GOL Linhas Aéreas Inteligentes S.A. (GOL)
Q4 2012 Earnings Call
March 26, 2013 11:30 am ET
Paulo Sérgio Kakinoff - Chief Executive Officer and President
Edmar Prado Lopes Neto - Chief Financial Officer, Financial Director and Investor Relations Officer
Richa Talwar - Deutsche Bank AG, Research Division
Duane Pfennigwerth - Evercore Partners Inc., Research Division
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Before proceeding, let me mention that forward-looking statements are based on the beliefs and assumptions of GOL Linhas Aéreas Inteligentes 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 macroeconomic conditions, industry conditions 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. Kakinoff, you may begin your presentation.
Paulo Sérgio Kakinoff
Hello, everyone, and thank you for joining us today in our earnings conference call for the fourth quarter and full year of 2012. Let's begin with Slide 4, where we show the main initiatives in 2012, the year that was marked by the company's measures to expand in its strategy, reinforce its focus on the clients through the development and enhancement of services and initiatives to maintain GOL's low-cost DNA.
On the cost side, we decided to wind up Webjet's operations and consequently, remove all 737-300 aircraft from service due to the exceptionally high fuel-cost inefficiency and maintenance cost. We also had to adjust the company, resulting in a 15% reduction in the workforce. These adjustments were absolutely necessary in order to ensure GOL's sustainable growth in the coming years and were done due to a challenging scenario faced by the domestic industry.
An 18% fuel increase, devaluation of the real against the U.S. GOL in 17%, an increase of over 30% in airport fees year-over-year and a growth below-than-expected for the Brazilian GDP were the main drivers in this tough year that we are leaving behind.
At the same time that a lot was done on the cost side, we also put focus on our clients and the improvement of our services. GOL was the country's most punctual airline and also managed to increase its remote passenger check-in ratio, showing that it was capable of innovating highly efficient airport operations without reducing service inquiries. This performance is the result of one of the many synergies related to the integration of Webjet.
We also introduced several initiatives along the year to provide our clients with even more benefits, including special seats, the expansion of Buy on Board service, the improvement of the partnership base and greater flexibility in regard to anticipating flights at the airport.
In terms of strategy, GOL acted fast, adopting its operating capacity to this new market reality, having less the drive to reduce domestic supply since the beginning of 2012. For 2013, the company has already announced the curbs of domestic supply, ASKs, of around 7%, meaning a reduction of more than 10% in 2 years, reinforcing the company's commitment to resuming operating margins.
The new international flights to Santo Domingo and United States are also part of this environment. In addition to exploring a high-growth market and offering our clients more options, this operation allows us to reroute domestic operating capacity to the international market, using the same model of aircraft.
The creation of the Brazilian Airline Association, ABEAR, is a clear sign that the local airline industry is changing in terms of both organization and concern with sustainable growth in the years ahead.
The association will help ensure a more organized aviation sector that is sustainable in the long term. The association has already achieved an important victory for the industry and continues to work in material discussions for the development of commercial aviation in the country. A new route network was designed at the end of 2012 and implemented at the beginning of 2013, resulting in more convenient flight times, routes and connections, as well as an adjustment of the route network due to the continuation of Webjet's operations at the end of 2012.
GOL also focused on strengthening and developing its SMILES loyalty product. Since January, a fully fledged company business unit called SMILES S.A., which is currently preparing for its IPO. We believe in the potential of loyalty programs in the coming years and the benefits that a combination of this business will add to the GOL group.
In October 2012, we announced an additional award of 60 Boeing 737 MAX aircraft for delivery as of 2018. This decision exemplifies GOL's low-cost DNA, ensuring a competitive cost advantage in the long term, using that business model is even more efficient than we currently have.