Gol Intelligent Airlines Earnings Call Insights: CADE & CapEx and Recent Yields Explained

Gol Intelligent Airlines (NYSE:GOL) recently reported its fourth quarter earnings and discussed the following topics in its earnings conference call.

CADE & CapEx

Richa Talwar – Deutsche Bank: This is actually Richa Talwar filling in for Mike. My second question is just on CADE’s opposition if you are trimming your workforce at Webjet, I just wanted to know, if you can comment on whatever became of that?

Edmar Prado Lopes Neto – CFO: Richa this is Edmar. There is no opposition from CADE as for trimming the workforce with Webjet. There is nothing. As far as CADE is related we have done everything that was under the upper (indiscernible).

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Paulo Sergio Kakinoff – President and CEO: Good morning this is Kakinoff. Actually that’s a misunderstanding, which was during the approval process, there was the so called approval, which foreseen the Company not allowed to have any kind of workforce integration and even this meet us. So, after the CADE had approved it, the integration process should have approved without any kind of restrictions. Therefore, this is misunderstanding related to the time when the CADE was just analyzing the process but not came to any conclusion at that moment.

Richa Talwar – Deutsche Bank: So, there is no risk that they are going to come back and say anything related to that? I mean you’ve satisfied all the requirements on the Webjet after listening, correct?

Paulo Sergio Kakinoff – President and CEO: Yes, we did.

Richa Talwar – Deutsche Bank: Then the second question is, I noticed your CapEx spend declined quite significantly for the next few years. I believe it’s a little under R$1 billion for 2013 and then almost R$2 billion for 2014. I was just wondering what drove that decrease.

Edmar Prado Lopes Neto – CFO: Richa, this is Edmar here. If you look at our – first, our CapEx is 95% related to aircraft, which is one. Second, we have – the system has been kept. We have changed just by a slight change over 2014 and we are accounting here that we will have more by 2013. We will have more 800 flying than we have now a days; that is we are receiving 800 and we are taking out from the operation the 700. That is we are adjusting our commitment for the future related to this fact.

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Richa Talwar – Deutsche Bank: Then one more, on ancillary revenues do you have any new product ideas for 2013 that we can expect any goals related to ancillary revenue?

Paulo Sergio Kakinoff – President and CEO: It’s going to improve surely basically we are increasing the buy on board service to all the aircraft and also due to the SMILES natural growth. Once we are in the quiet period for the SMILES and certainly we cannot give the guidance for 2013. I hope you can understand. Richa, just have one word, please remember that here in Brazil we are not allowed to charge for bags. So, this does limit the potential growth that we have. We are only allowed to charge for (passenger).

Recent Yields Explained

Duane Pfennigwerth – Evercore: Just on the fourth quarter I think your yield as reported was up about 2% in your January traffic. I believe you said it was going to be up 5% or actually that was in your December traffic reported in January. So, I was wondering what drove the difference. It looks like your RASK was – total unit revenue was in line, but your yield was lower, what drove that difference in reporting?

Edmar Prado Lopes Neto – CFO: This is Edmar here. Would you please repeat the question please?

Duane Pfennigwerth – Evercore: Yeah, I believe when you reported your December traffic in late January, I believe you said yields for the fourth quarter were going to be up 5%, and as reported they were up 2%, yet your unit revenue was in line. I’m just wondering what the difference was on the yield if some revenue is transition from passenger revenue to other revenue?

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Richa Talwar – Deutsche Bank: This is actually Richa Talwar filling in for Mike. My second question is just on CADE’s opposition if you are trimming your workforce at Webjet, I just wanted to know, if you can comment on whatever became of that?

Edmar Prado Lopes Neto – CFO: Richa this is Edmar. There is no opposition from CADE as for trimming the workforce with Webjet. There is nothing. As far as CADE is related we have done everything that was under the upper (indiscernible).

Paulo Sergio Kakinoff – President and CEO: Good morning this is Kakinoff. Actually that’s a misunderstanding, which was during the approval process, there was the so called approval, which foreseen the Company not allowed to have any kind of workforce integration and even this meet us. So, after the CADE had approved it, the integration process should have approved without any kind of restrictions. Therefore, this is misunderstanding related to the time when the CADE was just analyzing the process but not came to any conclusion at that moment…

Richa Talwar – Deutsche Bank: So, there is no risk that they are going to come back and say anything related to that? I mean you’ve satisfied all the requirements on the Webjet after listening, correct?

Paulo Sergio Kakinoff – President and CEO: Yes, we did.

Richa Talwar – Deutsche Bank: Then the second question is, I noticed your CapEx spend declined quite significantly for the next few years. I believe it’s a little under R$1 billion for 2013 and then almost R$2 billion for 2014. I was just wondering what drove that decrease.

Edmar Prado Lopes Neto – CFO: Richa, this is Edmar here. If you look at our – first, our CapEx is 95% related to aircraft, which is one. Second, we have – the system has been kept. We have changed just by a slight change over 2014 and we are accounting here that we will have more by 2013. We will have more 800 flying than we have now a days; that is we are receiving 800 and we are taking out from the operation the 700. That is we are adjusting our commitment for the future related to this fact.

NEW! Discover a new stock idea each week for less than the cost of 1 trade. CLICK HERE for your Weekly Stock Cheat Sheets NOW!

Richa Talwar – Deutsche Bank: Then one more, on ancillary revenues do you have any new product ideas for 2013 that we can expect any goals related to ancillary revenue?

Paulo Sergio Kakinoff – President and CEO: It’s going to improve surely basically we are increasing the buy on board service to all the aircraft and also due to the SMILES natural growth. Once we are in the quiet period for the SMILES and certainly we cannot give the guidance for 2013. I hope you can understand. Richa, just have one word, please remember that here in Brazil we are not allowed to charge for bags. So, this does limit the potential growth that we have. We are only allowed to charge for (passenger).