
|
899,594
|
|
|
|
|
|
As of December 31, 2017
|
|
|
|
|
Current
|
741
|
45,820
|
-
|
46,561
|
Noncurrent
|
-
|
355,031
|
207,597
|
562,628
|
Total
|
741
|
400,851
|
207,597
|
609,189
|
(a) The additions of provisions for
aircraft and engine return also include present value adjustment effects.
(b) The provisions recorded include
write-offs due to the revision of estimates and processes settled.
20.1.
Provision for aircraft and engine
return
This provision
considers the costs that meet the contractual conditions for the return of
engines maintained under operating leases, as well as the costs to reconfigure
aircraft without purchase option as described in the return conditions of the
lease contracts, and which is capitalized in property, plant and equipment,
under “aircraft reconfigurations/overhauling”.
71
20.2.
Provision for legal proceedings
As of December
31, 2018, the Company and its subsidiaries are parties to lawsuits and
administrative proceedings, which are classified into Operational (those arising
from the Company’s normal course of operations), and Succession (those arising
from the succession of former Varig S.A. obligations).
The civil
lawsuits are primarily related to compensation claims generally related to
flight delays and cancellations, baggage loss and damage. The labor claims
primarily consist of issues related to overtime, hazard pay, risk premium and
wage differences.
The provisions
for cases whose likelihood of loss is assessed as probable are broken down by
type of claim as follows:
|
2018
|
2017
|
Civil
|
64,005
|
67,528
|
Labor
|
181,556
|
137,071
|
Taxes
|
1,899
|
2,998
|
Total
|
247,460
|
207,597
|
Provisions are
reviewed based on the progress of the proceedings and history of losses based on
the best current estimate for labor and civil lawsuits.
There are
other civil and labor lawsuits assessed by management and its legal counsel as
possible risk of loss, in the estimated amount of R$36,320 for civil claims and
R$183,506 for labor claims as of December 31, 2018 (R$30,945 and R$124,062 as of
December 31, 2017, respectively), for which no provisions are
recognized.
The tax
lawsuits below were evaluated by the Company’s management and its legal counsels
as being relevant and with possible risk of loss as of December 31,
2018:
·
GLA is discussing the non-incidence of the
additional 1% COFINS rate on the imports of aircraft and parts, amounting
R$65,679 (R$48,596 as of December 31, 2017). The Company’s legal counsel
believes that the classification of possible risk was due to the fact that there
was no express revocation of the tax relief (zero rate) granted to regular
flight transportation companies.
·
Tax on Services (ISS) in the amount of R$22,927
(R$21,222 as of December 31, 2017) arising from assessment notices issued by the
Municipality of São Paulo against the Company, in the period from January 2007
to December 2010 regarding a possible ISS taxation on partnerships. The
classification of possible risk of loss is a result from the matters under
discussion being interpretative, and involves discussions of factual and
evidential materials, and has no final positioning of the Superior
Courts.
·
Customs Penalty in the amount of R$49,078
(R$57,823 as of December 31, 2017) relating to assessment notices issued against
the Company for alleged breach of customs rules regarding procedures for
temporary import of aircraft. The classification of possible risk is a result of
the absence of a final positioning of the Superior Courts.
·
BSSF Air Holdings (“BSSF”) goodwill in the amount
of R$107,579 (R$104,213 as of December 31, 2017) related to an infraction notice
due to the deductibility of the goodwill allocated to future profitability. The
classification of possible risk is a result of the absence of a final opinion
from the Superior Courts.
·
GLA’s goodwill (from the acquisition of the
former VRG) in the amount of R$83,704 (R$80,198 as of December 31, 2017)
resulted from assessment notice related to the deductibility of the goodwill
classified as future profitability. The classification of
possible risk
is a result of the absence of a final opinion from the Superior
Courts.
72
·
In May 2018, the subsidiary Smiles received an
infraction notice related to the years of 2014 and 2015, due to: (i) the
deductibility of the goodwill allocated to future profitability after the merger
of GA Smiles by Smiles S.A. on December 31, 2013, and (ii) the deductibility of
financial expenses from the debentures issued in June 2014. The amount of
R$118,119 on December 31, 2018 was assessed by Management and its legal counsel
as a possible loss, as there are grounds for appeal.
There are
other lawsuits that the Company’s Management and its legal counsels assess as
possible risk of loss, in the estimated amount of R$101,050 (R$70,762 as of
December 31, 2017) which added to the lawsuits mentioned above, totaled
R$548,136 as of December 31, 2018 (R$382,814 as of December 31,
2017).
21.Equity
21.1.
Capital stock
As of December
31, 2018, the Company’s capital stock was R$3,098,230, represented by
3,131,226,450 shares, comprised by 2,863,682,710 common shares and 267,543,740
preferred shares.
As of December
20, 2018, the fundo Volluto, controller of the Company, partially spin-off
its equity in the Company, and as a consequence changed all of its
preferred shares of its ownership into the MOBI Equity Investment Fund, which in
turn belongs to the same holders of the fundo Volluto, also observing the same
proportion of its participation.
The Company’s
shares are held as follows:
|
2018
|
2017
|
|
Common
|
Preferred
|
Total
|
Common
|
Preferred
|
Total
|
Fundo Volluto
|
100.00%
|
-
|
23.42%
|
100.00%
|
49.25%
|
61.19%
|
Mobi FIA
|
-
|
48.85%
|
37.41%
|
-
|
-
|
-
|
Delta Air Lines, Inc.
|
-
|
12.29%
|
9.41%
|
-
|
12.38%
|
9.47%
|
Airfrance - KLM
|
-
|
1.58%
|
1.21%
|
-
|
1.60%
|
1.22%
|
Treasury shares
|
-
|
0.00%
|
0.00%
|
-
|
0.10%
|
0.08%
|
Other
|
-
|
1.03%
|
0.79%
|
-
|
0.93%
|
0.71%
|
Free float
|
-
|
36.25%
|
27.76%
|
-
|
35.74%
|
27.33%
|
Total
|
100.00%
|
100.00%
|
100.00%
|
100.00%
|
100.00%
|
100.00%
|
The authorized
capital stock as of December 31, 2018 was R$4 billion. Within the authorized
limit, the Company can, once approved by the Board of Directors, increase its
capital regardless of any amendment to its by-laws, by issuing shares, without
necessarily maintaining the proportion between the different types of shares.
Under the law terms, in case of capital increase within the authorized limit,
the Board of Directors will define the issuance conditions, including pricing
and payment terms.
In the year
ended December 31, 2018, the Company’s Board of Directors approved capital
increases through the subscription of shares as a result of the exercise of
stock options: (i) on January 11, 2018, in the amount of R$1,500, from the
subscription of 161,029 preferred shares; (ii) on May 8, 2018, in the amount of
R$5,798, from the subscription of 498,674 preferred shares; (iii) on August 1,
2018, in the amount of R$2,472, from the subscription of 331,418 preferred
shares; (iv) on October 31, 2018, in the amount of R$167, from the subscription
of 63,601 preferred shares; and (v) on December 21, 2018, in the amount of
R$5,491, from
the subscription of 589,586 preferred shares.
73
As of December
31, 2018, the Company’s balance of “Shares to be issued” totaled R$2,818, due to
the subscription of 348,821 preferred shares as a result of the exercise of
stock options.
As of December
31, 2018 and 2017, the Parent Company balance with share issuance costs totaled
R$42,290 and the Consolidated balance totaled R$155,618.
21.2.
Treasury shares
In the year
ended December 31, 2018, the Company (i) repurchased 740,000 shares in the
amount of R$15.929; (ii) transferred 1,012,222 treasury shares by means of
remuneration to the beneficiaries of the restricted stock plan, granted on
August 11, 2015, in the amount of R$19,685, with goodwill of R$286.
As of December
31, 2018, the Company had 6,390 treasury shares, totaling R$126 (278,612 shares
in the amount of R$4,168 as of December 31, 2017). As of December 31, 2018, the
market value of the treasury shares stood at R$160 (R$4,068 as of December 31,
2017).
22.Earnings (loss) per share
Although there
are differences between common and preferred shares in terms of voting rights
and priority in case of liquidation, the Company’s preferred shares are not
entitled to receive any fixed dividends. Preferred shares hold economic power
and the right to 35 times more dividends than common shares. The Company
believes that the economic power of preferred shares is more than that of common
shares. As a result, income for the year attributable to equity holders of the
parent is allocated in proportion to their interest in the total common and
preferred shares.
Earnings
(loss) per share are calculated by dividing the net income or loss by the
weighted average number of all classes of shares outstanding during the period.
Diluted
earnings (loss) per share are calculated by adjusting the weighted average
number of shares outstanding by instruments potentially convertible into shares.
The Company has only the stock option plan in the category of potentially
dilutive shares, see Note 23. However, due to losses recorded in the year ended
December 31, 2018, these instruments issued by the parent company have no
dilutive effect and therefore were not included in the total quantity of
outstanding shares considered in the diluted loss per share.
74
|
Parent Company and
Consolidated
|
|
2018
|
2017
|
|
Common
|
Preferred
|
Total
|
Common
|
Preferred
|
Total
|
|
|
|
|
(Restated)
|
Numerator
|
|
|
|
|
|
|
Net income (loss) for the year attributable
to equity holders of the parent
|
(254,828)
|
(830,565)
|
(1,085,393)
|
7,708
|
11,084
|
18,792
|
|
|
|
|
|
|
|
Denominator
|
|
|
|
|
|
|
Weighted average number of outstanding
shares (in thousands)
|
2,863,683
|
266,676
|
|
4,981,350
|
204,664
|
|
Effect of dilution from stock
options
|
-
|
-
|
|
-
|
2,614
|
|
Adjusted weighted average number of
outstanding shares and diluted presumed conversions (in
thousands)
|
2,863,683
|
266,676
|
|
4,981,350
|
207,278
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per
share
|
(0.089)
|
(3.115)
|
|
0.002
|
0.054
|
|
Diluted earnings (loss) per
share
|
(0.089)
|
(3.115)
|
|
0.002
|
0.053
|
|
23.Share-based payments
The Company has two share-based payment plans
offered to its management personnel: the Stock option plan and the Restricted
share plan. Both plans stimulate and promote the alignment of the Company’s
goals with management and employees, and mitigate risks for the Company
resulting from the loss of executives, strengthening the productivity and
commitment of these executives to long-term results.
23.1.
Stock option plan - GLAI
The beneficiaries of the Company’s stock option
plan are allowed to purchase shares at the price agreed on the grant date after
three years from the grant date, provided that they maintain their employment
relationship up to the end of this period.
The stock options vest 20% as from the first
year, an additional 30% as from the second year, and the remaining 50% as from
the third year. All stock options may also be exercised within 10 years after
the grant date. For stock options granted, the expected volatility of the
options is based on the historical volatility of 252 working days of the
Company’s shares traded on the B3.
Year of grant
|
Date of approval
|
Total options granted
|
Number of options
outstanding
|
Exercise price of the option
(in Reais)
|
Fair value at grant date (in
Reais)
|
Estimated volatility of share
price
|
Expected
dividend yield
|
Risk-free return rate
|
Average remaining
maturity (in years)
|
2010 (a)
|
02/02/2010
|
2,774,640
|
759,092
|
20.65
|
16.81
|
77.95%
|
2.73%
|
8.65%
|
1.0
|
2011
|
12/20/2010
|
2,722,444
|
523,446
|
27.83
|
16.07 (b)
|
44.55%
|
0.47%
|
10.25%
|
1.9
|
2012
|
10/19/2012
|
778,912
|
214,342
|
12.81
|
5.32 (c)
|
52.25%
|
2.26%
|
9.00%
|
3.7
|
2013
|
05/13/2013
|
802,296
|
220,414
|
12.76
|
6.54 (d)
|
46.91%
|
2.00%
|
7.50%
|
4.3
|
2014
|
08/12/2014
|
653,130
|
197,661
|
11.31
|
7.98 (e)
|
52.66%
|
3.27%
|
11.00%
|
5.6
|
2015
|
08/11/2015
|
1,930,844
|
623,043
|
9.35
|
3.37 (f)
|
55.57%
|
5.06%
|
13.25%
|
6.6
|
2016
|
06/30/2016
|
5,742,732
|
4,012,625
|
2.62
|
1.24 (g)
|
98.20%
|
6.59%
|
14.25%
|
7.5
|
2017
|
08/08/2017
|
947,767
|
690,960
|
8.44
|
7.91 (h)
|
80.62%
|
1.17%
|
11.25%
|
8.6
|
2018
|
05/24/2018
|
718,764
|
578,929
|
20.18
|
12.68 (i)
|
55.58%
|
0.60%
|
6.50%
|
9.4
|
Total
|
|
17,071,529
|
7,820,512
|
9.19
|
|
|
|
|
6.38
|
(a)
In April 2010, an additional grant of 101,894
shares referring to the 2010 plan was approved.
75
(b)
The fair value is calculated by the average value
from R$16.92, R$16.11 and R$15.17 for the respective periods of vesting (2011,
2012 and 2013).
(c)
The fair value is calculated by the average value
from R$6.04, R$5.35 and R$4.56 for the respective periods of vesting (2012, 2013
and 2014).
(d)
The fair value is calculated by the average value
from R$7.34, R$6.58 and R$5.71 for the respective periods of vesting (2013, 2014
and 2015).
(e)
The fair value is calculated by the average value
from R$8.20, R$7.89 and R$7.85 for the respective periods of vesting (2014, 2015
and 2016).
(f)
The fair value is calculated by the average value
from R$3.61, R$3.30 and R$3.19 for the respective periods of vesting (2015, 2016
and 2017).
(g)
On July 27, 2016, an additional grant of 900,000
shares referring to the 2016 plan was approved. The fair value was calculated by
the average value from R$1.29, R$1.21 and R$1.22 for the respective periods of
vesting (2017, 2018 and 2019).
(h)
The fair value is calculated by the average value
from R$8.12, R$7.88 and R$7.72 for the respective periods of vesting (2017, 2018
and 2019).
(i)
The fair value is calculated by the average value
from R$13.26, R$12.67 and R$12.11 for the respective periods of vesting (2018,
2019 and 2020).
The price of the Company’s shares traded on B3 as
of December 31, 2018 was RR$25.10 (R$14.60 as of December 31, 2017).
The movement of the stock options outstanding for
the year ended December 31, 2018 is as follows:
|
Number of
stock
options
|
Weighted average
exercise price
|
Options outstanding as of December 31,
2017
|
9,040,293
|
8.63
|
Options granted
|
718,764
|
20.18
|
Options canceled and adjustments in
estimated prescribed rights
|
225,597
|
11.35
|
Options exercised
|
(2,164,142)
|
9.25
|
Options outstanding as of December 31,
2018
|
7,820,512
|
9.19
|
|
|
|
Number of options exercisable as
of:
|
|
|
December 31, 2017
|
7,307,151
|
9.59
|
December 31, 2018
|
7,065,174
|
8.01
|
23.2.
Restricted share plan - GLAI
The Company’s restricted share plan was approved
at the Extraordinary Shareholders’ Meeting of October 19, 2012, and the first
grants were approved at the Board of Directors’ Meeting of November 13,
2012.
Year of grant
|
Date of approval
|
Total shares granted
|
Total vested shares
|
Average fair value at grant
date
|
2016
|
06/30/2016
|
4,007,081
|
3,079,315
|
2.62
|
2017
|
08/08/2017
|
1,538,213
|
1,166,151
|
8.44
|
2018
|
05/24/2018
|
773,463
|
620,275
|
20.18
|
Total
|
|
6,318,757
|
4,865,741
|
|
The movement in the restricted shares for the
year ended December 31, 2018 is as follows:
|
Total restricted
shares
|
Restricted shares outstanding as of
December 31, 2017
|
5,297,191
|
Restricted shares granted
|
773,463
|
Restricted shares cancelled and adjustments
in estimated expired rights
|
(117,315)
|
Restricted shares transferred
(*)
|
(1,087,598)
|
Restricted shares outstanding as of
December 31, 2018
|
4,865,741
|
(*) In the year ended December 31, 2018, the
Company transferred 1,012,222 shares through equity instruments (treasury
shares) and 75,376 shares through cash. The restricted shares transferred
totaled R$20,600.
23.3.
Stock option plan – Smiles
Fidelidade
The beneficiaries of the Company’s stock option
plan are allowed to purchase shares at the price agreed on the grant date after
three years from the grant date, provided that they maintain their employment
relationship up to the end of this period.
76
The stock options vest 20% as from the first
year, an additional 30% as from the second year, and the remaining 50% as from
the third year. All stock options may also be exercised within 10 years after
the grant date. For stock options granted, the expected volatility of the
options is based on the historical volatility of 252 working days of the
Company’s shares traded on the B3.
Year of grant
|
Date
of
approval
|
Total options granted
|
Number
of
options
outstanding
|
Exercise price of the option (in
Reais)
|
Average
fair value at grant date
|
Estimated volatility of share
price
|
Expected dividend yield
|
Risk-free
return
rate
|
Average remaining maturity
(in years)
|
2013
|
08/08/2013
|
1,058,043
|
54,003
|
21.70
|
4.25 (a)
|
36.35%
|
6.96%
|
7.40%
|
4.5
|
2014
|
02/04/2014
|
1,150,000
|
48,050
|
31.28
|
4.90 (b)
|
33.25%
|
10.67%
|
9.90%
|
5.0
|
2018
|
07/31/2018
|
1,300,000
|
975,000
|
52.67
|
8.93 (c)
|
41.28%
|
9.90%
|
6.39%
|
9.5
|
Total
|
|
3,508,043
|
1,077,053
|
|
|
|
|
|
|
(a)
Average fair value in Brazilian reais calculated
for the stock options was R$4.84 and R$4.20 for the vesting periods in 2013 and
2014, and R$3.73 for the vesting periods in 2015 and 2016.
(b)
Average fair value in Brazilian reais calculated
for the stock options was R$4.35, R$4.63, R$4.90, R$5.15 and R$5.37 for the
respective vesting periods from 2014 to 2018.
(c)
Average fair value in Brazilian reais calculated
for the 2018 stock options was R$8.17, R$8.63, R$9.14, and R$9.77 for the
respective vesting periods from 2019 to 2022.
The price of Smiles’ shares traded on B3 as of
December 31, 2018 was R$43.77 (R$75.90 as of December 31, 2017).
The movement of the stock options outstanding for
the year ended December 31, 2018 is as follows:
|
Number of stock
options
|
Weighted average
exercise price
|
Options outstanding as of December 31,
2017
|
253,053
|
29.24
|
Options granted
|
1,300,000
|
52.67
|
Adjustments in estimated prescribed
rights
|
(325,000)
|
52.67
|
Options exercised
|
(151,000)
|
11.72
|
Options outstanding as of December 31,
2018
|
1,077,053
|
50.17
|
The management and employees are granted
additional bonuses settled in cash referenced to Smiles Fidelidade shares in
order to strengthen their commitment to results and productivity. As of December
31, 2018, the balance of this obligation totaled R$6,899 recorded under
“Salaries”, referenced to 111,272 equivalent shares of Smiles Fidelidade. In the
year ended December 31, 2018, Smiles Fidelidade recorded under “Salaries” the
amount of R$7,450 (R$6,332 as of December 31, 2017) related to these bonuses,
recognized in profit or loss for the period.
In the year ended December 31, 2018, the Company
recorded in equity share-based payments in the amount of R$17,790 attributable
to controlling shareholders and R$782 to non-controlling interests from Smiles
(R$11,956 attributable to controlling shareholders and R$192 attributable to
non-controlling interests from Smiles in the year ended December 31, 2017) for
the above-mentioned plans, with a counter entry in profit or loss under
“Salaries”. As of December 31, 2018, the balance of share-based payments totaled
R$117,413 (R$119,308 as of December 31, 2017).
77
24.Revenue
|
Consolidated
|
|
2018
|
2017
|
|
|
(Restated)
|
|
|
|
Passenger transportation (*)
|
11,148,292
|
10,027,414
|
Cargo
|
400,959
|
354,561
|
Mileage revenue
|
446,448
|
554,380
|
Other revenue
|
95,681
|
109,045
|
Gross revenue
|
12,091,380
|
11,045,400
|
|
|
|
Related tax
|
(680,026)
|
(716,366)
|
Net revenue
|
11,411,354
|
10,329,034
|
(*) Of the total amount, R$479,136 in the year
ended December 31, 2018 (R$433,639 in the year ended December 31, 2017) consists
of revenues from unused passenger tickets, reissued tickets and cancellation of
flight tickets. Includes breakage revenue.
Revenues are net of federal, state and municipal
taxes, which are paid and transferred to the appropriate government
entities.
Revenue by geographical location is as
follows:
|
Consolidated
|
|
2018
|
%
|
2017
|
%
|
|
|
|
(Restated)
|
|
|
|
|
|
Domestic
|
9,729,498
|
85.3
|
8,798,002
|
85.2
|
International
|
1,681,856
|
14.7
|
1,531,032
|
14.8
|
Net revenue
|
11,411,354
|
100.0
|
10,329,034
|
100.0
|
25.Operating costs, selling and administrative
expenses
25.1.
Parent Company
|
2018
|
2017
|
|
Total
|
%
|
Total
|
%
|
Salaries (a)
|
(3,806)
|
(0.7)
|
(5,853)
|
15.1
|
Services provided
|
(21,745)
|
(4.0)
|
(20,143)
|
52.0
|
Sale-leaseback transactions
|
748,561
|
139.4
|
(7,072)
|
18.2
|
Other revenue (expenses), net
(b)
|
(185,990)
|
(34.7)
|
(5,696)
|
14.7
|
Total
|
537,020
|
100.0
|
(38,764)
|
100.0
|
(a)
The Company recognizes compensation paid to
members of the Audit Committee and the Board of Directors in the "Salaries" line
item.
(b)
From the total amount, R$183,695 is related to
debt forgiveness involving the Company, GAC and GLA.
78
25.2.
Consolidated
|
2018
|
|
Cost of services provided
|
Selling expenses
|
Administrative expenses
|
Other operating income,
net
|
Total
|
%
|
Salaries (a)
|
(1,215,324)
|
(32,526)
|
(656,002)
|
-
|
(1,903,852)
|
19.0
|
Aircraft fuel
|
(3,867,673)
|
-
|
-
|
-
|
(3,867,673)
|
38.6
|
Aircraft rent
|
(1,112,837)
|
-
|
-
|
-
|
(1,112,837)
|
11.1
|
Maintenance, material and
repairs
|
(570,333)
|
-
|
-
|
-
|
(570,333)
|
5.7
|
Passenger costs
|
(474,117)
|
-
|
-
|
-
|
(474,117)
|
4.8
|
Services provided
|
(149,959)
|
(124,553)
|
(339,256)
|
-
|
(613,768)
|
6.1
|
Sales and marketing
|
-
|
(581,977)
|
-
|
-
|
(581,977)
|
5.8
|
Landing fees
|
(743,362)
|
-
|
-
|
-
|
(743,362)
|
7.4
|
Depreciation and amortization
|
(644,765)
|
-
|
(23,751)
|
|
(668,516)
|
6.7
|
Sale-leaseback transactions
(b)
|
-
|
-
|
-
|
914,167
|
914,167
|
(9.1)
|
Other operating expenses, net
|
(356,941)
|
(22,870)
|
(9,700)
|
-
|
(389,511)
|
3.9
|
Total
|
(9,135,311)
|
(761,926)
|
(1,028,709)
|
914,167
|
(10,011,779)
|
100.0
|
|
2017 (Restated)
|
|
Cost of services provided
|
Selling expenses
|
Administrative expenses
|
Other operating income,
net
|
Total
|
%
|
Salaries (a)
|
(1,241,052)
|
(51,162)
|
(415,897)
|
-
|
(1,708,111)
|
18.3
|
Aircraft fuel
|
(2,887,737)
|
-
|
-
|
-
|
(2,887,737)
|
30.9
|
Aircraft rent
|
(939,744)
|
-
|
-
|
-
|
(939,744)
|
10.1
|
Maintenance, material and
repairs
|
(368,719)
|
-
|
-
|
-
|
(368,719)
|
3.9
|
Passenger costs
|
(437,045)
|
-
|
-
|
-
|
(437,045)
|
4.7
|
Services provided
|
(98,527)
|
(241,365)
|
(288,248)
|
-
|
(628,140)
|
6.7
|
Sales and marketing
|
-
|
(590,814)
|
-
|
-
|
(590,814)
|
6.3
|
Landing fees
|
(664,170)
|
-
|
-
|
-
|
(664,170)
|
7.1
|
Depreciation and amortization
|
(492,289)
|
-
|
(13,136)
|
-
|
(505,425)
|
5.4
|
Sale-leaseback transactions
(b)
|
-
|
-
|
-
|
(7,072)
|
(7,072)
|
0.1
|
Other operating expenses, net
|
(305,497)
|
(38,957)
|
(258,784)
|
-
|
(603,238)
|
6.5
|
Total
|
(7,434,780)
|
(922,298)
|
(976,065)
|
(7,072)
|
(9,340,215)
|
100
|
(a)
The Company recognizes compensation paid to
members of the Audit Committee and the Board of Directors in the "Salaries" line
item.
(b)
This amount is from sale-leaseback transactions
of 25 aircraft traded in the period, together with deferred gains and losses
arising from these transactions and transactions of aircraft traded between 2006
and 2009 as of December 31, 2018 (R$7,072 related to deferred net losses with
aircraft traded between 2006 and 2009 in the year ended December 31,
2017).
79
26.Financial income (expenses)
|
Parent Company
|
Consolidated
|
|
2018
|
2017
|
2018
|
2017
|
Financial income
|
|
|
|
|
Gain from derivatives
|
-
|
11,675
|
17,838
|
35,053
|
Gain from short-term
investments
|
35,534
|
7,285
|
161,223
|
119,863
|
Monetary variation
|
2,038
|
-
|
78,169
|
14,208
|
(-) Taxes on financial income
(a)
|
(4,590)
|
(2,451)
|
(20,372)
|
(24,393)
|
Interest on loan agreement
|
75,813
|
70,659
|
-
|
-
|
Other
|
174
|
1,985
|
22,870
|
68,715
|
Total financial income
|
108,969
|
89,153
|
259,728
|
213,446
|
|
|
|
|
|
Financial expenses
|
|
|
|
|
Losses from derivatives
|
-
|
(581)
|
(51,674)
|
(40,770)
|
Interest on short and long-term debt and
others
|
(342,333)
|
(260,867)
|
(710,787)
|
(727,285)
|
Bank charges and expenses
|
(27,420)
|
(24,697)
|
(75,673)
|
(61,711)
|
Exchange offer costs (b)
|
(53,952)
|
(53,041)
|
(53,952)
|
(53,041)
|
Loss from short-term
investments
|
-
|
-
|
(33,999)
|
(44,263)
|
Other
|
(16,414)
|
(50,323)
|
(135,004)
|
(123,391)
|
Total financial expenses
|
(440,119)
|
(389,509)
|
(1,061,089)
|
(1,050,461)
|
|
|
|
|
|
Exchange rate variation,
net
|
(433,239)
|
(24,612)
|
(1,081,197)
|
(81,744)
|
|
|
|
|
|
Total
|
(764,389)
|
(324,968)
|
(1,882,558)
|
(918,759)
|
(a) Relative
to taxes on financial income (PIS and COFINS), according to Decree 8,426 of
April 1, 2015.
(b) Refers to
the total amount of the prepayment of Senior Notes II, III, V, VI and VII (for
further information, see Note 16.3). Includes the write-off of costs from this
debt totaling R$34,979.
80
27.Segments
Operating
segments are defined based on business activities from which it may earn
revenues and incur expenses, the operating results of which are regularly
reviewed by the Company’s relevant decision makers to evaluate performance and
allocate resources to the respective segments. The Company holds two operating
segments: flight transportation and the Smiles loyalty program.
The accounting
policies of the operating segments are the same as those applied to the
consolidated financial statements. Additionally, the Company has distinct
natures between its two operating segments, so there are no common costs and
revenues between operating segments.
The Company is
the controlling shareholder of Smiles Fidelidade, and the non-controlling
interests of Smiles Fidelidade reached 47.3% as of December 31, 2018 and
2017.
The
information below presents the summarized financial position of the reportable
operating segments as of December 31, 2018 and 2017:
27.1.
Assets and liabilities of the operating
segments
|
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
|
|
2017
|
|
Flight transportation
|
Smiles loyalty program
|
Combined information
|
Eliminations
|
Total consolidated
|
|
(Restated)
|
|
(Restated)
|
(Restated)
|
(Restated)
|
Assets
|
|
|
|
|
|
Current
|
2,389,146
|
1,901,672
|
4,290,818
|
(945,820)
|
3,344,998
|
Noncurrent
|
6,769,399
|
269,239
|
7,038,638
|
(378,888)
|
6,659,750
|
Total assets
|
9,158,545
|
2,170,911
|
11,329,456
|
(1,324,708)
|
10,004,748
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Current
|
5,488,852
|
1,096,357
|
6,585,209
|
(815,589)
|
5,769,620
|
Noncurrent
|
7,131,078
|
202,835
|
7,333,913
|
(10,264)
|
7,323,649
|
Total equity (deficit)
|
(3,461,385)
|
871,719
|
(2,589,666)
|
(498,855)
|
(3,088,521)
|
Total liabilities
and
equity (deficit)
|
9,158,545
|
2,170,911
|
11,329,456
|
(1,324,708)
|
10,004,748
|
81
27.2.
Results of the operating
segments
|
2018
|
|
Flight
transportation
|
Smiles loyalty program
|
Combined information
|
Eliminations
|
Total consolidated
|
|
|
|
|
|
|
Net revenue
|
|
|
|
|
|
Passenger (a)
|
10,199,092
|
-
|
10,199,092
|
434,396
|
10,633,488
|
Cargo and other (a)
|
422,432
|
-
|
422,432
|
(12,799)
|
409,633
|
Mileage revenue (a)
|
-
|
987,444
|
987,444
|
(619,211)
|
368,233
|
Cost of services provided (b)
|
(8,963,750)
|
(58,386)
|
(9,022,136)
|
(113,175)
|
(9,135,311)
|
Gross profit
|
1,657,774
|
929,058
|
2,586,832
|
(310,789)
|
2,276,043
|
|
|
|
|
|
|
Operating income
(expenses)
|
|
|
|
|
|
Selling expenses
|
(815,843)
|
(112,524)
|
(928,367)
|
166,441
|
(761,926)
|
Administrative expenses (c)
|
(1,060,858)
|
(112,671)
|
(1,173,529)
|
144,820
|
(1,028,709)
|
Other operating income (expenses),
net
|
914,167
|
38,106
|
952,273
|
(38,106)
|
914,167
|
Total operating expenses
|
(962,534)
|
(187,089)
|
(1,149,623)
|
273,155
|
(876,468)
|
|
|
|
|
|
|
Equity results
|
315,721
|
-
|
315,721
|
(315,334)
|
387
|
|
|
|
|
|
|
Operating result before financial result,
net and income taxes
|
1,010,961
|
741,969
|
1,752,930
|
(352,968)
|
1,399,962
|
|
|
|
|
|
|
Financial income
(expenses)
|
|
|
|
|
|
Financial income
|
166,348
|
220,628
|
386,976
|
(127,248)
|
259,728
|
Financial expenses
|
(1,185,889)
|
(2,326)
|
(1,188,215)
|
127,126
|
(1,061,089)
|
Exchange rate variation, net
|
(1,084,543)
|
3,223
|
(1,081,320)
|
123
|
(1,081,197)
|
Total financial result
|
(2,104,084)
|
221,525
|
(1,882,559)
|
1
|
(1,882,558)
|
|
|
|
|
|
|
Income (loss) before income
taxes
|
(1,093,123)
|
963,494
|
(129,629)
|
(352,967)
|
(482,596)
|
|
|
|
|
|
|
Income and social contribution taxes
|
7,729
|
(317,652)
|
(309,923)
|
12,795
|
(297,128)
|
Net income (loss) for the
year
|
(1,085,394)
|
645,842
|
(439,552)
|
(340,172)
|
(779,724)
|
|
|
|
|
|
|
Net income attributable to equity holders
of
the parent
|
(1,085,394)
|
340,173
|
(745,221)
|
(340,172)
|
(1,085,393)
|
Net income attributable to non-controlling
interests of Smiles
|
-
|
305,669
|
305,669
|
-
|
305,669
|
82
|
|
|
2017 (Restated)
|
|
Flight
transportation
|
Smiles loyalty
program (d)
|
Combined information
|
Eliminations
|
Total consolidated
|
Net revenue
|
|
|
|
|
|
Passenger (a)
|
9,165,896
|
-
|
9,165,896
|
398,145
|
9,564,041
|
Cargo and other (a)
|
388,215
|
-
|
388,215
|
86,951
|
475,166
|
Mileage revenue (a)
|
-
|
899,576
|
899,576
|
(609,749)
|
289,827
|
Cost of services provided (b)
|
(7,416,092)
|
(45,917)
|
(7,462,009)
|
27,229
|
(7,434,780)
|
Gross profit
|
2,138,019
|
853,659
|
2,991,678
|
(97,424)
|
2,894,254
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
Selling expenses
|
(886,234)
|
(100,129)
|
(986,363)
|
64,065
|
(922,298)
|
Administrative expenses (c)
|
(892,449)
|
(85,111)
|
(977,560)
|
1,495
|
(976,065)
|
Other operating expenses, net
|
(7,071)
|
(18,619)
|
(25,690)
|
18,618
|
(7,072)
|
Total operating expenses
|
(1,785,754)
|
(203,859)
|
(1,989,613)
|
84,178
|
(1,905,435)
|
|
|
|
|
|
|
Equity results
|
395,245
|
-
|
395,245
|
(394,701)
|
544
|
|
|
|
|
|
|
Operating result before financial result,
net and income taxes
|
747,510
|
649,800
|
1,397,310
|
(407,947)
|
989,363
|
Financial income
(expenses)
|
|
|
|
|
|
Financial income
|
184,448
|
205,431
|
389,879
|
(176,433)
|
213,446
|
Financial expenses
|
(1,225,315)
|
(2,201)
|
(1,227,516)
|
177,055
|
(1,050,461)
|
Exchange rate variation, net
|
(78,462)
|
(3,284)
|
(81,746)
|
2
|
(81,744)
|
Total financial result
|
(1,119,329)
|
199,946
|
(919,383)
|
624
|
(918,759)
|
|
|
|
|
|
|
Income (loss) before income
taxes
|
(371,819)
|
849,746
|
477,927
|
(407,323)
|
70,604
|
|
|
|
|
|
|
Income and social contribution taxes
|
390,611
|
(89,131)
|
301,480
|
5,733
|
307,213
|
Net income for the year
|
18,792
|
760,615
|
779,407
|
(401,590)
|
377,817
|
|
|
|
|
|
|
Net income attributable to equity holders
of the parent
|
18,792
|
401,590
|
420,382
|
(401,590)
|
18,792
|
Net income attributable to non-controlling
interests of Smiles
|
-
|
359,025
|
359,025
|
-
|
359,025
|
(a)
Eliminations are related
to transactions between GLA and Smiles Fidelidade.
(b)
Includes depreciation and
amortization expenses of R$644,765 in the year ended December 31, 2018,
comprised by R$630,113 in flight transportation and R$14,652 in the Smiles
loyalty program (R$479,328 and R$12,961 in the year ended December 31, 2017,
respectively).
(c)
Includes depreciation and
amortization expenses of R$23,751 in the year ended December 31, 2018, comprised
by R$21,045 in flight transportation and R$2,706 in the Smiles loyalty program
(R$12,478 and R$658 in the year ended December 31, 2017,
respectively).
(d)
Amounts include Smiles
S.A. and Smiles Fidelidade.
In the
individual financial statements of the subsidiary Smiles Fidelidade, which
represents the segment Smiles Loyalty Program, and in the information provided
to the relevant decision makers, the revenue recognition occurs upon redemption
of the miles by the participants. Under the perspective of Smiles Fidelidade,
this measurement is appropriate given that this is when the revenue recognition
cycle is complete. At this point, Smiles has transferred to its suppliers the
obligation to provide services or deliver products to its customers.
However, from
a consolidated perspective, the revenue recognition cycle related to miles
exchanged for flight tickets is only complete when the passengers are
effectively transported. Therefore, for purposes of reconciliation with the
consolidated assets, liabilities and income and expenses, as well as for
purposes of equity method of accounting and for consolidation purposes, the
Company performed, in addition to elimination entries, consolidating adjustments
to adjust the accounting practices related to Smiles’ revenues. In this case,
under the perspective of the consolidated financial statements, the mileages
that were used to redeem airline tickets are only recognized as revenue when
passengers are transported, in accordance with accounting practices and policies
adopted by the Company.
83
28.Commitments
As of December
31, 2018, the Company had 130 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$63,235,639 (US$16,319,717), and are
segregated as follows:
|
Consolidated
|
|
2018
|
2017
|
2019
|
-
|
1,117,604
|
2020
|
1,791,661
|
4,538,258
|
2021
|
5,046,966
|
6,198,259
|
2022
|
7,883,277
|
6,353,457
|
2023
|
8,766,165
|
6,524,408
|
Thereafter
|
39,747,570
|
20,358,396
|
Total
|
63,235,639
|
45,090,382
|
As of December
31, 2018, from the total orders mentioned above, the Company had the amount of
R$8,827,272 (US$2,278,123) related to advances for aircraft acquisition to be
disbursed, in accordance with the following schedule:
|
Consolidated
|
|
2018
|
2017
|
2018
|
-
|
316,215
|
2019
|
283,579
|
773,268
|
2020
|
816,766
|
848,003
|
2021
|
1,072,048
|
852,458
|
2022
|
1,250,361
|
866,119
|
2023
|
1,313,497
|
786,487
|
Thereafter
|
4,091,021
|
2,021,014
|
Total
|
8,827,272
|
6,463,564
|
The
installment financed by long-term debt with aircraft guarantee corresponds
approximately to 85% of the aircraft total cost. Other establishments finance
the acquisitions with equal or higher percentages, reaching up to
100%.
The Company
performs payments related to aircraft acquisition through its own funds, short
and long-term debt, cash provided by operating activities, short and medium-term
lines of credit and supplier financing.
The Company
leases its entire aircraft fleet through a combination of operating and finance
leases. As of December 31, 2018, the total fleet leased was comprised of 121
aircraft, of which 110 were under operating leases and 11 were recorded as
finance leases. During the year ended December 31, 2018, the Company returned 4
aircraft under operating lease contracts. In addition, during the year ended
December 31, 2018, the Company changed the classification of 20 finance lease
agreements to operating lease agreements through sale-leaseback
transactions.
As of December
31, 2018, the Company recorded under current liabilities operating lease
installments in the amount of R$135,799 and 135,686 under noncurrent liabilities
(R$28,387 under current liabilities and R$110,723 under noncurrent liabilities
as of December 31, 2017).
On February 14
and November 27, 2017, the Company entered in sale-leaseback transactions for 10
aircraft with AWAS and GECAS. In the year ended December 31, 2018, the Company
received five aircraft in relation to this operation and, pursuant to the
agreement, the leases
will have a
12-year term as of the arrival date of each aircraft. The remaining aircraft are
expected to be delivered by August 2019. Under this agreement, AWAS and GECAS
undertake to carry out all necessary disbursements to pay for advances based on
the disbursement schedule of the aircraft acquisition agreement. Under the same
agreement, the Company shall act as a guarantor for the transaction if AWAS and
GECAS fail to comply with the commitments established in such
agreements.
84
28.1.
Operating leases
The future
payments of non-cancelable operating lease contracts are denominated in U.S.
dollars, and are as follows:
|
Consolidated
|
|
2018
|
2017
|
2018
|
-
|
858,508
|
2019
|
1,388,818
|
928,226
|
2020
|
1,317,883
|
888,944
|
2021
|
1,113,030
|
746,595
|
2022
|
936,887
|
630,477
|
2023
|
769,322
|
520,152
|
Thereafter
|
1,609,844
|
731,812
|
Total minimum lease
payments
|
7,135,784
|
5,304,714
|
28.2.
Sale-leaseback transactions
In the year
ended December 31, 2018, the Company recorded a Consolidated net gain of
R$911,704 arising from 25 aircraft sale-leaseback transactions, and recorded the
amount of R$2,463 related to deferred net gains from transactions carried out
between 2006 and 2018. From the total number of sale-leaseback transactions in
the year, the amount of R$352,437 recorded under “Other assets” on the Parent
Company and Consolidated refers to the sale of seven aircraft, which will be
received in March 2019.
29.Financial instruments and risk
management
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 exchange swap derivatives, 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 Risk Policy Committee sets guidelines
and limits, monitors controls, including mathematical models used to
continuously monitor exposures and possible financial effects, and also prevents
the execution of speculative financial instruments transactions.
The Company
does not hedge its total risk exposure, and is, therefore, subject to market
fluctuations for a significant portion of its exposed assets and liabilities.
Decisions on the portion to be protected consider the financial risks and the
costs for such protection and are determined and reviewed at least quarterly in
line with Risk Policy Committee strategies. The results from operations and the
application of risk management controls are part of the monitoring process by
the Risk Policy Committee and have been satisfactory to the proposed
objectives.
The
description of the consolidated account balances and the categories of financial
instruments
included in the statements of financial position as of December 31, 2018 and
2017 is as follows:
85
|
Measured
at fair value
through
profit or loss
|
Amortized
cost (c)
|
|
2018
|
2017
|
2018
|
2017
|
Assets
|
|
|
|
|
Cash and cash equivalents (a)
|
307,538
|
434,295
|
518,649
|
592,567
|
Short-term investments (a)
|
478,364
|
955,589
|
-
|
-
|
Restricted cash
|
822,132
|
268,047
|
-
|
-
|
Derivatives assets
|
-
|
40,647
|
-
|
-
|
Trade receivables
|
-
|
-
|
853,328
|
936,478
|
Deposits (b)
|
-
|
-
|
885,804
|
655,244
|
Other assets
|
-
|
-
|
478,628
|
123,721
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Debt
|
-
|
-
|
7,084,467
|
7,105,667
|
Suppliers
|
-
|
-
|
1,523,952
|
1,471,150
|
Suppliers - Forfaiting
|
-
|
-
|
365,696
|
78,416
|
Derivatives liabilities
|
409,662
|
34,457
|
-
|
-
|
Operating leases
|
-
|
-
|
271,485
|
139,110
|
(a)
The Company manages its
financial investments to pay its short-term operational expenses.
(b)
Excludes judicial
deposits, as described in Note 11.
(c)
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 16. The fair values approximate the book values, according to
the short-term maturity period of these assets and liabilities. During the year
ended December 31, 2018, there was no change on the classification between
categories of the financial instruments.
86
The Company's derivative financial instruments
were recognized as follows:
|
Fuel
|
Interest
rate
|
Exchange rate
|
Total
|
Derivative assets (liabilities) as of
December 31, 2017 (*)
|
40,647
|
(34,457)
|
-
|
6,190
|
Fair value
variations
|
|
|
|
|
Gains (losses) recognized in profit or loss
(a)
|
(25,280)
|
(4,488)
|
9,272
|
(20,496)
|
Losses recognized in other comprehensive
income
|
(349,252)
|
(37,719)
|
-
|
(386,971)
|
Settlements (payments received) during the
year
|
(29,383)
|
30,270
|
(9,272)
|
(8,385)
|
Derivative liabilities as of
December 31, 2018 (*)
|
(363,268)
|
(46,394)
|
-
|
(409,662)
|
|
|
|
|
|
Recognized in current
liabilities
|
(149,050)
|
(46,394)
|
-
|
(195,444)
|
Recognized in non-current
liabilities
|
(214,218)
|
-
|
-
|
(214,218)
|
|
|
|
|
|
Changes in other
comprehensive income (loss)
|
|
|
|
|
Balances as of December 31,
2017
|
35,505
|
(114,821)
|
-
|
(79,316)
|
Fair value adjustments during the
year
|
(275,583)
|
(37,719)
|
-
|
(313,302)
|
Time value of options
|
(73,669)
|
-
|
-
|
(73,669)
|
Net reversal to profit or loss
(b)
|
(64,955)
|
31,220
|
-
|
(33,735)
|
Balances as of December 31,
2018
|
(378,702)
|
(121,320)
|
-
|
(500,022)
|
|
|
|
|
|
Effects on profit or loss
(a-b)
|
39,675
|
(35,708)
|
9,272
|
13,239
|
|
|
|
|
|
Recognized in operating
income
|
64,955
|
(17,880)
|
-
|
47,075
|
Recognized in financial
income
|
(25,280)
|
(17,828)
|
9,272
|
(33,836)
|
(*)
Classified as "Derivatives" rights or obligations, if assets or liabilities.
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 December 31, 2018, the Company adopts cash flow hedge for the
interest rate (mainly the Libor interest rates) and jet fuel.
Cash flow
hedges are scheduled to be realized and consequently reclassified to expenses,
as shown below:
|
2019
|
2020
|
2021
|
2022
|
2023
|
2023
onwards
|
Interest rate derivatives
|
(6,282)
|
(3,951)
|
(5,334)
|
(9,697)
|
(8,271)
|
(87,785)
|
Fuel derivatives
|
(167,675)
|
(183,499)
|
(27,528)
|
-
|
-
|
-
|
Expected realization (*)
|
(173,957)
|
(187,450)
|
(32,862)
|
(9,697)
|
(8,271)
|
(87,785)
|
(*) The
negative amounts represent losses.
29.1.
Market risks
29.1.1.
Fuel risk
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 December 31, 2018,
the Company held call options and WTI, Brent and Collar derivatives. In the year
ended December 31, 2018, the Company recognized total gains of R$39,675 related
to derivatives operations in the statement of income (as of December 31, 2017,
the Company recognized total gains in the statement of income in the total
amount of R$13,768 related to fuel derivatives operations designated as “hedge
accounting”).
87
The Company
uses different instruments to hedge its exposure to fuel prices, which are
chosen based on factors such as market liquidity, market value of the items,
levels of volatility, availability and margin deposit. The main hedging
instruments are futures, collars, swaps and options.
The Company’s
Fuel Risk Management strategy is based on statistical models. Through the models
developed, the Company is able to (i) measure the economic relationship between
the hedging instrument and the hedged item, in order to assess whether the ratio
between the jet fuel price and the international fuel price is behaving as
expected; and (ii) properly define the hedge ratio in order to determine the
appropriate volume to be contracted to hedge the fuel volume to be consumed in a
given period.
The Company’s
models take into consideration possible ineffectiveness factors that may impact
its Risk Management strategies, such as a change in the way suppliers calculate
jet fuel prices and a mismatch between the term of the hedging instrument and
the hedged item.
In the year
ended December 31, 2018, the Company held derivatives operations designated as
“hedge accounting”.
29.1.2.
Foreign currency risk
Foreign
currency risk derives from the possibility of unfavorable fluctuation of foreign
currencies to which the Company’s liabilities or cash flows are exposed.
88
The Company’s
foreign currency exposure is summarized below:
|
Parent
Company
|
Consolidated
|
|
2018
|
2017
|
2018
|
2017
|
Assets
|
|
|
|
|
Cash, equivalents, short-term investments
and restricted cash
|
373,431
|
834,873
|
963,973
|
1,215,716
|
Trade receivables
|
-
|
-
|
148,538
|
140,716
|
Deposits
|
-
|
-
|
885,804
|
655,244
|
Derivatives
|
-
|
-
|
-
|
40,647
|
Other assets (*)
|
352,437
|
-
|
352,437
|
-
|
Total assets
|
725,868
|
834,873
|
2,350,752
|
2,052,323
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Short and long-term debt
|
4,659,102
|
4,034,975
|
5,576,835
|
4,593,169
|
Finance lease
|
-
|
-
|
640,660
|
1,476,151
|
Foreign currency suppliers
|
10,378
|
1,548
|
903,287
|
644,775
|
Derivatives
|
-
|
-
|
409,662
|
34,457
|
Operating leases
|
-
|
-
|
271,485
|
139,110
|
Total liabilities
|
4,669,480
|
4,036,523
|
7,801,929
|
6,887,662
|
|
|
|
|
|
Exchange exposure
|
3,943,612
|
3,201,650
|
5,451,177
|
4,835,339
|
|
|
|
|
|
Commitments not recorded in
the statements of financial position
|
|
|
|
|
Future commitments resulting
from operating leases
|
-
|
-
|
7,135,784
|
5,304,714
|
Future commitments resulting
from firm aircraft orders
|
63,235,639
|
45,090,382
|
63,235,639
|
45,090,382
|
Total
|
63,235,639
|
45,090,382
|
70,371,423
|
50,395,096
|
|
|
|
|
|
Total foreign currency exposure -
R$
|
67,179,251
|
48,292,032
|
75,822,600
|
55,230,435
|
Total foreign currency exposure -
US$
|
17,337,476
|
14,598,559
|
19,568,133
|
16,696,020
|
Exchange rate (R$/US$)
|
3.8748
|
3.3080
|
3.8748
|
3.3080
|
(*) Amount related to the sale of seven aircraft
to be carried out in March 2019. For additional information, see Note
28.2.
The Company is
mainly indexed to the U.S. dollar.
In the year
ended December 31, 2018, the Company recorded a gain of R$9,272 from foreign
exchange hedge operations (the Company had no foreign exchange hedge operations
in the year ended December 31, 2017).
29.1.3.
Interest rate risk
The Company’s
strategy to manage interest rate risk combines fixed and floating interest rates
to determine whether it is necessary to increase or reduce its exposure to
interest rates. The Company manages its exposure by determining the basis point
value (“BPV”) of each agreement and uses volumes equivalent to the amount of
BPVs necessary to achieve the goals proposed in the Risk Management for
contracting derivatives.
Through
statistical models, the Company measures the economic relationship between the
hedging instrument and the hedged item, taking into consideration possible
ineffectiveness factors, such as a mismatch between the term of the hedging
instrument and the hedged
item.
89
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 year
ended December 31, 2018, the Company recognized a total loss with interest
hedging transactions in the amount of R$35,708 (loss of R$33,501 in the year
ended December 31, 2017).
As of December
31, 2018 and 2017, the Company and its subsidiaries had interest rate swap
derivatives recorded as hedge accounting.
29.2.
Credit risk
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. The financial institutions in which the Company
concentrates more than 10% of its total financial assets are Itaú and Banco do
Brasil. Other assets are diluted among other financial institutions, pursuant to
the Company’s risk policy. Trade receivables consists of amounts falling
due from credit card operators, travel agencies, installment sales and
government entities, which leaves the Company exposed to a small portion of the
credit risk of individuals and other entities. The Company uses a provision
matrix to calculate the provision for expected loss during the asset lifecycle,
which considers historical data to determine the expected loss, through the
segmentation of the receivables portfolio into groups that have the same
behavior patterns, based on maturity dates. 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.
29.3.
Liquidity risk
The Company is
exposed to two distinct forms of liquidity risk: (i) market prices, which vary
in accordance with the types of assets and markets where they are traded, and
(ii) cash flow liquidity risk related to difficulties in meeting the contracted
operating obligations at the maturity dates. In order to manage liquidity risk,
the Company invests its funds in liquid assets (government bonds, CDBs and
investment funds with daily liquidity) and its Cash Management Policy requires
the weighted average maturity of its debt to be longer than the weighted average
term of its investment portfolio term.
90
The schedules
of financial liabilities held by the Company's consolidated financial
liabilities on December 31, 2018 and 2017 are as follows:
|
Less than 6 months
|
6 - 12
months
|
1 - 5
years
|
More than
5 years
|
Total
|
|
|
|
|
|
|
Short and long-term debt
|
903,492
|
319,832
|
2,856,625
|
3,004,518
|
7,084,467
|
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
|
Operating leases
|
135,799
|
-
|
135,686
|
-
|
271,485
|
As of December 31, 2018
|
2,904,553
|
419,525
|
3,326,666
|
3,004,518
|
9,655,262
|
|
|
|
|
|
|
Short and long-term debt
|
369,496
|
793,376
|
2,651,018
|
3,291,777
|
7,105,667
|
Suppliers
|
1,245,352
|
3,772
|
222,026
|
-
|
1,471,150
|
Suppliers - Forfaiting
|
78,416
|
-
|
-
|
-
|
78,416
|
Derivatives liabilities
|
34,457
|
-
|
-
|
-
|
34,457
|
Operating leases
|
28,387
|
-
|
110,723
|
-
|
139,110
|
As of December 31, 2017
|
1,756,108
|
797,148
|
2,983,767
|
3,291,777
|
8,828,800
|
29.4.
Capital management
The Company
seeks alternatives to capital in order to meet its operational needs, aiming a
capital structure that takes into account suitable parameters for the financial
costs, the maturities of funding and its guarantees. The Company monitors its
financial leverage ratio, which corresponds to net debt, including short and
long-term debt. The table below shows the Company’s financial leverage as of
December 31, 2018 and 2017:
|
Consolidated
|
|
2018
|
2017
|
|
|
(Restated)
|
Total short and long-term debt
|
7,084,467
|
7,105,667
|
(-) Cash and cash
equivalents
|
(826,187)
|
(1,026,862)
|
(-) Short-term
investments
|
(478,364)
|
(955,589)
|
(-) Restricted cash
|
(822,132)
|
(268,047)
|
A - Net debt
|
4,957,784
|
4,855,169
|
B – Total deficit
|
(4,505,351)
|
(3,088,521)
|
C = (B + A) - Total capital and net
debt
|
452,433
|
1,766,648
|
29.5.
Sensitivity analysis of financial instruments
The
sensitivity analysis of financial instruments has been prepared in accordance
with CVM Instruction 475/08 in order to estimate the impact on fair value of
financial instruments entered by the Company in three scenarios for each risk
variable: the most likely scenario in the Company's assessment (which is levels
of demand remaining unchanged); a 25% deterioration (possible adverse scenario)
in the risk variable; a 50% deterioration (remote adverse scenario).
The estimates
presented do not necessarily reflect the amounts to be reported in future
financial statements. The use of different methodologies and/or assumptions may
have a material effect on the estimates presented.
The tables
below show the sensitivity analysis of foreign currency exposure, derivatives
positions and interest rates on December 31, 2018 to market risks considered
relevant by Management. In the tables, positive values are displayed as net
asset exposures (assets higher than liabilities) and negative values are exposed
liabilities (liabilities greater than assets).
91
29.5.1.
Foreign currency risk
As of December
31, 2018, the Company adopted the closing exchange rate of R$3.8748/US$1.00 as
likely scenario. The table below shows the sensitivity analysis and the effect
on profit or loss of exchange rate fluctuations in the exposure amount of the
period as of December 31, 2018:
|
|
Parent Company
|
Consolidated
|
|
Exchange rate
|
Effect on profit or loss
|
Effect on profit or
loss
|
Net liabilities exposed to the risk of
appreciation of the U.S. dollar
|
3.8748
|
(3,943,612)
|
(5,451,177)
|
Dollar depreciation (-50%)
|
1.9374
|
1,971,806
|
2,725,589
|
Dollar depreciation (-25%)
|
2.9061
|
985,903
|
1,362,794
|
Dollar appreciation (+25%)
|
4.8435
|
(985,903)
|
(1,362,794)
|
Dollar appreciation (+50%)
|
5.8122
|
(1,971,806)
|
(2,725,589)
|
29.5.2.
Fuel risk
As of December
31, 2018, through its subsidiary GLA, the Company had oil derivative agreements
to hedge 58.6% of 12-month consumption, 43.0% of 24-month consumption and 28.5%
of 36-month consumption. The probable scenarios used by the Company are the
market curves at the close of December 31, 2018, both for derivatives that hedge
against fuel price risk and derivatives that hedge against Libor interest rate
risk. The table below shows the sensitivity analysis in U.S. dollars of the
fluctuations in jet fuel barrel prices:
|
|
|
Fuel
|
|
US$/bbl (WTI)
|
R$ (000)
|
Decline in prices/barrel
(-50%)
|
22.71
|
(735,676)
|
Decline in prices/barrel
(-25%)
|
34.06
|
(361,493)
|
Increase in prices/barrel
(+25%)
|
56.76
|
343,433
|
Increase in prices/barrel
(+50%)
|
68.12
|
720,179
|
29.5.3.
Interest rate risk
As of December
31, 2018, 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 December 31, 2018 (see Note 16)
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:
|
Consolidated
|
|
Short-term investments net of financial
debt (a)
|
Derivatives (c)
|
Risk
|
Increase in
the CDI rate
|
Decrease in the Libor
rate
|
Decrease in the Libor
rate
|
Reference rates
|
6.40%
|
2.81%
|
2.81%
|
Exposure amount (probable scenario)
(b)
|
370,282
|
(991,760)
|
(46,394)
|
Remote favorable scenario
(-50%)
|
83,229
|
41,803
|
1,956
|
Possible favorable scenario
(-25%)
|
69,358
|
34,836
|
1,630
|
Possible adverse scenario
(+25%)
|
(69,358)
|
(34,836)
|
(1,630)
|
Remote adverse scenario
(+50%)
|
(83,229)
|
(41,803)
|
(1,956)
|
(a)
Total invested and raised in the financial market
at the CDI rate and Libor rate. A negative amount means more funding than
investment.
(b)
Balances recorded on December 31,
2018.
(c)
Derivatives contracted
to hedge the Libor rate variation embedded in the agreements for future delivery
of aircraft.
92
The Company’s
interest-rate hedging is presented below:
|
2019
|
2020
|
2021
|
2022
|
2023
|
Total
|
Basis point value (“BPV”) -
thousands
|
-
|
185
|
138
|
68
|
-
|
391
|
Aircraft to be delivered
|
1
|
8
|
6
|
3
|
-
|
18
|
Hedged percentage
|
43%
|
68%
|
71%
|
53%
|
-
|
45%
|
Measurement of
the fair value of financial instruments
In order to
comply with the disclosure requirements for financial instruments measured at
fair value, the Company and its subsidiaries must classify its instruments in
Levels 1 to 3, based on observable fair value levels:
·
|
Level 1: Fair value measurements are
calculated based on quoted prices (without adjustment) in active market or
identical liabilities;
|
·
|
Level 2: Fair value
measurements are calculated based on other variables besides quoted prices
included in Level 1, that are observable for the asset or liability
directly (such as prices) or indirectly (derived from prices);
and
|
·
|
Level 3: Fair value
measurements are calculated based on valuation methods that include the
asset or liability but that are not based on observable market variables
(unobservable inputs).
|
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 December 31, 2018 and 2017:
|
|
2018
|
2017
|
|
Fair value level
|
Book
value
|
Fair
value
|
Book
value
|
Fair
value
|
Cash and cash equivalents
|
Level 2
|
307,538
|
307,538
|
434,295
|
434,295
|
Short-term investments
|
Level 1
|
21,100
|
21,100
|
32,701
|
32,701
|
Short-term investments
|
Level 2
|
457,264
|
457,264
|
922,888
|
922,888
|
Restricted cash
|
Level 2
|
822,132
|
822,132
|
268,047
|
268,047
|
Derivatives assets
|
Level 2
|
-
|
-
|
40,647
|
40,647
|
Derivatives
liabilities
|
Level 2
|
(409,662)
|
(409,662)
|
(34,457)
|
(34,457)
|
93
30.Liabilities from financing activities
The changes in
liabilities from the Company’s financing activities in the years ended December
31, 2018 and 2017 are as follows:
Parent Company
|
2018
|
|
|
|
|
Non-cash changes
|
|
|
|
Opening
balance
|
Cash flow
|
Interest
payments and loan costs
|
Treasury shares sold
|
Exchange variations, net
|
Provisi-on for interest
|
Other
|
Closing
balance
|
Short and long-term debt
|
4,034,975
|
(152,831)
|
(286,686)
|
-
|
697,879
|
365,765
|
-
|
4,659,102
|
Treasury shares
|
(4,168)
|
(15,929)
|
-
|
19,971
|
-
|
-
|
-
|
(126)
|
Capital stock
|
3,040,512
|
15,428
|
-
|
-
|
-
|
-
|
-
|
3,055,940
|
Shares to be issued
|
-
|
2,818
|
-
|
-
|
-
|
-
|
-
|
2,818
|
Obligations to related
parties
|
135,010
|
(136,420)
|
(8,458)
|
-
|
3,738
|
7,139
|
(1,009)
|
-
|
|
2017
|
|
|
|
|
Non-cash changes
|
|
|
Opening
balance
|
Cash
flow
|
Interest payments on
loans
|
Exchange variations, net
|
Provision for interest on
loans
|
Closing
balance
|
Short and long-term debt
|
3,261,714
|
723,156
|
(272,596)
|
39,885
|
282,816
|
4,034,975
|
Capital stock
|
3,037,820
|
2,692
|
-
|
-
|
-
|
3,040,512
|
Related companies
|
21,818
|
111,551
|
-
|
322
|
1,319
|
135,010
|
Consolidated
|
2018
|
|
|
|
|
|
|
Non-cash changes
|
|
|
|
|
|
|
Opening balance
|
Cash flow
|
Income for the year
|
Property, plant and equipment acquisition
through financing
|
Write-off of property, plant and
equipment
|
Dividends distributed by
Smiles
|
Provisi-on for interest on
loans
|
Treasury shares sold
|
Gains on change in
investment
|
Exchange variations, net
|
Interest payments and loan
costs
|
Other
|
Closing balance
|
Short and long-term debt
|
7,105,667
|
(536,888)
|
-
|
193,506
|
(805,081)
|
-
|
565,854
|
-
|
-
|
1,043,117
|
(481,708)
|
-
|
7,084,467
|
Other liabilities
|
143,473
|
(219,493)
|
-
|
-
|
-
|
238,879
|
-
|
-
|
-
|
-
|
-
|
(15,620)
|
147,239
|
Non-controlling interests from
Smiles
|
412,013
|
875
|
305,669
|
-
|
-
|
(239,877)
|
-
|
-
|
561
|
-
|
-
|
820
|
480,061
|
Treasury shares
|
(4,168)
|
(15,929)
|
-
|
-
|
-
|
-
|
-
|
19,971
|
-
|
-
|
-
|
-
|
(126)
|
Shares to be issued
|
-
|
2,818
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
2,818
|
Capital stock
|
2,927,184
|
15,428
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
2,942,612
|
2017
|
|
|
|
|
|
Non-cash changes
|
|
|
Opening
balance
|
Cash
flow
|
Income
for the year
|
Funding
|
Interest
payments on loans
|
Exchange variations on
loans
|
Provision
for interest on loans
|
Other
|
Closing
balance
|
Short and long-term debt
|
6,379,220
|
612,396
|
-
|
63,066
|
(505,105)
|
68,895
|
502,529
|
(15,334)
|
7,105,667
|
Non-controlling interests from
Smiles
|
293,247
|
(238,669)
|
359,025
|
-
|
-
|
-
|
-
|
(1,590)
|
412,013
|
Capital stock
|
2,924,492
|
2,169
|
-
|
-
|
-
|
-
|
-
|
523
|
2,927,184
|
94
31.Insurance
As of December 31, 2018, 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
Brazilian Reais
|
In thousands of U.S. dollars
|
GLA
|
|
|
Guarantee - hull/war
|
329,358
|
85,000
|
Civil liability per event/aircraft (a)
|
2,906,100
|
750,000
|
Inventories (local) (b)
|
968,700
|
250,000
|
Smiles
|
|
|
Rent insurance (Rio Negro – Alphaville complex)
|
1,238
|
-
|
D&O liability insurance
|
100,000
|
-
|
Fire insurance (Property insurance Rio Negro – Alphaville complex)
|
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.
32.Subsequent events
As per the notice to the market of January 3, 2019, the Company announced that its subsidiary, Gol Finance, commenced a cash tender offer (“Tender Offer”) for any and all of its US$91,533 aggregate principal amount of Senior Notes IV due in 2022, remunerated at 8.875% p.a. As of February 1, 2019, the Company concluded the tender offer after receiving valid offers of approximately US$13,460, which represents around 15% of Senior Notes IV.
As of February 1, 2019, the subsidiary Smiles Fidelidade sold its interest in Netpoints for R$914, related to the percentage of interest held by Smiles Fidelidade.
As of February 14, 2019, the Board of Directors of Smiles Fidelidade approved the distribution of additional dividends proposed to shareholders in the amount of R$284,471. The distribution is subject to approval by the Annual Shareholders’ Meeting of April 16, 2019. On the same date, the subsidiary’s Board of Directors approved a capital increase of R$210,000, without issuing new shares.
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: April 11, 2019
GOL LINHAS AÉREAS INTELIGENTES S.A.
|
|
|
|
|
By:
|
/S/ Richard Freeman Lark Junior
|
|
Name: Richard Freeman Lark Junior
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 offuture 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 a ctually 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.
95
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