GOL Accelerates Fleet Renewal and Balance Sheet Deleveraging with NG Transactions

GOL Linhas Aéreas Inteligentes S.A. (NYSE: GOL and B3: GOLL4), Brazil’s largest domestic airline, announced today the execution of sale and leaseback agreements of 11 Boeing 737 Next Generation (NG) aircraft with Carlyle Aviation. This will further accelerate GOL’s fleet renewal and balance sheet deleveraging. GOL intends to replace these NGs with Boeing 737 MAX-8 aircraft over the next few years.

Value creation

Since 2005, when GOL closed its first order for 80 Boeing 737s, the Company has realized over R$1.5 billion of gains on its aircraft portfolio. The 2005 order was comprised of 40 aircraft financed with a U.S. Ex-Im Bank guarantee, and 40 aircraft financed via sale and leaseback transactions. All of GOL’s aircraft have been sold to unrelated parties, with gains, and all cash proceeds have been used to pay for aircraft re-deliveries and reduce secured and unsecured debt. 

As GOL transitions its fleet to approximately 50% Boeing MAX aircraft by 2025, it expects to create over R$4.0 billion of value for all GOL shareholders, comprised of over R$2.0 billion of equity value in aircraft assets and over R$2.0 billion of increased income from greater revenue productivity and lower fuel burn.

“GOL’s sophisticated capacity discipline enables us to operate at a lower cost than other less efficient airlines, and the sale of these 11 NGs reinforces the flexibility of our fleet plan,” said Celso Ferrer, GOL’s Vice President of Operations.

Balance sheet deleveraging

The sale of these 11 aircraft will reduce GOL’s net debt by approximately R$500 million, comprised of a R$130 million reduction in finance lease debt and a R$370 million increase in cash liquidity.

Subsequently, the Company plans to use a portion of these proceeds to call the outstanding amount of its 8.875% Senior Notes due in 2022.  The asset management income and reduction in interest expense will contribute over R$420 million to the Company’s 2020 earnings and improve GOL’s credit ratios by reducing the net debt/EBITDA ratio by 0.2x and increasing the EBITDA/net interest expense ratio by 0.5x.

“GOL accelerated its fleet renewal and modernization plan in light of favorable market conditions for transactions of Boeing 737 NGs,” said Richard Lark, GOL’s Chief Financial Officer. “Our track record of consistent gains obtained from our aircraft portfolio has provided continuous value creation for all of GOL’s shareholders”.

Capacity management

The accelerated fleet renewal will not alter GOL’s planned capacity, as these aircraft will be returned simultaneously with the receipt of 737 MAX-8 aircraft under its order with Boeing.

GOL is committed to upgauging its fleet to further drive operating efficiency. By 2025, approximately 50% of the fleet will be comprised of 737 MAXs. Over the next five years, the transition to the MAX is expected to increase productivity by over 20% and reduce fuel consumption by approximately 15%.

“We believe the Boeing 737 is the best aircraft for the Brazilian market due to its ability to achieve over 13 hours of aircraft utilization in high density markets. This supports our highly flexible capacity management model, as well as providing high liquidity and market value consistency in our fleet,” added Mr. Ferrer.