São Paulo, November 11, 2014 - GOL Linhas Aéreas Inteligentes S.A. (BM&FBOVESPA: GOLL4 and NYSE: GOL), (S&P: B, Fitch: B-, Moody’s: B3), the largest low-cost and best-fare airline in Latin America, announces today its results for the third quarter of 2014. All the information herein is presented in accordance with International Financial Reporting Standards (IFRS) and in Brazilian Reais (R$), and all comparisons are with the third quarter of 2013, unless otherwise stated.

Highlights

                   Message from Management

In the 3Q14, we recorded operating income (EBIT) of R$ 152 million, an expansion of R$ 115 million when compared to the same period last year, while the EBIT margin moved up 4.5 percentage points registering 6.2%. This was the seventh consecutive quarterly improvement in this indicator, reflecting the continuity and consistent delivery on our results.

Net revenue in the last 12 months totaled R$ 10 billion, a new record, even in a scenario of soft economic growth. GOL’s demand for seats (RPK) grew by 8.3% year over year in the first nine months, representing 53% of the industry’s growth, which reflects the greater attractiveness of our products and services. Domestic supply, however, fell by 2.9%, demonstrating the rationalization strategy that the Company took in place since April 2012. From January to September, 2014, we were the market leader in terms of passengers boarded in the domestic market, reaching the record mark of 27.5 million.

In order to offer greater connectivity, we launched during this quarter two new regional destinations on the domestic market, Carajás and Altamira (Pará), as well as new international flights to Santiago (Chile) from Guarulhos (São Paulo), Miami from Campinas, and to Punta Cana from Guarulhos (São Paulo), Confins (Minas Gerais) and Brasília. In this way, we are the Brazilian airline with the greater supply to the Caribbean, with 78 weekly flights.

The strategy of increasing our international presence has been further reinforced by the expansion of our alliances. This has also strengthened revenue in other currencies, which accounted for 11% of our total revenue in the last 12 months. We implemented a two-way codeshare partnership with Aerolineas Argentinas, allowing us to sell its tickets on our website. We will shortly begin offering the same facility for AirFrance-KLM flights.

In order to ensure an even better flying experience, we extended our GOL+ Conforto seating to our entire domestic route network, with an even greater reclining angle and even more distance between seats. Currently, 94% of our fleet is configured as GOL+ and, by the end of the year, 100% of our fleet will have this configuration. In the third quarter, we also launched an exclusive service in Brazil, our express bag drop service at Congonhas airport. With this new service, the customers can complete one more check-in stage at the self-service totems, labeling and weighing their own baggage, as well as paying for any excess. This is one more simple and intelligent innovation providing our passengers with even greater control and visibility throughout the entire process, since the ticket purchase to the flight.

These new facilities have strengthened our capacity to ensure an even better flying experience for leisure passengers, and to be more attractive to the corporate client. Even in the midst of a challenging economic scenario in Brazil, resulting in reduced demand from corporate customers, GOL was the airline company leader in tickets issued for the corporate segment, according to Abracorp (Brazilian Travel Agents’ Association).

Continuing with our measures to strength our balance sheet, we concluded two senior notes tender offers totaling US$ 411 million. Also, we concluded a senior notes issuance this quarter, totaling US$ 325 million at 8.875% p.a. due on 2022. These actions aim to optimize the debt profile, avoiding major amortization pressure in the next three years and reduce the financial cost. We closed the quarter with R$ 2.7 billion in cash position, equivalent to 27% of revenue in the last 12 months, which is essential to pass through periods of high market volatility. The financial leverage ratio (adjusted gross debt/EBITDAR) stood at 6.3x, 4.6 points down on 3Q13.

I would like to thank our customers for their loyalty, our Team of Eagles for their commitment and investors for their confidence posted on the Company. We celebrated on September 8, 2014 in the New York Stock Exchange (NYSE) the 10-year listing of GOL, in which we reiterated our commitment to the transparency and communication with our shareholders, which reinforces our vision of being the best company to fly with, work for and invest in.

Paulo Sérgio Kakinoff 

CEO of GOL Linhas Aéreas Inteligentes S.A.

            Operating and Financial Indicators

1. Source: Brazilian Central Bank; 2. Source: Bloomberg; 3. Fuel expenses /liters consumed.       

Aviation Market – Industry

The domestic airline industry maintained its dynamic of rationality in terms of seat supply (ASK), with a 0.1% year-over-year decline in the first nine months, while the demand increased by 5.4%. The load factor moved up by 4.2 percentage points reaching 79.4%. In the quarter, industry supply fell by 0.7% while demand was up by 3.2%. As a result, the load factor came to 79.8%, 3.0 percentage points higher than in 3Q13.

The number of passengers boarded in the domestic market increased by 6.8% in the first nine months of 2014 to 70.3 million. In the international market more than 4.7 million passengers were transported, 4.4% more than in the same period last year.

Domestic Market - GOL

        Domestic supply declined by 2.9% in the 9M14 and 4.2% in the quarter, in line with the Company’s projections for 2014 of a reduction between -3% and -1%.

        Domestic demand increased by 8.3% in 9M14, representing 53% of the growth in the industry demand. In 3Q14, domestic demand grew by 6.8%.

        The domestic load factor stood at 77.0% and 78.3% in 9M14 and 3Q14, respectively, fueling PRASK growth in the period.

        GOL registered a record of 26 million passengers transported in the domestic market in the first nine months, 2.6 million more than in 9M13, which account for 57% of the increase reported by the industry as a whole in the same period. These results arose from the Company’s efforts to constantly improve its products and services, making them even more attractive to the customers.

        For the first time, GOL was the airline company leader in the sale of air tickets to the corporate segment in the nine months accumulated, according to Abracorp (Brazilian Travel Agents’ Association).

International Market - GOL

        International supply increased by 8% in 9M14, in line with the annual growth guidance of up to 8% for 2014. The company announced news flights in the quarter to Santiago (Chile) from Guarulhos (São Paulo), Miami from Campinas, and to Punta Cana from Guarulhos (São Paulo), Confins (Minas Gerais) and Brasília.

        International demand grew by 26.1% in 9M14, generating an increase of 10.2 percentage points in the period load factor.

        GOL carried 1.4 million boarded passengers in the international market in the first nine months, 251 thousand more than in 9M13, versus an increase of 197 thousand for the industry as a whole. The Company maintained its focus on gradually increasing its presence in other countries, expanding the share of foreign-currency revenue.

PRASK and Yield

        Due to the 8 percentage point upturn in the load factor, PRASK moved up by 9% over 3Q13. Yield recorded a 2% decline in the quarter, accompanying Brazil’s challenging economic activity scenario, which reduced demand from business travelers.

  Income Statement in IFRS (R$ million)

*In accordance with CVM Instruction 527, the Company presents the reconciliation of EBIT and EBITDA, whereby: EBIT = net income (loss) plus income and social contribution taxes and the net financial result; and EBITDA = net income (loss) plus income and social contribution taxes, the net financial result, and depreciation and amortization. We also show the reconciliation of EBITDAR, given its importance as a specific aviation industry indicator, whereby: EBITDAR = net income (loss) plus income and social contribution taxes, the net financial result, depreciation and amortization, and aircraft operating lease expenses.

Net Revenue

Net revenue totaled R$ 2.5 billion in 3Q14, 10% more than in 3Q13. In the last twelve months, the Company’s net revenue reached R$ 10 billion, a new record.

Net passenger revenue came to R$ 2.2 billion in 3Q14 and R$ 9 billion in the last twelve months, R$ 1.5 billion more than the 3Q13 LTM figure. The new load factor level allows GOL to achieve this volume in terms of revenue passenger in the period.

International passenger revenue totaled R$ 311 million in 3Q14, equivalent to 13% of total net revenue. This result was impacted due to GOL’s international expansion, which increased the number of passengers transported in this market by 21%, year to date. Revenue from connections with partner airlines increased by 54% over 3Q13, also pushing up international revenue. The last twelve months international revenue totaled R$ 1.1 billion, which represents 56% or R$ 406 million higher than the 3Q13 LTM.

Net cargo and other revenue totaled R$ 272 million, accounting for 11% of total net revenue, up from 8% in 3Q13 mainly driven by the cargo revenue development and the revenue from ticket rebooking, ticket refunds and cancellations. 

Operating Expenses

Operating costs and expenses totaled R$ 2.3 billion in the quarter, 5% up on 3Q13. In comparison with 2Q14, costs fell by R$ 34 million. Excluding the fuel line, expenses came to R$ 1.4 billion, 8% up on 3Q13 and 4% down on the previous quarter. In 3Q14, the cost per ASK (CASK) stood at R$ 18.92 cents, 7% more than in 3Q13 and 6% less than in 2Q14.

Aircraft Fuel per ASK totaled R$ 7.64 cents in 3Q14, 4% up on 3Q13 due to the 1% period increase in the average per-liter fuel price (R$ 2.45 in 3Q14). The variation was higher than the nominal upturn in the same line (2% variation), due to the 1% growth in the average flight distance, which also pushed up period consumption by 1%, and a lower dilution per ASK as a result of the 4% domestic supply reduction. The recent decline in the per-barrel oil price will be partially reflected in the fourth quarter results, due to the 45-day delay in jet fuel price formation.

Salaries, wages and benefits per ASK came to R$ 2.93 cents, 13% more than in 3Q13, due to: (i) the approximate 6% pay rise following the collective pay rise agreement in December 2013; (ii) the constitution of provisions for profit sharing (PPR) totaling R$ 15 million (in 2013, these provisions were constituted in the final quarter); (iii) from the salary accretion as risk premium to the airport, maintenance and CRC (Customer Relationship Center) employees of R$ 5 million; and (iv) the 1% increase in the period workforce (from 16,209 in 3Q13 to 16,354 in 3Q14). The increase was higher than the nominal growth due to the reduction in ASK.

Aircraft leasing per ASK stood at R$ 1.65 cents, 13% or R$ 19 million up on 3Q13, mainly due to the higher number of aircraft under operational leasing, which climbed from 95 in 3Q13 to 97 in 3Q14 and the higher average leasing price compared to 3Q13.

Sales and marketing per ASK totaled R$ 1.19 cents, 16%, or R$ 18 million, higher than in 3Q13, due to higher expenses with marketing and advertising, and the losses from direct sales channels which stood at R$ 23 million. Compared to 2Q14, the level of losses in direct sales channels declined due to the Company’s focus on improving prevention systems.

Landing fees per ASK totaled R$ 1.27 cents, 6%, or R$ 6 million, higher than in 3Q13, due to new international routes.

        Aircraft and traffic servicing per ASK stood at R$ 1.44 cents, 3% more than in 3Q13, primarily due to contractual adjustments and risk premium for ground services employees, partially offset by lower expenses with consulting services.

        Maintenance materials and repairs per ASK totaled R$ 0.90 cents, 3% down on 3Q13, due to the lower number of engines undergoing maintenance (12 engines in 3Q13 versus 6 in 3Q14).

        Depreciation and amortization per ASK stood at R$ 0.90 cents, 27% down year-over-year, due to the lower number of engines capitalized in the period in line with the Company’s maintenance schedule.

        Other expenses per ASK stood at R$ 1.0 cent, 122% more than in 3Q13, mainly due to: (i) higher expenses with travel and accommodation (R$ 7 million) due to the additional costs in the period of the World Cup and new international frequencies; (ii) increase in expenses with on-board service (R$ 4 million);  and (iii) the non-occurrence of gains from sale leaseback transactions in the period (versus 6 aircraft, or R$ 49 million, in 3Q13). This result was partially offset by the higher number of aircraft subleased to the European companies (7 in 3Q14, versus 4 in 3Q13).

Operating Result

GOL recorded operating income (EBIT) of R$ 152 million in 3Q14, R$ 115 million up on 3Q13, and  6.2% margin, up by 4.5 percentage points when compared to the same period last year. The results represents the fifth consecutive quarter GOL has reported a positive operating margin.

Net Financial Result

GOL posted a net financial expense of R$ 435 million in 3Q14, versus an expense of R$ 187 million in 3Q13. The increase was primarily due to the net exchange variation, which corresponded to 62% of the total result. It is worth noting that this variation has no immediate cash effect.

      Interest expenses increased by R$ 14 million to R$ 150 million, chiefly due to interest of the R$ 600 million debenture issue by Smiles S.A. to finance part of its R$ 1 billion capital reduction. Another factor that impacted the result was the increase of the SELIC rate in 2 percentage points higher than 2013.

      The net exchange variation totaled a negative R$ 270,5 million in 3Q14, versus a negative R$ 25 million in 3Q13, due to the 10% appreciation of the Dollar against the Real, impacting the value of financial liabilities.

      Interest income totaled R$ 30 million in 3Q14, versus R$ 78 million in 3Q13, due to the lower average cash volume invested in Reais in 3Q14 compared to 3Q13. The Company has maintained resources in Dollar, invested in order to reduce possible impacts of exchange rate fluctuations on its assets and liabilities.

      Other financial expenses totaled R$ 79 million negative in 3Q14, 56% more than in the same period in 2013, due to the premium paid on the two 2017, 2020 and 2023 senior note tender offer transactions. The tender offer transactions totaled US$ 411 million.

Hedge Result

The Company uses hedge accounting to recognize some of its derivative instruments. In 3Q14, GOL recorded a book gain of R$ 31.1 million from hedge operations.

*OCI (Other Comprehensive Income) or Statement of Comprehensive Income is a transitional account where positive and negative fair value adjustments of future operations are booked, designated as effective for hedging cash flow. The purpose is to state income as close to the Company’s reality as possible. As the results from operations occur in their respective accrual periods, they are incorporated into the Company's income. GOL records the fair value of hedges due in future periods whose aim is to protect cash flow.

      Fuel: operations of fuel hedge accounted losses of R$ 21.5 million in 3Q14. During the quarter, the Company acquired position of protection through fuel financial derivative instruments and, at the end of September, 2014, 4% of its exposure in the next 3 months and 15% for the next 6 months were protected with derivatives. Additionally, the Company has hedged 32% of its exposure for the next 3 months through the fixed price transactions for future delivery. Both positions combined, of fixed price and derivatives, totaled a 36% protection of its exposure for the next 3 months and 31% for the next 6 months, as of September 2014.

      Interest: swap transactions to protect cash flow from aircraft leasing future deliveries, against an increase in interest rates generated total gains of R$ 18.4 million in 3Q14. The Company reduced its nominal hedged position from US$ 688,5 million in 2Q14 to US$ 588.2 million at the end of 3Q14.

      Foreign exchange: foreign exchange hedge transactions through derivative financial instruments designed to protect the Company’s cash flow generated gains of R$ 34.2 million in 3Q14. GOL reduced its FX hedge protection with derivatives to 30% of exposure in the next 3 months and 13% in the next 6 months. Additionally, the Company had dollarized assets that protected 34% of the currency exposure for the next 3 months and 15% over the next 6 months. The positions combined results in a foreign exchange protection in the period of 65% for the next 3 months and 27% for the next six months.

Income Taxes

Income tax totaled a positive R$ 38 million in 3Q14, R$ 85 million more than the R$ 47 million recorded in 3Q13, due to the loss posted by the GOL Group (with the exception of the subsidiary Smiles S.A.), and the impact on deferred taxes due to the effect of the depreciation of the Real against the Dollar on aircraft leasing.

Net Result

GOL posted a net loss of R$ 245 million in 3Q14, with a negative net margin of 10%, versus a net loss of R$ 197 million and a margin of -8.8% in 3Q13. The result was negatively impacted by the period exchange variation of R$ 270.5 million.

                  Balance sheet: Liquidity and Indebtedness

        GOL closed 3Q14 with total cash, including financial investments and restricted cash, of R$ 2.7 billion, equivalent to 27% of net revenue in the last 12 months. Short-term receivables totaled R$ 532 million, consisting mostly of ticket sales via credit card and accounts receivable from travel agencies and cargo transportation.

        The Venezuelan cash position totaled R$ 317 million on September 30, 2014, net of R$ 47 million cash repatriation. The depreciation of the Venezuelan Bolivar against the Dollar accumulated in the year is R$ 82 million. The total cash reported is lower when compared to 2Q14, reflecting the reduction of the Company's risk in regard to this market. GOL is in constant discussions with the Venezuelan authorities regarding the repatriation of the remaining funds. This amount is subject to future oscillations, given the uncertainties in the Venezuelan scenario.

                                                                                                                                                                                                                                                                                                                   1-Financial commitments (gross debt + operational leasing contracts, in accordance with Note 30 of the interim financial statements) less cash and cash equivalents and short-term financial investments;

2 –Gross debt + LTM operational leasing expenses x 7.

                   Loans and Financings

        The Company has been implementing a series of measures to manage its debt in order to comply with its objective of avoiding large amortizations over the next 3 years.

        At the close of 3Q14, the Company’s total loans and financings came to R$ 6,069.5 million (including financial leasing), 10% up on 3Q13 and 12% more than in the previous quarter. In 3Q14, the Company amortized R$ 1.1 billion in financial debt, including US$ 187 million from the first public offering for the acquisition of the 2017 and 2023 bonds, and US$ 224 million from the second public offering for the acquisition of the 2017, 2020 and 2023 bonds. Excluding these tender offer transactions, GOL amortized R$ 125 million in financial debt in 3Q14. Period funding totaled R$ 1.4 billion, including R$ 797 million from the issue of the 2022 bonds, R$ 600 million from the Smiles debentures and R$ 45 million from a Finimp loan.

The current liquidity ratio (total cash plus receivables divided by current liabilities) stood at 0.8x in 3Q14.

The Company continued to record an improvement in its leverage ratio (adjusted gross debt/LTM EBITDAR) in the annual comparison, which stood at 6.3x in 3Q14, versus 10.9x in 3Q13. In comparison with the previous quarter, the ratio remained stable. The indicator was negatively affected by the 10% and 11% end-of-period depreciations of the Real against the Dollar over 3Q13 and 2Q14, respectively. If the exchange rate had remained flat over 2Q14, the leverage ratio would have been approximately 6.1x. Another factor that impacted the ratio was the R$ 600 million Smiles debenture issue maturing in the short term (R$ 152 million in 2014 and R$ 347 million in 2015).

The average maturity of the Company’s long-term debt in 3Q14, excluding aircraft financial leasing, Smiles debentures and non-maturing debt, was 4.7 years, versus 4.6 years in 2Q14, with an average rate of 11.4% for local-currency debt, versus 12.5% in 2Q14, and 7.9% for Dollar-denominated debt, versus 8.3% in 2Q14.

On September 18, 2014, the Company priced a US$ 325 million offer of Senior Notes maturing in 2022 at 8.875%, which can be redeemed after four years. Gol LuxCo, the guarantor of the 2022 Senior Notes, used most of the proceeds from the offering to pay the second repurchase of the Senior Notes maturing in 2023, 2020 and 2017. Both tender offers for the acquisition of the Company’s bonds resulted in the repurchase of US$ 411 million.

Smiles

In July 2014, Smiles S.A. concluded the capital reduction operation announced in April of R$ 1.0 billion, corresponding to R$ 8.17 per share, by raising R$ 600 million in debentures - on June 25, 2014, the Company approved the first issue of simple debentures, non-convertible into shares, in the principal amount of R$ 600 million.

The Debentures are remunerated at 115% of the DI rate, with amortization of the principal in 12 consecutive monthly installments as of August 4, 2014, and the possibility of early maturity and voluntary early redemption. The proceeds from the issue were used by the Company exclusively to pay the amount related to the capital reduction.

            Fleet Plan

   *Considers aircraft list price

             *Non-operational aircraft

              **Includes 5 aircraft being returned and 8 sub-leased aircraft

At the end of 3Q14, out of a total of 142 Boeing 737-NG aircraft, GOL was operating 133 aircraft on its routes. Of the remaining 9 aircraft, 5 were sub-leased to the European airlines and the remaining 4 were in the process of being returned to their lessors.

GOL has 97 aircraft under operating leases and 46 under financial leases, 40 of which with a purchase option when their leasing contracts expire. In 3Q14, GOL returned 4 B737 NGs.

The average age of the fleet was 7.6 years at the end of 3Q14. In order to maintain this indicator at low levels, the Company has 130 firm aircraft acquisition orders with Boeing for fleet renew until 2026.

Capex

GOL invested R$ 176 million in 3Q14 and R$ 483 million in 9M14. For more details on changes in property, plant and equipment, see Note 16 to the financial statements.

Financial Guidance 2014

Due to the impact of the adverse macroeconomic scenario, GOL may revise its guidance to incorporate any developments in its operating and financial performance, as well as any changes in interest, FX, GDP and WTI and Brent oil price trends. GOL is maintaining its previously published financial guidance for 2014.

Highlights of the Subsidiary Smiles’ Results in 3Q14

19.9% year-over-year upturn in the number of accrued ex-GOL miles; Miles redeemed increase by 13.7% over 3Q13; Operating margin of 30.8%, 6.0 percentage points higher than in 3Q13; Operating cash flow of R$ 180 million, 34.6% up on 2Q14; Launch of Brazil’s innovative ‘365 Reasons’ campaign; Net profit of R$ 60 million, 5.4% down on 3Q13, reflecting the financial result related to the capital structure following the capital reduction.

Smiles S.A. closed 3Q14 with an operating profit of R$ 69.1 million, 78.2% up on 3Q13, with an operating margin of 30.8%, up by 6.0 percentage points, thanks to the 19.9% increase in growth in the number of accrued ex-GOL miles and healthy direct redemption margins. The financial result reflects the capital structure following the capital reduction, which led to significant increase in the return on capital indicators. For more information, please go to http://www.smiles.com.br/ir.  

            9M14 Result by Operating Segment

For more information on the breakdown by business segment, see Note 29 to the standardized financial statements (DFPs).

                        Balance Sheet

            Cash Flow