GOL reaches 21% operating margin and grows net revenues by 10%

GOL Linhas Aéreas Inteligentes S.A. ("GOL" or "Company"), (NYSE: GOL and B3: GOLL4), Brazil's #1 airline, announces its consolidated results for the fourth quarter of 2018 (4Q18) and for the full year of 2018 (12M18). All information is presented in accordance with IFRS, in Brazilian Reais (R$) and all comparisons are with the fourth quarter of 2017 (4Q17) and for the full year of 2017 (12M17), unless otherwise stated.

Financial and Operational Highlights:

Improved operating indicators: RPKs increased by 3.5%, totalizing 10.2 billion in 4Q18, primarily due to the growth of 3.4% in the number of transported passengers. As a result of strong passenger demand and GOL's continued focus on revenue management, the Company was able to achieve (i) an average yield per passenger of 29.14 cents (R$), an increase of 6.6% compared to 4Q17, (ii) an average load factor of 81.9%, an increase of 0.9 p.p. compared to 4Q17, and (iii) on-time performance of 87.5% in 4Q18 according to Infraero's methodology and data from major airports in Brazil. For the full year 2018, ASKs increased by 2.9%, RPKs increased by 3.2% (primarily due to a 2.9% increase in the number of transported passengers), and yields grew by 7.7%. 2018 Load factor was 80.0%, a 0.3 p.p. increase compared to 2017.

Strong revenue growth: the combination of higher demand and optimized pricing resulted in net revenue for the quarter of R$3.2 billion, an increase of 10.1% compared to 4Q17. Net RASK was 25.59 cents (R$) in 4Q18, an increase of 7.5% over 4Q17. Net PRASK increased 7.7% over 4Q17, reaching 23.87 cents (R$). Average fare increased by 6.7% from R$313 to R$334. For full-year 2018, net revenues were R$11.4 billion, 10.5% higher than the prior year. GOL's 2019 net revenue guidance is approximately R$12.9 billion.

Controlled cost environment: Total CASK in 4Q18 decreased by 2.0%, reaching 20.22 cents (R$) relative to 4Q17. On an ex-fuel basis, CASK was reduced by 19.4%, due to operating results from aircraft sales, partially offset by maintenance and other costs on redelivered aircraft, in line with GOL's fleet renewal plan. Our CASK ex-fuel, and also ex-results from sales and returns of aircraft was 14.45 cents (R$), 3.9% higher than 4Q17. GOL remains the cost leader in South America for the 18th consecutive year.

Solid margins: According to the strong cost control, capacity management and yield's dynamic management, the Company achieved a positive operating result for the 10th consecutive quarter, despite the increase of 15.6% in average Jet Fuel prices over 3Q18. The combination of stronger pricing, higher demand, and operating result from aircraft sale, partially offset by maintenance costs from aircraft redelivery, in line with GOL's fleet renewal plan, permitted GOL's EBIT margin to reach 21.0% in 4Q18. Operating income (EBIT) in 4Q18 was R$672.4 million, an increase of 74.0% compared to 4Q17 (R$386.3 million). EBITDA margin was 26.6% in 4Q18, increase of 8.4 p.p. q-o-q. EBITDAR margin was 36.3% in 4Q18, higher by 10.3 p.p. over 4Q17. For full year 2018, EBIT margin was 12.3%, a growth of 2.7 p.p. compared to 2017, and the operating income reached R$1.4 billion. GOL's 2019 EBIT margin guidance is approximately 18%.

Balance sheet strengthening: While the Real appreciated 3.2% against the U.S. dollar in 4Q18 (end of period) causing net exchange and monetary variation gains of R$246.3 million, net debt (excluding perpetual bonds) to LTM EBITDA was 2.1x as of December 31, 2018, down versus September 30, 2018 (3.2x) and improving versus a year-ago metrics (3.0x). Total liquidity, including cash, financial investments, restricted cash and accounts receivable, was R$3.0 billion, stable in comparison to September 30, 2018 and a decrease of R$207.0 million versus a year ago. The combination of GOL's operational cash flow generation of R$802.6 million in the quarter and stable cash liquidity increased the Company's financial flexibility.

"The Brazilian economy is at an inflection point and the Company, by accelerating the arrival of new MAX 8 aircraft is structured and prepared to absorb this additional demand. The favorable market context allows us to make flexible the returns of the NGs and the anticipation of the firm orders that we have with Boeing", concludes Kakinoff.

Access to 4Q18 earnings release, management videos, presentation and full financials already available on: www.voegol.com.br/ir

4Q18 Earnings Call: February 28, 2019, 12:00 p.m. (US EDT), Phone: +1 (412) 317-6382, Code: GOL