GOL Records 1Q14 Operating Income of R$144 Million, 43% Increase versus 1Q13, and an Operating Margin of 5.8%

São Paulo, May 14, 2014 – GOL Linhas Aéreas Inteligentes S.A. (BM&FBOVESPA: GOLL4 e NYSE: GOL), (S&P: B, Fitch: B-, Moody’s: B3), the largest low-cost and low-fare airline in Latin America, announces today its results for the first quarter of 2014. All the information herein is presented in accordance with International Financial Reporting Standards (IFRS) and in Brazilian reais (R$), and all comparisons are with the first quarter of 2013, unless otherwise stated.

Highlights
Operating income (EBIT) totaled R$144 million in 1Q14, 43% increase versus 1Q13, with an operating margin of 5.8%. In the last 12 months (LTM), GOL achieved an EBIT of R$309 million and a margin of 3.3%.

Net revenues reached R$2.5 billion, 20% or R$411 million, up year over year and the Company’s highest ever first-quarter figure. LTM net revenue stood at R$9.4 billion.

Total load factor of 76.1% on the 1Q14 represented an 8.9 percentage point improvement over 1Q13 and also a first-quarter record, while yield maintained its upward trajectory, increasing by 4% in the period. These factors helped push RASK and PRASK by 18% to R$19.90 cents and R$18.23 cents, respectively.

Given the average 18% devaluation of the Real against the Dollar and fuel prices reaching record levels for a quarter, R$2.62/liter, total CASK moved up 17% over 1Q13, while CASK ex-fuel increased by 22%. LTM total CASK increased 3%.

EBITDAR totaled R$493 million, 34% more than in 1Q13. LTM EBITDAR of R$1,652 million, a Company record, reducing leverage (adjusted gross debt/LTM EBITDAR) from 27.9x, in 1Q13, to 6.5x in 1Q14.

GOL closed 1Q14 with a total cash position of R$2.8 billion, equivalent to 30% of LTM net revenue. The Company remains committed to maintaining ample liquidity, which is essential at times of high volatility in the economic scenario.

Given the devaluation of the Venezuelan Bolivar against the Dollar, the Company recognized an exchange variation adjustment of R$75.9 million in its 1Q14 financial result. As a result, the realizable value of its cash in Venezuela was R$274.6 million on March 31, 2014.

Smiles S.A. reported first-quarter net income of R$78.3 million in 1Q14, 162% up on 1Q13, with a net margin of 41.6%, driven by the 61% period increase in net revenue to R$188 million.

Message from Management
On the first quarter, operating income (EBIT) reached R$144 million, a 43% year-over-year improvement, with an operating margin of 5.8%.

This result was fueled by a new level of load factor, which reached a record 76%, which together with the continuing increase in yield, resulted in GOL’s highest ever net revenue for the first-quarter of R$2.5 billion, and R$9.4 billion for the last twelve months.

In regard to the industry as a whole, demand for seats moved up 6.5% over 1Q13, while supply decreased by 0.8%. On the eve of Easter Holiday, GOL transported 140,990 passengers, a record for a single day.

With the objective to offer our passengers even more comfort, the Company announced the expansion of GOL+ to the domestic fleet, resulting in an even more pleasant flying experience of more space with extra leg room, as well as the special GOL+ Conforto seats, with an even greater 34 inches between seats. By the end of May, 80% of GOL’s fleet will be equipped with the new configuration. The change is part of a process of standardization, operating efficiency gains and revenue generation.

In order to increase connectivity and become even more appealing, GOL announced new agreements with three leading international airlines that fly to Brazil: Air France-KLM, TAP and Aerolíneas Argentinas. In the first quarter, it entered into a strategic commercial cooperation partnership with Air France-KLM along the lines of the highly successful agreement with Delta Airlines, including expanded codeshare, improved joint sales procedures, and more benefits for Customers through both Companies’ frequent flyer programs. As part of this agreement, recently approved without restrictions by Brazil’s antitrust authority (CADE), Air France-KLM will invest US$100 million in GOL, including the acquisition of around 1.5% of the Company’s preferred capital stock for US$52 million.

The Company also signed codeshare and frequent flyer program agreements with TAP, which are awaiting approval by the regulators and CADE. ANAC (the Civil Aviation Authority) and CADE also approved the codeshare agreement with Aerolíneas Argentinas.

In line with its 2014 guidance, the Company is maintaining its strategy of gradually increasing its international market presence and its foreign-currency denominated revenue. With this in mind, it has announced a series of initiatives, including the re-start of flights between Santiago and São Paulo (Guarulhos airport), scheduled to begin in July, as well as new flights between Brazil and the United States from Campinas (Viracopos Airport) to Miami via Santo Domingo, in the Dominican Republic, where passengers will be able to connect to a flight to Orlando.

1Q14 Earnings Release
In April, GOL announced a new direct flight, once a week, between Fortaleza and Buenos Aires in association with the Ceará state government, which approved a 13 percentage point reduction in the ICMS tax (state VAT) on jet fuel for all domestic flights from Cear for airlines operating regular international flights to the same destination. Fortaleza has now joined Brasilia, which reduced its own ICMS in 2013, in offering better conditions for the development of the airline industry and the local economy.

As for costs, the Company maintained its focus on controlling manageable expenses: LTM CASK moved up by 3% and quarterly CASK by 17% over 1Q13, primarily due to the average 18% period devaluation of the Real against Dollar, the all time high fuel price of R$2.62/liter, and the upturn in Brazilian inflation. The workforce remained stable, closing at 16,157 positions, 1% down compared to 4Q13.

The Company ended the quarter with a cash position of R$2.8 billion, or 30% of annual net revenue, while leverage closed at 6.5x, versus 27.9x at the end of 1Q13, due to the R$1.3 billion increase in LTM EBITDAR to R$1.7 billion, its highest ever figure, in line with continuous deleverage strategy.

In 2014, after 64 years, the World Cup returns to Brazil, the country of football. As a truly Brazilian company, GOL takes great pride in being the Brazilian team’s official carrier. Throughout the last few months, the Company has been preparing to offer even better services. Our route network for the event has 974 extra flights or flight-time changes to serve the 12 host cities. Since the end of last year, we have been investing in a new visual identity in all the country’s airports and adding three new languages to our electronic kiosks: English, Spanish and French.

We have also reformulated our website and mobile platform, which are now available in Portuguese, English and Spanish. Our employees have also undergone specific training for the event, including in foreign languages, in order to ensure better service for visitors. We will also be hiring additional staff and reallocating personnel among the bases in order to prioritize service in the host cities. In addition, four of our aircraft have received special paint work, once again symbolizing our commitment to the event. All these initiatives are designed to offer GOL’s passengers the best World Cup while flying in Brazil.

Once again, GOL would like to thank its customers for their loyalty, its Team of Eagles for their commitment, and its investors for their confidence, all of which increasingly reinforces GOL’s vision of being the best company to fly with, work for and invest in.

Paulo Sérgio Kakinoff
CEO of GOL Linhas Aéreas Inteligentes S.A.