Operator: Good morning, everyone, and thank you for waiting. Welcome to GOL Airlines First Quarter of 2016 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 Investor Relations Director. This event is being recorded and all participants will be in a listen-only mode during the company’s presentation. After GOL remarks, there will be a question-and-answer session. At that further instructions will be given. [Operator Instructions] This event is also being broadcast live via webcast and maybe accessed through the GOL 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 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.

Paulo Kakinoff: Good morning, everyone and thank you for joining our webcast presentation. In this teleconference, we will first present information regarding the company’s restructuring plan, which is currently in its final phase. This information is important as we unexpected affected by macroeconomic ways, which struck Brazil at the beginning of last year and our management team here at GOL to development and execute a solid, but complex adhoc initiatives. I and our team of leaders are committed to delivering lasting and long-term results from these initiatives.

And this is the first quarter that we are showing results from our restructuring plan. After providing this update on the company’s restructuring, we will present GOL’s results for the first quarter of 2016. So please, turn to page 2 of the presentation. GOL is the largest low-cost airline in Latin America. The company has a standardized fleet of 143 Boeing 737-700 and 800 next-generation aircraft.

We serve 65 destinations in Brazil, South America and the Caribbean. We transport 39 million passengers per year. GOL is the leader in on-time service with an average of 860 flights per day. Our Smiles mileage program has over 11 million members. Our cargo operation is present in over 3,000 cities.

We have approximately BRL10 billion in revenues per year. You haven’t seen what our team has done in the past, as we took GOL from a negative 12% operating margin in 2012 to a positive 5% operating margin in 2014, and management is committed to delivering GOL from the current crisis. Moving to slide number 3 now, while we are most proud of our accomplishments becoming the largest low-cost airline in Latin America, this could not have been achieved without best-in-class corporate governance. We are proud of our track record as one of the best governance corporate in the market. Investors who have been with us from beginning recall that GOL was one of the first foreign private issuers to provide its Sarbanes-Oxley 404 certification, we need to have international deadline.

First, GOL was one of the first non-US companies to demonstrate its commitment to the principles of transparency, full access to information and equal treatment of investors. Please turn to the next page, slide 4. First in our agenda today is to provide an update on the company’s restructuring plan. Last week, we announced the final phase of this comprehensive restructuring plan that was began in mid-2015. All pieces of this plan are critical, work together and should allow us achieve our targets.

The final and most important piece is the exchange offers we recently announced. We need to restructure derived from several fronts, which I review on the next slide, slide number 5. After years of healthy growth, Brazil’s economy began to weaken in 2012, we haven’t seen that. The deterioration has accelerated since 2015, when the recession began is stronger than ever, fueled by significant uncertainty caused by the Petrobras related scandals, growing lack of confidence in the economic and political outlook and the recent proceedings to impeach the President of Brazil. Forward swaps on Brazilian bonds increased by over 100% in 2015 reflecting the weak and contracting economy.

The same period saw the Brazil aviation sector as a whole being adversely affected, principally by shrinking economy, climbing inflation and a steep decline of the Brazilian real versus US dollar. The political instability has been caused by the ongoing Lava Jato investigations revolving around Petrobras that we have - that have implicated [indiscernible]. The Brazilian House of Representatives has just voted impeachment to the Brazilian President causing expectations, that’s for sure, but also further increased instability and uncertainty. Brazil GDP contracted 3.8% in 2015 after averaging only 1.3% growth in the period between 2012 and 2014. The MAC market analyst consensus compiled by the Brazilian central bank in April shows an expected GDP decline in 2016 of another 3.9%.

According to estimates published by the IMF, the Brazilian economy is expected to shrink more or grow only marginally into 2018. Unemployment rose from 7% in January 2015 to 11% in March this year. A significant player of our operating and capital expenditures as well as a significant part of our debt is in US dollar base. The real devaluated 47% versus the dollar in 2015 and in the year at BRL3.90 per dollar. Also the oil prices in 2015 decreased 48% considering the WTI barrel, but in Brazil, our fuel expenses dropped only 14%, again because of the real devaluation.

The inflation as measured by the IPCA index increased from an average of 5% between 2012 and 2014 to 11% in 2015. The market consensus compiled by the Brazilian Central Bank in April show unexpected inflation rates for 2016, up 7% and inflation in the first quarter of this was already almost 3%. In part to combat the inflation, the Brazilian Central Bank has reacted by successfully raising the base interest rates. At year-end 2014, the rates was 11.75%, rose to 14.25% by the end of 2015 and has remained unchanged since, which has depressed travel and substantially increased borrowing cost. We and the Brazilian airline industry in general saw a market decrease in certain segments and especially in corporate level, which fell 58% of our total passenger revenue in 2015 from the historical average of approximately 70%.

As the business travel segment has a significantly higher yield than other segments, our revenues were negatively affected as a consequence. Being the market leader in yield as measured by the partners, we were particularly affected by the crisis in the oil and gas industry caused by the government investigations and the collapse of international oil prices. The largest airlines in Brazil, led by GOL have taken steps to rationalize capacity, but these were offset by increased competition in major airports and rapid growth of smaller competitors. As a result, the industry had suffered huge declines. The labor unions representing our employees won new industry-wide contracts that raised monthly salaries by 7% in 2015 and 11% in 2016.

As a result, and also as a consequence of inflation, our personnel costs increased by 15% in 2015. The economic crisis has resulted in a constricted and expensive credit environment in Brazil. Lenders, lessors, and fuel providers either increase their cash collateral requirements or reduced payment flexibility, sometimes both, negatively affecting our available cash as shown by our restricted cash which more than doubled from the end of 2014 to the end of 2015. Our credit ratings of B-, B3, B from Fitch, Moody’s and S&P respectively from July of 2015 have declined at an average of four notches to C, Ca3 and CC, which has significantly reduced our access to and increased our cost of capital. At the same time as yield and high margin revenue decreased, operating costs has increased, principally as a function of the exchange rate variation, inflationary pressures, increase in sales incentives and service improvements.

Our ex-fuel cost per ASK increased by 16% in 2015 thus compressing our operating margins. The fact as said, has caused our financial expenses to climb significantly. Our interest expenses increased by 50% from BRL593 million in 2014 to BRL886 million in 2015. Our CapEx reductions, the shrinking Brazilian economy, the real devaluation, pricing pressure and increased competition have reduced significantly our cash flow and consequently the payment capacity. You can see graphically the evolution of the some of the developments on page 6.

2016 is expected to be very challenging with an expected exchange rate of BRL3.70 per US dollar, the inflation around 7% and GDP growth at a negative 4%, while the interest rates at 14%. This year is expected to be the second consecutive year in a row of 4% negative growth in GDP in Brazil, as Brazilian airline demand growth has historically elasticity of 2 times GDP growth, the sector is expected to suffer a significant reduction. As you can see on slide 7, over capacity in Brazil had added pressure on GOL. While the company has been very disciplined, others have not. While we have since 2012 successfully worked to rationalize good network on fleet size, the confluence of diverse effect in 2015 offset much of the actual and expected operational improvements that our team working hard to achieve.

Most observers and we believe that a turnaround in the Brazilian economy is two or more years away. As a consequence, we embarked in the first year on a series of initiatives to comprehensively address our liquidity and capital structure concerns. Moving now to slide number 8. In mid-2015, GOL began its comprehensive restructuring plan as I said earlier, addressing over BRL17 billion of debt and other obligations. We have secured several important initiatives in the second half of 2015 and first months this year.

These initiatives to see consistent and concessions are well balanced. In September 2015, Volluto, our concerning shareholder made an active investment in GOL of BRL284 million. Concurrently, Delta for a change in additional capital stock for BRL177 million. Working closely with Delta, we have obtained a new unsecured term loan of $300 million purely guaranteed by us. Been able to offer this guarantee allowed us to secure this financial amounts and on terms that most likely would not have been available to us otherwise.

Our obligation to Delta is secured by pledge of our shares in Smiles or cash. Early this year, we returned five aircrafts under financial lease, two of them outright and the other three under sale and leaseback agreements generating an cash inflow of BRL212 million in February, and sold our rights to three aircraft deliveries from Boeing in 2016, which recently would have replaced outgoing fleet aircraft. Also in 2016, we implemented various operating cost saving initiatives including overhead reductions, introduction of part-time employees to offset reduced demand in low season and renegotiation with suppliers. In February, we actually entered into our ticket purchase agreement with Smiles, totaling up to BRL1 billion providing for a diverse ticket sales to Smiles in various franchises through June 2017. The first tranche of BRL376 million was disbursed by Smiles in February 2016 and the remaining tranches are conditions upon certain other additional cost savings and liquidity initiatives, including the completion the exchange offers.

On May 1, we implemented a change to our route network to focus on more attractable routes, suspended flights to A destinations and expect to reduce our fleet by approximately 15% by the year-end. We estimate that these changes will reduce year-over-year the number of take-offs and seats by 15% to 18% and other half ASKs by 5% to 8% due to the longer extended life. Key suppliers are helping us to reduce our cost and adjust to the new network and fleet profiles. For example, in the first quarter of 2016, we revised our delivery schedule with Boeing, so that we will not receive any new aircraft until mid-2018. The concluding phase of our initiatives include the renegotiation of the vast majority of our debt and lease obligations, specifically the exchange offers, renegotiation of the leases and amendments to the terms of the debentures.

We are in further discussions with all our lessors to renegotiate certain commission terms of lease agreements, including returning aircraft, deferring and reducing aircraft cost obligations and reducing monthly lease rates of deferring payments on a substantial number of remaining aircraft. The key initiative with lessors is reducing the GOL fleet by 21 aircraft, which we expect should have a net presence value savings of approximately BRL220 million and is invariable for happily adjusting GOL’s operations to current demand conditions. We are in discussions also with our local credit providers and debenture holders regarding concessions including a deferral of 90% of principal due in 2016 and 2017 through 2018 and 2019. A new two-year credit facility of BRL300 million is also under discussion and our waiver for one year of compliance with debt, severance and leverage covenants. We expect that the concessions we have asked from our debenture holders will reduce our principal payments into 2018 by BRL225 million.

Delta has agreed on an interim basis to reduce the over collateralization ratio we are required to maintain under our agreements related to Delta’s guarantee of $300 million, the team loan. Delta has agreed to make the reductions permanent, subject to the successful completion of the exchange offers. At December 31, 2015, we had BRL550 million in future commitments with Boeing. Boeing supported the rationalization of our network fleet plant and the future deliveries of aircraft. This agreement will give us materially in terms of cash flow.

Part of this cash flow release is intended to fund the exchange offers. Our agreement with Smiles provides that. If we achieve the expected cash savings from a series of initiatives, including exchange offers and lease renegotiations, we received from Smiles advance payments for future ticket sales of up to BRL1 billion, including the BRL376 million already disbursed by Smiles in February 2016. There is a great view of uncertainty for [indiscernible] in Brazil and also globally, and significant challenges in the airline sector, but we believe that our plan, including the exchange offers, renegotiation of other commitment and achievement of the recent initiatives should permit us to address our current situation. On the next page in this webcast presentation, slide number 9, you can graphically see that our short-term liabilities increased dramatically during 2015, primarily due to the macro effects described.

At year-end 2015, our current assets and current liabilities were BRL2.5 billion and BRL5.5 billion respectively representing a shortfall of BRL3 billion. In the first quarter this year, we received over BRL900 million of planned cash inflows from initiatives in the restructuring plan that more than offset planned cash outflows reducing the current ratio shortfall to BRL2.6 billion. Major cash inflows contributors from our plan were the BRL213 million from sale leaseback transactions, the BRL126 million of reduction in collateral related to the term loan and the BRL376 million first tranche of the Smiles agreement. I will now turn the presentation to our CFO Edmar Lopes, who will provide details on the exchange offers of our restructuring plan and how this fits into the company’s financial restructuring plan as I stated.

Edmar Lopes: Thank you, Kaki, good morning everyone.

I would invite you to turn to slide number 11. In May this year, just a week ago, we began the final component of its restructuring plan. This component, which is the restructuring of $780 million of dollar unsecured bonds issued in international capital market is a critically important transaction for the company as it is for the bondholders and also the most important component of our restructuring plan. GOL dollar unsecured bondholders now have the opportunity to exchange their securities for cash and the new secured bond at a premium to the current market debt. The dollar unsecured bond are the last major group to be approached in GOL’s comprehensive financial restructuring.

GOL’s offer to exchange all of its outstanding unsecured dollar bond for new secured bonds with collateral covering more than 100% of the new bond in addition to our cash component and with the premium to current market value is a great opportunity for both bondholders who voluntarily participate in restructuring and receive again premium for their bond. We strongly believe that this is a good and sale offer and we expect that bondholders will understand that it is in their best interest to exchange their notes. Existing note holders who do not exchange will become strictly subordinated to the new secured notes as a result of the pledge of collateral. In addition, holders of perpetual notes will receive new notes that have a step maturity date of 2028. The 95 threshold for completing the exchange offer is set by the company and we can change it if the consensus corporate.

On the slide, you can see a summary of the offers. As you can see, the GOL offer to the bondholders represents a 20% to 50% premium over current market prices; a significant component of our opportunity to creditors is providing collateral that is crucial to the operation of the airline. The new note are secured by a first priority secured interest in spare parts. We hired MVA to conduct an appraisal of this collateral and the appraised value came at USD$223 million. Furthermore, it is important to recognize that the value to GOL of this collateral is beyond matter given the importance of this operation.

I would like to give bring forth the main advantages to the holders of the new secured notes which are the following. First, we are providing cash to existing note holders. Also, in addition the holders of the new note become the permanent owners of the collateral and are entitled to sell the collateral to third party. Additionally, payment obligations secured by the collateral under the fiduciary sale agreement are not subject to judicial recovery proceeding up to the amount secured by the collateral. Next, the holders of the new note may enforce the right in the collateral during judicial recovery Fifth, the collateral will not be part of the liquidation proceeding.

Finally, obligations secured by the collateral are not subordinated to claims that have statutory preference under the Brazilian Bankruptcy law in a liquidation proceeding. I would like also to bring forth the main advantages for long-term holders of those notes. First, old notes will not get the benefit of the collateral securing the new note and will be effectively subordinated to that. Second, payment obligations under the old notes would be subject to the automatic stay of restructuring plan in the judiciary recovery. Last but not least, in a liquidation proceeding obligations under the old notes are subordinated to claims that have statutory preference under Brazilian Bankruptcy law including labor claims, secured creditors and tax claims.

On the next page, page 12, I'll summaries the important date for holders of the note. Next Tuesday just a few days from today May 17 is the deadline to qualify for the early participation premium that is the early work of 5% to 10% or withdraw tenders of old notes. The offer expires on June 1, the deadline to validly tender old notes and qualify for the payments. Holders of old note who do like to tender to old notes in exchange for new note should be sure to allow enough time for the necessary documents to be timely received by the exchange agent. I also would like to tell you that it is very easy to access that.

You can access the link on our website to register to receive the premium for exchanging your bond by next Tuesday. The address of our website is www. voegol.com.br/ri. Through today, many bondholders have already registered on the site. In summary, I would like to say that the exchange offers are a very critical component to our restructuring plan and are required to close certain other liquidity initiatives described earlier.

I will now invite you go to slide number 13 which has a title of exchange offer consideration. Despite significant operating improvements as we have shown in this quarter, GOL still needs to continue to address its capital structure challenges. Our ability to serve our capital structure has been impacted by industry overcapacity, political and macroeconomic conditions in Brazil and the significant evaluation of the real affecting our lease expenses, interest expenses and fuel costs and as Kaki mentioned earlier our capacity payment, our shareholders have contributed significantly to improve the company, the company liquidity. All of more important stakeholders and partners are expected to provide substantial support to improving our capital structure. The exchange offers are a crucial aspect of our overall restructuring.

It allows secured bondholders to receive cash plus new secured notes. Also, the completion of the exchange offers will facilitate completion of contributions from stakeholders and partners as we described. I will now turn the presentation back to Kaki who will review the results of the first quarter of ‘16.

Paulo Kakinoff: The next part of today’s presentation, we’ll review the results of our first quarter of 2016, please move to slide number 15 in the webcast presentation. In the first quarter of 2016 we saw an improvement of 17.3% in yield and 16.4% in PRASK when compared to the first quarter of 2015.

We decreased ASK in the domestic market by 4% and 18% in international market. Combined, the total ASK was up 6% lower than the same period of 2015. The takeoff volume and the number of seats reduced by 8.2% in the quarter, the 2.3 percentage point reduction above the ASK reduction is due to the increase in exchange rate which is part of the new route network which was fully implemented on May 1. The net revenues expanded 8.3% reaching BRL2.7 billion in the quarter. Recurring operating income was BRL225 million and operating margin was 8.3% in first quarter this year.

We generated BRL213 million related to the sale leaseback transaction of six aircrafts. CASK was BRL0.203 representing an increase of 12% in the period when compared to the first quarter of ‘15. On slide 16, we show the total net revenue growth of 8.3% in the quarter. Excluding the non-recurring earnings from sale leaseback transactions, the operating results EBIT was BRL224.6 million in the period with a margin of 8.3%. This recurring operating results reflect the realignment of our flight network and operations, CapEx reduction and downsizing.

This is the first quarter that we have seen some results from our initiatives. Our last 12 months periods are indicated of the new macroeconomic environment, in the last 12 months as a reflection of the Brazilian economic collapse EBIT reached negative BRL113 million with a margin of negative 1.1%. Recurring EBITDAR reached BRL663.2 million with margin of 24.4%. In the last 12 months this indicator accounted for BRL1.5 billion and a margin of 15.3%, a decline 2.5 percentage points versus the same period in 2015. In the next slide, the number 17, we break down the first-quarter results which were strongly impacted by two events.

The sale leaseback of aircraft of BRL213 million and BRL654 million in net exchange rate variations due to the real appreciation of the US dollar, and our total debt at the December 31, 2015 and March 31, 2016. This exchange rate variation has no negative cash impact. Excluding the non-recurring effects mentioned earlier, GOL’s EBT or earnings before taxes were negative BRL109 million. Please move now to slide 18. GOL has been reducing capacity since 2012.

However, a lot of players have been adding capacity negatively affecting sector results. As shown in the first block, you can see that GOL reduced the domestic ASK by 4% in the first quarter 2016. For 2016, we payment our capacity reduction of 5% to 8%. You can see on slide 19 a summary of our efforts to reduce capacity mainly in Brazil which includes a 15% to 18% decrease in available seats, a suspension of eight destination Miami, Orlando, Aruba, Caracas, and Ribeirão Preto, Bauru, Altamira and Imperatriz and a reduction of 20 aircrafts. Please turn to slide 20.

I want to reaffirm the capacity projection for 2016 which includes a total supply reduction of 5% to 8% and a total seta and volume of departures reduction between 15% to 18%. Given the higher level of uncertainty, we are currently unable to provide any kind of additional guidance for other metrics. I will now return the presentation to Edmar.

Edmar Lopes: Okay, thank you Kaki. In this section we'll review our recent financial results, highlighting the main aspects and drivers of this quarter.

Please move to the next slide, this is slide 22. Yield increased 17% over the first quarter of last year and was up 4% over December quarter ‘15. The increasing in PRASK was 16% quarter over quarter and 7% quarter to quarter. The improvement in PRASK came at 15%. At BRL0.20, our total CASK increased 12% over the same quarter last year.

At fuel CASK and I will go over that a little bit further in the presentation increased 17%. RASK minus CASK was BRL1.87, an improvement of 66% when compared to the same period last year. Please turn to the next slide, page 23. Here we can see that our CASK ex-fuel increased by 17%, BRL0.141. The increase was driven primarily by a 60% increase that is BRL0.01 in aircraft lease expenses.

It happened due to the higher number of aircrafts in operation and a 36% depreciation of the Brazilin real versus the US dollar. 24% increase in servicing expenses also related to FX, a 7% increase in salary expenses as mentioned by Kaki earlier due to the general agreement and they were approximately offset by a 7% increase in maintenance expenses. We are highlighting here that aircraft lease expenses were affected in a very significant manner by the FX rate. Doubling the participation of this line item we are on 14% of total expenses against just 6% one year ago. Now please move to the next slide.

Here on this slide we show our March quarter results for this year on a recurring basis comparing to last year. First quarter this year earnings before non-recurring items, exchange rate variations and taxes were negative BRL48 million compared to a negative BRL46 million last year at the same quarter. So although we have improved our margins it hasn't changed much in terms of cash flow. This result reflects the new macroeconomic environment facing now in the airline sector. Total net income was positively affected by sale leasebacks generating BRL230 million and as aforementioned by Kaki the exchange rate gains which have no cash in fact from the recent appreciation of the real came at BRL654 million.

Please turn to the next slide. Turning to our balance sheet, we see that at the end of the first quarter, our total adjusted debt including capitalized operating leases was approximately BRL15 billion. Our total on balance sheet debt as the chart shows totaled almost BRL8 billion, an increase of BRL2.3 billion against year-end 2013 and a decrease of BRL1.4 billion versus the end of 2015 primarily due to the FX. Including capitalized operating leases, our total debt to EBITDA ratio at the end of this quarter was 9.4 times. At March 31, ‘16 our total cash balance was at BRL1.8 billion.

The next slide, the left side of the page you can see that the cash balance of BRL1.8 billion was composed primarily by three tranches. The first one is the free cash BRL658 million, the second one BRL744 million of cash on the balance sheet of Smiles subsidiary, which we consolidate on our balance sheet and which the airline does not have direct affect. And also the last tranche would be the BRL413 million of restricted cash. Out of the almost BRL8 billion on balance sheet debt, approximately BRL840 million is due in the next 12 months as you can see in this graph. A significant debt reduction from current levels is required.

Our plan balances overall operating growth and long-term credit improvement. It is expected to deliver approximately BRL300 million of annual cash flow improvement when fully implemented. All of the initiatives are important to grow in order to be able to match its cash outflows with the expected cash inflows. As we have mentioned before the exchange offers are a critical component of this plan. We are confident that the initiatives and execution will deliver the required cash flow with the result being stronger balance sheet.

We are targeting these credit metrics post restructuring with the goal of achieving BB metrics longer term that is actually where we were before the turmoil started here in Brazil just a few years ago. With that, we will have our adjusted net debt below BRL13 billion post restructuring. We do expect that the results of our restructuring will be long-lasting. Again, thank you for your attention and now I give the floor back to Kaki.

Paulo Kakinoff: I would like to end here by thank you for joining us during this presentation.

GOL is the largest low-cost airline in Latin America and is committed to best practice corporate governance and transparency. I hope our review of the impacts generated by the unexpected market economic wave that hit us last year and the restructuring plan we are executing help you understand where we are taking the company. First-quarter ‘16 was our first quarter of results generated from the initiatives we began in 2015. Our team who view continue to deliver solid execution of initiatives saw that GOL weather the crisis and emerge as an even stronger company. We will now move to the Q&A session, please.

Edmar Lopes: Actually before we open the lines for your questions guys, I think I should address just several questions that we have received from investors in the market since last week when we launched the exchange offer. We have received mails, website calls but I think it is important we have a summary here. So the first question was what GOL expects from these exchange offers? We think that the goal of this exchange offers primarily is to ensure that GOL emerges from this current crisis in the best competitive position. Another question that was made is whether creditors were being treated in an equal manner? Certainly yes, GOL view creditors its lead arrangers and lenders by aircraft are providing concession and support. And the terms of the offer are based on current market price.

GOL’s local credit providers and partners are also providing compassions and support and the terms are surely based upon credit relationship. Again, the exchange offers are a critical component of GOL’s restructuring plan and the trends that we are offering are based on market prices for the bonds. There was a guy that also asked me about the Brazilian banks. Banco do Brasil and bradesco, which have long supported the company are key credit providers to GOL and we are discussing with them, extending the maturities and additional lines of credit of up to BRL300 million, also letters of credit, discussions and recognition are underway. So at this point, there is no final conclusion.

How much we can expect from those initiatives, just reinforcing what we have said before, we do expect BRL300 million of annual cash flow savings, when and if all the initiatives are executed. There was a question also about equity. Why we wouldn't be offering our equity at this point. There was a lot of discussion with the central of our bondholders and PDT has advised us that unsecured creditors would rather have new notes secured by collateral and receive cash rather than having an equity at this point. I will go again earlier today Kaki was asked during our journalist call, whether we would review the terms of the offer.

We have no intention to change that or to amend anything in the offering. Of course, we will obviously assess the state of the exchange offer following the early birth date that is next week. So there is no, it is very clear for us that at this point we will not change. Another question that was made, I just want to remember, it came directly to me is what we think that will happen if the exchange offer does not succeed. If we are not successful, we will not be able to complete several of the liquidity initiatives described previously because they are related.

As you can see from the presentation here, our liquidity, which has been shrinking, will suffer and we will not be able to improve neither our cash position or cash flow status in our credit profile. And with that, this is the final comment, because of the rating agencies having downgraded us and some of them put on a special calculation if you will, we were asked whether this is a default or not. No, this is not a default. We are conducting an exchange offer or exchange offers because of the number of the bonds and we are offering a premium price, cash and the collateral. Voluntarily unsecured bondholders can exchange for secured bonds.

I will now turn to the operator and please open the lines for questions.

Operator: Thank you. [Operator Instructions] And our first question comes from Michael Linenberg of Deutsche Bank. Please go ahead.

Michael Linenberg: Hey, good morning, everybody.

I have a couple here and it's either Edmar or Kaki, whoever would like to answer them. If we can just talk about, to start off, what your cash burn looks like right now. It does look like that your unrestricted cash at the end of the year was over 900 million and it looks like at the end of the March quarter, it was 650 million, something on the order of about BRL3 million plus a day. Where are you now, what does it look like as we move through the June quarter, which I know seasonally is one of your weakest quarters?

Edmar Lopes: Hi, Michael. Good morning in the US.

Michael, we are pointing out that the cash available is shrinking and that's why we’re being very clear about all the initiatives. As - I don't know if you saw the presentation, Kaki mentioned that in this quarter, we were able to raise at least BRL900 million of additional cash in order to meet our financial obligations and expenses as well. To say how much cash we will burn next quarter, it's a tough moment, because as Kaki mentioned, the uncertainty here in Brazil is very high at this point, it’s unclear but we know that we will burn cash because this is for sure the worst quarter, seasonality speaking as for Brazil. We don't have much visibility, but we are counting on the initiatives to move on, that's what we can say at this point.

Paulo Kakinoff: Michael, good morning.

Here is Kakinoff. This is a comprehensive restriction plan made of several parts. We are fully committed to deliver all of them, but the truth is, we cannot miss none of this part. Otherwise we will have the company being exposed to quite risky situation. So the second quarter is pretty challenging one.

All the initiatives linked to restricted time plan to be executed and delivered. So at the moment, the only thing that we can tell is we are 100% focused. Fortunately, the initiatives have been delivered on time. The second quarter is really challenging and currently, we are in a cash burn rate. So having the plan being executed, we will be able to go through this stormy weather, but we need to have all of those initiatives delivered.

Michael Linenberg: Okay, great. And then just with respect to sale leasebacks, you did three in the last quarter, you raised BRL212 million. At least that was the gain, do you have other aircraft available that you could pursue additional sale leasebacks on and if you do, are you currently contemplating those additional sale leasebacks and will they impact this quarter?

Paulo Kakinoff: Michael, we could have another aircraft to be either sold or sale sale-leaseback, but it's pretty much unlikely that we would get the same amount. Those were six aircraft with a lot of equity already paid and we were somehow lucky, because we could get a quite favorable exchange rate when those aircrafts were sold, the exchange rate was 4.15 [ph]. So we would have the same amount.

The burn is not even close to that by selling more aircraft, considering the Korean market values and exchange rate. Certainly, those are variables, they could change, but there is - that would be a more opportunistic approach of the company and not a part of our cash inflow plan or something like that.

Michael Linenberg: Okay, great. And then just on the exchange offer, I know in the documents you are targeting 95%, is there a minimum that you need to achieve in order to affect all of the other agreements that you have in principle with other creditors like some sort of minimum threshold, number 1A and I guess sort of number 1B, does each class of security have to achieve that minimum, say, you have to get to a majority percent in order to affect them to succeed with the exchange offering?

Paulo Kakinoff: The answer is no, but it's also pretty much related to the penetration of acceptance. In each of the notes plus the prep, it's going to - we're going to analyze and make the assessment for each note and then come to an individual conclusion, individual I mean for each note, whether it makes sense or not to go for the review.

So this is - there is no minimum preset amount, but certainly we’re going to analyze whether it makes sense or not.

Michael Linenberg: Okay. And then just quickly lastly and this is technical, when we get to May 17 or May 18, will you put out a press release with an update on the percent of note holders who have tendered, will that be available or will you just remain quiet until we get to June?

Edmar Lopes: Michael, this is Edmar here. We will decide on the [indiscernible] depending on what comes out, too early to say. But let me go back to one of your questions, that is, how much cash, because of the seasonality and the size of our operations, we are shrinking operations here.

Ballpark number for cash burn should be at the same levels of this quarter. Okay.

Michael Linenberg: Okay. So what we saw in the March quarter and that was around 3 million a day or so of real. Okay, thank you.

Operator: Our next question comes from Renato Salomone of Itau. Please go ahead.

Renato Salomone: Good morning, Kaki and Edmar. First of all, congratulations on the network reshuffle and the capacity discipline that we saw, especially in the latter part of the quarter. My first question is regarding the fleet.

Could you please give us a ballpark for the number of aircraft that are currently parked if possible with the mix of 700s and 800s? And also, how advanced are the negotiations with lessors that are being led by SkyWorks?

Paulo Kakinoff: Hi, Renato. Thank you very much for your comments and also for the participation. At the moment, we have 16 aircraft grounded and the mix of those aircrafts are related to the company's mix. I mean, 40% of them are 737-700s. The negotiations with the lessors are progressing quite well.

We are also treating all of them equally, but knowing that they have different exposure to the company and different number of aircraft blizzard. They will also participate proportionally to their exporters. For each of the lessors, the negotiations are in a different point of development, but they are progressing well. I believe that over the following weeks, we will start to deliver some news on this progress.

Renato Salomone: Okay, thank you.

And second question, I was impressed with the 80% yearly jump in international revenues, even with the 18% ASK reduction in the international market. Can you give us some insight on this growth, so we can properly project international revenues going forward?

Edmar Lopes: Hi, Renato. This is Edmar here. Thank you for the question. As we have been telling the market, we are expanding our channels of distribution, offshore Brazil, this is one.

So now, we have GDF in a lot of places that we did not. We're talking about 50 countries that were not served by our distribution channels. So this is one. We should expect still some growth, but also in terms of, on a relative basis, we were benefited by the FX, because the real was devaluated, meaning that we should see some revenues coming down. Okay.

The next point is related to the accounting, which is important because we've got a few questions whether people would be able to do the math to see RASK and PRASK in international and domestic revenue, no, you can't, because what we put here, what we account is the point of sale, while for doing the right math for RASK domestic and international, you need to see the flight by themselves. So you cannot do the math and we do not disclose the information. What we see here at our financial statements are the point of sale, okay, but again it's growing, but we should see some downturn in the next close future because of the FX.

Renato Salomone: Okay, thank you guys.

Operator: Our next question comes from Brad Armstrong of the GAA Hedge Fund [ph].

Please go ahead.

Unidentified Analyst: Hi, good morning. Thank you for taking my call. My question just relates to the exchange offer and I was hoping you guys could explain in more detail just how the liquidity initiatives are linked to the completion of the exchange offer?

Edmar Lopes: I will take this Kaki. Hi, Brad, here at GOL, we cannot go into more specific details of the negotiations, because they are not public, okay.

What we have told the market is exactly where we are at this point, okay. But one should understand that most of them have credit conditions that if we cannot meet, there will be, that will jeopardize the exchange offer, meaning that there is some correlation among the negotiations, some cross conditionality, but at this point, we cannot disclose much besides what we have told the market so far.

Unidentified Analyst: Understand, thank you very much.

Operator: Our next question comes from Savi Syth of Raymond James. Please go ahead.

Savi Syth: Hey, hello, guys. Thanks so much for the questions. Just a few follow-up ones. On the domestic and international, could you kind of give roughly like what you are seeing from a domestic proxy improvement standpoint, and in 1Q and maybe what that trend is for the rest, what you’ve seen so far in 2Q?

Paulo Kakinoff: Good morning. This is actually one of the - with respect of the credit capacity, which we started to implement, but the second quarter as I mentioned before is not only challenging, but the first output of the advanced sales showed that this quarter will be not different regarding the demand reduction than we had last year or even before.

The whole industry is getting capacity, but the demand seems to be really weak. We could not take the first quarter as a parameter for the remaining quarters, mainly the next one, so there is a lot of uncertainty and we cannot foresee [Technical Difficulty] Sorry for this.

Savi Syth: I appreciate that, Kaki. So you are taking a lot of capacity out and most of that started coming out in March. So are you at least seeing then the yields improving or as you get into the weak quarters, is that a struggle as well?

Paulo Kakinoff: Again, the yields were improving in the first quarter.

Now for the second, the yields could improve in case that the corporate demand of the business travelers would be at the expected level, which is not happening, considering that expected level was already at a lower level than last year. So, that's probably the main concern. We do not know how the market will react and how the economy in the short term will react to the today's news. I mean the change of the President, but it would be maybe too optimistic to assume that next week the companies and the businessmen will be back to their traditional level of frequency of business travelers. Therefore, again, we cannot give any kind of optimistic - not even more acreage on the fund rates.

Savi Syth: Understood. And then just on the capacity guidance for the year, I was wondering if you could kind of break it out between domestic and international, but also the 20 least aircraft that you are hoping to return, does guidance reflect all 20 being returned or if you are successful there, could we see maybe that updated if demand calls for it?

Paulo Kakinoff: No, the number of aircraft is 100% percent linked to the guidance already delivered. So our task is now to get rid of those airplanes.

Savi Syth: Okay. And my last kind of quick question on the fuel hedging, it doesn't seem like you're layering on new fuel hedges, I was wondering if you could and I appreciate the color that 60% [ph] is hedged over the next 12 months, but is more of that hedged in the next quarter or two or how should we think about and at what kind of what levels have been locked in?

Edmar Lopes: Hi, Savi.

This is Edmar. We have been hearing very light positions of hedging here and we have been using primarily Petrobras fixed price because of the credit crunch that we are facing here, and therefore, we are carrying the minimum levels that our policy has established, there is 20%, 25% for the short term.

Paulo Kakinoff: Hedging became even tougher, I mean hedging for the company because there is - the company does not have cash availability to purchase a new position. So it is light at the moment, not just because of our view on the future prices, but also because the company is facing several constraints to get credits in case there, we would go for a higher position.

Savi Syth: All right.

Thank you very much.

Operator: Our next question comes from Ravi Jain of HSBC. Please go ahead.

Ravi Jain: Hi, good morning. So just two couple of quick questions.

First is on the restructuring, so at the end of the restructuring let’s - assuming that the exchange offer and the negotiation with the aircraft lessors are successful, are you still probably looking at a leverage which is relatively slightly high and just wanted to get your thoughts on is it just going to be deleveraging from the business they are on, do you have some other initiatives in mind. That’s the first question. And the second one was on the CASK ex-fuel, now that assuming a more stable FX going forward, are there any other efficiencies or changes that we should expect? Thank you so much.

Paulo Kakinoff: Hi, Ravi, starting on the last question most of the cost cutting initiatives were either already implemented or announced. We do expect to have additional efficiency gains along this year.

The total amount to be saved would not really be as meaningful as necessary to be considered as a game changer regarding our cost structure. We have been under pressure on several items like navigation fees, tax, airport fees and labor cost just to name some of our costs, those are under pressure and increasing at the moment. So we do not expect the sizable cuts to be delivered when we compare to our total cost restructuring. Could you please repeat again your first question, because I am not sure that we really understood what you said?

Ravi Jain: Sure. So the first question was assuming a successful exchange offer and negotiation with the aircraft lessors, we are probably still looking at a debt level or a leverage that is relatively high.

Do you have any other initiatives in mind after that or do you think it is going to be the deleveraging from the business thereon?

Paulo Kakinoff: Considering that our leverage is pretty much linked to the exchange rate and that’s extremely volatile at the moment, it’s really hard to predict how it’s going to be our leverage after the initiatives, but I am pretty sure that being successful in delivering those two fronts the company will be not only sustainable, but able to assume its business continuation in a much healthier way than we have today. Hopefully this is necessary to have the company out of this transition period being at least the same size that the company became now and being again back on the growth track. We are pretty much confident on that but we do need to deliver those two front results.

Ravi Jain: Thank you. That’s helpful.

Paulo Kakinoff: Thank you.

Operator: Our next question comes from Pablo Zaldivar of GBM. Please go ahead.

Pablo Zaldivar: Hello, good morning. Thank you for taking my question.

I just had a couple. The first one, could you give us a little bit more insight regarding the current competition and pricing dynamics that you are seeing in the market for the following quarters?

Edmar Lopes: The competition has been tough. I mean I guess that as mentioned before the capacity reduction has not been followed by all the competitors, so it means that in some months of the year we are predicting to face is too an over capacity in comparison to the amount, so I would summarize like the following. The discipline regarding capacity is much more rationale than before that I wouldn’t say that it has achieved its balance in comparison to the demand when we are talking on the whole system. It’s improving, but we are not close to the optimum point.

Pablo Zaldivar: Okay, thank you. And another question regarding cargo and ancillary revenue, during the quarter we saw a slight decrease. Could you give us a little bit more color on the reasons that this happened, because in terms of gross revenue you registered a 13% increase and when you move to net revenue it is 1% decrease.

Edmar Lopes: Hi, Pablo, this is Edmar here. Some of our products have decreased in terms of revenue, it’s seasonality and also related to the lack of demand, because we are charging more for some products.

And also if you look at our earnings, you see that net revenues came down, but gross revenues were up. This is also related to taxes, but overall this is a reflection of the lower demand level that we are seeing in Brazil, because a lot of ancillary revenues are of selling products that we have and also the cargo, which is very much related to GDP in Brazil like tax demand, we are seeing the numbers coming down every single month. We are keeping a market share through pricing.

Pablo Zaldivar: Okay, thank you very much.

Operator: The next question comes from Victor Mizusaki of Bradesco BBI.

Please go ahead.

Victor Mizusaki: Hi, good morning. I have two questions. The first one is actual follow up on the CASK for the second quarter and going forward. If we take a look on what you report in the first quarter and the average FX rate, can we assume that maybe you likely saw another decline of maybe 3% to 5% in the second quarter?

Edmar Lopes: Hi, Victor, this is Edmar here.

We should not assume a gain on the CASK at this point, because as Kaki mentioned before, we have at least 16 planes grounded at this moment. So they will be less efficient during this quarter. This is one of the reasons why we are discussing with lessors. We need to get these planes out of Brazil. So if you were to say that, fuel is up.

Fuel went from 30 bucks a barrel in the first quarter that is January-February to 45 so we should see fuel moving up as well. Again total CASK will be up and ex-fuel CASK will see the pressure of the planes being grounded and the reduction in capacity as well because you saw that the number of ASKs in the first quarter decreased significantly after March. So at this point I would say that it’s a concern. Victor, just to add any further information, consider the beginning of this year’s forecast regarding jet fuel price and the exchange rate dollar-real, for this year, the full year effect, the jet fuel price in reais is 7.6% higher than it was supposed to be because of the 50% price increase on the WTI price since the beginning of this year. So that’s probably the best forecast we can give you on the jet fuel price at the moment.

Victor Mizusaki: Okay. And just my last question, why don’t we take a look on your average stage length, we can see an increase of 3%, what can we assume going forward for the remainder of the year?

Paulo Kakinoff: It varies between high and low season, but it’s something around 1,050 kilometers within new average stage length. [indiscernible] focus for year after the new network. You should remember that the new network was implemented in May 1, so it should add 60 to 70 kilometers on top of the average length you saw in the first quarter ‘16, but as I said, it varies between high and low season, because during the high leasing season we naturally have longer stage lengths.

Victor Mizusaki: Okay, thank you.

Operator: Our next question comes from Bruno Amorim of Santander. Please go ahead.

Bruno Amorim: Hi, good morning, all. So I have one question related to maintenance expenses which came down by 13% during the first quarter. I’d like to better under why this happened given that the FX has depreciated by over 30% in the same period and also to what extend is the current level of maintenance expense recurring going forward.

Thank you.

Edmar Lopes: Hi, Bruno, this Edmar. It’s just a calendar, you see this is sometimes it’s very - the number ranges from one quarter to the other, okay.

Bruno Amorim: Okay, so should we expect a freezing in the upcoming quarters?

Edmar Lopes: Yes, I would say, yes, but it will depend on the physical fleet itself, okay.

Bruno Amorim: Okay.

Thank you very much.

Operator: Our next question comes from [indiscernible] of USB. Please go ahead.

Unidentified Analyst: Hey, gentlemen, good morning. Thanks for the opportunity.

I had two questions. First if you allow me I would like to do a follow up on the international revenues. I think this an important point to understand. It seem to represent most of the user expansion in the first Q. I know you mentioned that we cannot do the routes calculation breakdown, but I imagine that this can be a - it is the best representation we have.

You mentioned that we should see international revenue going down as of second Q due to the reais appreciation, but my question is regarding the magnitude of this reduction because when you do the approximation for international routes, we have 91% increase in international routes, 55% explained by a point of sales and only 36% explained by the FX depreciation. So what’s the magnitude of this reduction you could see as of second Q and this is my first question. Thank you.

Paulo Kakinoff: Rosario, I will go back. Please do not take this as a good proxy what we have in the financial statements as a proxy for calculating the routes for domestic and international flight, you will go into mistakes, okay, because what you see in the financial statements are the point of sale, this is not what we fly, okay.

So there is a difference. But for the trends as Kaki mentioned before, we are seeing use going down both in the domestic market as well as in international markets. In the international market I would add as factors that would make the number go down. It’s lower demand, seasonality and also the because of FX. Again we should not see the same growth in the next quarters, okay, rather we should see a decrease from one quarter to the other.

Unidentified Analyst: Okay, got it. My second question is regarding the initiatives you are taking. You mentioned, if I am not mistaken, BRL300 million of annual cash flow savings. My question is regarding is this number right and does it include that interest savings as well or is it mostly lessors and other cost cutting. Thank you.

Paulo Kakinoff: Rosario, as I mentioned, it includes everything and the number we only appear if we do as acute and complete all the initiatives which at this point we are still discussing with lessors, we are still discussing with the Brazilian banks. The exchange offers are around the street, so there is still a lot of uncertainty here, but for sure we need all of them to be done and completed.

Unidentified Analyst: Okay, very clear. Thank you very much.

Operator: The next question comes from Josh Milberg of Morgan Stanley.

Please go ahead.

Josh Milberg: Good morning, everyone and thanks for the questions. Just a few doubts on your CapEx. It looks like excluding the effects of PDP inflows that you had about BRL170 million of investment in the quarter. Can you just comment on what’s behind that amount and also I think you said in the past that you expect to keep the maintenance CapEx to as little as BRL200 million on an annual basis.

So just wanted to know if that’s what you are still targeting.

Edmar Lopes: Yes, that’s what we are still targeting, but it depends on a few movements still unclear for us. The first one is where the FX will stabilize that FX - CapEx and other basis, and also as we have told the markets, we have come to an agreement with Boeing that is flexibility in terms of cash flow, but there are some conditions here and we cannot disclose them, but the number you are looking for could be higher depending on the FX, but that’s a ballpark.

Josh Milberg: Even if it’s a bit higher, how sustainable would that level be taking into account that your depreciation is well above it.

Edmar Lopes: Again depreciation also takes into account the engines, this is a different line.

It does not depend upon only the CapEx of the aircraft on a standalone basis. And again as Kaki mentioned before at this point we need to do everything, all the initiatives should be completed in order to take the company out of this crisis. That’s where we are now. We cannot say that we will keep all the CapEx levels exactly the same way that we were in the last few years.

Josh Milberg: Okay, thank you.

Operator: Our next question comes from Julia Bretz of BCP Securities. Please go ahead.

Julia Bretz: Hi, good morning. Thank you for the call. Sir, I just wanted - on CapEx, does that include the prepayments and sale leasebacks, the prepayments for Boeing, the BRL200 million net investments.

Edmar Lopes: Yes, this is - Julia, it goes on a different line. The sale leasebacks, it comes above this line, so whenever we have a transaction like this we book it a different way and everything that we are talking about - every time we are talking about CapEx, you are talking both PDPs and engine that are overhauled in a more sound manner, okay, so that’s how I would split the two lines here.

Julia Bretz: Okay, so for CapEx you are including the BRL322 million and BRL369 million for buying aircrafts?

Edmar Lopes: Sorry, would you repeat the question please?

Julia Bretz: Sure. For CapEx, are you including or excluding the advantage for acquisitions of Boeing’s aircrafts which is about BRL700 million?

Edmar Lopes: I am including, that’s part of our CapEx.

Julia Bretz: Okay, perfect.

Thank you.

Operator: The next question is a follow-up from Michael Linenberg. Please go ahead.

Michael Linenberg: Hey, thanks everyone. Just one quick one here, earlier I think Edmar you had talked about the collateral backing the new loans US$223 million that NBA did an appraisal on, can you just give us any color on what that collateral is? Is that gates or slots or engines or is it just all spare parts? What does that consist of?

Edmar Lopes: Hi, Michael, I will take this one okay.

This is a question - it’s an opportunity that we have to clarify there. We hired NBA, NBA is the well-known company that has done a lot of work to the market as for appraisal, aircraft appraisals, spare part appraisals. They came with a number of US$223 million for our spare parts which are rotables and expandable whoever is familiar with the aircraft business will know what it is. One of our most valuable assets, that’s our spare parts. First the value is linked to the value of Boeing 737-700s and 800s because they are all parts that we need to fly.

We cannot operate without them, that’s the point. We will - we need to keep them in order to fly so that’s a very important issue, so we will take care of the spare parts. And because we have a very good liquidity in the marketplace, I can assure that as for bondholders this is a very good security that we can offer, oaky, so 223 million appraisal from an external agents, it covers the 100% of principal. It has it’s the value linked to Boeing aircraft and we cannot - absolutely we cannot operate without them, so that’s where we are now for the collateral.

Paulo Kakinoff: Michael, this is really important to emphasize, once those parts as properly said, they have high liquidity their value is automatically adjusted by the 737-800 market price which has only grown since the aircraft was market introduced and what Edmar said is the most important thing.

We do need those rotables to operate the airline. So that secure is pretty much aligned with bondholders, new note expectations was the company - we make everything but not honor those notes because we cannot operate without these parts, so that’s a very, very robust and strong collateral that has been offered to the new notes.

Michael Linenberg: Great. Thanks, Kaki, thanks, Edmar.

Operator: [Operator Instructions] There are no further questions at this time.

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.

Paulo Kakinoff: I’d just like to thank you all for the attention.

It’s a very important conference call. Also we had the opportunity to explain the most important information on our restructuring plan and the exchange offers and mainly on the challenging scenario ahead. I would like kindly advice to clarify further questions in case any exists around this day, our team is fully available. Thank you very much. Have a very nice

day
Operator: That concludes today’s GOL Airlines conference all.

Thank you very much for your participation and have a nice day.