Gol Linhas Aereas Inteligentes SA (GOL) 2014 Q4 法說會逐字稿

Good morning everyone and thank you for waiting. Welcome to GOL Airlines fourth quarter of 2014 Results Conference Call. With us here today, we have Mr. Paulo Kakinoff, CEO; Mr. Edmar Lopes, Chief Financial and IR Officer; and Mr. Eduardo Masson, Financial and IR Director.

This event is being recorded and all participants will be in a listen-only mode during the Company's presentation. (Operator Instructions) This event is also being broadcast live via webcast and may be accessed through GOL's website at www.voegol.com.br/ir, where the presentation is also available. Participants may view the slides in any order they wish. The replay will be available shortly after the event is concluded. Those following the presentation via the webcast may post their questions on our website. They will be answered by the IR team after the conference is finished.

Before proceeding, let me mention that forward-looking statements are based on the beliefs and assumptions of GOL management and on information currently available to the Company. They involve risks and uncertainties, because they relate to future events and therefore depend on circumstances that may or may not occur. Investors and analysts should understand that conditions related to macroeconomic conditions, industry and other factors could also cause results to differ materially from those expressed in such forward-looking statements.

Now I will turn the conference over to Mr. Paulo Kakinoff. Mr. Paulo, you may begin your presentation.

Thank you very much. Good morning, hello, everyone, and thank you for joining us for our earnings conference call for the fourth quarter and full year of 2014. In 2014, we continued to expand our margins against the background of a challenging and highly volatile economic scenario. For GOL, it was a year of major deliveries, in line with our strategic plan.

Let's begin our presentation with slide number two. The chart on the left shows that the real depreciated by 13% compared to 2013 and a further 22% for full year 2014 compared to yesterday's close. This (inaudible), together with the high volatility seen in recent months has resulted in a new foreign exchange scenario.

The second half of 2014 was difficult due to the political uncertainty and low economic growth, resulting in substantial decline in the number of corporate passengers and reduced demand in general. As for jet fuel, the international per barrel oil price fell by 45% in the year, most abruptly in the fourth quarter. However, due to the average 45 day delay for international jet fuel prices to prices practiced in Brazil, the lower per barrel oil had no impact on our 2014 operating expenses. The last item shows that industry supply remains virtually flat for the year, while GOL reduced its domestic capacity by 1.7%. You will see more details on this in the coming slide.

On the right, we have the highlight for GOL, which recorded a series of important achievements in 2014. We maintained and expanded our leaderships in terms of numbers of passengers transported in the domestic market in 2014, serving 3.5 million more customers than a second place airline. For the second consecutive year, we also carried the most corporate customers, with a 30% share of the business passenger market, according to the Brazilian Association of Corporate Travel Agencies, the Abracorp.

We delivered and improved our products and services, providing our passengers with an even better flying experience with great focus on service. For example, we expanded GOL+ Conforto, our economy class product suite to our entire domestic route network and (inaudible) this year, we expanded our Conforto class products with several enhanced attributes, including, the blocked middle seat to all international destinations.

We also increased our connectivity and number of destinations. Throughout the year, we launched new international flights to Chile, Miami and Punta Cana as part of our strategy of strengthening our share of revenues in other currencies. In the domestic market, we have added new flights to Carajas and Altamira in Para. We also began flying to Caldas Novas, an important tourist destination and Viracopos in Sao Paulo. The new bases are also the result of our first identify and seize opportunities. Currently, we fly to 71 destinations, being 15 international and serving 11 countries and 56 domestic with 22 being regional destinations. In 2015, we have already announced that one more international destination, Tobago, and two regional ones; Juiz de Fora and Ribeirao Preto.

Moving on to slide number three, we recorded annual net revenue of BRL10 billion, a new level for the Company with growth of 32% since 2011 and 12.4% since 2013. This year, revenues in foreign currency and ancillary revenues accounted for 12% and 10% of the total respectively. In our strategic plan, we call 2014 the gaining altitude year, characterized by an increase in operating margin and a consequent neutral operating cash flow.

Operating income totaled BRL505 million, 90% up in comparison to 2013 and the highest figure recorded by a Brazilian airline in the last three years. The EBIT margin was widened by 16.2 percentage points since 2012 and 2 percentage points since 2013. This year EBIT was 5%.

On the operational front, slide four, shows one of GOL's main assets, its flexible management of domestic supply. The graph shows the last 14 months and you can see that between its lowest level in June 2014 and its peak in January 2015, our supply has varied by more than 31%. This flexibility allows us to rapidly take advantage of an adjusted market opportunities in accordance with seasonality. Increasing our supply in certain high season months is part of our plan. Overall, we recorded a capacity decrease of 1.7% in the year as a whole.

Moving to slide number five, you can see that the industry RPKs grew by 5.8%. GOL captured 49% of this increase, recording an 8% increase in domestic demand compared to 2013. Industry's load factor increased by 3.7 percentage points over 2013, while GOL's increased by 7 percentage points, achieving 77.8%. The industry supply remained virtually stable, up by 0.9%, while we recorded an [1.7%] decline.

Consequently, as we show on the slide 6, GOL increased its leadership in terms of number of passengers transported in the domestic market. According to ANAC, we carried more than 35.5 million passengers in 2014, almost 10% more than the year before and 3.5 million more than our main competitor. This advantage is roughly equivalent to our passenger volume in a single month. In addition to leading in passengers transported, in 2014, GOL ranked second in terms of RPKs with a share of 36% as detailed on the next slide, the number seven, you can see that GOL expanded its market share by 1 percentage point in 2014.

Moving onto slide number 8, here you can see the continuous growth of our revenue indicators, despite the highly challenging second half of 2014 and a decline in the number of corporate passengers. PRASK moved up by 11.7% over 2013 and by more than 32% since the beginning of our Flight Plan in 2012. In 2014, load factor grew 7 percentage points, balancing the challenge of maintaining yield, which increased by 1.4% over the previous year.

On slide number 9, you can see the efforts of our employees, our Team of Eagles, to increase GOL's efficiency and productivity indicators. Net revenue per employee has increased by 62% since 2011. The same trend can be seen in seat demand per employee, which moved up by 36% in the same period. Operating indicators have also recorded continuous progress with revenue generation per flight increasing by 37%, and fuel consumption there, RPK, falling by almost 14% over the last four years.

The next slide, number 10, shows the results of our international expansion strategy. We continually keep strengthening our foreign currency -- [international] revenue in line with our strategic plan. In 2014, we implemented a two-way codeshare partnership with [Aerolineas] Argentinas and increased our international frequencies with new flights to Chile, Miami and Punta Cana. As a result, revenue in other currencies totaled around BRL1.2 billion, 46% up in the annual comparison and representing 12% of total net revenue, an increase of more than 5 percentage points in two years. International load factors increased by almost 8 percentage points over 2013 to more than 70%.

In 2015, we will continue seeking partnerships that result in more benefits for our customers, exemplified by three new codeshares agreement with Copa, Korean Airlines and Air Canada.

On slide 11, we show that GOL has been working constantly on improving customer service and the flight experience through the introduction of innovative features and extra facilities. From ticket purchase to conclusion of the flight, including customer satisfaction ratings, GOL closely monitors changes in passengers need in order to improve its products and services. As we went into each bullet of this slide in detail last quarter, on slide 11, I would just like to cover the launch of another unprecedented aviation functionality, [geolocation/condition]. Slide 12 gives more details of the new functionality. Using the mobile phone localization, passengers can receive information on how long it should take to arrive at the airport, as well as information on whether they should consider an earlier or later flight at their choice if necessary. The service is free of charge and is already available for smartphones equipped with iOS or Android. The results will also be automatically updated for customers who already have the GOL app. We believe that in addition to adding value to customers, travel experience, the functionality will help GOL to maintain high levels of flight punctuality, regularity, and allows us to sell more last minute tickets at higher prices.

On the next slide number 13, I would like to draw your attention to an important event in 2015. On January 21, we announced our proposal for a new corporate structure. On March 23, we have an Extraordinary Shareholders Meeting attended by shareholders making up 82% of our capital stock. The proposal was approved by 99% of those present.

On the left of the slide you can see the new corporate structure represents, by the way, a [35] times increase in the rights of preferred shareholders. Number two, common shares fleet in the same proportion. Number 3, an improvement in corporate governance. Number 4, a lock-up for the controlling shareholders and number 5, a public tender offer in the case of the acquisition of a share of 30% or more. This new format will ensure a graded and more flexible capitalization potential, as well as for the improving corporate governance, one of GOL's major pillars.

I will now hand you over to Edmar who will present our period's financial results.

Hi, Kaki, thank you very much. Good morning, everyone. I've drawn up page 15 and I will go over just the highlights of the quarter and the year. First is the level of revenue. We came flat year-over-year in terms of the quarter and this indeed reflects the new environment that we have seen here in Brazil in the last few months. There is a softening of the growth with the prospects of an even decreasing GDP over 2013. For the year, we reached, as Kaki mentioned before, BRL10 billion level, which is again very important for us, a 12% increase over 2013, even if the GDP of Brazil came flat.

In terms of our EBIT, we improved on a year-over-year comparison, 6.3% for the quarter against a previous 6%. And then we almost doubled the results from one year to the other, that is the increase in EBIT was 90%, which is very important, if you take into consideration all the tough environment that we had seen here in Brazil. EBITDAR came as a record level, for full year, [BRL1.8 billion], 18% margin, which is again another improvement over the previous year, 1 percentage point.

As for the results above the EBIT, we have been very clear over that. We've suffered some losses related to FX with non-cash effect, and also we have decided to [unwind] positions of hedges at the end of the year. So we took the hit in the fourth quarter. Therefore, we are, let's say, saving some [issues] for 2015.

As for the [physics], I mean ASKs came flat, which is related to the decrease in the domestic market, as well as a double-digit growth in the international markets, always related to the strategy that we have in place here. As for margin expansion, they came primarily because RASK or RASM increased more than CASK here in Brazil.

Moving on to page 16, we highlight the growth in terms of revenues and in terms of margins in the last quarter of the year. So taking two years into consideration, revenues went up by BRL600 million. And EBIT margin came at BRL529 million. So, the full purpose here is to show that we have been able to capture in terms of margins the growth in terms of revenues, which is very important for us. Margins changed in the last quarter compared to 2012 by almost 20%.

Slide 17 highlights the yield on a quarterly basis. And it shows that in the last quarter, we are -- on a year-over-year comparison, we are starting to see a decrease in terms of how they have behaved. They do reflect this new environment in Brazil, which shows us that it will be softer in terms of pricing for a while. We have somehow mitigated that by higher load factors, although we could not net off it in terms of PRASK down by 4% on a year-over-year comparison.

Slide 18 shows improvement that we had on the CASK ex-fuel side. Even with some increase related to Brazilian regulation or infrastructure issues that we had to deal with during the year, CASK ex-fuel for fourth quarter came below BRL0.12, which is an improvement over the previous [period].

Slide 19 shows that although we have to deal with inflation here in Brazil, with the fact that the Company keep capacity flat for the last couple of years altogether, we are still very, very competitive in terms of ex-fuel CASK adjusted [per stage there]. So, this is a slide that we like, because it shows all the efforts, and this is part of our DNA to keep it the way it is or even to improve that.

Moving on to the next slide, would like to highlight the evolution over the last two years. If you compare 2012, we came at BRL258 million as for EBITDAR. We closed 2014 with just over [BRL1.8 billion], I have just mentioned that figure. So, this improvement of more than BRL1.5 billion happened, even if the environment was very tough on us. So, FX moved against us by 30% and the GDP in Brazil show this is very, very bad numbers. We have indeed put the Company at different level. Therefore, we understand we are ready to face this new, let's say, even colder winter, as Kaki mentioned here in the conference.

So moving on to slide 21, we see that spread evolution was very, very significant over the last three years, moving on to BRL1.02, which is very important. Again, operating margins positive and consistent. In order to face this winter that may be long here in Brazil, we also would like to highlight some aspects of our finance position.

Slide 22 shows our cash position, 25%. This is the highest in the region. On average, our peers here they have less than 15% and we do understand this is one of the periods for us to face the environment that we're seeing here in Brazil. In terms of EBITDAR, and this is a very next slide, EBITDAR again at BRL1.8 billion and leverage almost flat if you compare on a year-over-year basis, and this is very much related against FX which hurt us in the balance sheet.

Target for cash during 2015 would be a range of 20% and 25%. This is very much in our plan and this is related to the fact that we do expect some volatility from now on in terms of FX and fuel.

As for amortization profile, and this is page 24, we have done a lot of liability management [exercises] in the last two years. So we have an amount of debt due in the next two years and I'm including 2016 now, which we understand is quite reasonable for the results and for the level of cash that we have.

As for the Smiles debt, this I'd like to highlight that, we had an outstanding total of BRL350 million at the end of 2014. At this time, its installments are paid on a monthly basis. We have just BRL200 million, which will be gone by mid-year. Therefore we have just to deal with this -- let's say, just over BRL400 million in the next 15 months.

With that I will turn the floor back to Kakinoff who will go over our guidance results and what is happening in the recent -- here in Brazil. Kakinoff, please.

Thank you, Ed. I'd like to talk a little about our 2014 guidance. Our EBIT margin reached 5% last year. Given our original guidance in March of between 3% and 6% and the subsequent revision to between 4% and 6%, our result was in the top half of the band. Although some macroeconomic indicators behaved differently than we expected a year ago, we were able to maintain control over domestic supply and at the same time, expand our international capacity.

The following slides we will be using track information already disclosed by GOL and our competitors to illustrate the 2015 scenario. On slide 26, the numbers for the last 12 months shows a continuity of our capacity management. We reduced our seat supply by 1.9%, the biggest reduction in the market. In terms of RPK, we accounted for 42% of the industry [upturn].

On the next slide, you can see that this strategy has been successful. We follow load factor, recording the biggest increase in the industry. Our load factor position quickly demonstrates the fact that GOL has prioritized achieving the maximum possible yield in different market scenarios. The pure improvement in our market share is based on the strategy of healthy growth.

Moving on to slide 28, here you can see that we are maintaining our firm commitment to not expanding domestic supply in 2015. Despite the challenge of estimating a foreign exchange event, we expect an average dollar of between [2.95 and 3.15] and average per liter fuel price of between [$2.10 and $2.30]. As a result, we estimate an annual EBIT margin of between 2% and 5%. Given this complex scenario, we will be adjusting our guidance on the occasion of each quarter's results disclosure.

The final message on slide 29 shows that we will be maintaining the course of our strategy adopted in the flight plan, which we have been executing with total discipline and commitment.

That brings our conference call to an end, at least our presentation, and now we can hand over to question and answer session.

(Operator Instructions) Richa Talwar, Deutsche Bank.

So, first, I just wanted to ask, can you remind us where you stand with respect to your debt covenants? Are you in compliance with all of your debt covenant right now?

Hi, Richa. This is Edmar here. Yes, we are in compliance with the covenants.

And then if you could tell us on the margin guidance you've provided for 2015, are they any ex-fuel cost savings assumed in your guidance? In other words, do you think there is an opportunity to further reduce cost going toward and that's particularly non-fuel cost?

Hi, Richa. Yes, we expect to improve overall number, but it will depend a lot on the FX. So, final number -- that's why we are -- let's say closing some of the disclosure we used to give beforehand, because of the uncertainty related to the FX, okay? But yes, gaining efficiency here is a major issue for us.

Any examples you care to share on what you're doing, maybe streamlining certain practices or anything like that?

No, just generally speaking, we have projects here over airport efficiency. We have procurement projects as well. So there is a lot of issues going on, but no specific majors. What we have been telling the market, there is no silver bullet, but there is a lot of small items, which we think we will show some improvement during the year. At the moment we have three different plans, three different initiatives. Edmar has already mentioned the procurement and airport. We have another one relating to the crew plans, I mean the crew allocation. There is still room for further improvement and we do strongly expect to have further efficiency gains throughout this year by implementing those three initiatives. At the airport side, you can see -- I have just related an example. This geolocation device app, in combination (inaudible) can release 5% of our airport crew, just because we do not need to handle with last minute customers, or the late customers come in order to rebook their flights, while we have another customer waiting to occupy that free seating. So, those type of investment in technology has helped us to release several workstations at the airport side. This year, we will further improve that indicator too.

And if I could just ask one more. Kakinoff, you started off by talking about how you've seen some substantial decrease in demand from corporate passengers, and then you talked about how the growth in yield -- the softening of the growth in yield continuing, the softness in yield. Can you elaborate on that? Have you seen any uptick in the corporate passenger demand, any change there?

Not really. Considering the first, we cannot provide any specific guidance for 2015 on top of the EBIT margin and the supply. Those we have already announced. But I can tell you that the market behavior related to the corporate demand has been stable at a much lower level than in comparison to last year's. This is basically driven by four segments in Brazil. Those were pretty strong in corporate demand, but they are weaker -- much weaker this year than last year. The segments are oil and gas, the building companies, the automotive sector and the mining sector. Those are among the top six largest corporate customers in Brazil and they are demanding between 20% -- [up to] 30% less airline tickets than we were last year. So we are considering this new level -- we have considered that and we elaborated our guidance for 2015. So we are assuming no -- any strong recovery in those sales.

Savanthi Syth, Raymond James.

Just a couple of follow-up questions on what Richa was asking. Just on the PRASK declines on a year-over-year basis, is it fair to assume that 1Q 2015, the year-over-year declines are greater than what we saw in 4Q 2014 or has it improved?

Savi, this is Edmar here. I will ask you to hold your anxiety for a few weeks or a few days, because we will disclose the number for the first quarter of the year when we release the traffic numbers as we have been doing in the past. The trends are, yes, that the number of -- for yields in PRASK are down on a year-over-year comparison, Yes, you are absolutely sure right about the trend, but full numbers will be released in a few days, okay.

And then the second question, Edmar, if you could -- on the cost line, the non-fuel costs, would it be possible to walk us through a little bit on what the trends are on some of the bigger items, like depreciation obviously was nicely down year-over-year on a per ASK basis in 4Q and are we going to see that in 2015 and maybe some of the other kind of headwinds and tailwinds in some of the line items in 2015 on a year-over-year basis?

Okay, Savi, I'll just go over major trends, so you get a good sense over that, okay. So, as for the lines related to FX, you will see [an almost full] impact on that. And those lines are maintenance and leases, okay. Very much the correlation with FX is very high here, almost 100%. This is one.

On the cost related to real, you see that we have been facing inflation in Brazil, you know, wages increased on a year-over-year comparison, was 7% this year. But if you're doing your model in USD, you see that they will decrease because of the FX. So yes, increasing real and a decrease in terms of USD.

As for depreciation, the full numbers should be -- full year should be [BRL450 million] something like this or even lower, but this is overall what we have. The major line is fuel, okay. The fuel at current levels should be lower than last year, but there is a lot of uncertainty here, you know that, because the prices -- the level of oil has changed very, very fast. This year, we had a 20% down -- 20% up in just 60 days. But just assuming for a second that everything will remain the way it is now, by the end of the year and I will repeat that, by the end of the year, the level of jet fuel in Brazil in real should be higher than the levels that we had last year, okay. But this is a hard call here, you probably would agree with me at this time.

And before I just jump on the queue, just to follow up on your comment on fuel and the volatility, has that changed your hedging strategy?

No. We are light now. And as last year with the exception of the fourth quarter for different reasons, we have been trying to [build positions] at fixed price in real with Petrobras, but it depends very much on Petrobras willingness to do that, as well as the price to do that, okay, but for the time being primarily most of our positions are built in real now as for fuel.

Duane Pfennigwerth, Evercore ISI.

Hi, this is Jeff Reisenberg in for Duane. With your plan to hold domestic supply flat and TAM holding Brazil domestic flat in 2015, how do you think about the competitive landscape, is it fairly benign relative to the end of 2014? Are you seeing incremental pressure elsewhere in the network?

Actually we -- as I mentioned before, we cannot comment on our competitor strategy, but I could say that we do see a more rational approach in the future sales eventually coming from the market as a whole. So we do expect that our competitors will follow this rational approach already started by GOL, followed by TAM. And we believe that [way] should be followed by Avianca and Azul along the following months. At least we can see that their future sales curves, their inventory is available for sales lower -- by the lower level than they were by the beginning of this year. So that's our expectation on the supply side.

And on your hedge book, how much did you unwind and do you have anything remaining in the book for 2015, are there for fuel or FX? And if so how much and at what strike prices?

So as for the end of the year, we unwind vast majority of our positions, we still have some fixed price positions for the short term. As for the way we are now -- we are close to the lower levels of our policy, which is between 20% and 25% coverage for the next 90 days -- 180 days. This is very much what we disclosed during the quarter, because again, this is a comparative data for us. Okay?

Carlos Louro, JPMorgan.

I just have one quick question here. I wanted a little bit more detail regarding the Company's leverage levels. I see that GOL has a declining covenant curve for 2015 with levels of around 4.4 times net debt to EBITDAR for the first half of this year. I would like to know if it's going to be necessary to renegotiate such -- that covenants with bondholders and if you have any estimate of the potential cost increases for this?

Hi, Carlos this is Edmar here. The covenant is built upon what we have in the balance sheet. So it doesn't take into account the leases off balance. So it's a little bit different than the aviation industry is used to. And at this moment, we don't foresee, let's say, a need to do that, but it depends on the FX as you know. So if there is any sharp move on the FX, probably we'll have to negotiate. But as before, the bondholders, and this is Bradesco and Banco do Brasil, they have been very supportive. In a nutshell, this is not of our scenario now. But if we need to move, we don't see any reason why we shouldn't get the waiver as we got in the past.

Stephen Trent, Citi.

This is [Kevin Gazzaniga] filling in for Stephen Trent. Now I guess the only thing that we noticed, we actually expected like a capacity decline year-over-year, and you guys are keeping it flat and I guess we feel that that's keeping your EBIT margin guidance lower than it could be or should be on view. I think, I guess, when you say that you're going to update us quarterly, do you think we should expect another capacity cut maybe coming into next quarter or the -- of current quarters?

It's too early to say that. As you can notice, GOL has adapted itself quite fast in order to supply the market with the higher -- I'm sorry with the right size according to our intention to always maximize yields. So Edmar will say our root is zero growth, it could be lower, it's pretty much depends on the following weeks macroeconomic scenario evolution.

And just to complement that standard-wise we have -- we may change the guidance during the year. This is part of the business. We have done in the past, in the last two years, but it was always -- at this moment the main message here is that we have closed some of our previous disclosure, because of the uncertainty that we're facing here in Brazil. So, rather than just showing the market any information, we decided to be very selective and again show the commitment that we have to deliver the guidance. So we haven't changed the guidance downwards as the competition has in the past did in the region, because we think that this is what we have doable for the moment.

I guess just a follow-up. The flat capacity guidance you're providing for 2015, is that because -- are you losing flexibility, can you not reduce it or you want to keep it flat? I guess I was just wondering what's driving that.

We can easily reduce that. Last year, as you can see, we have provided same guidance to the market, zero percent growth, but actually we ended year with minus 1.7%. So, this is basically our clear signage to the market that we want to increase capacity, but it could be lower. Basically the same behavior that we had last year, it's the roof, not the lowest level.

And then finally, how are you guys viewing FX going forward, do you see it continuing to deteriorate or leveling out, what are your expectations?

Really, this is probably the hardest question to be answered. I would love to know the answer, but in our current worst case scenario, in terms of guidance already released, I mean 2% EBIT margin is considered a [BRL3.15] exchange rate, real to dollar. And the year to date average is [2.83], so to achieve that we would face a real-dollar level at [3.15] by the end of the year. So I believe that our current guidance is quite comprehensive in order to accommodate the current worse and best case scenarios.

Rob Norwood, Goldman Sachs.

First off, aircraft [lease] was up 4% in the fourth quarter versus a full-year run rate [of about] 21%. Can you just elaborate on that, as you renegotiate some lease terms during the year, any color you can provide there would be helpful?

Rob, aircrafts lease is US dollar denominated. So every time that real depreciates you see an increase in this line. So this would be my first take on your question.

And then the direct sales channel's losses ramped in 2014. Can you provide some background there? And then I think you also in your release mentioned that you expect it to decline in 2015, what's driving that?

Yes, we do expect a decline and we are already seeing that in the first quarter of the year. We should go to levels beyond or below (inaudible) one-third of what we had last year. So all the efforts, all the investments that we made last year are showing results. Sorry to say, but the results for the first quarter are encouraging.

Pablo Zaldivar, GBM.

I do have a couple of questions. The first one, could you give me a little bit more detail on your yields and that would be why did they fall? And can you tell me the performance in the domestic and international front in terms of yields?

Probably we cannot comment any further on the current yields because we do not have released the first quarter of 2015 information, it is going to happen in four weeks period of time. So what we are just giving to you guys is a sort of color on how the market has behaved. There is clearly a mute decline, but we cannot deliver at the moment any precise information on that.

But for the fourth quarter of 2014, could you just give me a little bit more detail on how the yields are performing on the domestic and international -- performed, I'm sorry, on the domestic and International front?

Probably we can't.

The other question I have, do you have the detail of how the cash would have behaved on a constant currency basis the last quarter?

Our IR team can send you later, but here in Brazil we normally do not use this kind of mechanism, because of the volatility of the real. So last year the currency depreciated 13% and we had inflation in Brazil. So on a US dollar denominated basis, there wasn't much of a change as you see in the chart that we showed. But, for instance, this year, although in nominal terms because of the -- again, the inflation in real, the number probably will be up. If you look in USD terms, because of the devaluation of the real being much, much further than the inflation here, probably we'll show one of the -- if not the lowest ex-fuel CASK for the whole of the Western world, because just to make the math, we had [$0.046] with a [2.65] FX rate. Just moving the FX by 25%, 30% you see the amount that we have, we would be below [4]. So that's why we do not take the FX out of the ex-fuel considerations here, okay.

Another question if you guys allow me. Are you willing to share some of the benefit you will receive from the oil slump with your customers by reducing your prices of your products or something or you plan to keep all the benefits?

I'd say rather we are trying to push our yields up. The windfall coming out the fuel price reduction has been more than absorbed by the exchange rate devaluation -- the real devaluation, so there is no room for any price advantage to be forward to the [clients], not at all.

And my last question, on your hedge impact you had the last quarter it was like a one-time, right, because you decided to take the hit during that quarter. So we shouldn't be seeing a similar effect for the first quarter of 2015?

Pablo, yes, you are absolutely right. Just look at the financial statements of all the airlines, you will see that everyone took a hit in the fourth quarter or in the second half of last year, because of the change in the oil prices. So, that's a one-time, yes.

That comparison need to consider different accounting measures. So some of the airlines have already accounted the hedging impact, and some others they are just building it into their OCI account. That's basically the difference between the amount.

John Reardon, Merchant Partners.

And I'd like to say Paulo, you and your team, given all that you had have kind of done an excellent job of running the airline. And given that bad times are just that there are bad times sooner or later, because -- and then we have less bad times. Is there anything that would prevent you from perhaps considering selling off some of your Smiles position and then using the proceeds from that liquidation to buy in your stock price -- you common stock, which looks kind of dirt cheap right now, all things considered? That's question number one. And then I have a second one after you answer this one.

Hi, John. First of all, on behalf of the team here I really would like to thank you very much for the comment. You probably -- you are much more experienced than me in such business and in this last three years, we could see, in terms of market economic scenario in Brazil, a kind of roller coaster behavior, you can imagine, in every indicators, jet fuel price and exchange rates, the GDP growth so on and so forth. This is just to give you some pre-scenario, or the environment which is going to subsidize Edmar's comment on your question right now. Please Ed.

So, first, CVM, the local SEC, does not allow us to buy some of our own stock. We cannot do that for regulation reasons. So this is one. Secondly, we do not -- it's not part of the plan to sell some of our Smiles stake in order to have some additional cash here in the Company. Third, with the new corporate structure that we approved just a week ago, we understand we have the right to do that when the market is open. For the time being, we do not think that the market will be open for a Brazilian airline, but now we have a tool.

And I'm coming with an additional comment on that. You probably have seen exactly the same thing that we are, related to Company's capitalization opportunity. And the new governance structure gave us huge sort of alternatives to make it without considering selling any specific asset of the Company. Surely, it could happen, just in case we would have (inaudible) and very attractive price to do so. There is nothing to consider into our radar in the moment. We have different and more attractive alternatives, as I already commented, with the Company and we are now discussing them.

And just as a follow-up, if you talk to the big three over here, Delta, American, United Continental, one of the things they always talk about is the Brazilian market and how despite the current bad times, they see that as a really big opportunity down the road. You also see Azul, went out and ordered a bunch of long range Airbuses. And I'm kind of wondering, they're all looking for some kind of domestic feed and of course when you think of that you immediately think a goal. And I'd seem to recall, you have a relationship of some sort of codeshare with Delta. Does this new corporate legislation that went through recently, does this allow one of the American Airlines to buy stake in GOL?

Not as in any kind of hostile try. I would say the Company can be virtually capitalized up to [BRL50 billion] through this new structure. So we're allowed to sell preferred shares to any buyer, independent of the reason of the capital. So that includes any airlines. So if something that could only be implemented under our management and willingness. So there is, in that case, any airline will be treated as a potential investor. But we have Delta, as you probably know, as our partner and they are holding 3% of the Company shares. So we have developed together a long-term strategy, long-term view and therefore Delta is our natural partner (inaudible) any kind of investments coming from American Airlines -- not the American Airlines company, but an American, US carrier. So there is -- I'd say we are not blocked or limited to any kind of investor, including the US carrier.

Bob McAdoo, Imperial Capital.

Yes, just very quickly, what is the actual -- you give a jet fuel price range of [2.10 to 2.30] in your guidance. What is it today? What are you actually paying today, if we put that in perspective?

Hi Bob, this is Edmar here. For the first quarter, we should see levels around BRL2 per liter, but looking forward, with this pricing going up, up to BRL2.6 or even BRL2.7 by the end of the year, assuming that everything else remains where it is now.

And that increase is based on the shape of the curve is what you're looking at?

Exactly, exactly. The fourth quarter, for both the FX and fuel.

Okay. But today it's BRL2.

It was BRL2 for the [third] quarter, but in the second quarter we will see the price is going up at least by 5% to 10%.

And that's because of the currency changes?

Absolutely yes, you are right.

Christina Ronac, HSBC.

I want to ask you, when you just said, I believe, first quarter being BRL2 per liter, you are based on a 60-day lag. So I think that's based on [64] Brent, about. So, if you are at around [55] Brent, how would that look?

Hi, Christina, this is Edmar here. Good morning to you in the US. Yes, you're right, because you look backwards, you're right. But looking forward, there was a change in both the price of fuel and also for the FX. So the FX moved primarily during March. If you look at the number for, you know, the end of February, it was at BRL2.8, not even BRL2.9. Now the FX is trading at [BRL3.22] something. So the increase will come primarily from the FX change.

This concludes today's question-and-answer session. I would like to invite Mr. Paulo Kakinoff to proceed with his closing remarks. Please go ahead sir.

I just would like to say thank you very much to you all. Have a nice day and nice week. Thank you. Bye-bye.

This concludes GOL Airlines conference call for today. Thank you very much for your participation, and have a nice day. You may now disconnect.