GOL DAY Presentation

Transcription

GOL DAY
São Paulo, Brazil - November 21, 2006
1
This presentation 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. These are merely projections
and, as such, are based exclusively on the expectations of GOL’s
management concerning the future of the business and its continued access
to capital to fund the Company’s business plan.
Such forward-looking statements depend, substantially, on changes in
market conditions, government regulations, competitive pressures, the
performance of the Brazilian economy and the industry, among other factors
and risks disclosed in GOL’s filed disclosure documents and are, therefore,
subject to change without prior notice.
2
Agenda
GOL DAY – November 21, 2006
Time
Topic
08:30-09:00
Welcome Coffee
09:00-09:45
Overview and Strategy
09:45-10:15
10:15-10:30
Competitive Strengths and Industry
Environment
Revenue and Route Management
10:30-10:45
10:45-11:15
Break
Operations Overview
11:15-12:15
Fleet, Maintenance and Flight Operations
12:15-12:45
Sales and Marketing Overview
12:45-14:00
Lunch with Management
14:00-15:00
Guest Panel:
South American Air Travel Trends
Growth Airline Valuations
15:00-16:00
Financial Review
16:00-16:30
Wrap-Up and Closing Remarks
16:30-16:45
Coffee and End of Activities
Presenters
Constantino de Oliveira Júnior, CEO
Wilson Ramos, EVP - Planning and IT
Mauricio Emboaba, Planning Director
David Barioni, EVP - Technical
Fernando Sporleder, Fleet Director
Eustáquio Mendes, Maintenance Director
Fernando Rockert, Flight Operations Director
Tarcisio Gargioni, EVP - Marketing & Services
Robert Pasterick, CFO BCA
James Parker, MD Raymond James
Richard Lark, CFO
Constantino de Oliveira Júnior, CEO
This presentation is subject to copyright and may not be copied or used without GOL’s express consent
3
Overview and Strategy
Constantino de Oliveira Júnior
President & CEO
4
GOL – Key Themes
4
Growth Prospects and Demand Stimulation
GOL Effect, synergistic network and expansion prospects
4
One-of-a-kind Airline Business Model
Single platform, optimal aircraft and motivated team
4
Low Costs and High Productivity Always
Benchmark worldwide, “low cost / low fare” and relentless
pursuit of results
5
Brazil’s Low-Cost, Low Fare Airline
4 Track Record of Success in
Passenger Transportation
Lower
Costs
4 Growth Opportunities in Brazil
and South America
4 Sustainable Competitive
Advantages
4 Leading Financial Performance,
Strong Balance Sheet and
Earnings Momentum
4 High Governance and
Disclosure Standards
Strong
Earnings
Growth
Lower
Fares
Higher
Load Factors
6
GOL Management Delivers
Vision
Results
2001
To be recognized by
2005 as a world reference
in Low-Cost, Low-Fare
passenger
transportation
4 #1 airline operating margin in
world (2004)
4 #1 performing airline in world
(2004)(1)
4 Company of the Year, Brazil
(2004)(2)
2005
To be recognized by 2010
as the airline that
popularized high quality
low-fare air transportation
in South America
4 Stimulating industry demand with
low fares
4 Building South American network
4 Successfully launched Argentina,
Bolivia, Paraguay, Uruguay, Chile
and Peru
(1) Aviation Week and Space Technology – Airlines with annual revenues under US$1 billion
(2) Exame Magazine
7
What is GOL’s Vision?
4 GOL’s vision is to be
recognized by 2010 as
the airline that
popularized highquality,
low-fare air travel in
South America
Low Cost Carrier Penetration by Region (1) (2)
North America Population: 350MM
75%
4 Over the next 5 years,
South America is
projected to grow at 7.4%
annually, the second
highest
passenger growth
of any region in the
world after China (3)
European Union Population: 450MM
20%
80%
25%
South America Population: 550MM
Asia Pacific Population: 1,150MM (4)
~5%
~10%
90%
95%
LCC Market Share
(1)
(2)
(3)
(4)
Legacy Carrier Market Share
Market penetration share (RPKs) estimates from Boeing as of 2004; largest LCCs indicated in graphic.
Annual global insight population statistics as of February 15, 2006.
Growth and RPK estimates from Boeing 2005 market outlook.
Does not include China, India and Oceanic region.
8
Numerous Drivers of Future Growth
1
International
Route Expansion
2
3
5
New 737–800
aircraft
Drivers of Growth
International ASKs to
represent approximately
20% of total ASKs by 2007
Tripled domestic
market share from 12%
in 2002 to 36% in
September/06
Continue to
stimulate demand
with low fares
across its route
network
Developing
innovative products
to broaden its
customer base to
lower income
demographics
New 737-800s have
187 seats,
generating cost
savings and revenue
growth
4
Highly Price
Sensitive Sales
Stimulate
Demand
Capture
Market Share
9
Half a Century of Pax Transport Experience
4
Gol has transported almost 50 million passengers since initiating operations in 2001
4
Experienced / local knowledge of transportation sectors
4
Top executives with average of over 20 years managing airline operations
Senior Management Team
Previous Experience
Constantino de Oliveira Júnior
President & CEO
Over 20 years transportation experience
David Barioni
Executive VP – Technical
Over 20 years airline experience
Richard F. Lark, Jr.
Executive VP – Finance & CFO
20 years finance, e-commerce and transportation experience
Tarcísio G. Gargioni
Executive VP – Marketing and Services
Over 30 years transportation and cargo experience
Wilson M. Ramos
Executive VP – Planning and IT
Over 30 years transportation and IT experience
Source: Aurea Group
(1) Includes metropolitan, executive, inter-state and inter-city travelers
10
Corporate Governance
4 Board of Directors
•
•
•
Majority controlled by Aeropar
3 Independent Directors
Meets 6 times per year
4 Board Committees
•
•
•
•
•
Audit
−
−
−
−
−
Meets NYSE/SEC requirements
100% Independent Directors
Financial Expert
Pre-approval of external auditor work
Meets 4 times per year
Free Float
28.1%
Controlling
Shareholders
71.9%
Corporate Governance and Nomination
−
−
Responsible for monitoring governance practices
Board renewal
People Policies
−
Compensation Policy
Financial Policy
−
−
Capital Structure Policy
Dividend Policy
Risk Policies
−
−
GOL’s
Shareholder Structure(1)
Cash Management Policy
Hedging Policy
(1) As of September 30, 2006
11
Strategy Overview
Business
Strategy
Intelligent
Operating
Strategy
Growth
Strategy
12
Strategy Overview
Business
Strategy
Intelligent
Operating
Strategy
Growth
Strategy
13
Business Strategy
GOL’s business strategy positions it to
be the largest domestic airline and is
built around:
Low
Costs
Low Fares
Unique Brand
& Culture
Technology
Savvy
14
Best Value Proposition
Always Bet on the Low-Cost Provider (1)
High Quality Transportation with Low Fares (2)
Stage-Length Adj. CASK (U.S. cents)
10.0
8.5
7.9
8.0
7.7
300
7.2
4.9
2.0
150
+
Revenue and
Sales
Management
Systems
+
90
215
200
Route and
Fleet
Management
Systems
95
269
250
4.0
Intelligent Use of Technology
96
+25%
6.7
6.0
Punctuality (%)(3)
100
Average Fares (R$)
350
98
85
80
Competitor
Strong Brand and Superior Value Proposition
Cost
Control
Systems
Streamlined Decision-Making to
Maximize Profitability
(1)
(2)
(3)
LTM March 31, 2006 data for EasyJet, LTM June 30, 2006 fo West Jet and Ryanair. LTM September 30 for other airlines. Average exchange rates for relevant time periods used in conversion
LTM September 2006. Calculated as the average of the quarterly average fares in the last four quarters
Source ANAC, in the domestic market from January to June 2006
15
High Quality Transportation with Low Fares
4 Single-class service maintaining
high quality standards;
Average Fares
+25%
4 Adequate, intelligent and attractive
fare structure:
•
Limited fare classes
•
Fares increase with demand
•
Fares designed to address each
determined market segment
R$269
R$215
4 Prices 20% - 30% lower than
competitors → create and stimulate
demand for GOL services
Competitor
Source: LTM September 30,, 2006
16
Low Costs
Stage-Length Adjusted CASK(1)(2) (US$ cents(3))
17.5
Traditional
Carrier Models
13.4
4
4
4
4
Optimum fleet usage
Latest-generation aircraft
Virtual sales model (e-commerce)
Outsourcing
Low Cost
Carrier Models
10.0
8.7
8.5
7.9
7.7
7.2
7.2
6.7
4.9
U.S. Avg (5)
(1)
(2)
(3)
(4)
(5)
TAM
LCC Avg (4)
LTM September 30, 2006 data, except EasyJet; LTM March 31, 2006 and Copa, LAN, LTM June 30, 2006
Average exchange rates for LTM used in conversion.
Stage Length adjusted CASK = ((competitors average stage-length / GOL’s average stage-length)0,5) x competitors CASK
LCC average exclude GOL
US average includes Continental and American
17
Technology - Savvy
4 Real time sales data and operating information
4 Ticket-less: simplification of internal controls
4 E-commerce
4 Advanced yield management system
4 Intelligent outsourcing
18
Strategy Overview
Business
Strategy
Intelligent
Operating
Strategy
Growth
Strategy
19
Intelligent Operating Strategy
GOL’s operating strategy creates sustainable competitive advantages
and is based on:
4 Single type of aircraft
4 Well-structured route network
4 High aircraft utilization
4 Smart in-sourcing of critical functions
4 Internet commerce and services
4 Highly motivated workforce
20
Benefits of Single Fleet Type
GOL’s operating strategy is largely built around the Boeing 737NG
4 Commonality & Cost Savings
•
•
Simplified Maintenance issues
Smaller spare parts inventory
4 Operational flexibility
•
•
Scheduling is simplified
Higher Utilization
4 Lower labor costs
•
•
Reduced training expenses
Employees become highly knowledgeable about the Boeing 737
21
Highly Integrated Network
Jan/06
Jan/05
Jan/04
Jan/07
Panamá City (1)
Cidade do Panamá (1)
Boa Vista
Macapá
Macapá
Manaus
Boa Vista
Macapá
Macapá
Macapá
Macapá
São Luis
Belé
Belém
Santaré
Santarém
Manaus
Fortaleza
São Luis
Belé
Belém
Santaré
Santarém
Natal
Manaus
Porto Velho
Palmas
Petrolina
Aracaju
Salvador
Brasí
Brasília
Cuiabá
Cuiabá
Aracaju
Rio Branco
Porto Seguro
Curitiba
Joinville
Porto Seguro
B. Horizonte
Rio de Janeiro
Campinas
Ribeirão Preto
Maringá
Maringá
Rio de Janeiro
Londrina
Curitiba
Sao Paulo
Joinville
Foz do Iguaç
Iguaçu
Florianópolis
Florianópolis
Santa Cruz (Bolivia)
Salvador
B. Horizonte
Santa Cruz
Brasí
Brasília
Sao J. Rio Preto
Porto Seguro
B. Horizonte
Campo Grande
Caxias do Sul
Porto Alegre
Porto Alegre
Ilhé
Ilhéus
Uberlandia
Vitó
Vitória
Campinas
Cabo Frio
Ribeirão Preto
Maringá
Maringá
Rio de Janeiro
Londrina
Assunç
Assunção
Foz do Iguaç
Iguaçu Curitiba
Sao Paulo
Joinville
Chapecó
Chapecó
Florianópolis
Caxias
do Sul
Cordoba
Vitó
Vitória
Florianópolis
Cordoba
Recife
Aracaju
Goiânia
Campinas
Ribeirão Preto
Maringá
Maringá
Assunç
Assunção (Paraguay)
Curitiba
Joinville
Caxias do Sul
Porto Alegre
Sao J. Rio Preto
Campo Grande
Joao Pessoa
Petrolina
Rio Branco
Cuiabá
Cuiabá
Uberlandia
Vitó
Vitória
Campo Grande
Sao Paulo
Salvador
Palmas
Porto Seguro
Goiânia
Vitó
Vitória
Campinas
Ribeirão Preto
Maringá
Maringá
Lima
Brasí
Brasília
Cuiabá
Cuiabá
Natal
Campina Grande
Porto Velho
Recife
Aracaju
Salvador
Goiânia
B. Horizonte
Campo Grande
Petrolina
Fortaleza
Teresina
Imperatriz
Joao Pessoa
Rio Branco
Brasí
Brasília
Cuiabá
Cuiabá
Goiânia
Palmas
São Luis
Belé
Belém
Santaré
Santarém
Natal
Campina Grande
Porto Velho
Recife
Manaus
Fortaleza
Teresina
Natal
Teresina
Recife
Belé
Belém
Fortaleza
Joao Pessoa
Palmas
Macapá
Macapá
São Luis
Porto Alegre
Rosario
Rosario
Santiago
Buenos Aires
Montevideo
Montevideo
(Uruguay)
Buenos Aires
Buenos Aires
Destinations:
28
39
49
59
Flights / Day:
237
284
406
608
22
“Best-in-Class” Aircraft Utilization
4
4
4
4
Quick turnaround times
Modern fleet of Boeing aircraft
Night flights to productively use assets 24 hours per day
Phased maintenance program structured to reduce maintenance down time
Daily Aircraft Utilization
(Block
Hours)
GOL utilizes assets
more efficiently
16.0
14.4
14.0
13.0
12.1
12.0
11.3
11.0
10.3
10.0
Average
11.7
8.9
8.0
6.0
4.0
Source: Latest company filings, FAA and ICAO
23
Simple Concepts
4 Single Class of Service
•
All economy-class
4 No overbooking
4 Simple in-flight service
24
Internet Commerce and Services
4 Bookings, check-in, changes/cancellations, seat assignments via web or cell
phone
4 Sales sites in three languages
25
Strategy Overview
Business
Strategy
Intelligent
Operating
Strategy
Growth
Strategy
26
Growth Strategy
GOL’s strategy positions it to be Brazil’s largest domestic carrier
4 Strategy produces demand stimulation, RPK growth and market share gains
4 36% domestic market share (of average RPKs) in October 2006
Market Share (RPK)
60%
TAM
50%
GOL
40%
30%
20%
10%
0%
dec/98
dec/99
dec/00
dec/01
dec/02
dec/03
Varig
VASP
Transbrasil
dec/04
dec/05
out/06
27
Growth Strategy: Highly Attractive Market
Brazilian Domestic Industry RPK Evolution
South America
Market:
CAGR=9.0%
or 2004-2013,
behind only China
(9.1%) (1)
(Bn)
55
50
45
Load
Factor
51
CA
40
G
2-0
0
(
R
10.3
=
)
6
90%
40
34
27
30
23
25
22
18
20
11
12
13
27
24
58%
58%
14
28
25
100%
%
35
15
54
70%
80%
72%
70%
65%
60%
57%
60%
10
50%
5
0
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005A
2006E
2007E
2008E
Source: DAC records and GOL planning estimates
(1)
Source: Boeing
28
40%
Growth Strategy
4 GOL’s Growth Strategy aims to
popularize air travel in South
America and is based on:
• Increasing Market Penetration
• Leveraging GOL platform into New
Markets
• Attracting New Air Travelers
GOL’s 737
aircraft have
a range which
covers South
America
4São Paulo
29
Increasing Market Share and Driving Market Growth
As GOL increases market share, it drives market growth with low fares
4
Continued Market Share Gains in Brazil
Brazil Market RPK Growth / GOL RPK Growth
RPKs (BN)
RPKs (BN)
39.8
38.7
39.5
34.4
33.2%
30.1
21.5
17.2
16.0
43.0
43.0
25.8
RPKs (MM)
13.2
36.0
33.7
27.3%
11.8%
29.0
34.9%
35.8%
33.0%
12.0
32.5
22.4%
19.4%
26.8
47.7%
43.5%
10.0
28.2
9.7
25.2
8.0
25.5
12.9
8.6
4.3
0.0
39.3%
14.0%
2002
GOL
22.0
33.6%
31.1%
13.9%
10.8%
2003
2004
Varig
11.4%
26.7%
2006E
Other
15.0
(1)
6.0
6.3
4.0
4.8
18.5
7.8%
2.5%
2005
TAM
14.0
3.2
2002
2.0
2003
2004
Brazil Market RPKs
2005
2006E
GOL RPKs
Source: ANAC
(1) Ten months (January 2006 – October 2006) annualized
30
(1)
Significant International Expansion Opportunities
Passengers Between Brazil and Other Latin American Countries
Annual
Enplanements
(000s)
38.2
1,600
Significant
International
Traffic To and
From Brazil
1,457.9
1,400
1,200
1,000
800
16.0
600
402.1
400
3.4
264.3
9.0
103.8
217.2
200.9
200
5.8
181.6
27.5
143.4
45.3
26.1
3.2
94.7
78.3
72.4
0
Argentina
GOL Flights/
Day (Oct/06)
7
Chile
4
Uruguay
1
Bolivia
1
Mexico
–
Paraguay
1
Peru
–
Colombia Venezuela
–
Panama
–
–
= Population (MM)
Source:
ANAC (Anuário de Transporte Aéreo 2004)
31
Growth Strategy: South America
International Operations Growth – 2005-2007
International offer (ASK)
as a percentage of
GOL’s total ASK
25%
20%
15%
20%
10%
11%
5%
6%
0%
2005
2006E
2007E
32
Growth Strategy: International Operations
Argentina
Argentina
Bolivia
Bolivia
Chile
Chile
Paraguay
Paraguay
Uruguay
Uruguay
Dec-04
Nov-05
Sep-06
Jan-06
Jan-06
Destinations
3
1
1
1
1
Flights / Day
7
1
4
1
1
ASK (mm) (1)
593
64
145
115
105
PAX Flown (000) (1)
633
26
322
64
150
Net Revenues 2006E (R$ mm)
100
5
6
8
20
First Flight
Source: GOL Information.
(1) 2006E
33
Growth Strategy: Untapped Customers
4 Atract New Air Travelers
•
Brazil has apporx 9 million air
passengers per year
− Potential to grow to 20MM
− Over 135 million interstate bus
passengers per year (1)
•
Brazil has a very low air
travel penetration rate
− The U.S. penetration rate
(income-adjusted) applied in
Brazil would imply in over
100MM enplanements vs.
30MM today (2)
•
(1)
(2)
(3)
New payment mechanisms
are key to attracting new air
passengers
Annual Enplanements Per Capita(3)
3.0
2.69
2.5
Brazil has low air
travel penetration
2.24
2.10
2.0
1.47
1.5
1.35
1.16
1.0
0.82
0.5
0.36
0.37
0.36
Mexico
Chile
Argentina
0.0
Canada
USA
Actual
Australia
0.17
Brazil
Per Capita GDP Adjusted (2)
CY2003; Source: Brazilian Department of Highways
GDP per capita as defined by World Bank 2003 report using PPP method. Each country adjusted to U.S. per capita GDP
CY 2003; Source: Government census and Department of Transportation reports
34
GOL’s Strategy Generates “BIG” Results
Best Value
Proposition
Intelligent
Operating
Platform
Growth
Opportunities
35
Questions:
4 What is unique about GOL’s business model?
4 How is GOL positioned?
4 What are GOL’s competitive strengths?
4 What is GOL’s strategy and future plans?
36
Competitive Strengths and Industry Environment
Wilson Maciel Ramos
Executive Vice President – Planning and IT
37
Questions:
4 What are GOL’s strengths and competencies?
4 What is GOL’s strategy to keep low operating costs?
4 How will GOL capitalize on the current opportunities?
4 What is GOL’s flight plan for 2007?
38
Competitive
Strengths
2007
Initiatives
Industry
Environment
39
Competitive
Strengths
2007
Initiatives
Industry
Environment
40
GOL’s Competitive Strengths
Proven
Proven
management
management
Lowest-cost
Lowest-cost
provider
provider
Modern
Modern and
and
efficient
efficient fleet
fleet
Low
Low fares
fares and
and high
high
profitability
profitability
Highly
Highly productive
productive
workforce
workforce
Strong
Strong brand
brand
Unique
Unique culture
culture
Efficient
Efficient sales
sales
distribution
distribution
Quality
Quality customer
customer
service
service
41
Experienced
Experienced and
and
proven
proven
management
management
Low Cost Provider
Lowest-cost
Lowest-cost
provider
provider
Low
Low fares
fares and
and high
high
profitability
profitability
Highly
Highly productive
productive
workforce
workforce
Strong
Strong brand
brand
Unique
Unique culture
culture
Efficient
Efficient sales
sales
distribution
distribution
Quality
Quality customer
customer
service
service
4 Driving costs lower
•
•
Scalability as fleet grows
Low break-even load factor
4 Industry-leading aircraft utilization
•
•
•
•
Route system and low fares maximize aircraft utilization (14.3 block hours)
Average 10 legs per day per aircraft (average stage length of 820km)
Increased availability and fuel efficiency
Low maintenance costs
4 Controlled distribution costs
•
•
Ticket-less and 80%+ of bookings on internet
Home-based sales force
4 Technology to improve efficiency
•
Real-time systems and decisions
Modern
Modern and
and
efficient
efficient fleet
fleet
42
Experienced
Experienced and
and
proven
proven
management
management
Modern and Efficient Fleet
Modern
Modern and
and
efficient
efficient fleet
fleet
Low
Low fares
fares and
and high
high
profitability
profitability
Highly
Highly productive
productive
workforce
workforce
Strong
Strong brand
brand
Unique
Unique culture
culture
Efficient
Efficient sales
sales
distribution
distribution
4 One of the youngest fleets
4 Next Generation fleet faster, more
fuel efficient and can meet high
utilization needs
4 Lower maintenance costs and
staying that way
4 Brazil national safety
classification: Class 1(1)
4 Strict maintenance
4 Experienced crew members and
ongoing training
(1) Source: FAA & ICAO
Lowest-cost
Lowest-cost
provider
provider
43
Quality
Quality customer
customer
service
service
Experienced
Experienced and
and
proven
proven
management
management
Highly Motivated Workforce
Lowest-cost
Lowest-cost
provider
provider
Modern
Modern and
and
efficient
efficient fleet
fleet
Low
Low fares
fares and
and high
high
profitability
profitability
Highly
Highly productive
productive
workforce
workforce
Strong
Strong brand
brand
Unique
Unique culture
culture
Efficient
Efficient sales
sales
distribution
distribution
Quality
Quality customer
customer
service
service
4
Culture: Quality & Results
•
•
•
Empowered to make
decisions
Cost-conscious
Open communications
Salaries and Benefits per ASK (US$ cents) (1)
3.00
2.45
2.04
2.00
4
Profit sharing
•
4
1.87
Stock options for key
employees
Experienced crew
4
Most of GOL’s labor force
is nonunionized
1.81
1.53
A competitive advantage
4
(1)
(2)
1.97
1.36
1.17
0.95 0.92
1.00
0.62
0.00
Majors (2)
Converted to U.S.D. based on average exchange rate for period. LTM as of latest company filings
Statistics based on consolidated operations where applicable
LCCs
GOL
44
Experienced
Experienced and
and
proven
proven
management
management
Unique Culture – “The Intelligent Airline”
Lowest-cost
Lowest-cost
provider
provider
Low
Low fares
fares and
and high
high
profitability
profitability
Highly
Highly productive
productive
workforce
workforce
Strong
Strong brand
brand
Unique
Unique culture
culture
Efficient
Efficient sales
sales
distribution
distribution
Quality
Quality customer
customer
service
service
4 Perceived as innovator in the airline industry
4 “Agent of change” promoting shift in the way Brazilians fly
4 Re-defining low-cost operations
4 Popularizing air travel in South America
4 Strong corporate culture: focus on costs and quality
4 Consumer-friendly image
4 One of the leading brands in Brazil
4 Simplified, efficient service
4 Safe, on-time operations
Global Recognition
4 Latin America’s Leading
Airline, Global Finance (2005)
4 World’s Most Profitable
Airline, Airline Business
(2004)
4 Brazil’s Company of the Year,
Revista Exame (2004)
Modern
Modern and
and
efficient
efficient fleet
fleet
45
Experienced
Experienced and
and
proven
proven
management
management
High Quality Customer Service
Highly
Highly productive
productive
workforce
workforce
Strong
Strong brand
brand
Unique
Unique culture
culture
Efficient
Efficient sales
sales
distribution
distribution
Lost Baggage/1,000 Passengers
1.0
0.81
0.8
0.48
0.44
0.4
0.37
0.24
0.2
0.0
2002
2003
2004
2005
Regularity (Completion)
100%
90%
90%
80%
80%
GOL
Industry
70%
60%
9M06
Punctuality (On-time)
100%
70%
60%
50%
50%
2002
2003
2004
2005
1Q06
2Q06
3Q06
2002
2003
2004
2005
1Q06
2Q06
3Q06
Source: ANAC
Modern
Modern and
and
efficient
efficient fleet
fleet
Low
Low fares
fares and
and high
high
profitability
profitability
0.6
Lowest-cost
Lowest-cost
provider
provider
46
Quality
Quality customer
customer
service
service
Experienced
Experienced and
and
proven
proven
management
management
Low-Cost Sales Distribution
Highly
Highly productive
productive
workforce
workforce
Strong
Strong brand
brand
Unique
Unique culture
culture
Efficient
Efficient sales
sales
distribution
distribution
Sales Channel
Direct
(noncommissionable)
Sales Systems
GDS
Call Center +
Airport
GDS / Other
30%
3%
11%
3%
70%
97%
86%
Indirect
(Commissionable)
Internet
Openskies
GOL Internet Bookings and Sales Expense
76.4%
80%
49.0%
60%
40%
20%
81.3%
82.2%
57.9%
13.0%
14%
14.3%
13.7%
13.4%
12.5%
0%
2001
18%
16%
15.3%
2002
2003
% Internet Bookings
2004
2005
12%
11.8%
10%
9M06
Sales Expense as % of Net Revenues
Modern
Modern and
and
efficient
efficient fleet
fleet
Low
Low fares
fares and
and high
high
profitability
profitability
Direct vs. Nondirect
Lowest-cost
Lowest-cost
provider
provider
47
Quality
Quality customer
customer
service
service
Experienced
Experienced and
and
proven
proven
management
management
Strong Brand and Superior Value
Modern
Modern and
and
efficient
efficient fleet
fleet
Low
Low fares
fares and
and high
high
profitability
profitability
Highly
Highly productive
productive
workforce
workforce
Strong
Strong brand
brand
Unique
Unique culture
culture
Efficient
Efficient sales
sales
distribution
distribution
4 Ticket-less travel
4 Lower fares
4 No overbooking
4 Single-class seating
4 Emphasis on frequency in hightraffic routes
4 Numerous industry awards and
exceptional customer feedback
4 Customer commitment
(1) Pesquisas Inteligentes, September 2006
Lowest-cost
Lowest-cost
provider
provider
48
Quality
Quality customer
customer
service
service
Competitive
Strengths
2007
Initiatives
Industry
Environment
49
2007 Initiatives
Cost Reductions and Additional Traffic:
4 New payment mechanisms
4
4
4
4
Voe Fácil
Debit cards
Online Bank account transfer
Corporate Card
4 Additional revenue
4
Payments with installments generating interest revenue
4 New distribution channel
4 Travel packages portal
4 Security improvement
4 Verified by Visa and Komerci
Initiatives will reduce costs and increase revenues
50
2007 Initiatives
Cost Reductions and Additional Traffic:
4 Expand interline and code-share agreements
4 Intensify international expansion
4 using 5th and 6th freedoms rights (ex: SCL/LIM; LIM/MEX)
4 New 737/800 SFP aircraft
4 consuming 25% less fuel per seat-kilometer
4 187 seat configuration reduces total costs per seat-kilometer by 21%
4 Increase in average stage length up to 9%
4 reducing overall unit costs by 4%
Initiatives will reduce costs and increase revenues
51
2007 Initiatives
Information Technology:
4 Sales and express check-in using PDAs (reduce check-in times)
4 CRM (Customer Relationship Management)
4 SMS and e-mail alerts informing schedule changes and other
occurrences
4 Passengers with Baggage self check-in (reduce check-in times)
4 Alert messages to passengers (avoiding no-shows)
4 New Skies (upgraded sales system)
4 ERP (Oracle upgrade)
4 Gollog (new cargo system)
4 EPM (Enterprise Process Management)
4 BPM (Business Process Management)
52
Competitive
Strengths
2007
Initiatives
Industry
Environment
53
Positive Macroeconomic Outlook
Exchange Rates (R$/US$)
Brazil GDP Growth
6.0%
4.0
3.5
3.6%
3.1%
4.0%
3.0
2.3%
2.5
2.0%
2.0
0.5%
0.0%
1.5
J a n- 0 3
4.9%
J ul- 0 3
J a n- 0 4
A ug- 0 4
F e b- 0 5
A ug- 0 5
A pr- 0 6
2003
S e p- 0 6
2004
2005
2006E
2007E
• High correlation with yields
• Increase in overall economic activity
• Fuel / Aircraft Rental Expenses in US$; Revenues in R$
• Increase in air traffic demand (high elasticity)
Brazil Interest Rates
30.0%
Growth in Average Income (R$)
16.2%
20.0%
13.6%
12.6%
8,694
0.0%
7,000
2005
2006E
2007E
9,729
10,000
8,500
2004
10,520
19.0%
10.0%
2003
11,165
11,500
23.3%
7,631
2002
2003
2004
2005
2006E
• Consumer credit expansion should benefit spending
• Increase in disposable income
• Lower interest rates should boost overall investment levels
• Attractiveness of night flights / promotional fares
Source: Central Bank of Brazil.
54
Strong Industry Growth
4From 1999 to 2005, domestic industry gross revenues CAGR was 11.7% (4.7x GDP)
Domestic PAX on Board and RPK
50.0
CAGRPAX (99-03): 2.7% / (03-06): 17.1%
45.0
CAGRRPK (99-03): 3.1% / (03-06): 16.6%
35.0
22.2
24.3
25.0
20.0
45.0
40.0
33.7
35.0
40.0
30.0
40.3
23.9
24.3
1999
2000
26.8
26.3
27.6
27.9
2001
2002
27.9
25.1
42.2
38.4
25.0
20.0
29.6
26.6
Domestic Industry Gross Revenues
15.0
2003
PAX on Board
30.0
RPK (bn)
PAX (mm)
55.0
2004
2005
2006E
RPK
11.0
R$ Bn
60.0
ASK (bn)
55.0
CAGR (99-03): 1.0% / (03-06): 10.3%
56.2
8.0
8.0
7.0
7.0
6.0
45.3
40.0
40.3
48.0
47.0
41.9
41.6
6.2
5.1
CAGR (99-03): 14.9% / (03-06): 8.9%
1999
2000
4.0
42.9
2001
2002
2003
2004
Gross Revenues
30.0
1999
2000
2001
2002
2003
2004
2005
9.8
8.9
9.0
5.0
45.0
35.0
10.0
10.0
Domestic ASK
50.0
11.5
12.0
2006E
Source: ANAC
55
2005
2006E
Strong Industry Growth
4 Expected 2007 Brazil GDP Growth: 3 - 4%
4 Expected 2007 Brazil Market Growth: 12 - 16%
Industry CAGRRPK (99-06E): 8.9% (3.5x GDP)
Domestic RPK Evolution
2003
RPK (bn)
Night flights
Unique promotions
50
45
40
35
30
25
20
15
10
5
-
55%
40.3
33.7
Industry RPK
22.2
24.3
26.3
26.8
25.1
27.9
36%
GOL share 5%
1.3
1999
2000
2001
3.2
19%
4.8
23%
6.3
35%
25%
27%
12%
45%
14.5
9.2
GOL RPK
15%
5%
-5%
2002
2003
2004
2005
2006E
56
Growth Stimulated by Low Fares
4Industry fares and yields: flat in real terms
Domestic Average Fares
380
335
330
285
180
212
255
254
221
204
212
256
211
219
204
140
195
202
206
115
130
93
80
1999
2000
2001
Industry Nominal Values
273
212
147
152
100
128
128
116
118
2002
2003
2004
2005
2006E
Industry Real Values ¹
GOL Nominal Values
Domestic Average Yield
0.40
GOL Real Values ¹
0.35
0.36
0.30
0.32
R$
R$
280
230
339
0.28
0.24
0.20
0.30
0.36
0.31
0.29
0.25
0.22
0.23
0.21
0.22
0.23
0.23
0.27
0.26
0.22
0.21
0.19
0.16
0.19
0.15
0.15
2000
2001
2002
Industry Nominal Values
(1) Using IPCA - 1999 base price
Source: ANAC
GOL Nominal Values
2003
0.17
0.16
0.16
0.14
2005
2006E
0.19
0.12
1999
0.29
0.27
2004
Industry Real Values ¹
GOL Real Values ¹
57
2007 Industry Environment
Expected domestic supply / demand scenario:
4 Demand Scenarios
4 4 scenario analysis
4 Applied methodologies at GOL:
• Econometric models: bi-linear, bi-logarithmic, consensus
• Time series decomposition: classical method
• Informal: experts opinion, analyst judgment
4 Supply Scenarios
4 6 scenario analysis
4 Based on announced airlines’ growth plans
58
2007 Industry Environment
Expected domestic supply / demand scenario:
Supply (seat-Km)
67.8 bn
+/-75%
Load Factor
68%
Load Factor
Demand (pax-Km)
45.9 bn
59
Low Fares Stimulating Demand - “GOL Effect”
4 GOL stimulates
passenger demand with
low-fares;
4 Low-fares attract fareconscious leisure and
business travelers;
Passenger Growth on GOL Routes (1)
67%
GOL
Effect
61%
52%
47%
43%
4 Stimulating demand
allows GOL to grow the
market in addition to
capturing share;
16%
4 Night flights stimulate
“first time” flyers.
Brazil(2)
40%
(1)
(2)
Source DAC, Infraero. Growth in enplanements over the three year period from one year prior to two years after GOL’s entry
into each market.
Growth in enplanements for the Top 50 airports from 2000 to 2004.
60
Florianópolis
Belo Horizonte
Salvador
Brasília
Fortaleza
Recife
Curitiba
23%
Porto Alegre
36%
GOL Growth by Airport
Airport
GOL Service
Commenced
Enplanements
Per Month at
Service Inception
(PAX)
CWB
BSB
REC
SSA
POA
GRU
CGH
GIG
BEL
FLN
PLU
SDU
CNF
May-01
Jan-01
Apr-01
Jan-01
Jan-01
Dec-03
Jan-01
Jan-01
Oct-01
Jan-01
Jan-01
Dec-01
Mar-05
2,175
4,742
1,833
3,204
3,488
5,903
14,089
9,711
1,803
3,038
1,272
14,885
31,769
Enplanements
Per Month
Current
(PAX)
64,858
133,808
50,909
80,671
68,471
106,547
242,820
150,248
24,472
30,531
8,847
44,632
69,131
CAGR
(as of Aug06)
% per year
97%
95%
94%
91%
81%
78%
77%
73%
68%
59%
47%
25%
17%
Source: Company Information - September, 2006
61
Demand Stimulation in 2007
Bolstering the “GOL Effect”
4 More Seats at Low Fares
4 New passenger services:
4 Domestic: More frequencies in existing markets
4 International (approx 20% of new AKSs): LIM, CUN and MEX
4 New distribution channel
4 Corporate Card
4 Voe Fácil (up to 36 installments)
4 Debit cards (approx 130 million users in Brazil)
4 Code share / Interline
4 “Minhas Viagens” Travel Portal
4 Other marketing and promotional actions
62
Questions:
4 What are GOL’s strengths and competencies?
4 What is GOL’s strategy to keep low operating costs?
4 How will GOL capitalize on the current opportunities?
4 What is GOL’s flight plan for 2007?
63
Maurício Emboaba
Director – Planning & Statistics
64
Questions:
4 How does GOL build its route network?
4 What are the unique characteristics of GOL’s
network?
4 How is GOL positioned in principal airports?
4 What is GOL’s pricing policy?
4 How does GOL manage its yields and loads?
65
GOL’s Highly
Integrated
Route Network
GOL’s
Position in
Main
Airports
GOL’s
Dynamic
Revenue
Management
66
GOL’s Highly
Integrated
Route Network
GOL’s
Position in
Main
Airports
GOL’s
Dynamic
Revenue
Management
67
GOL’s Operating Model is Highly Efficient
4 Base model counts on short turn times for more flights
4 Airlines may vary their model to appeal to specific target markets
55
Primary hubs, multiple aircraft types, and regional
affiliates typify a more complex structure
ATA
Frontier
50
45
Average
Scheduled
40
Time on
Ground
(Minutes)
35
30
20
200
Source: Boeing 2005
jetBlue
AirTran
Virgin Blue
WestJet
easyJet
Air Asia
25
Longer stage lengths
and “Redeye” flights
from major airports
GOL
400
Southwest
Ryanair
600
Traditional LLC model: High utilization
through short turns, emphasis on local
market, minimal connections
800
1000
1200
1400
Average Stage Length (SM)
68
Cidade do Panamá (1)
4 GOL: high-frequency
integrated network
Boa Vista
• Maximizes connection
options at each
destination
Macapá
Macapá
Manaus
São Luis
Belé
Belém
Fortaleza
Santaré
Santarém
Natal
Teresina
Imperatriz
Joao Pessoa
Campina Grande
Porto Velho
Lima
• 50% of GOL passengers
connect
Palmas
Petrolina
Recife
Aracaju
Rio Branco
Salvador
Brasí
Brasília
Cuiabá
Cuiabá
Goiânia
Santa Cruz
Sao J. Rio Preto
Ilhé
Ilhéus
Porto Seguro
B. Horizonte
Uberlandia
Vitó
Vitória
Campinas
Cabo Frio
Ribeirão Preto
Maringá
Maringá
Rio de Janeiro
Londrina
Assunç
Assunção
Foz do Iguaç
Iguaçu Curitiba
Sao Paulo
Joinville
Chapecó
Chapecó
Florianópolis
Caxias do Sul
Cordoba
Campo Grande
Porto Alegre
Rosario
Santiago
Montevideo
Buenos Aires
69
Unique Characteristics of GOL’s Route System
4 Generates highest domestic load factors - 75%(1)
4 Generates industry-leading aircraft utilization
(10 legs/day and 14.3 block hours)(1)
4 Generate maximum traffic without negatively
affecting yields
4 Permits service to low-density markets
4 Maximizes revenue contribution to overall
network
(1)
Year round 2006
70
GOL’s Fleet Allocation Process
4 2007 aircraft additions are already allocated to specific routes according to
the manufacturer delivery schedule
4 Detailed economic and traffic studies (bottom-up approach)
4 GOL’s fleet planning methodology allows the re-programming of aircraft
allocation within hours, adjusting the fleet to a changing market
environment
Night
Business
• Frequent
• Commuting
• Flexible
• Passengers
• Students/VFR(1)
(1) “Visitors, Friends and Relatives”
Leisure
•
•
•
•
•
Tourism
Coastal destinations
Inter-state Markets
Underserved markets
Overpriced markets
Business
• High yield
• Short haul
Night
• Bus Fares
71
GOL’s Fleet Allocation for 2007
4 Fleet Plan (2007 EOY)
B737/800 NG
-
34
B737/700 NG
-
32
B737/300
-
14
Total
-
80
4 Supply Mix
% Mix
Growth
2007/ 2006
Domestic ASK (000)
80%
+ 33-36%
International ASK (000)
20%
+ 125-135%
100%
+ 45%
Total ASK (000)
72
GOL’s Highly
Integrated
Route Network
GOL’s
Position in
Main
Airports
GOL’s
Dynamic
Revenue
Management
73
Slots - Main Airports
Airport
City
GOL Share(1)
CGH
São Paulo
40.3%
GRU
São Paulo
15.7%
BSB
Brasília
40.7%
SDU
Rio de Janeiro
32.0%
(1) Slots in September/06
74
GOL’s Highly
Integrated
Route Network
GOL’s
Position in
Main
Airports
GOL’s
Dynamic
Revenue
Management
75
Revenue Management and Pricing
4 GOL uses state-of-the-art yield management tools
4 Proposes the optimal configuration mix for a given flight based
on historical purchasing behaviour of clients
4 As the bookings begin, our software proposes, on a regular
basis, potential changes in the fare configuration mix to
maximize the total revenue to be generated by a given flight
4 GOL has several analysts that monitor any potential
optimization alternative suggested by the software on a daily
basis
76
Revenue Management
Fare Classes
4 Multiple fare classes (for all distribution channels) + around 5
exclusive web fares;
4 Fares in between the ceiling and the floor are defined based on
interpolation models;
4 Fares are defined based on complex cost curves → price orientation
to costs of production;
4 Restricted fares targeting flexible travelers
4 Lowest fares only available on GOL’s website to stimulate lower
distribution costs
•
Web-exclusive fares are at least 30-35% below call center fares and about
25% below the lowest competitor
77
Main Principle of Revenue Management
Differential Pricing
4 Practice of offering a variety of fares differentiated by restrictions
4 Restrictions justify different prices
78
Revenue Management
GOL’s Effective Yield Management
+ 36%
+ 37%
0.25
0.2
0%
25%
70%
36%
60%
37%
50%
7%
0%
19%
Yield
40%
0.15
5%
0.1
0%
1%
Variation vs flight
departure date
30%
20%
0.05
10%
0
0%
28
21
14
7
0
Days to Flight Departure
Yield
Load Factor
79
Load Factor
0.3
The Lowest Fares and Best Yield Management
4 GOL offers the lowest fares
Routes Served
Between São Paulo (CGH) and:
Rio - Santos Dumont (SDU)
Brasilia (BSB)
BH - Confins (CNF)
Curitiba (CWB)
Florianópolis (FLN)
Campo Grande (CGR)
Between Rio de Janeiro (GIG) and:
Brasilia (BSB)
Salvador (SSA)
Recife (REC)
Between Belo Horizonte (CNF) and:
Brasilia (BSB)
Rio - Galeão (GIG)
Current Market
Range(1) (R$)
Lowest Fare
Total GOL
Round Trips
Per Day
R$109 - 730
159 - 1053
99 - 847
89 - 711
122 - 922
169 - 1078
GOL
GOL
GOL
GOL
GOL
GOL
44
12
14
16
10
4
R$145 – 1115
145 - 1574
259 - 1577
GOL
GOL
GOL
16
12
6
119 - 927
R$79 - 720
GOL
GOL
6
4
Source: GOL as of September 2006
(1) Current Market Range includes GOL
80
The “Triple H” of Success
High Aircraft
Utilization
High Price
hub
Attractiveness
High Network
Connectivity
81
Questions:
4 How does GOL build its route network?
4 What are the unique characteristics of GOL’s
network?
4 How is GOL positioned in principal airports?
4 What is GOL’s pricing policy?
4 How does GOL manage its yields and loads?
82
Operations Overview
David Barioni
Executive Vice President – Technical
83
Questions:
4 What is GOL’s fleet strategy?
4 How will GOL grow its fleet?
4 What is unique about GOL’s flight operations?
4 How does GOL keep fuel costs low?
4 How does GOL optimize maintenance costs?
4 What are GOL’s flight safety standards?
84
Operations Overview
Fleet and Flight
Operations
Maintenance
Flight Safety
85
Operations Overview
Fleet and Flight
Operations
Maintenance
Flight Safety
86
Fleet – Why the B737-NG Fits our Strategy
4 Adequate seat configuration permits optimum yield and load
factor management on most routes
4 State-of-the-art technology enables cost-efficient operations
4 Optimized maintenance routines
4 One-type standardized training for the crews
4 Highest dispatch reliability
4 Lowest operating costs in its class
4 More spacious interior
87
Fleet – Benefits of a Young Fleet
With a forecasted decrease in average fleet age, GOL’s aircraft fleet is
the most modern fleet in South America and one of the youngest in
the world
In maintaining a young fleet, GOL benefits from:
4 Higher reliability for consumers
4 Improved corporate image
4 Higher aircraft utilization
4 Reduced operational complexity
4 Flexibility to rapidly adjust internal seat configuration to demand
4 Reduced maintenance costs, resulting in cost-efficient operation
4 Aircraft and spare parts warranties, resulting in lower capex
88
Fleet: Acquisition Plan
4 GOL has firm orders for 87 Boeing 737-800s with scheduled
deliveries between 2006 and 2011
•
GOL also has the option to purchase an additional 34 aircraft for
deliveries up to 2012
GOL’s order for 121 737 NGs guarantees that it will
be one of the world’s largest LCCs
89
New 737-800 Aircraft: Competitive Advantage
4 Incremental profit of ~US$1,580 per flight
New 737-800 Aircraft Incremental Revenue
Seats
250
200
150
43
187
144
100
~US$2,000
Incremental
Revenue / Flight (1)
30% Increase
in Seat
Capacity
50
0
Current 737-700 Seats
Incremental Seats
New 737-800 Seats
New 737-800 Direct Cost Savings vs. Current 737-700 (US$ cents)
6.0
5.35
Additional
Seat Savings
5.0
Fuel Efficient
Winglets
~ 4.43
4.0
EX-IM Guaranteed
Financing
3.0
~US$1,580 in
Additional
Profit / Flight
~US$420 in
Additional
Direct Costs /
Flight (1)
2.0
Current 737-700 CASK
(1)
New 737-800 CASK
Assumes RASK of R$ 0,20 and stage length of 721 km
90
Fleet Plan to Serve Growth
4 Fleet plan to facilitate profitable growth and reduce costs
4 Order for 121 737-NGs (87 firm orders)
# of Aircraft
1.7%
1
=
R
AG
Seat C
110
100
90
80
80
70
60
65
86
12
14
88
7
94
92
101
10
10
20
21
28
14
30
50
40
30
91
2011E
2012E
60
30
46
20
10
84
72
36
21
0
2006E
2007E
2008E
737 – 800s
2009E
737 – 700s
2010E
737 – 300s
91
High Operating Standards
Backed by highly experienced crews and strict fleet monitoring and
control, GOL’s aircraft operating standards are fully in line with
Boeing operations manuals.
Our optimal performance is due to:
4 Highly experienced engineers, mechanics and flight crews
4 Superior aircraft maintenance routines
4 Disciplined fuel conservation practices
4 Strict monitoring and analysis of historical operational data
92
Jet Fuel Consumption: “Real World” Scenario
Weather influence
(enroute deviations
and winds)
Necessity to execute
holding patterns
sometimes (ATC)
Takeoff
ATC Speed and
Altitude
restrictions to climb
(the aircraft is less fuel
efficient on this phase
of flight)
d
an
nt h
c
sce
De pproa
A
Fuel Tankering
(extra weight)
on dispatch
sometimes
Cli
mb
Cruise
ATC Speed and Altitude
restrictions to descent
(yielding to different flaps /
gear / engine utilization)
Landing
Equipment degradation (the
older the aircraft, the less
fuel efficient it would be)
93
Competitive Advantages
Competitors
4 More seats / aircraft
4 Less fuel consumption
•
•
Lighter aircraft
Winglets
4 Higher aircraft utilization
4 Short-field landings (Santos Dumont)
4 Less ground time (turnaround)
4 Ground support necessity
187
174 (max)
7% more
efficient
14h / day
12 m / year
12h / day
11 m / year
SFP
-
Shorter
turnaround
30 minutes +
turnaround
Basic
Complex
94
Operations Overview
Fleet and Flight
Operations
Maintenance
Flight Safety
95
Maintenance Strategy
4 GOL’s fleet is composed of aircraft built upon a maintenance
philosophy that allows a high degree of flexibility in task performance;
•
Types of maintenance utilized by GOL
− Phased (700s/800s)
− Blocked (300s)
4 Phased maintenance is extensively used by GOL, allowing
maintenance work to be performed every day without sacrificing
airplane revenue time;
4 GOL’s Aircraft Maintenance Center operates at Confins Airport
(State of Minas Gerais)
•
GOL maintenance organization certifications
− RBHA 121: light maintenance
− RBHA 145: heavy maintenance
96
Operations Overview
Fleet and Flight
Operations
Maintenance
Flight Safety
97
Flight Safety: GOL’s Highest Priority
4 Modern and efficient fleet of state-of-the-art aircraft
4 Highest safety classification: Class 1 (Brazil, same standards as U.S.) (1)
4 Strict and continuous maintenance of aircraft
4 Ongoing & efficient crew training
4 Strict, detailed & result-oriented monitoring of aircraft / people
performance
(1) Source: FAA & ICAO
98
Prevention Tools
4 Main Programs
•
•
•
•
•
•
•
Recovery of Abnormal Situations;
FOQA
LOSA
F.O.D. Prevention
C.F.I.T. Prevention
Land Occurrences Prevention
Runway Incursion Prevention
4 Flight Security Inspections
•
•
•
•
•
Initial inspection before the launch of a base
Performed at least twice a year at every airport where we operate
Supervise the operation of a specific base for a few days
Aim to train Base team and to identify potentially unsafe situations
The inspection generates an “Inspection Report”
99
Emergency Response System
GOL has a well-prepared emergency response plan
4 The Company’s responsibilities include attending families as
quickly and efficiently as humanly possible.
•
Organization
•
Performance and discipline in the first few hours
•
Ability to follow and correctly execute the Emergency Response
Plan
4 Image and credibility depends on ability to respond effectively
to an emergency situation
100
Family Assistance Plan
Emergency’s Director actions after accident confirmation by Air Traffic Control
4 An accident was Informed to the President and Vice-Presidents
4 Family Assistance Plan operation was launched
4 All teams involved were contacted
4 Advertising and promotions were canceled
4 A Briefing was carried out with Home Base Team members
4 A Briefing was carried out with Field Team members (conference call)
4 Specific briefing was carried out with the Flight Safety Officer before his
departure to the accident location
4 The Dark Site structure was activated
4 The press communication was initiated through the GOL Media and Public
Relations Outside Counselor, including the President’s press conference
4 A press report was released every hour
4 The Dark site was continuously monitored and updated
101
Family Assistance Plan - Organizational Structure
Accountable Manager
(President)
Emergency Director
(Technical VP)
Emergency Director Secretary
Public Relations Officer
Operations Control Center
ERC Codeshare Partner
Liaison Officer
Emergency Response Center
Passenger
Information Ctr.
Passenger
Information Ctr.
Field
Team
Homebase
Team
Station
Of Ocurrence
1. Dir. FAC
2. Human Resources
3. FAC Team
Members
1. Dir. PIC
2.C. Share Contact
3. Human Resources
4. PIC Team
Members
1. Field Team Dir.
2. Flight Crew
3. Flight Attendants
4. Mtce./Technical
Support
5. Public Relations
6. Bag./Cargo
7. Passenger Claims
8. Security
9. Legal
10. Medical
1. Homebase Team Dir.
2. Flight Crew
3. Flight Attendants
4. Flight Dispatch
5. Mtce./Technical
Support
6. Station Support
7. Public Relations
8. Financial Support
9. Bag./Cargo
10. Passenger Claims
11. Insurance
12. Legal
13. Security
14. Catering
15. Transportation
16. TI
1. Station Manager
2. Operation Agents
3. Rep. to Airport EOC
4. Rep. to Uninj. Ctr.
5.Rep. to Meeters Ctr.
6. Rep. to Hospitals
7. Rep to Mortuary
8. Handling Manager
9. Cargo Manager
Dep.
Station
Dest.
Station
Interm.
Station
Station
Nearest
102
Check List Example (Emergency Director)
Checklist Dir.
(CL11.1.010.)
de
Emergências
Notificar o Presidente da GOL / Conselho;
Notificar a Assessoria de Segurança de
Vôo;
Notificar o Escritório de Relações Públicas;
Notificar o(a) Secretário(a) do CCC;
Bloquear a Lista de Passageiros;
Transmitir à Equipe de Segurança do
Prédio, a lista das pessoas que terão
acesso ao CCC;
Ativar o CCC e todas as suas facilidades, e
dirigir-se ao mesmo para conduzir a
reunião inicial;
Convocar
imediatamente
reunião
e
informar o CCO. Este, por sua vez,
convocará os Diretores da Equipe da Sede
e de Campo;
Notificar Lessores;
Notificar Jurídico;
Notificar Diretor de Manutenção;
Elaborar comunicado interno aos
colaboradores;
Solicitar, junto ao Depto. de Marketing, a
suspensão de toda a veiculação de
publicidade e propaganda da GOL na
mídia.
Contatar a Base da Ocorrência e solicitar
os últimos detalhes/situação no local do
acidente;
Manter-se informado sobre os cuidados
para o bem-estar de passageiros e
tripulantes;
Manter-se informado sobre localização e
números de PAX (mortos, feridos e ilesos).
103
GOL Operations: Low-cost & High Safety
Low-cost Fleet
and Flight Ops
Low-cost
Maintenance
High Safety –
Priority #1
104
Questions:
4 What is GOL’s fleet strategy?
4 How will GOL grow its fleet?
4 What is unique about GOL’s flight operations?
4 How does GOL keep fuel costs low?
4 How does GOL optimize maintenance costs?
4 What are GOL’s flight safety standards?
105
Fernando Sporleder
Fleet Director
Eustáquio Mendes
Maintenance Director
Fernando Rockert
Flight Operations Director
106
GOL’s 737
Fleet
GOL’s Phased
Maintenance
Program
GOL’s Flight
Operations
107
GOL’s 737
Fleet
GOL’s Phased
Maintenance
Program
GOL’s Flight
Operations
108
GOL Fleet - 60 aircraft (Nov-2006)
10 x 737-800s (SFP) +
(187 seats)
9 x 737-800s
(177 / 184 seats)
27 x 737-700s
(144 seats)
14 x 737-300s
(141 seats)
109
Fleet Strategy - Benefits of Single Fleet Type
Commonality & Cost Savings
4 Maintenance issues are simplified
4 Spare parts inventory required reduced
Operational flexibility
4 Scheduling is simplified
More efficient employees
4 Reduced training expenses
4 Employees become highly knowledgeable about the Boeing 737
110
Shorter Turnaround Times
4Increases daily aircraft utilization
4“Ground level” cargo holds allow fast luggage loading & unloading
4No need for expensive, time consuming loading conveyors
4Simplified catering - no hot meals
111
Short Field Performance
4 Aerodynamic improvements and slower approach speeds allows B737-800 SFP
to land at the Santos Dumont Airport
4 Increased seat capacity in one of the highest traffic slotted routes
4 Absence of hot meals on board (no frills) requires smaller galley area, which
allows more free space for seat allocation.
112
Winglets – Reduced Fuel Consumption
Fuel Savings
4 Winglets lower drag and improve aerodynamic efficiency;
4 Winglets can improve cruise fuel mileage up to 3-4 percent.
113
Winglets – Reduced Maintenance Costs
Improved Takeoff Performance
4 By allowing a steeper climb → better takeoff performance, especially from
obstacle-limited, high, hot, weight-limited, and/or noise-restricted airports;
4 Improved climb gradients increase 737-800 allowable takeoff weight (TOW).
Reduced Engine Maintenance Costs
4 Better climb performance → lower thrust settings → extending engine life and
reducing maintenance costs;
4 Takeoff - winglets allow up to 3% incremental derate;
4 Cruise - cruise thrust levels are reduced by up to 4%.
114
GOL’s 737
Fleet
GOL’s Phased
Maintenance
Program
GOL’s Flight
Operations
115
Maintenance Operations
4 GOL maintenance organization certifications
•
RBHA 121: light maintenance
•
RBHA 145: heavy maintenance
− Reduces costs and increases availability
− Increases controls and quality
− Additional future revenue source
4 Types of maintenance utilized by GOL
•
Phased (700s/800s)
•
Blocked (300s)
116
Phased Maintenance – Key Success Factor
4 GOL’s 737 NG fleet is built upon a maintenance philosophy that
allows a high degree of flexibility in task performance
•
This flexibility is extensively used by GOL, allowing maintenance work
performed every day without sacrificing airplane revenue time
4 Major services requiring aircraft grounding are performed at higher
intervals, generally between five and eight years
4 Major services on airframe have to be accomplished at hangar
facilities and require the removal of the aircraft from revenue service
4 Daily services are conducted at our line stations which are staffed
with GOL personnel
4 Accessories are restored at shops monitored by GOL in the U.S.,
Europe and Brazil
117
GOL Aircraft Maintenance Center
4 Major airframe maintenance services demand the use of a hangar
4 At Confins Airport (State of Minas Gerais):
•
•
Fully operational since August 2006
Perform all airframe maintenance services in-house
4 Invested US$12MM, generating annual savings of US$2MM
118
119
120
121
GOL’s 737
Fleet
GOL’s Phased
Maintenance
Program
GOL’s Flight
Operations
122
Experienced & Proven Flight Crews
4 Flight Operations
•
•
•
•
•
•
•
501 captains (10,000+hours)
448 co-pilots
6.6 crews per aircraft
Training 2x/year at CAE
LOFT, CFIT, SPOT
FOQA / LOSA
SDU SFP
123
Training for Pilots
4 CAE (Canadian Airspace) Flight
Simulator for Captains and Co-pilots
• Before starting with GOL:
Theoretical and practical
• ANAC Inspector final test
•
• Update training twice a year:
Once simulator
• Once route training
•
124
Training for Crews Members
4 Loft (Line Oriented Flight Training)
• Line oriented simulator training with flight
attendants
Abnormal or emergency situation
• Crew coordination, performance
• Emergency steps and procedures
• Passenger evacuation
•
125
SPOT Flight
4 Unscheduled spot flights
4 To re-verify in-flight services
•
•
•
•
•
•
Pilots
Crew members
Documentation
Maintenance
Adherence to “SOP” - standard operating procedures
Cleaning of planes
126
GOL and the NG
Boeing NG is “The
Right Choice”
New NG Fleet
Drives Costs
Lower
Phased Maintenance
Keeps Aircraft in the
Air
127
Marketing and Sales Overview
Tarcisio Gargioni
Executive Vice President – Marketing and Services
128
Questions:
4 What are the elements of the GOL value
proposition?
4 What is GOL’s channel strategy?
4 How will GOL decrease sales costs?
4 How will GOL increase corporate sales?
4 How will GOL increase sales to B & C segments?
4 How will GOL increase cargo revenues?
4 What is GOL doing on sustainability?
129
The GOL
“Product”
Sales &
Distribution
Channels
Cargo
Operations
130
The GOL
“Product”
Sales &
Distribution
Channels
Cargo
Operations
131
The GOL “Product”
4 The Best Value Proposition in the Brazilian Market
•
Safe and quality air transportation at fair prices
•
Emphasis on low fares and simple process based on low costs
•
Easy purchase and boarding
•
High regularity and punctuality
•
Elimination of superfluous (simple on-board service)
•
Modernity (new aircraft and high technology)
•
Motivated and friendly employees
(1) March 2006
132
GOL Passenger Profile and Satisfaction
4 High Customer Satisfaction (1)
•
92% of GOL customers would fly again
•
88% of GOL customers would recommend GOL to others
4 Travel reasons (2006E):
•
Business passengers: 40%
•
Non-business passengers: 60%
4 10% of passengers are first-time
flyers
•
37%
39%
60%
63%
61%
40%
Demand stimulation!
2003
Source: Survey by Pesquisas Inteligentes
2005
Business
2006E (1)
Non-business
133
Marketing Strategy: Price-Sensitive Consumers
4 Focus on under-penetrated B&C consumer segments
• Stable “A” (upper income) class market
4 Solid corporate customer base
•
•
Budget-conscious travelers
Large corporate clients
Managed Corporate Sales
(% of total sales)
18%
4 Increased frequencies on profitable
business traveler routes
•
São Paulo, Rio de Janeiro, Brasilia,
Belo Horizonte, Curitiba, Porto Alegre
+15.6pp
15%
11.3%
12%
9%
6%
4 Increasing government clients
20.1% 20.3%
21%
7.7%
4.5%
3%
0%
2002
2003
2004
2005
134
2006E
High growth potential in mid/lower income (B, C, D) classes
Competes with inter-state bus services (night flights)
•
•
A
B
C
2
10
3
2
6
2
8
42
37
15
Income
Segment
Population
(MM)
1987
2005
Year
Consumption
(%)
R$ Bn
22
29
23
56
60
648
39
63
23
252
27
42
16
175
A&B
C
D&E
65
53
50
53
D&E
Mexico
Population (mm) 106
Brazil
188
Chile
16
Colombia
45
Source: Strategy Research Corporation – Synovate, Febraban , BC Brazil, Target,
Banco de Mexico, Secretaria del Trabajo y Previsión Social México – April, 2005
Source: Segments determined by income per home ( A and B – 5 minimum wages/month; C – 2-5
minimum wages; D – Under 2 minimum wages). Income distribution information: IBGE (POF 1987 and
2003). 2003-2005 adjust based on 3% population growth, considering no changes between income
segments. Total internet users based on IBOPE/Net Ratings data. 2005 Annual household consumption
was 1.075 billion, according to IBGE. Information toward annual consumption by segments: IBGE (POF
2003)
135
4 “Voe Fácil” – Fly Easy Program
•
Customers pay installments up to 36 months
•
October 2006: 3% of total revenues
•
Over 400,000 active clients
136
•
Leisure revenues subject to seasonality
4 Tour and Package Sales Portal: “Minhas Viagens”
www.minhasviagens.com.br
4 Process cost reductions to reach
leisure shoppers and enhance
major tour operators practice
4 Portal will allow any individual
country-wide to access prices
and packages simultaneously
4 In the future, the portal will have
programs and tools that will
allow anyone to build up a tailormade tour itinerary
137
Marketing Strategy: Small Companies
4 Expand to Small-to-mid sized companies
•
Corporate revenues are stable and recurring
•
The number of small-to-medium sized companies is growing
in Brazil
•
Corporate Card
138
Increasing Market Share
First Birthday:
8% Mkt Share
Second Birthday:
17% Mkt Share
Third Birthday:
20% Mkt Share
Fourth Birthday:
23% Mkt Share
Fifth Birthday:
30% Mkt Share
RPK Domestic Market Share(1)
50%
45%
40%
International
routes
35%
Small-Medium
Corporate Card
30%
25%
20%
15%
10%
5%
0%
Jan/01
(1)
Jan/02
Jan/03
Jan/04
Jan/05
Jan/06
Jan/07E
Jan/08E
Source: ANAC
139
The GOL
“Product”
Sales &
Distribution
Channels
Cargo
Operations
140
Sales & Distribution Channels
4 Brazilian Travel Industry
•
In Brazil over 85% of passenger sales are via Travel Agencies
•
In Brazil travel agency commissions vary from 7%-10% (domestic)
4 GOL – Distribution Based on Internet
•
Major advantage of Internet sales (via NAVITAIRE-OPENSKIES) is the
lower cost per transaction and improved penetration versus GDS booking
system
•
GOL does not operate “sale shops” outside of airports
141
Low-cost Distribution
In 2006, GOL will sell close to R$4 billion over the web
4 80% of total sales on internet
4 30% direct-to-consumer
Customer
Direct
30%
Sales Channel
Systems Used
GDS
Call Center +
Airport 11%
GDS 3%
3%
70%
86%
Indirect
(Commissionable)
Internet
97%
Openskies/Navitaire
142
Low-cost Distribution
Online Travel
Internet Users
Billion
R$ 10.2
%
31
67.5
1.9x
=
R
G
CA R$ 7.3
60.0
R$ 8.8
10
0
-2
5
0
R$ 5.7
20
52.5
46.3
41.3
R$ 4.0
35.0
19%
2005
22%
23%
2006
2007
Internet Users (MM)
26%
2008
29%
2009
31%
2010
R$ 2.6
2005
Penetration (% of pop.)
2005-2010 compound growth
Source: Credit Suisse (internet users and broadband projections), IBGE
(population) and Forrester Research (e-Shoppers). Considers 3% population
growth until 2010
Brazil
USA
2006
2007
2008
2009
2010
Online travel as a % of travel market
10%
22%
26%
46%
Source: Forrester Research for e-commerce projections - 2004.
Jupiter Research for online travels projections - 2006.
143
Sales and Marketing Costs - Reductions
Sales and Marketing Costs
400
16%
336
350
329
15%
15.3%
300
14.3%
250
13.7%
191
200
262
14%
13.4%
13%
150
12.5%
100
50
12%
97
11.8%
11%
35
10.9%
0
10%
2001
2002
2003
Sales and Marketing Costs
2004
2005
9M06
2007E
Sales Expense as a % of Net Revenues
144
The GOL
“Product”
Sales &
Distribution
Channels
Cargo
Operations
145
Cargo Operations
Innovation
4 The majority of the “Low-Cost, Low-Fare”
airlines companies transport only luggage
and COMAT
4 GOL implemented a Cargo Service
without affecting passenger operations
with the following characteristics:
•
•
•
Small packages
No dangerous goods
Supported by franchising system
Strategy
4 Generate incremental revenues without
significant additions to fixed costs
4 Customer Satisfaction, Quality Services
and Competitive Prices
146
Cargo Operations
+60%
200
R$ mm
Characteristics
125
4 Strong Revenue Growth
2006E
2007E
4 Average Weight for AWB indicates tendency to small packages (-8%
2006/2005)
4 40,000 Tons expected for 2006
4 95% of cargo delivered within 24 hours
4 2006: 54% Direct Sales (no commission)
4 Cargo costs are 21% of cargo revenues > 79%
operating margin
147
Cargo Operations
Types of cargo customers
Technology, Electronics
Materials and Accessories
Other
Spare Parts
9%
8%
Newspapers and
Magazines
29%
13%
22%
Medicines, Laboratories
and Cosmetics
19%
Clothing and
Synthetic Products
148
Corporate
Responsibility
149
Corporate Responsibility
4 Publication of annual corporate social
report and balance sheet
4 In 2006, approximately R$ 3 million
donated for 14 Projects:
•
Social projects targeting children
•
Re-foresting program for SOS Mata
Atlântica
•
Cultural projects
•
Internal initiatives: food, scholarship
material and recycling
150
Recent TV Ads
VIDEO
151
Questions:
4 What are the elements of the GOL value
proposition?
4 What is GOL’s channel strategy?
4 How will GOL decrease sales costs?
4 How will GOL increase corporate sales?
4 How will GOL increase sales to B & C segments?
4 How will GOL increase cargo revenues?
4 What is GOL doing on corporate responsibility?
152
Panel: Industry Specialists
South America Air Travel growth trends
Robert Pasterick, CFO - Boeing Commercial Airplanes
Growth Airline Valuation
Jim Parker, Managing Director - Raymond James
153
South America Air Travel
Growth Trends
From 2006 Boeing Latin American CMO
October 06
2006 GDP performance
Growth
3.3%
United States
2.5%
European Union
Japan
3.2%
5.1%
Other Asia
10.6%
China (PRC)
Latin
America
Latin
America
Middle East
4.3%
Other Europe
3.5%
Canada
3.0%
India and Pakistan
7.5%
Mexico
Mexico
3.8%
Russia and CIS
Australia and NZ
$0
World Growth: 2006 3.8%
2007 3.2%
4.0%
7.0%
3.0%
$2,000
$4,000
$6,000
$8,000
GDP, Billions U.S. Dollars
Based on Monthly Global Insight Data (August Update — Annual Real GDP)
$10,000
Air travel demand by region
Markets
Added traffic
2006 - 2025
2005 traffic
North America
3.6
Asia-Pacific*
5.4
Europe
3.4
North Atlantic
4.5
China
8.8
Europe - Asia-Pacific
5.5
Transpacific
5.8
North
America
- Latin
North
America
- LatinAmerica
America
4.9
Europe
- Latin
Europe
- LatinAmerica
America
5.1
Latin
LatinAmerica
America
Three of the Top Ten Markets
6.9
Africa - Europe
5.0
Middle East - Asia-Pacific
6.0
0
500
1,000
RPKs, billions
* Except Within China
Annual
growth %
1,500
2,000
Intra-Latin America growth is second only to china
World Average Growth: 4.9%
Markets
8.8%
China
Latin
LatinAmerica
America
6.9%
6.0%
Middle East - Asia-Pacific
5.8%
Transpacific
5.5%
Europe - Asia-Pacific
5.4%
Asia-Pacific*
5.1%
Europe
- LatinAmerica
America
Europe
- Latin
5.0%
Africa - Europe
North
America
- Latin
North
America
- LatinAmerica
America
4.9%
4.5%
North Atlantic
3.6%
North America
3.4%
Europe
0%
1%
2%
3%
4%
5%
Traffic Growth Rate
* Except Within China
6%
7%
8%
9%
Airlines of Latin America will need 1,679 new
airplanes in the next twenty years
1%
Regional jets
Single-aisle
Twin-aisle
747 and larger
11%
1%
5%
15%
30%
73%
64%
110.5 billion
delivery dollars*
1,679
airplanes
* In year 2005 dollars
Latin America future new airplane deliveries
‘06 – ‘25
Brazil
Mexico
Rest of Latin America
35%
34%
45%
44%
21%
21%
110.5 billion
delivery dollars*
1,679
airplanes
* In year 2005 dollars
In 2000, Low-Cost Carriers were
Primarily Limited to the U.S. and Europe
z 32,000 weekly flights
z Shorter flights
Europe
North America
Flights/week: 25,863
Miles/flight:
573
Flights/week: 5,196
Miles/flight:
443
Asia
Flights/week:
Miles/flight:
Oceania
Flights/week:
Miles/flight:
Source: November 2000 OAG
136
588
723
376
By 2006, Low-Cost Carriers are
Operating Globally
z
70,000 weekly flights
Europe
Flights/week: 22,136 +326%
Miles/flight:
629 +42%
North America
Flights/week: 37,025
Miles/flight:
738
+43%
+29%
Asia
Flights/week:
Miles/flight:
4,593 +535%
564 +50%
Middle East & Africa
Flights/week: 426
Miles/flight: 1046
South America
Flights/week: 2,820
Miles/flight:
479
n/a
n/a
n/a
n/a
Oceania
Flights/week:
Miles/flight:
3,162
735
+2225%
+25%
Source: Aug 2006 OAG
Low-cost carriers are profitable
2005 Operating Margins
Ryanair*
Air Asia
Gol
Singapore
Southwest
Virgin Blue*
Cathay Pacific
British Airways
ANA
easyJet*
Korean Air
SAS
Lufthansa
jetBlue
Air France/KLM
JAL
Continental
LCC
American
Non LCC
Delta
Northwest
-20
-15
-10
-5
0
5
10
15
20
25
30
Percent
• Data from 2005 Company Reports
COPYRIGHT © 2006 THE BOEING COMPANY
*Airlines have YE other than Dec
737 is preferred by many successful
low-cost carriers
Source: Airclaims, September 2006.
Consistently higher reliability
A320s average 33% more technical delays
For a fleet of 30 airplanes at six flights per day, A320s will have
125 more delays per year
Schedule reliability*, 12-month rolling average percentage
100.0
99.7
Design superiority
Next-Generation 737 Family
99.4
737 Classics
A320 Series
99.1
98.8
98.5
2001
2002
2003
2004
Source: Manufacturer-reported data.
* Percentage of flights without delays over 15 min, cancellations, air turnbacks, or diversions (technical causes only).
2005
2006
2007
737-800 consistently rated number 1
Compared to A320:
15 more seats
245 nmi longer range
10% lower operating costs
The most comfortable single-aisle
airplane leaves and arrives on time
Passengers
prefer on-time
airplanes
Source: Travel Trak 2003 North America
Consumes less fuel
Fuel burn per seat, %
8
+7%
+6%
6
+5%
4
+3%
2
0
Lower cost
Base
Airplane 737-600
Seats
110
• 500-nmi trip
• Two-class seating
• A321 with two auxiliary fuel tanks
• 737-700/-800/-900ER with optional winglets
Base
A318
107
737-700
126
Base
A319
126
737-800
162
Base
A320
150
737-900ER
180
A321
183
Maintenance cost advantage
Airlines, independent trade publications, and publicly reported data
have confirmed the 737NGs maintenance cost advantage over the A320
Total labor and material costs per seat, %
30
+27%
+27%
+25%
20
+19%
10
Lower cost
0
Base
Airplane 737-600
Seats
110
• 2005 European rules
• 500-nmi trip
Base
A318
107
737-700
126
Base
A319
126
737-800
162
Base
A320
150
737-900ER
180
A321
183
Consistently preferred by investors
Airfinance Journal Investor Poll
Overall score
737-800 number 1
overall 4 years in
a row
737-700 number 2
overall 3 of 4 years
9
8
8.8
Overall score
9
8.7
8.4
1 st
8.1
8
7
7
6
6
737-800
737-700
A319
A320
8.5
8.1
737-800
737-700
2006
Overall score
9
9
8.5
1 st
7.9
A319
8.3
7.9
8
7.7
7.7
1 st
7.1
7
6
7.0
7
6
737-800
A320
737-700
2004
A320
7.7
2005
Overall score
8
7.9
1 st
A319
737-800
737-700
2003
A320
A319
Short-field performance improvements
were designed for GOL
Increased flight spoiler
deflection on ground T
Two-position
tailskid L
L
Reduce idle thrust delay
after touchdown L
Sealed slats for all takeoff
flap positions T
Winglet lift
credit T L
T
L
• FMC software also updated to reflect changes.
Takeoff improvement
Landing improvement
737NG Short Field Performance
Package selected by 15 customers for over 300 airplanes
The Source for Post-Deregulation Airlines
Gol Day
November 21, 2006
James D. Parker, Ph.D.
Managing Director
1
Regulatory Disclosures for James D. Parker
FRNT Frontier Airlines Holdings, Inc.
•
Raymond James & Associates makes a NASDAQ market in shares of Frontier Airlines Holdings, Inc..
GOL Gol Linhas Aereas Inteligentes S.A.
•
Raymond James & Associates co-managed an initial public offering of Gol Linhas Aereas Inteligentes S.A. American
depository shares in June 2004 and lead-managed a follow-on offering of Gol Linhas Aereas Inteligentes S.A. American
depository shares in May 2005.
JBLU JetBlue Airways
•
Raymond James & Associates co-managed a follow-on offering of JetBlue Airways shares in November 2005.
•
Raymond James & Associates makes a NASDAQ market in shares of JetBlue Airways.
MEH Midwest Air Group, Inc.
•
Raymond James & Associates provided investment advisory services to Midwest Air Group, Inc. in February 2006.
MESA Mesa Air Group, Inc.
•
Raymond James & Associates makes a NASDAQ market in shares of Mesa Air Group, Inc..
•
Raymond James & Associates received non-investment banking securities-related compensation from Mesa Air Group, Inc.
within the past 12 months.
RJET Republic Airways Holdings Inc.
•
Raymond James & Associates co-managed an initial public offering of Republic Airways Holdings Inc. shares in May 2004,
follow-on offerings of Republic Airways Holdings Inc. shares in February 2005 and July 2005, and a secondary offering of 9.5
million Republic Airways Holdings Inc. shares at $14.50 per share in December 2005 .
•
Raymond James & Associates makes a NASDAQ market in shares of Republic Airways Holdings Inc..
RYAAY Ryanair Holdings plc
•
Raymond James & Associates makes a NASDAQ market in shares of Ryanair Holdings plc.
SKYW SkyWest, Inc.
•
Raymond James & Associates co-managed a follow-on offering of 4.0 million SkyWest, Inc. shares at $26.05 per share in April
2006.
•
Raymond James & Associates makes a NASDAQ market in shares of SkyWest, Inc..
•
Raymond James & Associates received non-investment banking securities-related compensation from SkyWest, Inc. within the
past 12 months.
•
The covering analyst and/or research associate owns shares of the common stock of SkyWest, Inc..
2
The Winning Formula
Achieve the lowest unit costs in your market

•
•
•
Build a strong balance sheet with a lot of cash

•
•
•

Europe – Ryanair
United States – Southwest
South America - Gol
Southwest = $3.0 billion
Ryanair = $2.7 billion
Gol = $754 million
Have the management discipline to spend whatever
cash is necessary to repel competitive intrusions
3
Operating Cost per Available Seat
Kilometer, Adjusted to Gol’s Stage Length.
Airline
2005 CASK
(reais)
3Q06 CASK
(reais)
GOL
0.155
0.163
TAM
0.206 +33%
0.196 +20%
4
Gol is Adhering to the Winning
Formula
• Gol is allocating the resources now to keep Varig from
rebuilding since it would cost more later
• Gol is keeping the pressure on Tam by growing domestic
capacity 40%. Over the longer term, Tam will find it
difficult to compete with Gol because Gol has substantially
lower costs and a large and growing cash position
• Gol is expanding rapidly in international markets to
stimulate new traffic and establish defensible market
positions
• The masses represent the greatest growth opportunities in
the air travel business. Gol’s low costs, and, in turn, low
fares put it in the best position to capture this growth
5
Airline Service is Introduced to the
Masses
• Southwest Airlines starts up in 1971 in the state of Texas.
Gol started up in January 2001
• Southwest was founded to serve the masses with no frills
and $26 fares between Dallas, Houston, and San Antonio,
Texas
• It was the original VFR airline which took people off the
roads, out of busses and stimulated new travel. Gol is
stimulating new traffic by taking passengers off buses and
making affordable travel to the masses
• The airlines have become the mass transportation system
of the US. Gol will be the leading air carrier of the masses
in Brazil and possibly South America
6
Legacy Carriers Struggle to Match
Southwest’s Costs
• In its 34th year, Southwest remains the lowest cost
producer in spite of having the highest labor costs in the
industry
• Legacy carriers have been unable to bring costs down to
Southwest’s level even in bankruptcy. Their attempts to
establish low cost airlines have all failed
• Labor, led by pilots, ultimately gain control of airlines.
They do not want to become low cost. They will give in to
wage cuts to keep their airline alive but will demand to be
made whole when the airline returns to profitability.
7
Operating Unit Costs
(For the Quarter Ended 9/30/06)
$0.138
$0.113
$0.108 $0.110 $0.110
$0.105
$0.102
Cost per ASM
$0.115
$0.092
$0.088
$0.093 $0.094
$0.079
$0.069
$0.046
$0.023
Note: Not stage length adjusted and excluding special items
Source: Company Press Releases, SEC Filings.
United
American
Northwest
US Airways
Continental
Delta
AirTran
Frontier
Southwest
JetBlue
$0.000
8
Legacy Carriers Will Not Become Low Cost
Cost per ASM (cents)
2Q05 CASM at 1000 mile Stage Length Using Similar Aircraft
14.0
12.4
12.0
10.0
8.0
7.7
5.9
8.4
9.0 9.1
10.7 11.0
10.3
10.3
10.2
9.5 9.8
6.5
6.0
4.0
2.0
0.0
l
t
s
t
t
r
an lue
it e ican elta ay TA ska ited e s piri nta
es
r
e
A
la Un thw S
hw irT etB a W ron er
D ir w
n
t
i
A
r
t
u
J ric
A
A
F Am
o
n
o
o
S
S
N
e
C
U
m
A
t
es
9
Source: Roach and Sbarra Consulting
Ryanair’s Ancillary Revenues

Use Ryanair.com as distribution channel
Largest travel website in Europe – 15 million
unique visitors per month
Ryanair secures minimum guaranteed revenue
Potential for increased conversion

Travel insurance
Car hire
Hotels
New product potential

Online advertising
Activity breaks
Hostels, car parking, aircraft painting
Gambling, property, hotels
10
Source: Ryanair presentation
Forecasting Growth Airline Share
Prices
• Growth airlines are airlines that generally have
earnings and grow at substantial rates
• They are not conducive to traditional cash flow
and intrinsic value methods of valuation
• Using discounted cash flow to forecast earnings
for 2010 and 2020 is ridiculous
• Enterprise value/EBITDAR is useful for value
comparisons but does not drive share price
performance in the short to intermediate term
11
Factors Influencing Airline Earnings
•
•
•
•
•
•
•
•
•
Oil prices (38-40% of costs)
Capacity/Competition
Economic activity
Labor actions
Government actions
Safety
Terrorist acts
Financial institutions/GECAS
Bankruptcy laws
12
LCC’s
Price
(11/9/06)
CY2005A
EPS
CY2006E
EPS
CY2007E
EPS
CY2006E
P/E
CY2007E
P/E
EV/EBITDAR
2007
Airtran
10.12
$0.03
$0.34
$0.52
29.8
19.5
8.3
Frontier
7.98
($0.24)
($0.10)
($0.20)
NM
NM
6.9
Gol
30.30
$1.10
$1.67
$2.10
18.1
14.4
8.5
JetBlue
12.88
($0.06)
($0.01)
$0.45
NM
28.6
9.3
Ryanair
72.94
$2.28
$2.78
$3.25
26.2
22.2
12.0
Southwest
15.3
$0.53
$0.71
$0.77
21.5
19.9
7.2
Regional Airlines
ExpressJet
7.56
$1.65
$1.67
$1.37
4.5
5.5
5.0
Mesa
8.66
$1.34
$0.92
$1.25
9.4
6.9
6.1
Republic
17.98
$1.59
$1.82
$2.05
9.9
8.8
6.3
SkyWest
27.15
$1.90
$2.53
$2.69
10.7
10.1
6.0
13
RJ Carriers and Fleet Size
Regional Airline
%Change
(‘05-’08)
2005A
2006E
2007E
2008E
SkyWest
306
336
344
344
12%
Republic Airways
138
163
206
207
50%
ExpressJet
266
270
205
205
(23%)
Mesa
144
145
149
149
3%
Total
854
914
904
905
6%
14
LCC Flights Continue to Proliferate
Aircraft Fleets:
2005A
2008E
% Change
AirTran
105
157
50%
Frontier
49
63
29%
GOL
42
86
105%
JetBlue
96
182
95%
Southwest
445
547
23%
Ryanair
87
159
83%
Total
824
1,194
45%
15
Sources: SEC Filings and Company press releases
Relevant Criteria For Valuing
Growth Airlines
• P/E to earnings growth rate
• Earnings potential for one or two years out relative to
current P/E and group P/E
• Earnings momentum
• Predictability of earnings stream
• Profit margins
• Unit cost advantage or disadvantage
• Balance sheet strength with emphasis on cash position
• Liquidity in trading the shares
• Country risk
16
Financial Review
Richard Lark
Executive Vice President – Finance & CFO
154
Questions:
4 What are GOL’s financial characteristics?
4 How does GOL compare to international and
local peers?
4 What are GOL’s financial policies?
4 What are GOL’s financial strategies?
155
Financial Review
GOL’s Financial
Characteristics
GOL: Airline
Industry
Leader
GOL’s Financial
Policies &
Strategies
156
Financial Review
GOL’s Financial
Characteristics
GOL: Airline
Industry
Leader
GOL’s Financial
Policies &
Strategies
157
Financial Characteristics
4 Disciplined Growth and Cost Control
4 High and Consistent Margins
4 High Cash Flow Generation
4 Strong Balance Sheet and Capitalization
4 Strong Credit and High Liquidity
4 High Returns
158
Disciplined Growth and Cost Control
Year Ended December 31
US GAAP
(R$)
Quarter Ended September 30
2004
2005
% Growth
2005
2006
% Growth
PAX on Board (million)
9.2
13.0
41.3%
3.5
4.8
36.5%
RPKs (bn)
6.3
9.7
53.8%
2.6
4.1
56.3%
Load Factor
71.1%
73.5%
2.4 pp
73.7%
78.8%
5.1 pp
Breakeven Load Factor
50.2%
56.4%
7.5 pp
54.3%
61.8%
7.5 pp
Average Ticket (R$)
211
201
-4.7%
195
218
11.7%
Yield per Passenger km (R$ cents)
29.6
26.1
-12.0%
25.3
24.6
-2.9%
Passenger Revenues per ASK (R$ cents)
21.1
20.2
-4.3%
18.7
19.4
3.9%
Operating Expenses per ASK (CASK R$ cents)
15.6
15.5
-0.6%
14.4
16.3
13.2%
ASKs (bn)
8.9
13.2
48.9%
3.6
5.2
46.1%
Aircraft Utilization (block hours/day)
13.8
13.9
0.5%
13.9
14.3
2.9%
Average Stage Length
671
722
7.6%
731
821
12.3%
Average Operating Aircraft
23.0
34.2
48.7%
36.3
51.3
41.3%
159
Disciplined Growth and Cost Control
(MM)
(R$)
14
211
13.0
12
195
10
12.7
213
9.2
225
(%)
(R$ cents)
80
35
200
20
26
70
175
4.8
25
20
20
125
2
71
50
6360 64
47
100
0
2002 2003 2004 2005 9M06
Revenue Passengers
Average Fare
74
75
20
15
20
18
16
16
150
140
(1)
22
30
20
60
4
25
25
7.3
6
(R$ cents)
30
201
8
Cost Control and
High Margins
Increased Scale
Best Value Proposition
13 12
16
14
15
56
60
50
10
10
5
40
2002 2003 2004 2005 9M06
10
9
11
9
9
5
2002
Load Factor
Breakeven Load Factor (1)
Yield
2003
2004
2005
RASK
Operating Expense per ASK
Operating Expense (ex-fuel) per ASK
US GAAP
9M06
160
High and Consistent Margins
Year Ended December 31,
US GAAP (R$ 000)
Net Margin
Cash Earnings (1)
9M Ended Sept 30,
2002
2003
2004
2005
2005
5.2%
12.5%
19.6%
19.2%
18.5%
17.1%
43,242
189,303
416,010
548,749
366,252
521,646
2006
(1) Cash Earnings defined as Net Income plus depreciation and amortization
161
High Earnings Growth
2004
(R$ 000)
2005
(R$ 000)
9M05
(R$000)
9M06
(R$000)
Translation into
Thousands of
US$ 9M06
Net Operating Revenue
1,960,886
2,669,090
1,847,985
2,790,015
1,277,421
Operating Expenses
1,384,585
2,047,739
1,402,539
2,200,858
1,007,673
576,301
621,351
445,446
589,157
269,748
% Margin
29.4%
23.3%
24.1%
21.1%
21.1%
Other Income (expenses)
10,979
96,171
75,332
74,380
34,055
EBT
587,280
717,522
520,778
663,537
303,803
29.9%
26.9%
28.2%
23.8%
23.8%
384,710
513,230
342,651
476,481
218,159
19.6%
19.2%
18.5%
17.1%
17.1%
2.13
2.65
1.78
2.43
1.11
99.1%
24.4%
21.5%
36.5%
NA
0.73
1.14
0.71
1.11
1.11
109.8%
56.2%
44.0%
56.3%
NA
USGAAP (R$000)
Operating Income
% Margin
Net Income
% Margin
Earnings per Share (Diluted)
% Growth
Earnings per ADS (US$) (2)
% Growth
(1)
(2)
Assuming average exchange rate of R$2.184/US$ as of 9M06
Assuming average exchange rate each year (R$/US$): 2004-2.924, 2005-2.434, 9M05-2.497, 9M06-2.184
162
Strong Cash Flow Generation
Year Ended December 31,
US GAAP (R$ 000)
Cash flows from:
2003
Operating activities
% of Net Revenues
Investing activities (1)
Financing activities
Net Increase (Decrease)
in cash equivalents
Cash and cash equivalents
at beginning of the period
Cash and cash equivalents
at the end of the period
R$85,235
2004
9M Ended Sep 30,
2005
R$239,920 R$353,745
2005
2006
R$185,412 R$411,983
6.1%
12.2%
13.3%
(39,263)
(89,681)
(482,460)
(347,326)
(296,955)
90,867
552,562
148,659
146,449
622,131
136,839
702,801
19,944
(15,465)
737,159
9,452
146,291
849,091
849,091
869,035
146,291
849,091
869,035
833,626
1,606,194
10.0%
14.8%
(1) Excluding short-term cash investments of R$443,362 in 2004, R$319,327 in 2005, R$329,370 in the first nine months of 2005 and
R$573,109 in the first nine months of 2006 (xR$ 000)
163
Strong Balance Sheet
Assets
U.S. GAAP (R$000)
Sept 30, 2006
Current Assets
Cash, cash equivalents & short-term invest. R$ 1,606.2
694.3
Receivables, less allowance
412.4
Other current assets
2,712.9
Total Current Assets
Other Assets
Deposits - aircraft leasing contracts
Deposits - aircraft and engine maintenance
Other
Total Other Assets
41.9
283.8
45.3
371.1
Property and Equipment
Pre-delivery deposits
Flight equipment
Other property and equipment
Accumulated Depreciation
Total Property and Equipment, Net
Total Assets
453.1
316.8
118.7
(123.4)
765.2
3,849.2
Liabilities and
Shareholders Equity
Current Liabilities
Accounts payable
Short-term borrowings
Air traffic liability
Other current liabilities
Total Current Liabilities
Sept 30, 2006
R$ 119.6
117.7
311.4
279.4
828.1
Other Liabilities
Long-term debt
Deferred gains on sale-leaseback transactions
Other liabilities
750.6
53.8
58.4
Total Other Liabilities
862.8
Shareholders Equity
Preferred shares
Common shares
Additional paid-in capital
Retained earnings
Total Shareholders Equity
Total Liabilities and Shareholders Equity
164
846.1
41.5
35.3
1,235.3
2,158.2
3,849.2
Strong Credit and High Liquidity
US GAAP (R$ 000)
Ratios:
2004
2005
LTM-Sep06
EBIT/Interest
42.9x
32.1x
14.8x
1.9x
1.9x
2.5x
55.6%
48.8%
EBITDAR / (Net Interest + Leases)
3.8x
2.7x
3.0x
Current Ratio
2.5x
2.4x
3.3x
(Total Debt + Cap. Leases) / EBITDAR
(Total Debt + Cap. Leases) / Capitalization (1)
56.2%
(1) Book Capitalization
165
High Returns
US GAAP (R$ 000)
Ratios:
LTM-Sep06
2004
2005
113.1%
104.4%
93.8%
ROA (2)
22.2%
20.1%
16.8%
ROE (3)
33.5%
28.2%
30.0%
ROIC (4)
30.3%
27.4%
21.4%
ROIC (5)
47.4%
32.5%
25.3%
Return on Equity (Dupont Method) (6)
33.5%
28.2%
30.0%
Return on Capital Employed (7)
22.1%
19.1%
19.5%
1,739,598
2,693,444
3,323,752
Asset Turnover (1)
Capital Employed (8)
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
Net Revenues / Total Assets
Net Income / Total Assets
Net Income / Total Equity
Net Income / (Total Debt + Total Equity)
Operating Income / (Net working capital + net PPE + Goodwill + net other operating assets)
Profit Margin x Asset Utilization x Assets / Equity.
Net Income / (Total Debt + Total Equity + Capitalized Leases - Cash)
Total Debt + Total Equity + Capitalized Leases – Cash
166
Financial Review
GOL’s Financial
Characteristics
GOL: Airline
Industry
Leader
GOL’s Financial
Policies &
Strategies
167
GOL: Best-in-Class Air Transportation (1) (2)
GOL’s Combination of Low costs and High revenue generation
Stage-Length Adj. CASK
(US$ cents)
9
40
8,5
7,9
8
7,7
RASK – CASK
(US$ cents)
2.0
36.3
35
7,2
6,7
7
Rev / Aircraft
(US$MM)
1.9
1.6
30
1.2
25
6
5
20
4
15
3
10
(1)
(2)
24.0
22.9 22.8
21.1
19.2
0.8
0.7
0.6
0.3
0.4
0.1
0.0
LTM March 31, 2006 data for EasyJet and Virgin Blue; LTM June 30, 2006 for Ryanair; LTM September 30, 2006 for other
airlines. Average exchange rates for relevant time periods used in conversion.
US GAAP.
168
GOL: International Cost Leader
GOL’s Cost Structure rewards efficient aircraft utilization
Expenses as a Percentage
of Total Expenses (1)
Fuel
Avg.
40.6%
36.8%
25.1%
25.3%
33.4%
26.9%
36.6%
28.7%
31.7%
Rentals/Leasing
9.6%
3.4%
9.2%
2.1%
4.4%
NA
12.3%
5.0%
6.6%
D&A
2.0%
8.7%
4.7%
6.4%
6.4%
NA
1.6%
7.5%
5.3%
11.6%
12.1%
13.9%
8.5%
10.8%
NA
13.9%
12.5%
11.9%
4.1%
3.0%
6.4%
5.6%
3.9%
9.3%
7.8%
5.0%
5.6%
56.3%
51.9%
45.4%
39.4%
48.1%
36.2%
58.3%
46.2%
49.2%
Landing Fees
4.9%
11.7%
22.1%
6.2%
7.0%
19.8%
4.4%
14.8%
11.4%
Salaries & Wages
12.9%
13.1%
22.8%
37.4%
24.3%
11.9%
20.9%
NA
20.5%
Other
25.9%
23.4%
9.6%
17.0%
20.7%
32.2%
16.3%
39.0%
23.0%
Total
100.0% 100.0% 100.0% 100.0% 100.0%
Maintenance
Sub-total
Adj CASK
7.2
4.9
NA
6.7
7.7
100.0% 100.0% 100.0% 100.0%
7.9
8.9
8.5
(1) Source: Company filings; LTM data as of September 30, 2006, except Virgin Blue & easyJet: LTM March 31, 2006.
169
7.1
GOL: Low Fixed Cost Structure(1)(2)
Estimated Stage-Length Adjusted Costs / ASK (US$ cents)
8.5
7.9
8.00
Variable costs
7.7
7.2
5.2
3.5
Fixed costs
6.7
3.5
2.7
4.9
4.9
4.00
2.4
4.4
3.4
4.2
4.0
2.2
2.5
0.00
(1)
(2)
LTM March 31, 2006 data for EasyJet, LTM for September 30, 2006 for other airlines. Average exchange rates for relevant time periods
used in conversion
“Other costs” allocated 50% fixed / 50% variable
170
GOL Profit Drivers: Low Costs and Revenue Productivity
4
60%-70% of total GOL costs are aircraft related
•
GOL´s total cost per aircraft is among the world’s lowest
4
•
Keeping aircraft productive is key to generating high margins
GOL’s productivity is the world’s highest
Operating Cost Drivers (USGAAP 9M06)
%
US$ cents
Fuel
40.7
2.89
Variable
Aircraft Efficiency
Sales / Marketing
14.9
1.06
Variable
Ticket Sales
5.1
0.36
Variable
Airport Charges
Other
10.7
0.76
Salaries
12.9
0.91
Mostly Fixed
Crew costs
Maintenance
4.2
0.30
Mostly Fixed
Aircraft type / age
Rents
9.4
0.67
Fixed
Leased Aircraft
• High aircraft utilization
D&A
2.1
0.15
Fixed
Owned Aircraft
• All leased aircraft
100.0
7.10
Landing fees
Total
• Modern 737 aircraft
• 80% sales via internet
• High load factors
Variable / Fixed Outsourcing / PAX • High loads
•Non-union / profit sharing
• Single aircraft type / phased
maintenance
171
GOL: Brazilian Cost Leader
GOL has a Significant Cost Advantage over domestic competitors
Yields
Load
Factor
(¢) (2)(3)
R$25.1 / US$11.4
T
D
75.1%
75.4%
Operating
Revenue per ASK
(RASK) (3)
(¢)
Operating
Expenses per ASK
(CASK) (3)(4)(5)
(stage-length
adjusted) (¢)
R$20.0 / US$9.1
R$16.1 / US$7.3
(R$16.1 / US$7.3)
Breakeven
Load
Factor
Oper.
Margin
60.5%
19.5% 53.2%
64.8%
12.5% 28.9%
BRGAAP
2006
ASK
Growth
+22%
TAM
(1)
(2)
(3)
(4)
(5)
R$26.1 / US$11.9
T
74.1%
D
73.2%
R$21.1 / US$9.6
R$18.4 / US$8.4
(R$19.6 / US$8.9)
Figures are in Brazilian GAAP for the nine months thru September 30, 2006. TAM operating data from the company's reported data. GOL operating data from ANAC
Gross passenger revenues divided by RPK.
Amounts in US$ converted using average exchange rate 2.2008 for LTM Sep/06.
Average stage-length = RPKs / PAX flown.
Stage-length adjusted CASK = ((competitors average stage-length / GOL’s average stage-length)0.5) x competitors CASK.
172
Lowest Cost Provider in Local Market
GOL’s Cost Advantages (LTM September 2006)
4 GOL’s low fixed costs:
TAM
•
Integrated network (more flexible)
•
More flexible aircraft type
•
More efficient operations
•
Shorter–haul network
Cost
Per ASK (R$)
Cost
Per ASK (1) (R$)
%
Difference
Fuel
6.40
6.68
4.3%
Maintenance
0.65
1.20
84.2%
Aircraft Leasing and D&A
1.82
1.90
4.4%
Personnel
2.03
2.56
26.1%
Lower Personnel Costs
Sales & Marketing
2.40
2.80
16.5%
Higher Internet Distribution
Third Party Services
0.81
1.57
94.7%
More Efficient Operations
Other
1.65
2.35
42.5%
Total
15.76
19.05
20.9%
EBIT / Per ASK
4.24
3.26
-22.9%
EBITDAR / Per ASK
6.06
5.16
-14.7%
(U.S. GAAP)
(1)
More Efficient Fleet
Phased Maintenance
Larger Aircraft
Translates into
Stronger Results
and Higher Profitability
Stage-length adjusted. Figures are in USGAAP.
173
GOL: Significant Cost Advantage in South America
Total Operating Costs /
(1)
Total Net Operating Revenue (%)
(1)
Stage-Length Adjusted CASK (US$ cents)
+143%
20.0
100.0
17.5
18.0
94.1
16.0
+39%
14.0
12.0
+21%
10.0
8.7
8.0
90.0
85.4
81.7
10.0
78.8
80.0
7.2
6.0
70.0
4.0
2.0
60.0
0.0
TAM
(1)
TAM
LTM September 30, 2006 for GOL and TAM. LTM June 30, 2006 for LAN and Copa (excludes AeroRepublica). Chilean GAAP for LAN
and US GAAP for others airlines
174
GOL: Superior Revenue Production
4 High aircraft productivity
combined with high load factors
results in industry-leading
revenue per aircraft
4 Unrivaled productivity translates
into greater top-line growth as
GOL fleet continues to grow
Operating Revenue / Aircraft (1) (US$MM)
40.0
36.3
35.0
30.0
25.0
27.0
24.0
22.9 22.8
21.1
20.0
15.0
10.0
5.0
(1)
LTM March 31, 2006 data for EasyJet and Virgin Blue; LTM June 30, 2006 for Ryanair; LTM September 30, 2006 for other airlines.
Average exchange rates for relevant time periods used in conversion
175
19.2
GOL: Most profitable aircraft operator
Operating
Revenue
Operating
Cost
–
Aircraft
Aircraft
=
Operating
Profit
Aircraft
Operating Profit / Aircraft (1) (US$MM)
10.0
8.0
7.7
7.3
GOL has the highest aircraft utilization and highest
revenue generation of any LCC in the world
6.0
4.0
2.0
2.9
2.3
2.0
0.8
0.3
0.0
(1)
LTM March 31, 2006 data for EasyJet and Virgin Blue; LTM June 30, 2006 for Ryanair; LTM September 30, 2006 for other airlines.
Average exchange rates for relevant time periods used in conversion
176
GOL Profit Drivers: Low Costs and Revenue Productivity
4 GOL has the best combination of cost structure and revenue generation
USGAAP
Per ASK
LTM Sep 06
(US cents)
Revenues
Costs
Per Aircraft
(US$ MM)
Passenger
8.6
94.5
34.3
Cargo & Other
0.5
5.5
2.0
9.1
100.0%
36.3
Aircraft Fixed Costs (1)
2.1
22.5
8.2
Aircraft Variable Costs (2)
3.6
39.9
14.5
5.7
62.4%
22.7
Ticket Distribution Costs
1.1
12.0
4.4
Other Costs
0.4
4.4
1.6
Total
7.2
78.8%
28.6
1.9
21.2%
7.7
Operating
Profits
(1)
(2)
% Net Revenues
Leasing, maintenance, salaries, depreciation
Jet Fuel + landing fees
177
We Are Not Done Yet!
4 Operating profit per aircraft should improve with new, larger aircraft
GOL Fleet
2006E
GOL Fleet
2007E
Var %
# Aircraft (End of Period)
65
80
23%
Average Seats / Aircraft (Year Average)
153
159
4%
402
372
-8%
113
136
20%
Average Cost / Seat (R$000)
(1)
Average Operating Profit / Seat (R$000)
(1)
(1) Considering average seats for the period
178
GOL: One of World’s Most Profitable Carriers (1)
Company
Operating
Income (2)
(US$MM)
Net Income (2)
(US$MM)
347.6
294.0
21.2
17.9
593.3
494.6
23.9
19.9
57.8
34.3
25.0
14.8
924.0
113.4
528.0
73.4
10.5
8.6
6.0
5.6
177.6
79.0
12.1
5.4
(9.0)
(59.5)
(0.4)
(2.7)
(143.4)
(186.9)
(5.6)
(7.3)
Operating
Margin (%)
Net Income
Margin (%)
Low-cost carriers:
LCC Avg (ex-Gol)
(1)
(2)
244.8
137.6
9.0
5.0
Source: Company filings; LTM data as of March 31, 2006 for Virgin Blue & EasyJet; LTM June 30, 2006 for AirAsia; LTM September 30, 2006 for
other airlines.
Assumes average period exchange rates
179
Benchmarking GOL: Growth Rate
4 Higher growth rate…
2005-2006 Est.
2006-2007 Est.
Revenue Growth Revenue Growth
2005-2006 Est.
EPS Growth
2006-2007 Est.
EPS Growth
2007 P/E
Multiple
26.7%
21.8%
23.7%
16.0%
20.2x
19.9%
11.7%
39.6%
28.4%
16.4x
38.1%
23.7%
nm
nm
36.5x
24.3%
11.0%
nm
28.8%
14.0x
49.7%
35.6%
57.0%
30.2%
13.3x
Source: EPS estimates from Thomson First Call, 10/26/2006
180
Industry Benchmarks – LTM 3Q06(1)
EBITDAR (US$ MM)
497(2)
819(2)
1,587
267
343(2)
EBITDAR Margin
30.3%
33.0%
18.0%
12.3%
23.4%
Net Income
294(2)
495(2)
528
-60
79(2)
17.9%
19.9%
6.0%
--2.8%
5.4%
Projected EPS Growth(3) 29%
9%
20%
-27%
-8%
P/E 2006(4) (x)
17.5
23.6
20.3
NA
16.1
P/E 2007(4) (x)
13.3
20.2
16.4
36.5
14.0
0.6
1.4
1.4
16.1
0.8
(US$ MM)
Net Income Margin
PEG Ratio(5) (x)
(1) LTM September 30, 2006
(2) Translated to US Dollars at average exchange rate R$2.2008 / US$1.00 €0.8121 / US$1.00 e CAD$1.1936 / US$1.00
(3) Projected EPS Growth (CAGR) (Source: I/B/E/S)
(4) P/E = Share prices as of October 30, 2006 divided by EPS (Source: I/B/E/S)
(5) P/E 2007 divided by 5-year EPS projected growth (CAGR) (Source: I/B/E/S)
181
Benchmarking GOL: Financial Strength
4 Strong balance sheet quality relative to peers...
Debt / Cap Ratio
(including operating leases) (1)
Cash / Monthly
Revs
48.2%
5.0x
30.2%
2.9x
77.5%
2.2x
72.4%
2.3x
56.3%
4.5x
(1) Operating leases capitalized at 7.5x 2006 minimum required operating leases payments
182
GOL: One of the World’s Best Credits
A3.br / Ba2 (GSLC) / Ba2 (FC) (Moody’s)
AA- (bra) / BB+ (IDRLC) / BB+ (IDRFC) (Fitch)
Main Financial Indicators (1) (2)
Brazil Sovereign: BB+/Ba2
A
BBB
BB
B
<B
EBIT / Interest
14.8x
10.8x
2.5x
2.1x
0.9x
NM
EBITDA / Interest
15.9x
16.8x
5.0x
5.0x
2.5x
0.5x
EBIT / Revenues
21.2%
10.5%
5.0%
4.8%
2.0%
NM
Adj. Total Debt (3) /
Adj. Book Capitalization (3)
56.2%
31.0%
59.8%
65.3%
70.8%
NM
2.5x
1.9x
2.6x
4.6x
8.3x
11.1x
Adj. Total Debt (3) / EBITDAR
GOL Best in Class
(1)
(2)
(3)
The financial indicators of the ratings range are the average of the indicators of the companies rated in the respective range
LTM December 31, 2005 for Lufthansa and LTM September 30, 2006 for GOL and Southwest; LTM June 30, 2006 for other airlines
Includes rental expense capitalized at 7x
183
Benchmarking GOL: Industry Fundamental’s
4 Better market fundamentals...
Estimated Home Market
Growth Rate
Average Annual Domestic
Flight Legs per Capita (1)
Legacy Carriers’
Competitiveness
<5.0%
2.5x
Moderate
<5.0%
2.2x
Strong
<5.0%
2.2x
Strong
<5.0%
2.2x
Strong
12-16%
0.2x
Mixed
(1) Relevant home market used for Ryanair is Europe; for Southwest, JetBlue and AirTran the U.S. is used;
for WestJet Canada plus the U.S. is used; for GOL Brazil is used.
184
Benchmarking GOL: High Returns
LTM Sep 30, 2006
Asset Turnover (1)
93.8%
36.7%
62.4%
60.7%
50.5%
ROA (2)
16.8%
7.0%
3.7%
3.3%
-1.4%
ROE (3)
30.0%
16.0%
8.0%
11.4%
-6.5%
ROIC (4)
21.4%
9.0%
6.2%
4.0%
-1.7%
1.78
2.29
2.13
3.49
4.69
Capital Structure (5)
(1)
(2)
(3)
(4)
(5)
Net Revenues / Total Assets
Net Income / Total Assets
Net Income / Total Equity
Net Income / (Total Debt + Total Equity)
Total Assets / Total Equity
185
GOL: Superior Return on Capital
Return on Invested Capital (1,2) (%)
25.0
EBITDAR per Aircraft (1,3) (US$MM)
High Return on
Invested Capital
21.4
20.0
12.0
10.0
8.0
15.0
10.0
Fast Payback on
Aircraft Investments
11.0
8.0
9.6
6.0
7.7
5.8
5.4
6.2
5.0
4.0
4.0
2.6
2.0
-1.7
(1)
(2)
(3)
3.5
2.6
0.0
(5.0)
3.7
0.0
LTM March 31, 2006 data for EasyJet and Virgin Blue; LTM September 30, 2006 for other airlines. Average exchange rates for relevant
time periods used in conversion. ROIC = After-tax EBIT/Total Book Capital
Tax rate from KPMG corporate tax survey
Average aircraft over time period
186
Financial Review
GOL’s Financial
Characteristics
GOL: Airline
Industry
Leader
GOL’s Financial
Policies &
Strategies
187
GOL’s Financial Policies
4 Cash Management > Maximize Returns vs. Benchmarks
4 Corporate Finance > Minimize WACC; Adequate Liquidity
4 Risk Management > Minimize Volatility
4 Corporate Disclosure > Maximize Timeliness and Understanding
188
Cash Management Policy
4 Dynamic Program
•
•
•
Policy establishes benchmarks and compliance limits
Cash management committee at operating level
Policy committee at governance level
4 Books
•
•
•
•
USD passive
USD / G7 active
BRL passive
BRL active
Results:
102 - 103% of CDI
4 Operating Procedures
•
•
•
Daily monitoring of returns and compliance
Weekly operating committee
Quarterly policy effectiveness review
189
Corporate Finance Policy
4 Dynamic Program
•
•
•
Policy establishes optimum capital structure, liquidity and credit ratios
Finance committee at operating level
Policy committee at Board level
4 Indicators
•
•
•
•
Ratings
Leverage
Cost of capital (debt and equity)
Capital structure
Results:
11-12% WACC
•
•
•
•
Monthly monitoring of projections and compliance
Quarterly review of capital requirements
190
Risk Management Policies
4 Dynamic Program
•
•
•
•
Policies establish exposure limits and hedge ratios
Risk management committee at operating level
Policies committee at Board level
SFAS-133 accounting
4 Books
•
•
•
•
Operating expenses (USD + Jet Fuel)
Interest Rates
Medium-term obligations
Balance Sheet
Results:
High-level of effectiveness
•
•
•
•
Daily monitoring of expenses and compliance
Positions adjusted weekly or ad hoc
191
Corporate Disclosure Policy
Required Financial
Reports
Supplemental
Disclosures
Interaction with
Investor/Intermediaries
Financial statements in
BRGAAP and USGAAP
(quarterly)
• Disclosure Committee
(302)
4
Key drivers of the business
and non-financial metrics
4
Quarterly conference calls
and webcasts
4
FS in USGAAP Quarterly
and pro forma reporting
4
Non-deal roadshows and
conference participation
4
Quarterly MD&A
4
IR website with full
information about GOL
4
Analyst and investor
meetings
4
Required disclosures by SEC
and CVM (filings)
4
Guidance: management’s
financial outlook
4
Pro-activity in conveying
investment proposition
4
Corporate governance
comparison as per NYSE
regulation (website)
4
Exemplary disclosure
4
4
All information available in
English and Portuguese
Enhance
timeliness
and
transparency
Deepen and solidify
understanding of
business model &
vision
Credibility and Reliability
192
GOL’s Financial Strategies
4 Disciplined Cost Management and Controls > Low-Cost Culture
4 Flexible Working Capital Management > Growth Liquidity
4 Optimal Capital Structure for Investment Plan > Low WACC
4 Proactive Risk Management > Reduce Volatility
4 Appropriate Dividend Policy > Provide Current Yield
193
Disciplined Cost Management and Controls
4 “Cost control is not the job of the
financial team…it’s everyone’s job.”
– Constantino de Oliveira Jr., GOL CEO
194
Disciplined Cost Management and Controls
4 Internal Controls (SOX 404 Certification)
•
One of first FPIs to achieve compliance (2005)
4 Zero-based Budgeting
•
~500 Basic Managerial Units (profit centers)
−
−
−
Commitment of functional areas
Decentralized accountability
“Buddy System”
•
Goals for sales, costs and expenses
•
Monthly tracking of results
Process
Focus
Frequency
Annual Budget
Strategic
Annual (Board approved)
Tactical
Quarterly (re-projections)
Rolling Plan
Tracking
Operational
Monthly (variation analysis)
195
Financing GOL’s Investment Plan
4 Revenue growth primarily based on aggressive fleet expansion
plan (101 aircraft by 2012E)
Investment Plan (R$MM)
2005A
2006E
2007E
2008-2012E
Aircraft (Boeing Order)
-
297
1,120
6,314
Aircraft Pre-Delivery Deposits (net)
313
162
148
580
Spare Parts
68
61
69
126
Property & Equipment
56
139
87
198
Information Technology
11
11
15
55
Sub-total (ex-aircraft)
135
211
171
379
448
670
1,439
7,273
TOTAL
196
Low-Cost Financing Plan
4 US$267MM primary equity raised in June 2004 IPO and April
2005 follow-on
4 US$200MM perpetual notes (8.75%)
4 AAA aircraft finance with EXIM support (Libor cost of funds)
4 Attractive sale lease-back financing
4 Operating leases
4 Syndicated Loan Facilities
4 Cash flow from operations of US$194MM in 2006 (9m)
4 US$238MM of pre-delivery deposits
197
Proactive Risk Management
4 GOL – Continue to reduce fuel costs
•
Winglets will lower fuel burn by 3-4%
•
New aircraft reduce fuel / ASK by 25%
4 Hedges of jet kerosene (since 2003)
•
Recently more opportunistic
4 USD hedging reduces fuel impact
198
Dividend Policy
Dividend Policy: 25% of Net Income
0.51
0.46
R$ 4,199
+59%
increase
R$ 40,671
0.32
0.19
R$
96,619
2004
0.14
0.29
R$
128,308
R$ 32,592
R$ 8,079
2005
R$
30,082
R$
32,272
R$
29,698
1Q06
2Q06
3Q06
R$
92,052
2006 Acc.
Dividends
(1)
Interest on Shareholder's Capital
Dividend/Share (R$)
(1) Net of taxes
199
Looking Forward
4Q06
9
9
9
9
9
Fleet Increase to 65 aircraft
50% increase in ASKs
73 - 74% load factor
R$ 25 - 27 cent yield
R$ 9.4 - 9.7 cent non-fuel CASK
Guidance
2006 FY Old
2006 FY New
+/- 45%
+/- 75%
+/- 45%
+/- 74%
Net Revenues
+/-R$ 4.1 billion
+/-R$ 4.0 billion
CASK ex-fuel
Operating Margin
R$ 9 - 10 cents
26% - 28%
+/- R$ 9.3 cents
+/- 23%
R$ 3.90 - R$ 4.30
R$ 3.75 - R$ 4.00
ASK Growth
Load Factor
Earnings per Share
200
Looking Forward
Excellent Growth Prospects
Guidance
ASK Growth
Load Factor
Net Revenues
CASK ex-fuel
Operating Margin
Earnings per Share
2007 Full-year
+/- 45%
+/- 75%
+/-R$ 5.6 billion
+/- R$ 9.0 cents
+/- 23%
R$ 5.20 - R$ 5.65
201
Financial Review
2007 Plan
202
2007 Plan
Macro
GDP Growth
USD Inflation
BRL Inflation
Exchange Rate
WTI
3.25 - 3.75%
2.75 - 3.25%
4.25 - 4.75%
2.15 - 2.21
US$ 61 - 63
Industry
vs. 2006 Full Year
ASK Supply - Domestic
ASK Supply - Intl (Brazil)
RPK Demand - Domestic
RPK Demand - Intl (Brazil)
Load Factor - Domestic
Load Factor - Intl (Brazilians)
Yield - Domestic
+ 18 - 22%
+ 7 - 9%
+ 12 - 16%
+ 7 - 9%
-3 - 4 pts
Flat
Flat
203
2007 Plan
GOL Fleet
Seats
Avg Operating
EoY Operating
Vs. 2006
737-800
187
26
34
+ 13
737-700
144
31
32
+2
737-300
141
14
14
+0
23% Increase in Fleet
(EoP)
+ 4% increase in seats / aircraft (year average) +
2% increase in aircraft utilization + 9% increase in stage length
= 45% ASK increase (80% domestic / 20% intl)
204
2007 Plan
GOL
vs. 2006 Full Year
ASK Supply - Domestic
ASK Supply - Intl
RPK Demand - Domestic
RPK Demand - Intl
+ 33 - 36%
+ 125 - 135%
+ 35 - 38%
+ 130 - 140%
Load Factor - Domestic
+ 0 - 1 pt
Load Factor - Intl
+ 2 - 3 pts
Break-Even Load Factor - Domestic
Break-Even Load Factor - Intl
flat
- 1 - 2 pts
Yield - Domestic
- 5 - 7%
Yield - Intl
+ 1 - 2%
RASK - Domestic
- 3 - 5%
RASK - Intl
+ 2 - 3%
205
2007 Plan
Cost per ASK
vs. 2006 Full Year
Salaries, wages and benefits
Jet fuel
Aircraft rent
Sales and marketing
Landing fees
Aircraft and traffic servicing
Maintenance, materials and repairs
Depreciation
Other operating expenses
CASK USGAAP
CASK ex-fuel USGAAP
- 2 - 3%
- 5 - 7%
- 1 - 2%
- 8 - 10%
- 4 - 6%
- 3 - 5%
+ 25 - 30%
+ 5 - 6%
- 15 - 20%
- 5 - 7%
- 3 - 5%
206
G-O-L: Results!
Global Airline
Reference
Outstanding
Financial
Characteristics
Leading-edge
Financial Policies
207
Questions:
4 What are GOL’s financial characteristics?
4 How does GOL compare to international and
local peers?
4 What are GOL’s financial policies?
4 What are GOL’s financial strategies?
208
Wrap-Up and Closing Remarks
Constantino de Oliveira Jr.
President & CEO
209
Questions for you!
4 What company is one of the fastest growing
passenger carriers in the world?
4 What LCC has the highest productivity indexes
worldwide?
4 Can you differentiate a LCC from a traditional carrier?
4 What LCC is the most profitable worldwide?
4 Which airline has some of the the best growth
prospects?
4 Do solid management and relentless pursuit of cost
savings matter in your LCC investment decision?
210