As filed with the Securities and Exchange Commission on February 28, 2007May 7, 2009

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

OR

OR

OR

Commission file number 001-32221

Gol Linhas Aéreas Inteligentes S.A.

(Exact name of Registrant as specified in its charter)

Gol Intelligent Airlines Inc.

(Translation of Registrant’s name into English)

The Federative Republic of Brazil

(Jurisdiction of incorporation or organization)
RuaPraça Comte Linneu Gomes, de Carvalho 1629S/N Portaria 3,
04547-006Jd. Aeroporto
04626-020 São Paulo, São Paulo
Federative Republic of Brazil

(+55 11 3169 6800)2128-4000)
(Address, including zip code and telephone number, including area code, of registrant’s principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

* Not for trading purposes, but only in connection with the trading on the New York Stock Exchange of American Depositary Shares representing those preferred shares.

Securities registered or to be registered pursuant to Section 12(g) of the Act:
None

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
7.50% Senior Notes Due 2017

None

The number of outstanding shares of each class of stock of Gol Linhas Aéreas Inteligentes S.A. as of December 31, 2006:2008:

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x¨    No  ¨x

If this is an annual or transition report, indicate by check mark if the registrant is not required to file pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934    Yes  ¨    No  x

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Indicate by check mark which financial statement item the Registrant has elected to follow.

Item 17  ¨    Item 18  x

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ¨    No  x

i

Table of Contents

ii

Table of Contents

INTRODUCTION

     In this annual report, we use the terms “the Registrant” to refer to Gol Linhas Aéreas Inteligentes S.A., “Gol” to refer to Gol Transportes Aéreos S.A. and “we,” “us” and “our” to refer to the Registrant and Gol together, except where the context requires otherwise. References to “preferred shares” and “ADSs” refer to non-voting preferred shares of the Registrant and American depositary shares representing those preferred shares, respectively, except where the context requires otherwise.

     The phrase “Brazilian government” refers to the federal government of the Federative Republic of Brazil, and the term “Central Bank” refers to the Banco Central do Brasil, or the Central Bank of Brazil. The term “Brazil” refers to the Federative Republic of Brazil. The terms “U.S. dollar” and “U.S. dollars” and the symbol “US$” refer to the legal currency of the United States. The terms “real” and “reais” and the symbol “R$” refer to the legal currency of Brazil. “U.S. GAAP” refers to generally accepted accounting principles in the United States, and “Brazilian GAAP” refers to generally accepted accounting principles in Brazil, which are accounting principles derived from Law No. 6,404 of December 15, 1976, as amended and supplemented, or the Brazilian corporation law and the rules of the CVM.

This annual report contains terms relating to operating performance within the airline industry that are defined as follows:

• “Revenue passengers” represents the total number of paying passengers flown on all flight segments.
• “Revenue passenger kilometers” represents the numbers of kilometers flown by revenue passengers.
• “Available seat kilometers” represents the aircraft seating capacity multiplied by the number of kilometers the seats are flown.
• “Load factor” represents the percentage of aircraft seating capacity that is actually utilized (calculated by dividing revenue passenger kilometers by available seat kilometers).
• “Breakeven load factor” is the passenger load factor that will result in passenger revenues being equal to operating expenses.
• “Aircraft utilization” represents the average number of block hours operated per day per aircraft for the total aircraft fleet.
• “Block hours” refers to the elapsed time between an aircraft’s leaving an airport gate and arriving at an airport gate.
• “Yield per passenger kilometer” represents the average amount one passenger pays to fly one kilometer.
• “Passenger revenue per available seat kilometer” represents passenger revenue divided by available seat kilometers.
• “Operating revenue per available seat kilometer” represents operating revenues divided by available seat kilometers.
• “Average stage length” represents the average number of kilometers flown per flight.
• “Operating expense per available seat kilometer” represents operating expenses divided by available seat kilometers.

1

Table of Contents

PRESENTATION OF FINANCIAL AND OTHER DATA

      We make statements in this annual report about our competitive position and market share in, and the market size of, the Brazilian and South Americaninternational airline industry. We have made these statements on the basis of statistics and other information from third-party sources, governmental agencies or industry or general publications that we believe are reliable. Although we have no reason to believe any of this information or these reports are inaccurate in any material respect, we have not independently verified the competitive position, market share and market size or market growth data provided by third parties or by industry or general publications. All industry and market data contained in this annual report is based upon the latest publicly available information as of the date of this annual report.

     Certain figures included in this annual report have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.

     The consolidated financial statements included in this annual report have been prepared in accordance with U.S. GAAPInternational Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) inreaisreais.and reflect our financial condition and results of operations as if the Registrant had been incorporated and held all of the capital stock of Gol, with the exception of five common shares of Gol held by members of Gol’s board of directors for eligibility purposes, since January 1, 2001. See “Item 10B. Memorandum of Articles of Association—Description of Capital Stock—General.” We publish our consolidated financial statements in Brazil in accordance with Brazilian GAAP, which differ in certain significant respects from U.S. GAAP.

     We have translated some of therealamounts contained in this annual report into U.S. dollars. The rate used to translate such amounts in respect of the year ended December 31, 20062008 was R$2.13802.337 to US$1.00, which was the commercial rate for the purchase of U.S. dollars in effect as of December 31, 2006,2008, as reported by the Central Bank. The U.S. dollar equivalent information presented in this annual report is provided solely for the convenience of investors and should not be construed as implying that therealamounts represent, or could have been or could be converted into, U.S. dollars at such rates or at any other rate. See “Exchange Rates” for more detailed information regarding the translation ofreaisinto U.S. dollars.

2     In this annual report, we use the terms “the Registrant” to refer to Gol Linhas Aéreas Inteligentes S.A., and “Gol”, “Company”, “we,” “us” and “our” to refer to the Registrant and its consolidated subsidiaries together, except where the context requires otherwise. The term VRG refers to VRG Linhas Aéreas S.A., a wholly owned subsidiary of the Registrant. References to “preferred shares” and “ADSs” refer to non-voting preferred shares of the Registrant and American depositary shares representing those preferred shares, respectively, except where the context requires otherwise.

     The phrase “Brazilian government” refers to the federal government of the Federative Republic of Brazil, and the term “Central Bank” refers to the Banco Central do Brasil, or the Central Bank of Brazil. The term “Brazil” refers to the Federative Republic of Brazil. The terms “U.S. dollar” and “U.S. dollars” and the symbol “US$” refer to the legal currency of the United States. The terms “real” and “reais” and the symbol “R$” refer to the legal currency of Brazil. “IFRS” refers to the international financial reporting standards issued by the International Accounting Standards Board (IASB). “U.S. GAAP” refers to generally accepted accounting principles in the United States, and “Brazilian GAAP” refers to generally accepted accounting principles in Brazil, which are accounting principles derived from Law No. 6,404 of December 15, 1976, as amended and supplemented, or the Brazilian corporation law and the rules of the CVM.

     This annual report contains terms relating to operating performance within the airline industry that are defined as follows:

• “Revenue passengers” represents the total number of paying passengers flown on all flight segments.
  
  
• “Revenue passenger kilometers” represents the numbers of kilometers flown by revenue passengers.
  
  
• “Available seat kilometers” represents the aircraft seating capacity multiplied by the number of kilometers the seats are flown.
  
  
• “Load factor” represents the percentage of aircraft seating capacity that is actually utilized (calculated by dividing revenue passenger kilometers by available seat kilometers).
  
  
• “Breakeven load factor” is the passenger load factor that will result in passenger revenues being equal to operating expenses.

3

Table of Contents

• “Aircraft utilization” represents the average number of block hours operated per day per aircraft for the total aircraft fleet.
  
  
• “Block hours” refers to the elapsed time between an aircraft’s leaving an airport gate and arriving at an airport gate.
  
  
• “Yield per passenger kilometer” represents the average amount one passenger pays to fly one kilometer.
  
  
• “Passenger revenue per available seat kilometer” represents passenger revenue divided by available seat kilometers.
  
  
• “Operating revenue per available seat kilometer” represents operating revenues divided by available seat kilometers.
  
  
• “Average stage length” represents the average number of kilometers flown per flight.
  
  
•  “Operating expense per available seat kilometer” represents operating expenses divided by available seat kilometers.

SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS

     This annual report includes forward-looking statements, principally under the captions “Risk Factors,” “Operating and Financial Review and Prospects” and “Business Overview.” We have based these forward-looking statements largely on our current beliefs, expectations and projections about future events and financial trends affecting our business. Many important factors, in addition to those discussed elsewhere in this annual report, could cause our actual results to differ substantially from those anticipated in our forward-looking statements, including, among other things:

• general economic, political and business conditions in Brazil and in other South American markets we serve;
  
  
• the effects of the global financial markets and economic crisis;
  
  
• management’s expectations and estimates concerning our future financial performance and financing plans and programs;
  
  
• our level of fixed obligations;
  
  
• our capital expenditure plans;
  
  
• our ability to obtain financing on acceptable terms;
  
  
• inflation and fluctuations in the exchange rate of thereal;real;
  
  
• existing and future governmental regulations, including air traffic capacity controls;
  
  
• increases in fuel costs, maintenance costs and insurance premiums;
  
  
• changes in market prices, customer demand and preferences and competitive conditions;
  
  
• cyclical and seasonal fluctuations in our operating results;
  
  
• defects or mechanical problems with our aircraft;
  
  
• our ability to successfully implement our growth strategy;
  
  
• developments in the Brazilian civil aviation infrastructure, including air traffic control, airspace and airport infrastructure, and

4

Table of Contents

• the risk factors discussed under “Risk Factors.”

     The words “believe,” “may,” “will,” “aim,” “estimate,” “continue,” “anticipate,” “intend,” “expect” and similar words are intended to identify forward-looking statements. Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities, and the effects of future regulation and the effects of competition. Forward-looking statements speak only as of the date they were made, and we undertake no obligation to update publicly or to revise any forward-looking statements after we distribute this annual report because of new information, future events or other factors. In light of the risks and uncertainties described above, the forward-looking events and circumstances discussed in this annual report might not occur and are not guarantees of future performance.

3

Table of Contents

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERSADVISORS

     Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

     Not applicable.

ITEM 3. KEY INFORMATION

A. Selected Financial Data

      We changed our financial reporting from U.S. GAAP to IFRS, beginning with the financial statements as of and for the year ended December 31, 2008. Therefore, we present in this section the following summary financial data:

• Summary financial and operating data derived from our audited financial statements as of and for the year ended December 31, 2008 and 2007, included herein and prepared in accordance with IFRS; and
  
  
• Summary financial data derived from our audited financial statements as of and for the years ended December 31, 2007, 2006, 2005 and 2004, not included herein and prepared in accordance with U.S.GAAP.

     For a reconciliation of profit (loss) and shareholders’ equity of our audited financial statements in U.S. GAAP to our audited financial statements in IFRS at January 1, 2007 and December 31, 2007 and for the year then ended, see note 23 under the caption "Reconciliation between USGAAP and IFRS as of and for the year ended December 31, 2007" to our financial statements included in this annual report. See also Item 5 for information on certain differences between U.S. GAAP and IFRS and related critical accounting policies.

     The summary financial data prepared in accordance with IFRS and U.S. GAAP is not comparable.

The following table presentstables present summary historical consolidated financial and operating data for us for each of the periods indicated. You should read this information in conjunction with our consolidated financial statements and related notes, and the information under “—Selected Financial Data” and “Item 5. Operating and Financial Review and Prospects.”

     The consolidated financial statements and related notes included elsewhere in this annual report have been prepared in accordance with U.S. GAAP and reflect our financial condition and results of operations as if the Registrant had been incorporated and held all of the capital stock of Gol since January 1, 2001, except for five common shares of Gol held by members of Gol’s board of directors for eligibility purposes.

Solely for the convenience of the reader,real amounts as of and for the year ended December 31, 20062008 have been translated into U.S. dollars at the commercial market rate in effect as of December 31, 20062008 as reported by the Brazilian Central Bank of R$2.13802.337 to US$1.00.

IFRS Summary Financial and Operating Data

45

6

Table of Contents

Table of Contents

7

Table of Contents

8

Table of Contents

Exchange Rates

Before March 4, 2005, there were two principal legal     The Brazilian foreign exchange markets in Brazil:

• the commercial rate exchange market; and
• the floating rate exchange market.

     Most trade and financial foreign-exchange transactions were carried out on the commercial rate exchange market. These transactions includedsystem allows the purchase orand sale of sharesforeign currency and the international transfer ofreaisby any person or paymentlegal entity, regardless of dividends or interestthe amount, subject to certain regulatory procedures. The Brazilian currency has during the last decades experienced frequent and substantial variations in relation to the U.S. dollar and other foreign currencies. Between 2000 and 2002, the real depreciated significantly against the U.S. dollar, reaching an exchange rate of R$3.53 per US$1.00 at the end of 2002. Between 2003 and mid-2008, thereal appreciated significantly against the U.S. dollar due to the stabilization of the macro-economic environment and a strong increase in foreign investment in Brazil, with respect to shares. Foreign currencies could only be purchasedthe exchange rate reaching R$1.56 per US$1.00 in August 2008. In the context of the crisis in the commercial exchange market through a Brazilian bank authorized to operate in these markets. In bothglobal financial markets rates were freely negotiated.

     In March 2005, the National Monetary Council, dated March 4, 2005, consolidated the foreign exchange markets into one single foreign exchange market. All foreign exchange transactions are now carried out through institutions authorized to operate in the consolidated market and are subject to registration with the Central Bank’s electronic registration system. Foreign exchange rates continue to be freely negotiated, but may be influenced by Central Bank intervention.

     Since 1999, the Central Bank has allowedsince mid-2008, thereal/ depreciated 31.9% against the U.S. dollar over the year 2008, reaching R$2.34 per US$1.00 on December 31, 2008. On April 30, 2009, the exchange rate to float freely, and during that period, thereal/U.S. dollar exchange rate has fluctuated considerably. In the past, thewas R$2.18 per US$1.00. The Central Bank has intervened occasionally to control unstable movementsinstability in foreign exchange rates. We cannot predict whether the Central Bank or the Brazilian government will continue to letallow thereal to float freely or will intervene in the exchange rate market through a currency band system or otherwise. Therealmay depreciate or appreciate against the U.S. dollar substantially in the future. For more information on these risks, see “Item 3D. Risk Factors—Risks Relating to Brazil.”substantially.

     The following tables set forthpresent the commercial selling rate, expressed inreaisper U.S. dollar (R$/US$), for the periods indicated.

				Average for
		Month-End		Month(2)		Low		High
		(reaisper U.S. dollar)
Month
September 2008		1.914		1.800		1.645		1.956
October 2008		2.115		2.157		1.921		2.392
November 2008		2.333		2.273		2.121		2.428
December 2008		2.337		2.266		2.337		2.500
January 2009		2.316		2.394		2.189		2.380
February 2009		2.378		2.307		2.245		2.392
March 2009		2.315		2.314		2.422		2.237
April 2009		2.178		2.205		2.169		2.289

_____________
Source: Central Bank
Notes:—
(1) Represents the average of the exchange rates on the last day of each month during the period.

6

Table
(2) Average of Contents

B. Capitalization and Indebtedness

     Not applicable.

C. Reasons for the Offer and Use of Proceeds

     Not applicable.

9

Table of Contents

D. Risk Factors

     An investment in the ADSs or our preferred shares involves a high degree of risk. You should carefully consider the risks described below before making an investment decision .decision. Our business, financial condition and results of operations could be materially and adversely affected by any of these risks. The trading price of the ADSs could decline due to any of these risks or other factors, and you may lose all or part of your investment. The risks described below are those that we currently believe may materially affect us.

Risks Relating to Brazil

     The Brazilian government has exercised, and continues to exercise, significant influence over the Brazilian economy. This involvement, as well as Brazilian political and economic conditions, could adversely affect our business and the trading price of our ADSs and our preferred shares.

     The Brazilian government frequently intervenes in the Brazilian economy and occasionally makes significant changes in policy and regulations. The Brazilian government’s actions to control inflation and other policies and regulations have often involved, among other measures, increases in interest rates, changes in tax policies, price controls, currency devaluations, capital controls and limits on imports. Our business, financial condition and results of operations may be adversely affected by changes in policy or regulations at the federal, state or municipal levels involving or affecting factors such as:

• interest rates;
  
  
• currency fluctuations;
  
  
• inflation;
  
  
• liquidity of domestic capital and lending markets;
  
  
• tax policies;
  
  
• exchange rates and exchange controls and restrictions on remittances abroad, such as those that were briefly imposed in 1989 and early 1990; and
  
  
• other political, social and economic developments in or affecting Brazil.

     Uncertainty over whether the Brazilian government will implement changes in policies or regulations affecting these or other factors may contribute to heightened volatility in the Brazilian securities markets and of securities issued abroad by Brazilian companies.

     Exchange rate instability may adversely affect our financial condition and results of operations and the market price of the ADSs and our preferred shares.

     As a result of inflationary pressures, among other factors, theThe Brazilian currency has devalued periodically during the last four decades. Throughout this period, the Brazilian government has implemented various economic plansdecades experienced frequent and utilized a number of exchange rate policies, including sudden devaluations, periodic mini-devaluations during which the frequency of adjustments has ranged from dailysubstantial variations in relation to monthly, floating exchange rate systems, exchange controls and dual exchange rate markets. Although over long periods depreciation of the Brazilian currency generally has correlated with the rate of inflation in Brazil, devaluation over shorter periods has resulted in significant fluctuations in the exchange rate between the Brazilian currency and the U.S. dollar and other foreign currencies. Between 2000 and 2002, the real depreciated significantly against the U.S. dollar, reaching an exchange rate of R$3.53 per US$1.00 at the end of 2002. Between 2003 and mid-2008, thereal appreciated significantly against the U.S. dollar due to the stabilization of the macro-economic environment and a strong increase in foreign investment in Brazil, with the exchange rate reaching R$1.56 per US$1.00 in August 2008. In the context of the crisis in the global financial markets since mid-2008, thereal depreciated 31.9% against the U.S. dollar over the year 2008 and reached R$2.337 per US$1.00 at year end 2008. On April 30, 2009, the exchange rate was R$2.18 per US$1.00.

7     Depreciation of thereal against the U.S. dollar could create inflationary pressures in Brazil and cause increases in interest rates, which could negatively affect the growth of the Brazilian economy as a whole and harm our financial condition and results of operations, may curtail access to foreign financial markets and may prompt government intervention, including recessionary governmental policies. Depreciation of thereal against the U.S. dollar can also, as in the context of the current economic slowdown, lead to decreased consumer spending, deflationary pressures and reduced growth of the economy as a whole. On the other hand, appreciation of thereal relative to the U.S. dollar and other foreign currencies could lead to a deterioration of the Brazilian foreign exchange current accounts, as well as dampen export-driven growth. Depending on the circumstances, either depreciation or appreciation of thereal could materially and adversely affect the growth of the Brazilian economy and our business, financial condition and results of operations.

10

Table of Contents

     Therealdepreciated against the U.S. dollar by 9.3% in 2000 and by 18.7% in 2001. In 2002, therealdepreciated 52.3% against the U.S. dollar, due in part to political uncertainty surrounding the Brazilian presidential elections and the global economic slowdown. Although therealappreciated 18.2%, 8.1%, 11.8% and 8.7% against the U.S. dollar in 2003, 2004, 2005 and 2006, respectively, no assurance can be given that therealwill not depreciate or be devalued against the U.S. dollar again. On February 27, 2007, the U.S. dollar/realexchange rate was R$2.110 per US$1.00. See “¯Exchange Rates.”

     Substantially all of our passenger revenue and cargo revenue and temporary investments are denominated inreais, and a significant part of our operating expenses, such as fuel, aircraft and engine maintenance services, aircraft rent payments and aircraft insurance, are denominated in, or linked to, U.S. dollars. We maintain U.S. dollar-denominated deposits and maintenance reserve deposits under the terms of some of our aircraft operating leases. For the year ended December 31, 2006, 49%2008, 57% of our operating expenses were either denominated in or linked to the U.S. dollar. In addition, the purchase price of the 76 737-80094 Boeing 737 Next Generation aircraft for which currently we havehad placed firm purchase orders as of December 31, 2008 and the 34 737-80036 Boeing 737 Next Generation aircraft for which we currently have purchase options are denominated in U.S. dollars. Since 2006, a portionAt the end of 2008, 96.1% of our indebtedness iswas denominated in U.S. dollars. While in the past we have generally adjusted our fares in response to, and to alleviate the effect of, depreciationsdepreciation of therealand increases in the price of jet fuel (which is priced in U.S. dollars) and have entered into hedging arrangements to protect us against the effects of such developments, there can be no assurance we will be able to continue to do so. To the extent we are unable to adjust our fares or effectively hedge against any such depreciation or increases in jet fuel prices,developments, this may lead to a decrease in our profit margins or to operating losses caused by increases in U.S. dollar-denominated costs, increases in interest expense or exchange losses on unhedged fixed obligations and indebtedness denominated in foreign currency. We had total U.S. dollar-denominated future operating lease payment obligations of US$911.44,675.4 million (including long-term vendor payables) and US$715.6R$3,396.3 million other U.S. dollar-denominated indebtedness at December 31, 2006.2008. We may incur substantial additional substantial amounts of U.S. dollar-denominated operating lease or financial obligations and U.S. dollar-denominated indebtedness and be subject to fuel cost increases linked to the U.S. dollar. At December 31, 2006,2008, we had a short-term hedging program in place forto cover part of our U.S. dollar-denominated operating lease obligations, our U.S. dollar-linked jet fuel expenses and our interest rate exposure.

     Historically, depreciationsDepreciation of therealrelative to the U.S. dollar have also created additional inflationary pressures in Brazil, and future depreciations could negatively affect us. Depreciations generally curtail access to foreign financial markets and may prompt government intervention, including recessionary governmental policies. Depreciations also reducereduces the U.S. dollar value of distributions and dividends on the ADSs and the U.S. dollar equivalent of the market price of our preferred shares and, as a result, the ADSs.

     Inflation and governmentGovernment efforts to combat inflation may contribute significantly to economic uncertainty in Brazilhinder the growth of the Brazilian economy and could harm our business and the market value of the ADSs and our preferred shares.business.

     Brazil has in the past experienced extremely high rates of inflation. More recently, Brazil’s annualinflation and has therefore followed monetary policies that have resulted in one of the highest real interest rates in the world. Between 2004 and 2008, the base interest rate of inflation was 25.3%(“SELIC”) in 2002, 8.7% in 2003, 12.4% in 2004, 1.2% in 2005Brazil varied between 19.25% p.a. and 3.8% in 2006 (as measured by¥ndice Geral de Preços—Mercado, or the IGP-M).11.25% p.a. Inflation and certain government actions takenthe Brazilian government’s measures to combat inflation,fight it, principally through the Central Bank, have in the past had and may have significant negative effects on the Brazilian economy. Actions taken to curb inflation, coupledeconomy and our business. Tight monetary policies with public speculation about possible future governmental actions, have contributed to economic uncertainty in Brazilhigh interest rates may restrict Brazil’s growth and heightened volatility in the Brazilian securities market. Future Brazilianavailability of credit. Conversely, more lenient government actions, includingand Central Bank policies and interest rate decreases intervention in the foreign exchange market and actions to adjust or fix the value of therealmay trigger increases in inflation. If Brazil again experiences high inflation, and, consequently, growth volatility and the need for sudden and significant interest rate increases, which could negatively affect our business. In addition, we may not be able to adjust the fares we charge our customers to offset the effects of inflation on our cost structure. Inflationary pressures may also hinder our ability to access foreign financial markets or lead to government policies to combat inflation that could harm our business or adversely affect the market value of our preferred shares and, as a result, the ADSs.

     Developments and the perception of risk in other countries, especiallyincluding the United States and emerging market countries, may adversely affect the market price of Brazilian securities, including the ADSs and our preferred shares.

     The market value of securities of Brazilian companiesissuers is affected to varying degrees by economic and market conditions in other countries, including other Latin Americanthe United States, the European Union and emerging market countries. Although economic conditions in suchthose countries may differ significantly from economic conditions in Brazil, investors’investor’s reactions to developments in these other countries may have an adverse effect on the market value of securities of Brazilian issuers. Crises in otherthe United States, the European Union or emerging market countries may diminish investor interest in securities of Brazilian issuers, including ours. This could adversely affect the trading price of the ADSs or our preferred shares, and could also make it more difficult for us to access the capital markets and finance our operations in the future on acceptable terms or at all.

8     The global financial crisis has had significant consequences, including in Brazil, such as stock and credit market volatility, unavailability of credit, higher interest rates, a general economic slowdown, volatile exchange rates and inflationary pressure, among others, which may, directly or indirectly, adversely affect us and the market price of Brazilian securities, including the ADSs and our preferred shares.

11

Table of Contents

Risks Relating to Us and the Brazilian Airline Industry

     Changes to the Brazilian civil aviation regulatory framework and air traffic control may adversely affect our business and results of operations.

     TheBrazilian aviation supervisory authorities monitor and influence the developments in Brazil’s airline market. For example, the predecessor of the National Civil Aviation Agency (Agência Nacional de Aviação Civil, or “ANAC”), an independent regulatory agency linked, but not subordinated, to the Ministry of Defense was created in 2005 and operates as an independent agency for an indefinite term. ANAC principally has the authority to: (i) regulate, inspect and supervise services rendered by airlines operating in Brazil, (ii) grant concessions, permits and authorizations for air transport operations and airport infrastructure services, (iii) represent the Brazilian government before international civil aviation organizations, (iv) control, register and inspect civil aircraft, and (v) ensure that air transportation services are provided under free market principles.

     As ANAC commenced its activities and began to exercise its powers, the Civil Aviation DepartmentDAC (Departamento de Aviação CivilCivíl, or “DAC”), an organization that was subordinated to the Air Force Command of the Ministry of Defense, and responsible prior to ANAC for coordinating and supervising Brazilian civil aviation (coordinating and supervising air transportation services and aviation and ground infrastructure), transferred all its responsibilities and operations to the new agency and was extinguished. ANAC did not assume any of the current responsibilities of the Civil Aviation National Council (Conselho de Aviação Civilor “CONAC”), which will continue to set guidelines for regulation, control the development, and generally establish policy for the air transportation sector as a whole.

     The importation of any new aircraft is subject to approval by the Commission for Coordination of Civil Air Transportation (Comissão de Coordenação de Transporte Aéreo Civil, or “COTAC”), a sub-department of ANAC. In recent years, the DAC and since 2006 the ANAC have actively monitored developments in Brazil’s airline market and have taken certain restrictive measures that have helped to restore greater stability to the industry. For example, the ANAChad addressed overcapacity by establishing stricter criteria that must be met before new routes or additional flight frequencies arewere awarded. Our growth plans contemplate expanding into new markets, increasing flight frequenciesConversely, the ANAC has more recently pursued policies to loosen the market structures and operating considerably more thanincrease competition. The policies of the ANAC and other aviation supervisory authorities may negatively affect our existing fleet. As such,operations. For example, in 2008, ANAC enacted a regulation providing that the minimal ground time for aircraft between landing and take-off must be 40 minutes at the International Airport of São Paulo in Guarulhos, the international airport of Rio de Janeiro Galeão and at the Brasília airports, and 30 minutes at all other Brazilian airports. This regulation negatively affected our ability to grow generally depends on receiving the required authorizations from ANAC and COTAC. We cannot assure you that future authorizations will be granted to us. If the Brazilian civil aviation framework changes in the future, or ANAC implements increased restrictions, our growth plans and our business and results of operations could be adversely affected.increase aircraft utilization by minimizing turnaround times between flights.

     Several legislative initiatives have been taken by the National Congress, including the preparation of a draft bill of law that would replace Law No. 7,565 of December 19, 1986, the current Brazilian Aeronautical Code (Código Brasileiro de Aeronáutica). In general, this draft bill deals with matters related to civil aviation, including airport concessions, consumer protection, increased foreign shareholder participation in airlines, limitation of airlines’ civilairlines’civil liability, compulsory insurance and fines.

     No assurance can This draft bill is still under discussion in theHouse of Representatives and, if approved, must be given that these or othersubmitted to the Federal Senate, for new approval, before being sent to the government for presidential approval. If the Brazilian civil aviation framework changes in the Brazilianfuture, or ANAC implements increased restrictions, our growth plans and our business and results of operations could be adversely affected.

     The airline industry regulatoryis particularly sensitive to changes in economic conditions and continued negative economic conditions would likely continue to negatively impact our results of operations and our ability to obtain financing on acceptable terms.

     Our operations and the airline industry in general are particularly sensitive to changes in economic conditions. Unfavorable general economic conditions, such as higher unemployment rates, a constrained credit market and increased business operating costs, can reduce spending for both leisure and business travel. Unfavorable economic conditions can also impact our ability to raise fares to counteract increased fuel, labor, and other costs. An increasingly unfavorable economic environment will notwould likely negatively impact our results of operations. We continue to be cautious of current domestic economic conditions.

     Factors such as continued unfavorable economic conditions, a significant decline in demand for air travel, or continued instability of the credit and capital markets could result in pressure on our borrowing costs, operating results and financial condition and would affect our growth and investment plans. These factors could also negatively impact our ability to obtain financing on acceptable terms and our liquidity generally.

Technical and operational problems in the Brazilian civil aviation infrastructure, including air traffic control systems, airspace and airport infrastructure may have a material adverse effect on our business, andour results of operations.operations and our strategy.

     Technical and operational problemsWe are dependent on improvements in the coordination and development of Brazilian air trafficairspace control systems since the last quarter of 2006 have led to extensive flight delays, higher than usual flight cancellations and airport congestionsinfrastructure, which, mainly due to the large growth in civil aviation in Brazil in recent years, require substantial improvements and negatively affected our punctualitygovernment investments. If the measures taken and operating results. The Brazilian government and air traffic control authorities have taken measures to improve the Brazilian air traffic control systems, but if the changes proposed and measures takeninvestments made by the Brazilian government and regulatory authorities do not prove successful, thesesufficient or effective, air traffic control, airspace management and runway safety relatedsector coordination-related difficulties might reoccur or worsen, which might have a material adverse effect on our business, our results of operations and our growth strategy.

     We operate in a highly competitive industry.

     We face intense competition on our domestic routes in Brazil from existing scheduled airlines and charter airlines. In addition, the Brazilian aviation authorities have the flexibility to permitairlines and new entrants in our market. In addition to competition among scheduled airline companies and charter operators, the Brazilian airline industry faces competition from ground transportation alternatives, such as interstate buses. We may also face increased competition in the future.from international airlines as they introduce and expand flights between Brazil and other South American destinations.

912

Table of Contents

     Our existing competitors or new entrants into the marketmarkets in which we operate may undercut our fares, increase capacity on their routes in an effort to increase their market share or attempt to conduct low-fare or low-cost airline operations of their own. In any such an event, we cannot assure you that our level of fares or passenger traffic would not be adversely affected. We may also face competition from international airlines as we introduceaffected and expand flights between Brazil and other South American destinations.

     In addition to competition among scheduled airline companies and charter operators, the Brazilian airline industry faces competition from ground transportation alternatives, such as interstate buses. Such competition maywould not have an adverse impact on our business and results of operations.

     A failure to successfully implement our growth strategy would harm the market value of the ADSs and our preferred shares.

     Our growth strategy involves expandingcapitalizing on our strong market position in Brazil and Latina America, with the highest number of markets we serve and increasingroutes at the frequency of flights to the markets we currently serve. Increasing the number of markets we servemost important airports in Brazil, our consolidated flight network and our flight frequencies depend onSmiles mileage program, to increase our ability to identifypenetration of all traveler segments.

     Slots at Congonhas Airport in São Paulo, the appropriate geographic markets upon which to focus and to gain suitablemost important airport access and route approval in these markets. There can be no assurance that the new markets we enter will provide passenger traffic that is sufficient to makefor our operations, in those new markets profitable.

     Two of theare fully utilized. The Santos-Dumont airport facilities from which we operate, Santos Dumont in Rio de Janeiro, Congonhas ina highly utilized airport with half-hourly shuttle flights between São Paulo have limited landing slots available and passenger processing is at or near maximum capacity. Four ofRio de Janeiro, has certain slot restrictions. Several other Brazilian airports, for example the airports from which we operate, Juscelino Kubitschek in Brasília Santos Dumont, Congonhas, GuarulhosInternational Airport and São Paulo International Airport in Guarulhos, are subject to slot restrictions limitinghave limited the number of landings and take-offsslots per day due to infrastructural limitations at these airports and when they can be made.airports. Any condition that would prevent or delay our access to airports or routes that will beare vital to our growth strategy, including the ability to process more passengers or the imposition of flight capacity restrictions or our inability to maintain our existing slots, and obtain additional slots, inat the Juscelino Kubitschek, Santos Dumont,Santos-Dumont and Congonhas Guarulhos airports, could constrain the expansion ofmaterially adversely affect our operations. In addition, we cannot assure that any investments will be made by the Brazilian government in the Brazilian aviation infrastructure to permit a capacity increase at busy airports and consequently additional concessions for new slots to airlines.

     In addition,     We may be subject to increased litigation risks related to the introduction and expansionoperations of flights between Brazil and other destinations outsideVarig S.A.

     Even though the Brazilian bankruptcy laws protect us from any risks related to the legal succession of Brazil requiresVarig S.A., the availabilitycompany from which, in the context of flight capacity under, and compliance with,its bankruptcy proceeding, we bought certain assets for the criteria set forth in bilateral treaties governing cross-border air travel that have been negotiated between Brazil and other South American countries. To the extent that there is no available capacity orcreation of VRG, we cannot comply withforesee the criteria containednumber and amount of contingencies relating to lawsuits making claims related to that succession. After our acquisition of VRG, we experienced a significant increase in legal proceedings, especially proceedings related to labor claims of Varig S.A. We cannot foresee the outcome of these treaties, our plans to introduceproceedings and the amounts of any additional flights between Brazil and other destinations outside of Brazil could be constrained. In addition, our plans to further expand our operations into other South American countries could be adversely affected by political, economic and social conditions in those countries.

     The expansion of our business will also require additional skilled personnel, equipment and facilities. An inability to hire and retain skilled personnel or secure the required equipment and facilities efficiently and cost-effectivelyprobable disbursements, which may adversely affect our ability to execute our growth strategy. Expansionconsolidated operating margins and results of our markets and flight frequencies may also strain our existing management resources and operational, financial and management information systems to the point that they may no longer be adequate to support our operations, requiring us to make significant expenditures in these areas. In light of these factors, we cannot assure you that we will be able to successfully establish new markets or expand our existing markets and operations, and our failure to do so would harm our business and the value of the ADSs and our preferred shares.operations.

     We have significant fixedrecurring aircraft lease costs, and we will incur significantly more fixed costs that could hinder our ability to meet our strategic goals.

     We have significant fixed costs, relating primarily to operating leases for our aircraft and engines, of which leases for four115 aircraft have floating-rate rent payments based on LIBOR or U.S. interest rates. Currently,As of December 31, 2008, we havehad commitments of approximately US$11.5R$15.8 billion to purchase 7694 additional Boeing 737-800 Next Generation aircraft, based on aircraft list prices, although the actual price payable by us for the aircraft will be lower due to supplier discounts. As of December 31, 20062008, we had US$949.0R$2,024.4 million in long-term indebtedness.indebtedness, excluding our perpetual bonds in the amount of R$414.4 million. We expect that we will incur additional fixed obligations and debt as we take delivery of the new aircraft and other equipment to implement our growth strategy.

10

Table of Contents

     Having significant fixed payment obligations could:

• limit our ability to obtain additional financing to support expansion plans and for working capital and other purposes;
  
  
• divert substantial cash flow from our operations to service our fixed obligations under aircraft operating leases and aircraft purchase commitments;
  
  
• if LIBOR or U.S. interest rates increase, require us to incur significantly more lease or interest expense than we currently do; and
  
  
• limit our ability to plan for or react to changes in our business and the airline industry and to general economic conditions.

13

Table of Contents

     Our ability to make scheduled payments on our fixed obligations, including indebtedness we will incur, will depend on our operating performance and cash flow, which will in turn depend on prevailing economic and political conditions and financial, competitive, regulatory, business and other factors, many of which are beyond our control. In addition, our ability to raise our fares to compensate for an increase in our fixed costs may be adversely affected by any imposition of fare control mechanisms by the Brazilian civil aviation authorities.

     We may have to use our cash resources to finance a portion of our firm purchase order aircraft. We may not have sufficient cash resources available to do so.

     We currently finance our aircraft principally through operating leases. As a result of our firm purchase orders to purchase 7694 Boeing 737-800 Next Generation aircraft in the futureas of December 31, 2008, we expect to own a larger portion of our fleet as well as continue to lease aircraft through principally long-term operating leases. The firm purchase orders represent a significant financial commitment for us. In 2006, weWe have in recent years financed and we intend to finance a portion ofcontinue financing our new Boeing 737-800 NG aircraft with a commitment we received from the U.S. Export-Import Bank of the United States providing guarantees covering approximately 85% of the aggregate purchase price for the firm purchase order aircraft. While we expect that the guaranty from the U.S. Export-Import Bank will assisthelp us in obtaining low-cost financing for the purchase of the firm purchase order aircraft, we may be required to use our own cash resources for the remaining 15% of the aggregate purchase price for the firm purchase order aircraft. As of December 31, 2006,2008, we had R$1.7 billion591.6 million of cash, cash equivalents, and short-term investments in overnight deposits and deposit certificates of highly-rated Brazilian banks and marketable securities, mainly highly-rated Brazilian government bonds.bonds, including R$176.7 million in restricted cash. If the value or liquidity of these investments were to decrease, or we do not have sufficient cash resources, we may be required to modify our aircraft acquisition plans or to incur higher than anticipated financing costs, which would have an adverse impact on the execution of our growth strategy and business and could have an adverse impact on our results of operations.

     Substantial increasesfluctuations in fuel costs or the unavailability of sufficient quantities of fuel would harm our business.

     Fuel costs, which have recently beenat times in 2007 and 2008 were at historically high levels, constitute a significant portion of our total operating expenses, accounting for 39.6%40.5% of our operating expenses for the year ended December 31, 2006.2008. Historically, international and local fuel prices have been subject to wide price fluctuations based on geopolitical issues and supply and demand. In 2008, WTI prices peaked at US$145.3 per barrel in March 2008, but decreased to US$44.6 per barrel at the end of 2008. Fuel availability is also subject to periods of market surplus and shortage and is affected by demand for both home heating oil and gasoline. In the event of an international or local fuel supply shortage, our fuel prices may increase.

     In addition, substantially all of our fuel is supplied by one source, Petrobras Distribuidora S.A. If Petrobras Distribuidora is unable or unwilling to continue to supply fuel to us at the times and in the quantities that we require, or if Petrobras Distribuidora were to raise significantly the price it charges us for its fuel, our business and results of operations would be adversely affected. Some of our competitors may be able to obtain fuel on better terms than we, both with respect to quantity and price. Although we enter into hedging arrangements to reduce our exposure to fuel price fluctuations and have historically passed on the majority of fuel price increases by adjusting our fare structure, the price and future availability of fuel cannot be predicted with any degree of certainty. Our hedging activities or the extent of our ability to adjust our fares may not be sufficient to protect us from fuel price increases.

     In addition, substantially all of our fuel is supplied by one source, Petrobras Distribuidora S.A. If Petrobras Distribuidora is unable or unwilling to continue to supply fuel to us at the times and in the quantities that we require, or if Petrobras Distribuidora were to raise significantly the price it charges us for its fuel, our business and results of operations would be adversely affected.

     We have only a limited number of suppliers for our aircraft and engines.

     One of the key elements of our current business strategy is to save costs by operating a simplifiedstandardized aircraft fleet equipped with one type of engine.fleet. After extensive research and analysis, we chose the Boeing 737-700/800 Next Generation aircraft and CFM 56-7B engines from CFM International. In light of our firm purchase orders to purchase 76 Boeing 737-800 Next Generation aircraft and options to purchase an additional 34 Boeing 737-800 Next Generation aircraft, weWe expect to continue to rely on Boeing and CFM International into the foreseeable future. If either Boeing or CFM International were unable to perform their contractual obligations, we would have to find another supplier for a similar type of aircraft or engines. While we await the delivery of our new 737-800 Next Generation aircraft, we are currently using 14 Boeing 737-300 aircraft to help meet our short-term capacity needs caused by higher than expected demand for our air travel services in Brazil and South America.

11

Table of Contents

     If we had to lease or purchase aircraft from another supplier, we could lose the benefits we derive from our current fleet composition. We cannot assure you that any replacement aircraft would have the same operating advantages as the Boeing 737-700/800 Next Generation aircraft or that we could lease or purchase engines that would be as reliable and efficient as the CFM engines. We may also incur substantial transition costs, including costs associated with retraining our employees, replacing our manuals and adapting our facilities, to the extent that such costs would not be covered by the alternate supplier. Our operations could also be disrupted by the failure or inability of Boeing or CFM International to provide sufficient parts or related support services on a timely basis.

14

Table of Contents

     Our business would also be significantly harmed if a design defect or mechanical problem with the Boeing 737-700/800 Next Generation aircraft, Boeing 737-300 aircraft or the CFM engines used on our aircraft were discovered, causing our aircraft to be grounded while any such defect or problem is being corrected, assuming it could be corrected at all. The use of our aircraft could be suspended or restricted by the ANAC in the event of any actual or perceived mechanical, design or other problems while the ANAC conducts its ownan investigation. Our business would also be significantly harmed if the public avoids flying on our aircraft due to an adverse perception of the Boeing 737-700/800 Next Generation aircraft Boeing 737-300 aircraft or the CFM engines because of safety concerns or other problems, whether real or perceived, or in the event of an accident involving Boeing 737-700/800 Next Generation aircraft, Boeing 737-300 aircraft or the CFM engines.

     We may be unable to maintain our company culture as our business grows.

     We believe that our growth potential and the maintenance of our results-oriented corporate culture are directly linked to our capacity to attract and maintain the best professionals available in the Brazilian and South American airline industry. We are dedicated to providing professional, high-quality service in a positive work environment and finding innovative ways to improve our business. We place great emphasis on the selection and training of enthusiastic employees with potential to add value to our business and who we believe fit in with and contribute to our company culture. As we grow domestically and internationally, we may be unable to identify, hire or retain enough people who meet the these criteria, or we may have trouble maintaining this company culture as we become larger. Our company culture is crucial to our business plan, and failure to maintain that culture could adversely affect our business and results of operations.

     The loss of our senior management and key employees could disrupt our business.

     Our business also depends significantly upon the efforts of our chief executive officer, who has played an important role in shaping our company culture and, through his interest in our controlling shareholder, owns a significant numberculture. If the services of our shares, as well as other key executives. If our chief executive officer or a number of our key executives leave our company,become unavailable to us, we may have difficulty finding suitable replacements, which could harm our business and results of operations.

     We rely heavily on automated systems to operate our business, and any failure of these systems could harm our business.

     We depend on automated systems to operate our business, including our computerized airline ticket sales system, our telecommunication systems and our website. Our website and ticket sales system must be able to accommodate a high volume of traffic and deliver important flight information. Substantial or repeated website, ticket sales system or telecommunication systems failures could reduce the attractiveness of our services and could cause our customers to purchase tickets from another airline. Any disruption in these systems could result in the loss of important data, increase our expenses and generally harm our business.

     We rely on maintaining a high daily aircraft utilization rate to increase our revenues.revenues and reduce our costs. High aircraft utilization also makes us vulnerable to delays.

     One of the key elements of our business strategy is to maintain a high daily aircraft utilization rate. High daily aircraft utilization allows us to generate more revenue from our aircraft and dilute our fixed costs, and is achieved in part by operating with quick turnaround times at airports so we can fly more hours on average in a day. Our rate of aircraft utilization could be adversely affected by a number of different factors that are beyond our control, including, among others, air traffic and airport congestion, adverse weather conditions and delays by third-party service providers relating to matters such as fueling and ground handling.

12

Table In 2008, our aircraft utilization was negatively affected due to a new regulation effective as of ContentsMarch, 2008 that increased turnaround times of our aircraft, and our parallel operation of two airlines until our corporate restructuring in September 2008.

     High aircraft utilization increases the risk that if an aircraft falls behind schedule during the day, it could remain behind schedule during the remainder of that day and potentially the next day, which can result in disruption in operating performance, leading to passenger dissatisfaction related to delayed or cancelled flights and missed connections.

15

Table of Contents

     Our reputation and financial results could be harmed in the event of an accident or incident involving our or other Brazilian airline’s aircraft or our aircraft type or as a result of the mid-air collision of one of our aircraft in September 2006.type.

     Accidents or incidents involving our aircraft could involve significant claims by injured passengers and others, as well as significant costs related to the repair or replacement of a damaged aircraft and its temporary or permanent loss from service. We are required by ANAC and lessors of our aircraft under our operating lease agreements to carry liability insurance. Although we believe we currently maintain liability insurance in amounts and of the type generally consistent with industry practice, the amount of such coverage may not be adequate and we may be forced to bear substantial losses in the event of an accident. Substantial claims resulting from an accident in excess of our related insurance coverage would harm our business and financial results. Moreover, any aircraft accident or incident involving our aircraft, even if fully insured, or an accident or incident involving Boeing 737 Next Generation aircraft or the aircraft of any other Brazilian airline could cause anegative public perception that we areperceptions about us or the Brazilian air transport system as less safe or reliable than other airlines, which would harm our business and results of operations. On September 29, 2006, one of our new Boeing 737-800 NG aircraft was involved in a mid-air collision with a private aircraft of ExcelAir. We cannot assure you that our reputation will not be negatively affected by the implications of this accident.

     Our controlling shareholder has the ability to direct our business and affairs and its interests could conflict with yours.

     Our controlling shareholder has the power to, among other things, elect a majority of our directors and determine the outcome of any action requiring shareholder approval, including transactions with related parties, corporate reorganizations, dispositions, and the timing and payment of any future dividends, subject to minimum dividend payment requirements imposed under the Brazilian corporation law. Although you are entitled to tag-along rights in connection with a change of control of our company and you will have specific protections in connection with transactions between our controlling shareholder and related parties, our controlling shareholder may have an interest in pursuing acquisitions, dispositions, financings or similar transactions that could conflict with your interests as a holder of the ADSs or our preferred shares.

Risks Relating to the ADSs and Our Preferred Shares

     The relative volatility and illiquidity of the Brazilian securities markets may substantially limit your ability to sell the preferred shares underlying the ADSs at the price and time you desire.

     Investing in securities that trade in emerging markets, such as Brazil, often involves greater risk than investing in securities of issuers in the United States, and such investments are generally considered to be more speculative in nature. The Brazilian securities market is substantially smaller, less liquid, more concentrated and can be more volatile than major securities markets in the United States. Accordingly, although you are entitled to withdraw the preferred shares underlying the ADSs from the depositary at any time, your ability to sell the preferred shares underlying the ADSs at a price and time at which you wish to do so may be substantially limited. There is also significantly greater concentration in the Brazilian securities market than in major securities markets in the United States. The ten largest companies in terms of market capitalization represented approximately 50.4%52.4% of the aggregate market capitalization of the BM&F BOVESPA S.A. Bolsa de Valores, Mercadorias & Futuros (“BOVESPA”) as of December 31, 2006.2008. The top ten stocks in terms of trading volume accounted for approximately 45%46.1%, 51%41.5% and 46.4%53.2% of all shares traded on the BOVESPA in 2004, 20052006, 2007 and 2006,2008, respectively.

     Holders of the ADSs and our preferred shares may not receive any dividends.

     According to our by-laws, we must generally pay our shareholders at least 25% of our annual net income as dividends, as determined and adjusted under Brazilian GAAP.corporate law. This adjusted income may be capitalized, used to absorb losses or otherwise appropriated as allowed under the Brazilian corporation law and may not be available to be paid as dividends. We may not pay dividends to our shareholders in any particular fiscal year if our board of directors determines that such distributions would be inadvisable in view of our financial condition.

13

Table of Contents

     If you surrender your ADSs and withdraw preferred shares, you risk losing the ability to remit foreign currency abroad and certain Brazilian tax advantages.

     As an ADS holder, you benefit from the electronic certificate of foreign capital registration obtained by the custodian for our preferred shares underlying the ADSs in Brazil, which permits the custodian to convert dividends and other distributions with respect to the preferred shares into non-Brazilian currency and remit the proceeds abroad. If you surrender your ADSs and withdraw preferred shares, you will be entitled to continue to rely on the custodian’s electronic certificate of foreign capital registration for only five business days from the date of withdrawal. Thereafter, upon the disposition of or distributions relating to the preferred shares, you will not be able to remit abroad non-Brazilian currency unless you obtain your own electronic certificate of foreign capital registration or you qualify under Brazilian foreign investment regulations that entitle some foreign investors to buy and sell shares on Brazilian stock exchanges without obtaining separate electronic certificates of foreign capital registration. If you do not qualify under the foreign investment regulations you will generally be subject to less favorable tax treatment of dividends and distributions on, and the proceeds from any sale of, our preferred shares.

16

Table of Contents

     If you attempt to obtain your own electronic certificate of foreign capital registration, you may incur expenses or suffer delays in the application process, which could delay your ability to receive dividends or distributions relating to our preferred shares or the return of your capital in a timely manner. The depositary’s electronic certificate of foreign capital registration may also be adversely affected by future legislative changes.

     Holders of ADSs may be unable to exercise preemptive rights with respect to our preferred shares.

     We may not be able to offer our preferred shares to U.S. holders of ADSs pursuant to preemptive rights granted to holders of our preferred shares in connection with any future issuance of our preferred shares unless a registration statement under the Securities Act is effective with respect to such preferred shares and preemptive rights, or an exemption from the registration requirements of the Securities Act is available. We are not obligated to file a registration statement relating to preemptive rights with respect to our preferred shares, and we cannot assure you that we will file any such registration statement. If such a registration statement is not filed and an exemption from registration does not exist, The Bank of New York Mellon, as depositary, will attempt to sell the preemptive rights, and you will be entitled to receive the proceeds of such sale. However, these preemptive rights will expire if the depositary does not sell them, and U.S. holders of ADSs will not realize any value from the granting of such preemptive rights.

ITEM 4. INFORMATION ON THE COMPANY

A. History and Development of the Company

General

     The Registrant was formed on March 12, 2004 as asociedade por ações, a stock corporation duly incorporated under the laws of Brazil with unlimited duration. The Registrant’s only material assets consist of the shares of Gol, twoVRG, three offshore finance subsidiaries, cash and cash equivalents and short-term investments. The Registrant owns all of Gol’sVRG’s shares, except for five common shares of Gol that are held by members of Gol’s boardVRG’s boards of directors for eligibility purposes. Our principal executive offices are located at RuaPraça Comte Linneu Gomes, de Carvalho 1629, 04547-006S/N, Portaria 3, Jardim Aeroporto, CEP: 04626-020, São Paulo, SP, Brazil, and our general telephone number is +55 11 3169-6003.2128-4000. The telephone number of our investor relations department is +55 11 3169-6800.2128-4700. Our website address is www.voegol.com.br and our website is available in Portuguese, Spanish and English.www.voegol.com.br. Investor information can be found on our website under the caption “Investor Relations.”www.voegol.com.br/ir. Information contained on our website is not incorporated by reference in, and shall not be considered a part of, this annual report.

Capital Expenditures

     For a description of our capital expenditures, see below “Item 5—5. Operating and Financial Review and Prospects—Liquidity and Capital Resources.”

14

Table of Contents

B. Business Overview

     We are one of the most profitablelargest low-cost low fare airlines in the world and the most profitable airline in South America,terms of passengers transported in 2008, and had net revenues of R$3.8 billion and net income of R$569.1 million for the year ended December 31, 2006. We are the only low-fare low-cost airline providing frequent service on routes connecting all of Brazil’s major cities and also to major cities in Argentina, Bolivia, Chile, Paraguay, Peru,South America. With our young and Uruguay. Our mission is to increasestandardized operating fleet of 106 Boeing 737 aircraft, we serve the growth and profitslargest number of our business by stimulating and meeting demand for safe, affordable, convenient air travel for both business and leisure passengers. We do this by offering simple, safe and efficient service while having one of the lowest operating costsdestinations in the airline industry worldwide. Our vision is to be recognized by 2010 asBrazilian air passenger transportation market.

17

Table of Contents

      Since the airline that popularized high-quality, low-fare air transportation in South America.

     We have flown over 55 million passengers since beginning of our operations in 2001, and, according to the ANAC, Brazil’s civil aviation authority, our share of the domestic market, based on revenue passenger kilometers, grew from 4.7% in 2001 to 37.1% in December 2006. Our share of the international market, based on revenue passenger kilometers transported by Brazilian airlines grew from 3.1% in 2005 (our first full year operating international flights) to 13.3% in December 2006. Our strategy is to increase the size of the market by attracting new passengers through our low fares, a young and modern aircraft fleet, targeted marketing, simplified travel services and through a variety of payment mechanisms designed to make the purchase of our tickets easier for customers belonging to a much broader income class. Our affordable, reliable and simple service and our focus on markets that were either underserved or did not have a lower-fare alternative has led to a strong awareness of our brand and a rapid increase in our market share.

     As of We were the end of 2006, we operated 65 single-class Boeing 737 aircraft. We have firm purchase orders with The Boeing Company for 76 737-800 Next Generation aircraft,first company to successfully introduce low cost carrier industry practices and we have options to purchase an additional 20 737-800 Next Generation aircraft. Currently, we have 14 firm purchase orders for aircraft deliveries scheduledtechnologies in 2007, 9 in 2008, 16 in 2009, 16 in 2010 and 21 after 2010. To meet the recent higher than expected demand for our air travel services in Brazil and South America, in 2006 we took delivery of six Boeing 737-300 aircraft under four year operating leases, which we are using to help meet our short-term capacity needs while we await the delivery of the new 737-800 Next Generation aircraft.

Latin America. We have a diversified revenue base, with customers ranging from business passengers traveling between densely populated cities in Brazil, such as São Paulo, Rio de Janeiro and Belo Horizonte, to leisure passengers traveling to destinations throughout Brazil and to our internationalSouth American destinations. Our strategy is to increase the size of the market by attracting new passengers through our consolidated flight network, a modern aircraft fleet, targeted marketing and our loyalty program (Smiles, the largest loyalty program in South America with more than six million members), a variety of attractive ancillary businesses such as our air cargo services (Gollog), and through a variety of payment mechanisms (includingVoe Fácil) designed to make the purchase of our tickets easier for customers in lower income classes. Passenger transportation revenues represented 91.9% and ancillary revenues represented 8.1% of our consolidated revenues in 2008.

     As of the end of 2008, we offered over 736 daily flights to 59 destinations connecting the most important cities in Brazil as well as the main destinations in Argentina, Bolivia, Chile, Colombia, Paraguay, Peru, Uruguay and Venezuela. We strategically focus on the Brazilian and South America. WeAmerican markets, and will continue to carefully evaluate opportunities to continue the growth of our business through increasing the frequency of flights to our existing high-demand markets and adding new routes in these markets, all of which can be reached with our Boeing 737 Next Generation aircraft.

     In April 2007, we acquired VRG in order to improve over the long term our position within the highly competitive Brazilian and Latin American passenger transportation industry. VRG is a company formed from assets of the former Varig group, which sought bankruptcy protection in June 2005. Varig’s route and airport operating rights permitted us to expand our activities in Brazil and South America and increased our slots at the Congonhas airport in São Paulo, the most important airport for our operations, from 138 slots in 2006 to other Latin232 slots at the end of 2008. The acquisition was approved by the ANAC in April 2007 and by the Brazilian antitrust authority CADE in June 2008. In the second half of 2008, we completed a corporate restructuring that resulted in the merger of our former operating subsidiary Gol Transportes Aéreos S.A. (GTA) into VRG and allowed the integration of ourSmiles loyalty program into our consolidated flight network. The corporate restructuring became effective on September 30, 2008 and has since then simplified and improved our operational structure, enabling us to explore synergies and to provide more efficient air transportation service through an integrated network for Brazilian and South American destinations.

     Our net passenger revenues in 2008 reached R$5.9 billion, an increase of 29.0% when compared to net passenger revenues in 2007. Due to increased costs related to the integration and consolidation of our business after the VRG acquisition, high fuel prices in the first half of 2008 (which reached an all time high of US$145.3 per barrel in March 2008), and a strong devaluation of thereal against the U.S. dollar in the second half of 2008 (thereal depreciated from an all time high of R$1.56 per US$1.00 in July, 2008 to R$2.34 at year end 2008), we had net losses of R$1.2 billion in 2008. After our corporate restructuring, we were able to improve our operating performance as compared to the first half of 2008. In 2006,the fourth quarter of 2008 we inaugurated 10 new destinations, thereby increasinghad operating income of R$54 million, with an operating margin of 3.5% .

     Our Competitive Strengths

     Our principal competitive strengths are:

We Keep Our Operating Costs Low.Our operating cost per available seat kilometer for the year ended December 31, 2008 was R$15.80 cents, or US$6.76 cents. We believe that our cost per available seat kilometer for the year ended December 31, 2008, adjusted for the average number of destinations servedkilometers flown per flight, was over the year the lowest in the domestic market and one of the lowest among international low-cost carriers, based upon our analysis of data collected from publicly available information. Our business model is based on innovation and best practices adopted to 55 (48improve our operating efficiency, including:

18

Table of Contents

We Stimulate Demand for Our Service.We believe that through our differentiated services we create demand for air travel services. Our average fares are lower than the average fares of our domestic competitors. We identify and stimulate demand among both business and leisure passengers for air travel that is safe, convenient, simple and is a reasonably priced alternative to traditional air, bus and car travel. By combining low fares with simple and reliable service, we have successfully increased our market share, strengthened customer loyalty and are attracting new groups of air travelers in Brazil)our markets. These new travelers did not previously consider air travel due to the higher prices and more complicated sales procedures that preceded our entry into the market. For example, our night flights, which we have offered since 2005 at highly competitive fares, have proven to be very successful, generating load factors higher than that of our other flights. In 2008, we commenced offering attractive fares on certain routes with minimum stay requirements. We estimate that on average, approximately 10% of the customers on our flights are either first-time flyers or have not flown for more than one year. We have developed and will further develop flexible payment mechanisms such as debit payments and long-term installment payments (Voe Fácil), with which we expect to increase our potential market and customer base to broader income classes and which enable us to further penetrate markets and customers.

We Have a Strong Market Position at the Most Important Airports in Brazil.Since the VRG acquisition, we have had the most flights at the busiest airports in Brazil: Congonhas (São Paulo), Santos Dumont (Rio de Janeiro), Juscelino Kubitschek (Brasilia) and Confins (Belo Horizonte). Routes between those airports are among the most profitable routes in our markets, with higher yields achieved mostly from travelers in the corporate segment. In Congonhas, an airport with slot restrictions, we were the leader in terms of passengers transported in 2008.

We Have the Largest Loyalty Program in Latin America.We have a loyalty program (Smiles), which we consider as a strong relationship tool and which is available to all our passengers. TheSmiles program serves as a source of revenue for us, since we can sell miles directly to corporations for marketing purposes or utilize them for co-branded credit cards. It supports partnerships with hotel chains, car rental companies, restaurants, insurance companies, publishers and schools and also forms the basis for partnerships with some of Brazil and South America’s largest banks and credit card companies. In 2008, the program offered a number of marketing promotions aimed at re-engaging its existing members and expanding its client base. The Smiles program had over six million members at the end of 2008.

19

Table of Contents

We Have Strong Brands that are Widely Recognized.We believe that the Gol brand has become synonymous with innovation and value in the airline industry. Our customers identify Gol as being safe, accessible, friendly, fair and reliable and distinguish Gol in Brazil’s domestic airline industry on the basis of its modern and simplified approach to providing air travel services. OurSmiles,Gollog andVoe Fácil brands give us valuable customer recognition in various businesses and create a tool for brand diversification for us. OurVarig brand is widely known in the Brazilian and the South American markets in which we operate.

We Have a Proven Management Team and High Corporate Governance Standards. Our controlling shareholder has been operating in the Brazilian passenger transportation market for over 50 years, and our top managers have an average of approximately 25 years of experience in the Brazilian passenger transportation industries. This experience has helped us to develop the most effective elements of our low-cost model. Our corporate governance practices go beyond those of most issuers in the transportation industry and emerging markets issuers, with the efficient and active use of specialized committees with highly qualified professionals and senior managers that add value to decisions made in the day-to-day management of our business.

Our Strategies

Capitalize on Our Strong Market Position in Brazil and Latin America. We intend to further expandcapitalize on our servicestrong market position, with the highest number of routes at the most important airports in Brazil, our consolidated flight network and ourSmiles program, to additional internationalincrease penetration of all segments of travelers. We focus on Brazilian operations and selected South American destinations in South America.that are or we expect to become profitable and fit into our flight network.

Reduce Operating Costs and Improve Operating Efficiency. Continuing to reduce our operating costs per available seat kilometer is a key to increasing profitability. We generate ancillary revenues from air cargo services and our installment payment mechanisms. We areaim to remain one of the fewlowest cost airlines in the world. We intend to further reduce the average age of our fuel-efficient fleet, while optimizing the size of our fleet to ensure high utilization rates. We expect to return or sublease all our Boeing 737-300 and 767 aircraft in 2009. We are also working to achieve this goal by using our aircraft efficiently, concentrating on minimizing our turnaround times at airports and maintaining a high number of daily flights per aircraft. Due to macro-economic developments, regulatory limitations and the effects of the VRG acquisition until our corporate restructuring in September 2008, our operating results in 2008 were atypical, driven by increased average fares (reflecting record-high fuel costs) and decreasing utilization, while our corporate strategy remains to operate as a low cost carriers in the world that offers cargo services.low fare airline with high aircraft utilization. We will continue to utilize technological innovations wherever possible to reduce our distribution costs and improve our operating efficiency. We expect to benefit from economies of scale and reduce our average cost per available seat kilometer as we add aircraft to an established and efficient operating infrastructure.

Stimulate Demand. Our installmentwidely available service is designed to popularize air travel and stimulate demand, particularly from fare-conscious leisure travelers and small to mid-size business travelers who might otherwise use alternative forms of transportation or not travel at all. We will continue to provide our customers with low fare alternatives and flexible payment mechanisms, such as debit payments, credit card installment payments and monthly installment payments in the form of direct credit. For example, ourVoe Fácil card, are (“Fly Easy”) Program, which allows qualifying customers to pay for airline tickets in up to 36 monthly installments as an innovative and help stimulate demand.

     We offer a simplified productway to our customers with single-class seating and a light snack and beverage service. Generally, our low operating costs allow uspurchase airline tickets, is especially designed to set our fares at levels to win customer loyalty and stimulate demand by attracting new customers who previously used other means of travel or traveled less often due to price sensitivity. We have kept our operating costs low principally by maintaining a simplified aircraft fleet that is one ofmake the newest in South America, which reduces maintenance and fuel costs.

     We deploy aircraft in a highly efficient manner to maintain industry leading aircraft utilization and concentrate heavily upon internet-based distribution channels and sales. The strong promotion of internet-based distribution channels and sales is an integral elementpurchase of our low cost structure and efficiency and has made us one of the largest and leading e-commerce businesses in Brazil with total sales of passenger tickets of R$3.7 billion over the internet in 2006. We believe we effectively employ technology to make our operations more efficient, using real time sales and operating information, internet based sales and ticketless travel, advanced yield management systems and intelligent outsourcing.easier for customers from lower income classes.

     Expand Our operational emphasis on controlling costs and yield management has given us flexibility in setting our fares to achieve a balance between our load factors and yields that we believe will generate the highest profitability and growth for us. During 2006, a year with historically high fuel prices, we generated net income of R$569.1 million. Our profits in 2006 were due largely to the economies of scale fromCustomer Base. In planning the growth of our business, we will continue to select our routes and havingbuild the lowest cost per available seat kilometerfrequency of our service based upon the extent and type of demand in the marketsregions we serve in Brazil and South America. We are committed to provide air travel to a wide range of travelers. We will continue to popularize air travel, making low-fare flights more accessible to a larger portion of the population, including business travelers from small and medium-sized companies, a growing customer base that tends to be price sensitive.

      We will continue to carefully evaluate opportunities to meet demand for leisure travel by offering more seats at lower fares, expanding flight frequencies on existing routes and adding additional routes that contribute to our network and for which we perceive a market demand in Brazil. In addition, by offering flights to South American destinations with connections integrated in our network, we create opportunities for incremental traffic, feeding our network and increasing our overall load factor and supporting our strategy of expanding our network and stimulating demand for our services.

20

Table of Contents

     We believe we have the best platform in the market in which we operate based uponto expand our analysiscustomer base. Our standardized services and lower fares attract leisure travelers from all income levels, and with the integration of publicly available data.theSmiles loyalty program into our consolidated operations we intend to increase the penetration of the corporate segment. In addition, since April 2009 we have offered lower priced seats to price-sensitive leisure travelers and more flexible tickets with higherSmiles miles allocation to our corporate customers. We expect to receive our IOSA airline safety certification in 2009, which we believe will, combined with the integration of theSmiles loyalty program in our consolidated flight network, make us the preferred partner of major international airlines in Brazil, with which we do not compete on inter-continental routes. We expect that, under these partnerships, our customers could use their miles accumulated under the Smiles program to fly to international destinations in North America, Europe and Asia. For example, in April 2009, we entered into a commercial agreement with Air France-KLM, which will be implemented in two phases and will allow for the integration of ourSmiles and Air France-KLM’s Flying Blue programs and lays the groundwork for a future code-share agreement. We intend to strengthen our existing partnerships and build new ones with large international airlines in the form of code-share arrangements to further increase our international feeder network, load factors and profitability.

Further Establish and Increase Our Ancillary Revenue Businesses.Our ancillary revenues are derived from theGollog andVoe Fácil businesses as well as ticket change fees, excess baggage charges and other incidental services. Ancillary revenue represents a significant, growing revenue stream and have grown from R$374.3 million in 2007 to R$516.1 million in 2008. We expect further growth in these businesses, which will provide us with additional revenue at low incremental cost.

     ThroughGollog, our cargo transportation service, we make efficient use of extra capacity in the stronghold of our aircraft by carrying cargo. TheVoe Fácil (“Fly Easy”) program allows select customers to pay for airline tickets in up to 36 monthly installments, with interest. By acquiring 63 new Boeing 737-800 Next Generation aircraft through 2011, with a seat capacity approximately 30% higher than that of conventional Boeing 737-700NG aircraft,increasing the Voe Fácil program penetration we believe that we will be able to more efficiently usestimulate demand for our tickets and increase our ancillary revenue business. We are constantly evaluating opportunities to generate additional ancillary revenues such as sales of travel insurance, marketing activities and other services which may help us to better capitalize on the airport slots available to uslarge number of passengers on our flights on our aircraft and to further reducethe high volumes of customers using our costs per seat kilometer.website.

15

Table of ContentsRoutes and Schedules

     Our operating model is a highly integrated, multiple-stopmultiple-hub route network that is a variation ondifferent from the point-to-point model used by other successful low-cost carriers worldwide. The high level of integration of flights at selected airports permits us to offer frequent, non-stop flights at low fares between Brazil’s most important economic centers and ample interconnections through our network linking city pairs through a combination of two or more flights with little connecting or stop-over time. Our network also allows us to increase our load factors on our strongest city pair routes by using the airports in those cities to connect our customers to their final destinations. This strategy increases our load factor by attracting customers traveling to secondary markets who prefer to pay lower fares even if this means making one or more stops before reaching their final destination. Over 40% of our passengers connect or path through one or more destinations before reaching their final travel destination. Our operating model allows us to build our flight routes to add destinations to cities that would not, individually, be feasible to serve in the traditional point-to-point model, but that are feasible to serve when simply added as additional points on our multiple-stop route network. We do this by offering low-fare, early-bird, minimum stay or night (red-eye) flights to lower-traffic destinations, which are usually the first or last stops on our routes, allowing us to increase our aircraft utilization and generate additional revenues. By offering international flights to South American destinations, and with stops integrated in our network, we create opportunities for incremental traffic, feeding our network and increasing our overall load factor and our competitive advantage and supporting our strategy of expanding our network and stimulating demand for our services.

     We believe that our operating model, when combined with our low fares and reliable service, stimulates demand for air travel, and helped us to achieve a load factor of 73.1% in 2006, the highest in the domestic market, according to the ANAC. During 2006, we maintained high standards of operating efficiency and customer satisfaction, completing 96.4% of our scheduled flights, with on-time performance of 98.8%, based on our internal data.

     We were one of the first Latin American companies to give the relevant officer certifications under Section 404 of the U.S. Sarbanes Oxley Act of 2002 regarding internal controls over financial reporting. The 2006 certifications are included as Exhibits 12.1 and 12.2 to this Annual Report.

     In December 2005, we entered into a joint venture to create a low-cost Mexican airline. We can currently not foresee if and when this joint venture will become operative.

     On September 29, 2006, one of our new Boeing 737-800 NG aircraft was involved in a mid-air collision with a private aircraft of ExcelAir. Our aircraft went down in the Amazon forest, leaving no survivors among the 148 passengers and six crew members. The ExcelAir aircraft, a new Embraer Legacy 135BJ, performed an emergency landing and all of its seven occupants were unharmed. We continue to cooperate fully with all regulatory and investigatory agencies to determine the cause of this accident. We believe that the costs to defend any claims and any potential liability exposure will be covered by insurance.

     Our Competitive Strengths

     Our principal competitive strengths are:

We Keep Our Operating Costs Low.Our cost per available seat kilometer for the year ended December 31, 2006 was R$15.3 cents, or approximately US$7.2 cents. We believe that our cost per available seat kilometer for the year ended December 31, 2006, adjusted for the average number of kilometers flown per flight, was one of the lowest in the airline industry worldwide, and was on average the lowest in the domestic market, based upon our analysis of data collected from publicly available information. Typically, airline operating costs per kilometer decrease as flight length increases. Our low operating costs are the result of being innovative and using best practices adopted from other leading low-cost carriers to improve our operating efficiency, including:   

16

Table of Contents

We Stimulate Demand for Our Services.We believe that through our low fares and high-quality service, we provide the best value in our markets and create demand for air travel services. Our average fares are lower than the average fares of our domestic competitors. We identify and stimulate demand among both business and leisure passengers for air travel that is safe, convenient, simple and is a reasonably priced alternative to traditional air, bus and car travel. By combining low fares with simple and reliable service that treats passengers equally in a single-class environment, we have successfully increased our market share, strengthened customer loyalty and are attracting a new group of air travelers in our markets. These new travelers did not previously consider air travel due to the higher prices and more complicated sales procedures that preceded our entry into the market. For example, our night flights, for which we offer highly competitive fares, have proven to be very successful, generating load factors higher than that of our other flights. We believe our night flights attract passengers who previously relied upon bus or car travel and who have now become air travel customers. We estimate that on average, approximately 10% of the customers on our flights are either first-time flyers or have not flown for more than one year. We have developed and will further develop flexible payment mechanisms such as debit payments and long-term installment payments, with which we expect to increase our potential market and customer base to broader income classes and which enable us to further penetrate markets and customers. Our strong market position and strong brand recognition allow us to increasingly influence and stimulate this demand. Our firm order for 76 new Boeing 737-800NG aircraft, which has an increased seat capacity of 187 passengers but does not compromise passenger comfort, will enable us to increase our capacity in the key markets in which we operate.

We Have a Strong Brand that is Widely Recognized Among Consumers and Investors.We believe that the Gol brand has become synonymous with innovation and value in airline industry. In 2006, we received for the second time the “Melhores e Maiores” (Best and Biggest) award in the transportation sector from the leading business magazine in Brazil,EXAME, and we were elected the best performing airline in the world in 2005 according to a study published byAviation Week and SpaceTechnology. Our customers also identify us as being safe, accessible, friendly, fair and reliable and distinguish us in Brazil’s domestic airline industry on the basis of our modern and simplified approach to providing air travel services. Customer satisfaction surveys conducted in 2006 byPesquisas Inteligentes, an independent market research firm, indicated that approximately nine out of every ten passengers trust Gol, and would recommend Gol to others. Our effort at promoting our brand awareness has earned us recognition from the marketing industry in Brazil as well. In 2005, we were named one of Brazil’s most valuable brands byIsto é Dinheiro magazine in its fourth annual Most Valuable Brazilian Brands Ranking, with a brand value of US$326 million. In 2006, we were also the most awarded company in a survey conducted by theLatinFinance magazine. In addition, we are recognized among Brazilian and international investors as a company with an innovative financial management and very high level of disclosure and transparency. For a second year in a row, we ranked first in the category of “Disclosure Procedures” in Latin America and our investor relations website was awarded the top prize in the industry and was top 5 in Latin American websites at the Ninth Annual IR Global Rankings in February 2007.

17

Table of Contents

We Have a Strong Financial Position and Access to the Financial Markets.We have focused on maintaining a strong financial position with significant cash balances. As of December 31, 2006, we had R$281.0 million of cash and cash equivalents, R$1,425.4 million of short-term investments, R$659.3 million of accounts receivable and R$537.8 million of U.S. dollar denominated deposits for aircraft leasing and aircraft engine maintenance contracts, representing a total of R$2,903.5 million. As of December 31, 2006, our debt to capitalization ratio was 33.7% . In 2006, to finance our operations and capital expenditures, we accessed the international debt capital markets with the issuance of US$200 million of perpetual notes and also arranged long-term financings with the BNDES, the International Finance Corporation (IFC) and the Private Export Funding Corporation (PEFCO).

We Actively Manage Risk.We actively monitor movements in fuel prices, foreign exchange rates and interest rates to reduce our earnings volatility. We are able to adjust our fares to compensate for changes in fuel prices and the exchange rate of the real versus the U.S. dollar. Our general policy is to hedge on a short-term basis a majority of the fuel we expect to consume and our U.S. dollar exchange rate exposure, so as to minimize the effects of adverse changes in the fuel or foreign exchange markets. As part of our risk management program, we establish exposure limits, hedge ratios, instruments and programmed price triggers. We use a variety of financial instruments, including petroleum call options, petroleum fixed-price swap agreements, and foreign currency forward contracts. We do not hold or issue derivative financial instruments for trading purposes. As there is not a futures market for Brazilian jet fuel, we use international crude oil derivatives to hedge our exposure to increases in fuel price. In addition, we believe that our corporate-wide high standards of internal control reduce our risk exposure. We were one of the first foreign private issuers in Latin America to certify our internal controls over financial reporting.

We Have a Motivated Workforce and a Proven Management Team.We benefit from a highly motivated workforce that brings a new enthusiasm to air travel and a commitment to high standards of friendly and reliable quality service that we believe distinguishes us in our markets. We believe that the positive feedback we received from our customers in our customer satisfaction surveys is directly related to the priority our employees place on delivering top quality customer service. We invest a significant amount of time and resources into carefully developing the best training practices and selecting individuals to join our team who share our focus on ingenuity and continuous improvement. We conduct ongoing training programs that incorporate industry best practices and encourage strong and open communication channels among all of the members of our team so that we can continue to improve the quality of the services we provide. We also motivate our workforce by providing all our employees with profit sharing and our management employees with stock options. Our controlling shareholder has been operating in the Brazilian passenger transportation market for over 50 years, and our top managers have an average of approximately 25 years of experience in the Brazilian passenger transportation industries. This experience has helped us to develop the most effective elements of our low-cost model.

Our Strategy

     Our strategy is to offer travelers in Brazil and other South American countries a low-fare transportation alternative that we believe is cost-competitive compared to conventional airline and bus transportation. To continue the growth of our business and increase its profitability, our strategy is to further stimulate customer demand by continuing to offer a single-class of air travel service at low fares, while maintaining a high standard of quality and safety. We will strive to keep our operating costs low and continually pursue ways to make our operations more efficient. Our objectives are to provide the best travel value in the markets we serve, to encourage people to fly by making air travel accessible in our markets, and to further increase our market share.

18

Table of Contents

     We will continue to evaluate opportunities to expand our operations by (i) adding additional flights to existing high-demand routes and night flight domestic routes, (ii) adding new domestic routes where sufficient market demand exists or where we believe we can stimulate demand, (iii) expanding into other high-traffic centers in other countries, (iv) developing ancillary revenues in activities related to air transportation, and (v) seeking opportunities to grow through joint ventures or acquisitions. Our vision is to be recognized by 2010 as the airline that popularized high-quality, low-fare air transportation in South America. The following are the key elements of our strategy:

To Expand Our Customer Base by Offering Services on High-Demand Routes.When planning the growth of our business, we will continue to establish bases, select our routes and build the frequency of our service based upon the extent and type of demand in the regions we serve in Brazil and other South American countries. In particular, we expect to increase our focus on business travelers from small and medium-sized companies, a growing customer base that tends to be more price sensitive, by developing the routes and flight frequencies that best serve their travel needs and increasing our marketing efforts directed at this segment of our customer base. We will continue to carefully evaluate opportunities to meet demand for leisure travel by offering more seats at lower fares, expanding flight frequencies on existing routes, expanding successful night flight services and adding additional routes that contribute to our network and for which we perceive a market demand.

     We believe that the same business model and route management techniques that we have successfully introduced in Brazil to help popularize air travel can also be used to capture market share and stimulate demand for air travel between Brazil and other South American countries. We are pursuing opportunities to offer flights on routes between Brazil and select cities in other South American markets where growth opportunities exist and where the new destinations fit into our integrated flight network. In 2006, we inaugurated five new international destinations in Argentina, Chile, Paraguay and Uruguay and commenced service of non-Brazilian city-pairs between Asuncíon, Paraguay and Buenos Aires, Argentina, and Santiago, Chile. By offering international flights with connections integrated in our network, we create opportunities for incremental traffic, feeding our network and increasing our overall load factor and supporting our strategy of expanding our network and stimulating demand for our services.

To Stimulate Demand with Low Fares.Our widely available low fares and superior product offering are designed to popularize air travel and stimulate demand, particularly from fare-conscious leisure travelers and small- to mid-size business travelers who might otherwise have used alternative forms of transportation or would not have traveled at all. Our strategy is to continue to stimulate demand and encourage more people to fly by continuing to provide a superior product and low-fares. A key element of our superior product offering is our new Boeing 737-800 aircraft with increased seat capacity, which we achieve by means of new internal arrangements that do not compromise passenger comfort, and which allows us to distribute our operating costs over a higher number of available seat kilometers, therefore allowing us to offer more seats at lower fares. We will also continue to provide our customers with flexible payment mechanisms, such as debit payments, credit card installment payments and monthly installment payments in the form of direct credit. For example, we launched in November 2005 the Voe Fácil (“Fly Easy”) Gol Program, which allows qualifying customers to pay for airline tickets in up to 36 monthly installments as an innovative new way to purchase airline tickets, especially designed to make the purchase of our tickets easier for customers belonging to broader income classes. At December 31, 2006, over 650,000 customers had registered for our Voe Fácil program, 70% of whom were flying for the first time. Also, at the end of 2006 we launched in association with Mastercard and Banco do Brasil our corporate credit card “Gol Negócios” targeting small- and medium-sized corporate enterprises.

     The following table shows total passengers enplaned at airports in selected cities served by us outside the São Paulo – Rio de Janeiro market for the year ended December 31, 2000 (just before we commenced our operations) and the year ended December 31, 2006. The table also sets forth the date we commenced service at airports in selected cities and the compound annual growth rate of passengers enplaned at such airports.

Source: INFRAERO

19

Table of Contents

To Reduce Operating Costs and Improve Operating Efficiency.Continuing to reduce our operating costs per available seat kilometer is a key to increasing profitability. Our revenues per average aircraft in 2006 were US$35.5 million, which was the highest in the low cost carrier industry according to publicly available data. Our unit operating costs, or CASK, of US$7.2 cents was the lowest in the domestic market. We aim to remain one of the lowest cost airlines in the world. We have worked toward achieving this goal by assembling a new fleet of single-class aircraft that is capable of safely and reliably accommodating a high utilization rate, incurs low maintenance costs and is fuel-efficient. We are also working to achieve this goal by using our aircraft efficiently, concentrating on minimizing our turnaround times at airports and maintaining a high number of daily flights per aircraft. We will also continue to utilize technological innovations wherever possible to reduce our distribution costs and improve our operating efficiency. We expect to benefit from economies of scale and reduce our average cost per available seat kilometer as we add additional aircraft to an established and efficient operating infrastructure. Our system of phased maintenance allows us to perform maintenance work every day without sacrificing aircraft revenue time, to better determine the timing of heavy maintenance so as to help maximize aircraft utilization and to further reduce our maintenance costs. By performing our structural aircraft maintenance in our new Aircraft Maintenance Center in Confins, in the State of Minas Gerais we achieve greater control over maintenance costs. By performing 121 new and fuel efficient Boeing 737-800 Next Generation aircraft, we will further reduce the average age of our fleet, increase the number of available seat kilometers per aircraft and therefore increase operating efficiency and potentially lower our operating costs.

To Keep Our Customer Service Offering Attractive, Simple and Convenient.We believe that we are perceived by our customers as providing excellent value at reasonable fares and acting as a catalyst for changing the way the Brazilian airline industry works. In addition to offering low fares, our strategy is to make flying a simpler, more convenient experience. We have achieved this objective largely through the elimination of unnecessary extras and common-sense applications of technology. According to ANAC data, we had a punctuality rate of 90.4% in 2006, the highest punctuality rate in the Brazilian airline industry. We encourage our customers to use the internet not only to make reservations, but also to make many of the arrangements from the comfort of their home or office that they would otherwise have to make at crowded airports or airline ticket offices, such as checking-in and changing their seat assignments. We provide free shuttle service between airports and drop-off zones on selected routes. We offer customers single-class, pre-assigned seating flights, do not overbook our flights and have designated female lavatories. Our strategy will be to continue to seek ways to make the Gol brand signify simplicity and convenience in the minds of air travelers.

Routes and Schedules

     Our aircraft fly to various points on our route network linking our destinations. A significant portion of our route network is concentrated in highly populated areas in Brazil and South America, where numerous major business centers are located. We generally offer direct flights between these primary business centers, which enables many of our business travelers to fly with us directly to their destinations. However, after directly connecting high-density cities along the primary business routes, our aircraft often make multiple stops to other destinations. In this way, most of our aircraft has a daily flight plan that includes stops at multiple destinations throughout our network. We integrate the flight plans of our aircraft to provide maximum flexibility and connectivity at each stop, so that passengers have numerous connection options to reach their final destination. We believe this model of flight scheduling has helped us to more frequently serve a greater number of cities, generate higher load factors and stimulate demand for air travel in new markets, while also enabling us to increase aircraft utilization and provide our customers with more destination options. Having implemented this variation on the point to point approach successfully in Brazil, we have started adding international destinations to our flight plans in 2005, offering Brazilian and international passengers further destination options via direct flights or with one or more stops in a cost-efficient and practicable fashion.

     At December 31, 2006, we offered 600 daily flights in Brazil and to our international destinations. In 2006, we inaugurated ten new destinations, increasing the number of destinations served to 55 (48 in Brazil). By adding points of destination for our customers, we believe we can increase our overall load factor.

     Since 2001, we operate our cargo transport service Gollog, which achieved a 60% increase in revenues in 2006. Gollog ships packages in the cargo hold of our aircraft. In Brazil, Gollog currently operates from 44 locations in 41 cities.

20

Table of Contents

     In addition to monitoring growing market demand for increased daily flight frequency on our existing routes, we also seek to offer services in markets with previously untapped demand. We are also pursuing opportunities to offer flights on routes between Brazil and select cities in other South American countries where favorable market opportunities exist using the same business model and route management techniques that have proven successful within Brazil. Since 2005, we have been increasing the number of flights to and through Guarulhos and Galeão, the two international airports servinglocated in São Paulo and Rio de Janeiro, respectively, which we expect will givegives us additional growth opportunities in the Brazilian and international markets and more code share and interline agreement opportunities with international airlines.

Customer Value21

Table of Contents

     At December 31, 2008, we offered over 730 daily flights to 59 destinations connecting the most important cities in Brazil as well as the main destinations in Argentina, Bolivia, Chile, Paraguay, Peru, Uruguay, Colombia and Venezuela. As part of our strategy to focus exclusively on the Brazilian and selected South American markets, we decided, in the first half of 2008, to discontinue our intercontinental flights to Frankfurt, London, Rome, Madrid, Mexico City and Paris.

Services

Passenger Transportation

     We recognize that we must offer excellent services to our customers. As a result,Since April 2009, we offer lower priced seats to price sensitive leisure travelers and more flexible tickets with higherSmiles miles allocation to our corporate customers. We pay particular attention to the details that help to make for a pleasant, hassle-free flying experience, including:

• ticketless travel;
  
  
• convenient on-line sales, check-in, seat assignment and flight change and cancellation services;
  
  
• online flight status service.service;
  
  
• web-enabled cell phone ticket sales and check-in;
  
  
• self check-in at kiosks at designated airports;
• airport parking discounts;
  
  
• designated female lavatories;
• single-class, pre-assigned seating;
  
  
• friendly and efficient in-flight service;
  
  
• modern aircraft interiors;
  
  
• quick turnaround times at airport gates; and
  
  
• free or discounted shuttle services between airports and drop-off zones on certain routes.

     We also recognize that efficient andseek to achieve punctual operations, which are of primary importance to our customers. This emphasis resultedAccording to our internal data, which is corrected for delays out of our control and pre-advised changes in flight schedules, our punctuality rate in 2008 was 97%. According to ANAC data, which is not corrected for delays out of our control and pre-advised changes in flight schedules, our domestic punctuality statistic in 2008 averaged 72%.

Smiles Loyalty Program.

     We have a loyalty program (Smiles), which we consider as a strong relationship tool and which is available to all our passengers. We intend to increase theSmiles penetration through increasing and establishing partnerships with affiliated credit cards or using services and products at partner establishments. There are four tiers in our domestic completion factorSmiles program (Diamond,Gold,SilverandBlue) and qualification for a particular tier is based on the miles flown. TheSmiles program serves as a source of 97%revenue for us, since we can sell miles directly to corporations for marketing purposes or utilize them for co-branded credit cards. It maintains partnerships with hotel chains, car rental companies, restaurants, insurance companies, publishers and schools and also maintains a partnership with some of Brazil and South America’s largest banks and credit card companies. In 2008, the program offered a number of marketing promotions aimed at re-engaging its existing members and expanding its client base. We expect to receive our IOSA airline safety certification in 2009, which we believe will make us, combined with the integration of theSmiles loyalty program in our consolidated flight network, the preferred partner of major international airlines in Brazil, with which we do not compete on inter-continental routes. We expect that, under these partnerships, our customers could use their miles accumulated under the Smiles program to fly to international destinations in North America, Europe and Asia. For example, in April 2009, we entered into a commercial cooperation agreement with Air France-KLM, which will be implemented in two phases and will allow for the integration of ourSmiles and Air France-KLM’s Flying Blue programs and lays the groundwork for a future code-share agreement. The Smiles program had over six million members at the end of 2008.

22

Table of Contents

Ancillary revenues

     Ancillary revenues such as revenues from our Gollog services, ourVoe Fácilprogram, as well as baggage excess and ticket change fee revenues are an increasingly important part of our revenues. The further development and growth of our Gollog services andVoe Fácil program is part of our strategy, and they represented 8.1% of our consolidated revenues in 2008.

Gollog Cargo Transportation

     In addition to our passenger service, we make efficient use of extra capacity in the stronghold of our aircraft by carrying cargo, through our cargo transport service – Gollog. Gollog’s success is the result of the unique service we offer to the market: the Electronic Air Waybill that can be completed via the Internet. The Gollog system provides online access to air waybills and allows customers to track their shipment from any computer with Internet access. Our 49 destinations throughout Brazil and South America provide access to multiple locations in the region. With our capacity of over 800 daily flights we can guarantee quick and reliable delivery. Packages are shipped in the freighthold of our passenger aircraft.

Voe Fácil Installment Program

     We launched in 2005 and 93% in 2006, and domestic on-time performance rate of 98% in 2005 and 90% in 2006,theVoe Fácil (“Fly Easy”) program, an innovative new way to purchase airline tickets, which allows selected customers based on company data.their credit history to pay for airline tickets in up to 36 monthly installments. The program is especially designed for highly price-sensitive customers, many of which do not hold credit cards. Installment payments are a typical sales strategy in the Brazilian retail market and we are applying this sales technique to passenger transportation to increase our market and stimulate demand for our tickets. In 2008, theVoe Fácil program increased its ticket sales by 14% compared to 2007.

Sales and Distribution

     BasedOur customers can purchase tickets directly from us through a number of different channels, such as our website including our Booking Web Services (BWS), GDS – Global Distribution System, our call center and at airport ticket counters.

     Our low cost low fare business model utilizes website ticket sales as its main distribution channel. For the year ended December 31, 2008, 79% of our passenger revenues, whether directly to the customer or through travel agents, were booked via the Internet, making us one of the worldwide industry leaders in this area. In the same period 7% of our passenger revenues were booked through call centers and airport sales counters, 13% through our BWS and 1% of our total sales were made through the GDS, respectively.

     Our customers can purchase tickets indirectly through travel agents, who are a widely-used travel service resource in Brazil and South America, Europe, North America and other regions. Travel agents provide us with more than 20,000 distribution outlets throughout these regions. For the year ended December 31, 2008, 60% of our sales were to customers who purchased tickets indirectly from travel agents (74% of these sales were made on feedbackour website, 8% through call centers, 16% via BWS, and 2% by travel agents through a GDS system).

     GDSs allows us access to a large number of tourism professionals who are able to sell our tickets to customers throughout the globe, and enables us to enter into interline agreements with other airlines to offer more flights and connection options to our passengers and add incremental passenger traffic to our network.

Partnerships and Alliances

     Our market positioning enables us to successfully negotiate a number of arranged partnerships with supplementary major carriers worldwide, mostly in the form of code share agreements and interline agreements. Strategically, the additional passenger inflows generated from those partnerships aim to improve revenues at low incremental costs. At December 31, 2008, we had a code share agreement with COPA Airlines, and we had interline agreements with 53 airlines, including Air France – KLM, Alitalia, Delta and TAP Air Portugal. An interline agreement is a commercial agreement between individual airlines to handle passengers traveling on itineraries that require multiple airlines and allow its customers to utilize a single ticket, and to check their baggage through to the customers final destination. Interline agreements differ from code sharing agreements in that code sharing agreements usually refer to numbering a flight with the airline’s code (abbreviation) even though the flight is operated by another airline. This provides for better marketing and customer recognition of the links between the airlines.

23

Table of Contents

     Since early 2009, we have a code-share agreement with Air France and KLM, where their passengers will be able to connect with Gol operated flights within Brazil, marketed as Air France or KLM flights. Similar agreements are being negotiated with other international carriers. We are also launching a frequent flyer tie between ourSmiles program and the Flying Blue program of Air France – KLM, enabling travelers of both airlines to accrue and redeem miles within Air France – KLM, and our networks. We intend to enter into similar agreements with other long haul airlines serving Brazil.

     An important element of our business strategy is to cater to the corporate client. To further develop our business relationship with our corporate customers, we believehave also entered into partnerships with hotel chains and rental car service providers to offer our corporate customers the convenience of the combination of transportation and accommodation arrangements.

Pricing

     Brazilian airlines are permitted to establish their own domestic fares without previous government approval. However, domestic fares are monitored on a regular basis by the ANAC in order to prevent airlines, which are public concessionaires, from engaging in predatory pricing. Airlines are free to offer price discounts or follow other promotion activities. Airlines must submit, with a minimum of five working days’ advance notice, fares that are set at greater than a 65% discount to the per kilometer reference fares index curve published by the ANAC. The reference fares index curves are based on industry average operating costs, according to ANAC calculations.

     Airlines are permitted to establish fares for international tickets sold in Brazil without previous government approval, subject only to registration with the ANAC.

Yield Management

     Yield management involves the use of historical data and statistical forecasting models to produce knowledge about our markets and guidance on how to compete to maximize our operating revenues. Yield management forms the backbone of our revenue generation strategy and is strongly linked to our route and schedule planning and our sales and distribution methods. Our yield management practices enable us to react quickly in response to market changes. For example, our yield management systems are instrumental in helping us to identify the flight times and routes for which we offer promotions. By offering lower fares for seats that our yield management indicates would otherwise remain unsold, we capture additional revenue and also stimulate customer demand.

     The number of seats we offer at each fare level in each market results from a continual process of analysis and forecasting. Past sales history, seasonality, the effects of competition and current sales trends are meetingused to forecast demand. Current fares and exceedingknowledge of upcoming events at destinations that will affect traffic volumes are included in our forecasting model to arrive at optimal seat allocations for our fares on specific routes. Also, our practice of restricting seat reservations but instead requiring customers to pay for tickets at the time their service expectations, as approximately nine outseat is secured helps to increase the accuracy of every ten passengers trust Golour yield management. We use a combination of approaches, taking into account yields and would recommend Golflight load factors, depending on the characteristics of the markets served, to others.arrive at a strategy for achieving the best possible revenue per available seat kilometer, balancing the average fare charged against the corresponding effect on our load factors. For this purpose, we use a sophisticated forecasting, optimization and competitive analysis technology that proposes the optimal fare mix for a given flight based on the historical purchasing behavior of our customers. Our revenue management system is a state of the art tool based on the Sabre Air Max RM platform, which is able to store, process and analyze data, and provides us information about the passenger true origin and destination details, giving us insights on our passenger flows, and allowing us to maximize revenue at the network level. This tool has a specific module for low cost carriers that is able to optimize revenue in a non-restricted fare environment, moving away from the traditional models of discrete demand among fare classes. We worked with Sabre to build this version of their product, and were its launch customer.

24

Table of Contents

Safety and Security

     Our most important priority is the safety of our passengers and employees. We maintain our aircraft in strict accordance with manufacturer specifications and all applicable safety regulations, and perform routine line maintenance every day. Our pilots have extensive experience, with flight captains having more than 10,000 hours of career flight time, and we conduct ongoing courses, extensive flight simulation training and seminars addressing the latest developments in safety and security issues. We closely follow the standards established by the Air Accident Prevention Program of the ANAC and we have installed the Flight Operations Quality Assurance System, which maximizes proactive prevention of incidents through the systematic analysis of the flight data recorder system. All of our aircraft are also equipped with Maintenance Operations Quality Assurance, a troubleshooting program that monitors performance and aircraft engine trends. The Brazilian civil aviation market follows the highest recognized safety standards in the world. We are also an active member of the Flight Safety Foundation, a foundation for the exchange of information about flight safety.

21

Table of Contents

Sales and DistributionAircraft Fleet

     Our customers can purchase tickets directly from us through a number of different channels, including via our website, our call center and at airport ticket counters. For the year ended December 31, 2006, 30.4% of our customers purchased tickets directly from us (25.2% on our website and 5.2% via call centers and directly at airports).

     Our customers can also purchase tickets indirectly through travel agents, who are a widely-used travel service resource in Brazil and South America. Travel agents provide us with more than 8,000 distribution outlets throughout the region. For the year ended December 31, 2006, 69.6% of our sales were to customers purchased tickets indirectly from travel agents (approximately 3.0% of our sales through travel agents are made through a GDS system, with 5.6% of those sales made through call centers, and 61% on our website).

     For the year ended December 31, 2006, 81.6% of our passenger revenues, whether directly to the customer or to travel agents, were made via the internet, making us one of the worldwide industry leaders in this area, as compared to 10.8% of our passenger revenues through call centers and airport sales counters and 3.0% of our total sales made through the GDS, respectively.

     We also use GDSs, which allows us to access to approximately 75,000 tourism professionals who are able to sell our tickets to customers throughout the globe. GDSs also enables us to enter into code sharing agreements with other airlines to offer more flights and connection options to our passengers and add incremental passenger traffic to our network.

     To illustrate the importance of continuing to focus on increasing internet-based ticket sales directly to our customers, it costs an average of 90.8% less for each ticket sale made directly to a customer through our website compared to internet ticket sales through travel agents, 91.5% less than a call center ticket sale through a travel agent and 92.9% less than a GDS ticket sale. The higher ticket sales costs for GDS ticket sales are partially offset by higher average fares for tickets booked through a GDS. We strongly promote the use of our website because it is our most efficient distribution channel in terms of cost-savings and customer convenience. By focusing on virtual distribution, we are able to streamline our ticket sales and services and eliminate the need to incur costs associated with more traditional distribution channels, such as physical ticket sale centers located outside of airports. In addition to being cost-effective, focusing on internet distribution also provides our customers with high levels of convenience, as they are better able to interact with us when they want and how they want, in either Portuguese, English or Spanish. As a result of this emphasis on virtual distribution, we have become one of the largest and leading e-commerce businesses in South America in terms of revenue from internet-based sales.

     An importantA key element of our business strategymodel is to cater to the corporate client. To further develop our business relationship with our corporate customers, we have also entered into alliances with hotel chainsoperate a young and rental car service providers to offer our corporate customers the convenience of packaged transportation and accommodation arrangements.standardized fleet. At the end of 20062008, we launched in association with Mastercard and Banco do Brasil our corporate credit card “Gol Negócios” targeting small- and medium-size corporate enterprises. We will continue to focus on expanding our base of cost-conscious, medium-sized corporate clients who serve ashad a source of recurring revenues.

     We advertise primarily through cost-efficient media, including internet websites, radio spots, local newspaper ads and billboards. OurAqui todo mundo pode voar, or “Here everyone can fly” advertising campaign, commenced in July 2004, has been very effective in various related campaigns in promoting our objective to popularize air travel in Brazil. In December 2005, we successfully launched the campaignPor que viajar de outro jeito, se você pode voar?, or “Why travel by other means of transportation, if you can fly?” In 2006, we launched several campaigns related to the opening of ten new destinations (five of which international) and related to the beginning of the new Boeing 737-800 aircraft deliveries, which commenced in July 2006.

     We also use innovative promotions to stimulate demand for air travel. For example, we first offered our night flights in December 2003 as a measure designed to attract customers who may not have previously considered air travel as an option due to their price sensitivity and also to generate revenues from our aircraft at times they would otherwise have remained idle. These flights proved to be extremely popular among customers, achieving an average load factor of 90%, and we decided to offer them on a permanent basis. In 2004, we introduced ourBrasil mais perto, or “Brazil is closer”, campaign, which featured very low internet-based fares for weekend travel and we also offered promotional prices for certain customer segments, such as senior citizens and children. We believe that the high number of visits to our website, which averaged 1,500,000 visitors per month during 2006, are in part the result of the customer interest created by our promotions. By offering campaigns with low promotional prices, we stimulate our customers to search for opportunities to fly Gol.

22

Table of Contents

     To increase our market and stimulate demand for our tickets, we will also continue to provide our customers with a variety of flexible payment mechanisms. We offer more than 13 payment options for online-sales, such as credit card payments, debit payments and monthly installment payments. As part of this strategy, we launched in 2005 the Voe Fácil (“Fly Easy”) Gol Program, an innovative new way to purchase airline tickets, which allows selected customers based on their credit history to pay for airline tickets in up to 36 monthly installments. The program is especially designed for highly price-sensitive customers, many of which do not hold credit cards. Installment payments are a typical sales strategy in the Brazilian retail market and we are applying this sales technique to passenger transportation.

     Unlike other Brazilian airlines, we do not accept customer reservations for flights. Instead, tickets are paid for by our customers at the time their seat is secured. This eliminates the possibility of overbooking, and guarantees all of our ticketed customers a seat on our flights.

Awards and Recognition

     We have received a number of awards for matters such as service excellence, our website, operations, finance, marketing, investor relations, and corporate responsibility. Among the highlights in 2006 were:

• Top Performer in Transport and Logistics in theValor 1000publication in Brazil;
• Best Performing Airline in the world in 2005 byAviation Week and Space Technology;
• Most awarded Latin American Company in a survey by theLatinFinancemagazine;
• Best transportation company in Brazil, according to theEXAMEmagazine in Brazil;
• Most competitive airline in Latin America, according to rankings disclosed byAmerica Economia Magazine;
• Air Transport Worlds Market Leadership Award byAir Transport World; and
• No. 1 in the category of “Disclosure Procedures” in Latin America in two consecutive years and the top prize in the industry and top 5 ranking in Latin American websites for our investor relations website at the Ninth Annual IR Global Rankings in February 2007.

Pricing

     Our emphasis on keeping ourtotal operating costs low has in turn allowed us to set low fares while maintaining profitability. We have designed our fare structure to balance our load factors and yields in a way that we believe will generate the most profits from our flights. Our fares are below the average fares of our competitors. Our approach to more transparent and competitive pricing has lowered fares in many of the markets that we have entered. Consistent with airline industry market practice in Brazil, with the exception of our deeply discounted night flights or special offers and promotions, we do not have advance purchase restrictions, minimum stays or required Saturday night stayovers.

     As provided for in the ANAC regulations, passengers canceling travel plans on our flights are subject to a cancellation penalty. Passengers canceling their travel plans on our flights can either reschedule (if it occurs up to 24 hours prior to the flight and subject to the fare differential, if any), obtain a credit for future flights or be reimbursed for 80% of their fare. If the cancellation occurs less than 24 hours before the scheduled flight time, there is an additional penalty of R$30. We charge no-show customers a R$80 change fee, plus fare differential, if any, to use their ticket for another flight. If the replacement flight has a lower fare than the original flight (after giving effect to the change fee), the customer receives a credit equal to the difference.

     In connection with our night flights, we set deeply discounted fares designed to compete with bus lines for travel to the same destinations. This approach has helped us to maximize our aircraft utilization rates to generate revenue during night hours. The night flights have also increased our customer base to include those who have previously only used other modes of transportation. Approximately one third of our fleet operates night flights on a daily basis.

23

Table of Contents

     We also adjust our pricing in accordance with changes in passenger volume stemming from imbalances in the direction of traffic, such as during the holiday season. These periods often create demand peaks that result in traffic flows that are weighted heavily in one direction, causing demand for seats in the other direction to be low. During these periods, we discount fares on the lower demand flights to stimulate traffic on those routes to help offset our fixed costs.

Yield Management

     Yield management involves the use of historical data and statistical forecasting models to produce knowledge about our markets and guidance on how to compete in them to maximize our operating revenues. Yield management and pricing form the backbone of our revenue generation strategy and they are also strongly linked to our route and schedule planning and our sales and distribution methods. Our yield management practices enable us not only to react quickly in response to market changes but also to anticipate and help shape market changes. For example, our yield management is instrumental in helping us to identify times and the routes for which we offer promotions. By offering lower fares for seats that our yield management indicates would otherwise remain unsold, we capture additional revenue and also stimulate customer demand.

     The number of seats we offer at each fare level in each market results from a continual process of analysis and forecasting. Past sales history, seasonality, the effects of competition and current sales trends are used to forecast demand. Current fares and knowledge of upcoming events at destinations that will affect traffic volumes are included in our forecasting model to arrive at optimal seat allocations for our fares on specific routes. Also, our practice of not accepting seat reservations but instead requiring customers to pay for tickets at the time their seat is secured helps to increase the accuracy of our yield management. We use a combination of approaches, taking into account yields and flight load factors, depending on the characteristics of the markets served, to arrive at a strategy for achieving the best possible revenue per available seat kilometer, balancing the average fare charged against the corresponding effect on our load factors. For this purpose, we use a sophisticated forecasting, optimization and competitive analysis technology that proposes the optimal fare mix for a given flight based on the historical purchasing behavior of our customers. Our revenue management system is similar to that used by other successful low-cost carriers around the world.

Competition

     As the growth in the Brazilian low-cost, low-fare sector evolves, we may face increased competition from our primary competitors and charter airlines as well as other entrants into the market that reduce their fares to attract new passengers in some of our markets. In 2005, we became the second largest airline in the Brazilian market and our market share in December 2006 was 37.1% (13.3% in the international market).

     Airlines in Brazil compete primarily on the basis of routes, fare levels, frequency of flights, reliability of services, brand recognition, passenger amenities, such as frequent flyer programs, and customer service. We believe that our low-cost operating model and our low fares enable us to compete favorably in many of these areas. See “—Our Competitive Strengths.”

     Our competitors and potential competitors include TAM Linhas Aéreas S.A., or TAM, which is a full-service scheduled carrier offering flights on domestic routes and international routes, as well as other domestic scheduled carriers, regional airlines and charter airlines, which mainly have regional networks.

     On June 17, 2005, our former competitor Varig, filed for bankruptcy protection in Brazil and the United States. During 2006, the assets and operations of Varig were sold to various investors. Varig ceased operations on December 14, 2006 and VRG Linhas Aéreas S.A., or VRG, initiated operations as a commercial airline on December 15, 2006.

     The following table sets forth the historical market shares on domestic routes, based on revenue passenger kilometers, of the significant airlines in Brazil for each of the periods indicated:

24

Table of Contents

     The following table sets forth the historical market share of the major Brazilian airlines on international routes for each of the periods indicated.

     We also face competition from ground transportation alternatives, primarily interstate bus companies. In 2005, interstate bus companies transported over 141 million passengers, according to the National Ground Transportation Agency (Agência Nacional de Transportes Terrestres), and given the absence of meaningful passenger rail services in Brazil, travel by bus has traditionally been the only low-cost option for long-distance travel for a significant portion of Brazil’s population. We believe that our low-cost business model and strong capitalization has given us flexibility in setting our fares to stimulate demand for air travel among passengers who in the past have traveled long distances primarily by bus. In particular, the highly competitive fares we have offered for travel on our night flights, which have often been comparable to bus fares for the same destinations, have had the effect of providing direct competition for interstate bus companies on these routes. For example, at the end of 2006, we offered night flights between São Paulo and Porto Alegre, with a 1.5 hour flight duration, for fares as low as R$129. In comparison, interstate bus companies charged their passengers a fare of approximately R$137 for an 18.5 hour journey between the same two cities. We believe that operating night flights presents an opportunity to increase our overall load factor.

     As we expand our international services, our pool of competitors will increase and we will face competition from airlines that are already established in the international market and that participate in strategic alliances and code sharing arrangements.

Aircraft

     At the end of 2006, we operated a fleet of 65 aircraft comprised of 30106 Boeing 737-700 Next Generation aircraft, 21 Boeing 737-800 Next Generation aircraft and 14 Boeing 737-300737 aircraft. We expect to return all our Boeing 737-300 aircraft during 2009 and intend to concentrate our fleet on Boeing 737 Next Generation aircraft. We intend to operate approximately 94127 aircraft by the end of 2011, concentrating2012. At the end of 2008 we had 7 Boeing 767-300 under lease, which are not operating and which we expect to sublease or return in 2009/2010.

     The average age of our operating aircraft at December 31, 2008 was 6.8 years.The average daily utilization rate of our operating fleet on the 737-800 Next Generation aircraft. in 2008 was 12.1 block hours (13.8 block hours in 2007).

The composition of our operating fleet as of December 31, 20062008 is more fully described below:

*SFP means short field performance

     Each Boeing 737 aircraft in our fleet is powered by two CFM International Model CFM 56-7B22 engines or two CFM International Model CFM 56-7B24 engines, two 56-7B27B1 engines or two 56-3C1 engines and operates in a comfortable single-class layout. The average age of our aircraft at December 31, 2006 was 7.8 years and the average age of our Boeing 737NG fleet, which represents 78.5% of our total fleet, was 5.1 years.

     We took delivery of 14 Boeing 737-800 aircraft, 8 Boeing 737-700 aircraft and 3 Boeing 737-300 aircraft in 2006. We have placed firm purchase orders with The Boeing Company for 76 737-800 Next Generation aircraft and we have options to purchase an additional 34 737-800 Next Generation aircraft. Currently, we have 14 firm purchase orders for aircraft deliveries scheduled in 2007, 9 in 2008, 16 in 2009, 16 in 2010 and 21 after 2010. With these firm purchase orders and purchase options, we expect to further reduce our operating and financial costs. In addition, by purchasing aircraft, we expect to be able to maintain our young fleet of aircraft going forward, increase fuel and operating efficiency and reduce maintenance costs.

25

Table of Contentsengines.

     The following table shows the historical and expected development of our operating fleet at December 31, 2005 and 20062009 and the expected development of our operating fleet until December 31, 2012:

     Our new and simplifiedWe will revise this fleet structure allows usplan according to maintain a cost-efficient operation by reducing maintenance and training costs, reducing spare parts inventory requirements and supporting high reliability and high aircraft utilization rates. The average daily utilization rate of our aircraft between 2004 and 2006 was 14.0 block hours (including 14.2 block hours in 2006), which wasexpectations for the highest average utilization rate in Brazil and one of the highest utilization ratesgrowth potential in the industry worldwide according to airline company public filings.markets in which we operate.

     The Boeing 737-700 Next Generation and Boeing 737-800 Next Generation aircraft currently comprising our fleet are fuel-efficient and very reliable. They suit our cost efficient operations well for the following reasons:

25

Table of Contents

• they have comparatively simplifiedstandardized maintenance routines;
  
  
• they require just one type of standardized training for our crews;
  
  
• they use an average of 7% less fuel than other aircraft of comparable size, according to Boeing; and
  
  
• they have one of the lowest operating costs in their class.

     In addition to being cost-efficient, the Boeing 737-700/800 Next Generation aircraft are equipped with advanced technology that promotes flight stability, providing a more comfortable flying experience for our customers. Our focus on having low operating costs means that we will periodically review our fleet composition. As a result, our fleet composition may change over time if we conclude that adding otherWe use one single type of aircraft types would contribute to this goal. However, our approach to our fleet composition is based upon having a minimal number of different aircraft types to preserve the simplicity of our operations. As a result, the introduction of any new aircraft type to our fleet will only be done if, after careful consideration, we determine that such a step will reduce our operating costs. Since 2005, mostMost of our leased Boeing 737-800 Next Generation aircraft have beenare equipped with blended winglets and all Boeing 737-800 Next Generation aircraft from our purchase order will be equipped with winglets, which reduce our fuel and maintenance costs. Our experience with the new winglets has shown operating costfuel consumption reductions of overapproximately 3%. In addition, we expect the winglets to improve airplane performance during take-off and landing on short runways. The new Boeing 737-800NG aircraft will be delivered with short-field performance (SFP) with technical modifications that we expect to significantly improve flight performance, the ability to operate non-stop flights, reducedreduce noise during take-off and to enable us to fly with our Boeing 737-800 Next Generation aircraft to the airport of Santos Dumont in Rio de Janeiro, an important link to the most important routes in Brazil.

     At the end of 2006,2008, we leased all90 of our 115 aircraft under operating lease agreements that have an average remaining term of 5248 months. We believe that leasing our aircraft fleet under operating leases provides us with flexibility to adjust our fleet size if we consider it to be in our best interests to do so. We make monthly rental payments, some of which are based on floating rates, but are not required to make termination payments at the end of our leases. Under our operating lease agreements, we do not have purchase options and for some of our lease agreements we are required to maintain maintenance reserve deposits and to return the aircraft and engine in the agreed condition at the end of the lease term. Title to the aircraft remains with the lessor. We are responsible for the maintenance, servicing, insurance, repair and overhaul of the aircraft during the term of the lease. As of December 31, 2006,2008, our operating leases had terms of up to 12071 months from the date of delivery of the relevant aircraft. Currently, 10At the end of 2008, we had 18 aircraft acquired under our aircraft leases expire in 2007, 5 in 2008, 14 in 2009, 12 in 2010, and 19 after 2010.firm purchase order with Boeing under finance lease arrangements that had an average remaining term of 129 months.

26

Table of Contents

Maintenance

     According to ANAC regulation, we are directly responsible for the execution and control of all maintenance services performed on our aircraft. The maintenance performed on our aircraft can be divided into two general categories: line and heavy maintenance. Line maintenance consists of routine, scheduled maintenance checks on our aircraft, including pre-flight, daily and overnight checks and any diagnostics and routine repairs. All of our line maintenance is performed by our own highly experienced technicians at our line maintenance service bases throughout Brazil.Brazil and South America. We believe that our practice of performing daily preventative maintenance helps to maintain a higher aircraft utilization rate and reduces maintenance costs. Heavy maintenance consists of more complex inspections and servicing of the aircraft that cannot be accomplished overnight. Heavy maintenance checks are performed following a pre-scheduled agenda of major overhauls defined by the aircraft’s manual,manufacturer, based on the number of hours and flights flown by the aircraft. Our continued high aircraft utilization rate will result in shorter periods of time between heavy maintenance checks for our aircraft in comparison to carriers with lower aircraft utilization rates. In addition, engine maintenance services are rendered in different MRO facilities. We do not believe that our high aircraft utilization rate will necessarily result in the need to make more frequent repairs to our aircraft, given the durability of the aircraft type in our fleet. Our aircraft are covered by warranties that have an average term of three to five years. The warranties on the aircraft we received in 20062008 under our firm purchase order with Boeing will start expiring in 2011.2013.

     We internalized heavy maintenance on our Boeing 737 aircraft in 2006 with the completion of our new Aircraft Maintenance Center at the Tancredo Neves International Airport in Confins, in the State of Minas Gerais. The certification for the operation of the center authorizes maintenance services for Boeing 737-300s and Boeing Next Generation 737-700 and 800s. We use the newthis facility for airframe heavy checks, line maintenance, aircraft painting and aircraft interior refurbishment. We believe that the neware currently expanding our Aircraft Maintenance Center in order to ensure maintenance facility will accommodatecapacity while our recent and future fleet expansion, centralize our aircraft maintenance operations, provide cost savings and better enable us to determine the timinggrows.

26

Table of the heavy maintenance so as to continue to maximize our aircraft utilization.Contents

     With our system of phased maintenance for our Boeing Next Generation 737-700 and 737-800 aircraft fleet, we are able to perform maintenance work every day without sacrificing aircraft revenue time and to schedule preventive maintenance with more regularity and around the utilization of our aircraft, which helps to maintain high levels of block hours per day and reduces costs. We are one of the only airlinefew airlines in the world that takes full advantage of the Boeing 737-800NG737 Next Generation phased maintenance philosophy, supported by extensive investments we made in personnel, material, tools and equipment.

     We have also been certified by the ANAC under the Brazilian Aeronautical Certification Regulations to perform heavy maintenance services for third parties. We expect to utilize this certification, a potential source for ancillary revenues, only after the construction of an additional maintenance facility, currently contemplated to be finalized in 2008.2009.

     We employ 945 maintenance professionals, including engineers, supervisors, technicians and mechanics, who perform maintenance in accordance with maintenance plans that are established by Boeing and approved and certified by Brazilian aviation authorities.

     Facilities

     We have renewable concessions with terms varying from one to five years from INFRAERO to use and operate all of our facilities at each of the major airports that we serve. Our concession agreements for our terminals’ passenger service facilities, which include check-in counters and ticket offices, operations support area and baggage service offices, contain provisions for periodic adjustments of the lease rates and the extension of the concession term.

     Our primary corporate offices are located in São Paulo. Our commercial, operations, technology, finance and administrative staff is based primarily at our headquarters. We have concessions to use other airport buildings and hangars throughout Brazil, including a part of a hangar at Congonhas airport where we perform parts of our aircraft maintenance. In addition, we have a maintenance center at the Tancredo Neves International Airport in Confins, in the State of Minas Gerais.

Fuel

     Our fuel costs totaled R$1,227.02,630.8 million in 2006,2008, representing 39.6%40.5% of our operating expenses for the year. In 2006,2008, we consumed approximately 712.9 million liters of fuel. We purchasepurchased substantially all of our fuel from Petrobras Distribuidora S.A., a retail subsidiary of Petrobras, principally under an into-plane contract under which the supplier supplies fuel and also fills our aircraft tanks. In 2006,2008, fuel prices under our contracts were re-set every 1530 days and arewere composed of a variable and a fixed component. The variable component is defined by the refinery and follows international crude oil price fluctuations and thereal/U.S. dollar exchange rate. The fixed component is a spread charged by the supplier and is usually a fixed cost per liter during the term of the contract. We currently operate a tankering program under which we fill the fuel tanks of our aircraft in regions where fuel prices are lower. We also provide our pilots with training in fuel management techniques, such as carefully selecting flight altitudes to optimize fuel efficiency.

27

Table of Contents

     Fuel costs are extremely volatile, as they are subject to many global economic and geopolitical factors that we can neither control nor accurately predict. Because international prices for jet fuel are denominated in U.S. dollars, our fuel costs, though payable inreais, are subject not only to price fluctuations but also to exchange rate fluctuations. We maintain a fuel and foreign exchange hedging program, based upon best practices,policies which define volume, price targets and instruments for multi-year periods, under which we enter into fuel and currency hedging agreements with various counterparties providing for price protection in connection with the purchase of fuel. Our hedging practicespositions cover short-term periods, and are adjusted weekly or more frequently as conditions require. Our hedging practices are executed by our internal risk management committee and overseen by the risk policies committee of our board of directors. The risk policies committee of our board of directors meets quarterly or more often, if called, and its main responsibilities are to assess the effectiveness of our hedging policies, recommend amendments when and recommends amendments where appropriate.appropriate and establish its views regarding fuel price trends. We use risk management instruments that have a high correlation with the underlying assets so as to reduce our exposure. We require that all of our risk management instruments be liquid so as to allow us to make position adjustments and have prices that are widely disclosed. We also avoid concentration of credit and product risk. We have not otherwise entered into arrangements to guarantee our supply of fuel and we cannot provide assurance that our hedging program is sufficient to protect us against significant increases in the price of fuel. As of December 31, 2006,2008, we had hedged approximately 87%, 75% and 21%20% of our projected fuel requirements for the first, second and third quarters of 2007, respectively.2009.

The following chart summarizes our fuel consumption and costs for the periods indicated:

Insurance

     We maintain passenger liability insurance in an amount consistent with industry practice and we insure our aircraft against losses and damages on an “all risks” basis. We are required by the ANAC to maintain insurance coverage for general liability against terrorist acts or acts of war with a minimum amount of US$750 million. We are in compliance with this requirement.1.0 billion. We have obtained all insurance coverage required by the terms of our leasing agreements. We believe our insurance coverage is consistent with airline industry standards in Brazil and is appropriate to protect us from material loss in light of the activities we conduct. No assurance can be given, however, that the amount of insurance we carry will be sufficient to protect us from material loss.

     In response to the substantial increases of insurance premiums for coverage for damages resulting from terrorist attacks to aircraft after the September 11, 2001 attacks in the United States, the Brazilian government enacted Law No. 10,309 on November 22, 2001, generally authorizing the Brazilian government to undertake liabilities for damages caused to third parties as a result of terrorist attacks or acts of war against aircraft of Brazilian airlines. According to Law No. 10,744 of October 9, 2003, this undertaking by the federal government is currently limited to cover damages caused to third parties resulting from terrorist attacks and acts of war to Brazilian aircraft up to US$1 billion. Decree No. 5,035 of April 5, 2004, which regulates the provisions of Law No. 10,744, provides that the Brazilian government may, at its sole discretion, suspend this coverage at any time, effective within seven days after the announcement by the Brazilian government of its decision to do so.

     On September 29, 2006, one of our new Boeing 737-800 NG aircraft was involved in a mid-air collision with a private aircraft of ExcelAir. Our aircraft went down in the Amazon forest, leaving no survivors among the 148 passengers and six crew members. The ExcelAir aircraft, a new Embraer Legacy 135BJ, performed an emergency landing and all of its seven occupants were unharmed. We continue to cooperate fully with all regulatory and investigatory agencies to determine the cause of this accident. We believe that the costs to defend any claims and any potential liability exposure will be covered by insurance.

2827

Table of Contents

Corporate ResponsibilityCompetition

Domestic

     Airlines in Brazil compete primarily on the basis of routes, fare levels, frequency of flights, capacity, airport operating rights and presence, reliability of services, brand recognition, frequent flyer programs and customer service.

     Our values are based uponmain competitor in Brazil is TAM Linhas Aéreas S.A., or TAM, which is a full-service scheduled carrier offering flights on domestic routes and international routes. We also face domestic competition from other domestic scheduled carriers, regional airlines and charter airlines, which mainly have regional networks.

     As the growth respect,in the Brazilian airline sector evolves, we may face increased competition from our primary competitors and incentives for teamwork for our employees, andcharter airlines as well as other entrants into the fulfillmentmarket that reduce their fares to attract new passengers in some of our social and environmental obligations. We are committed to being a good corporate citizenmarkets.

     The following table sets forth the historical market shares on domestic routes, based on revenue passenger kilometers, of the significant airlines in Brazil by participating in projects dedicated to improving the education, health and nutritionfor each of the underprivilegedperiods indicated:

__________
Source:Advanced Comparative Data (Dados Comparativos Avançados) 2005—2008

     Domestically, we also face competition from ground transportation alternatives, primarily interstate bus companies. In 2007, interstate bus companies transported over 131 million passengers, according to preliminary data from the National Ground Transportation Agency (Agência Nacional de Transportes Terrestres), and given the absence of meaningful passenger rail services in Brazil, travel by bus has traditionally been the only low-cost option for long-distance travel for a significant portion of Brazil’s population, particularly children and sponsored in 2006 approximately R$2 million to social and cultural activities and donated 1,200 tickets for charity purposes.population. We are the largest individual sponsor ofPastoral da Criança, a non-governmental organization that has assisted in the health and education needs of more than 1.8 million children in Brazil from infancy to age six. We also support other various other governmental and non-governmental organizations, such asFundação Gol de Letra, a foundation dedicated to educating underprivileged children and teenagers;Projeto Felicidade, a project that provides assistance to children with cancer; andProjeto Solidariedade ao Nordeste, a project that provides food donations to poor families in the northeastern region of Brazil. We sponsor numerous cultural and sports activities, such as theater plays and dance shows and sports events, to help promote travel and tourism in Brazil. In addition to making a difference for those in need, we also believe that our social responsibilitylow-cost business model has given us flexibility in setting our fares to stimulate demand for air travel among passengers who in the past have traveled long distances primarily by bus. In particular, the highly competitive fares we have offered for travel on our night flights, which have often been comparable to bus fares for the same destinations, have had the effect of providing direct competition for interstate bus companies on these routes.

International

     As we expand our international services in South America, our pool of competitors will increase and cultural sponsorship initiatives benefit us by enhancing our corporate imagewe will face competition from Brazilian and promoting awarenessSouth American airlines that are already established in the international market and that participate in strategic alliances and code sharing arrangements. As part of our brand. In December 2005, our shares were includedstrategy to focus exclusively on the Brazilian and selected South American markets and to access inter-continental markets through code-share agreements with major international carriers, we decided, in the Corporate Sustainability Index (ISE) Bovespa. It is the first stock index in Latin America comprisedhalf of companies with responsible views towards the environment, society, customers, suppliers2008, to discontinue our intercontinental flights to Frankfurt, London, Rome, Madrid, Mexico City and other stakeholders.Paris.

Industry Overview

     Since air transportation has historically been affordable only to the higher income segment of Brazil’s population, resulting in a comparatively low level of air travel, we believe that the low-cost, low-fare business model has the potential to significantly increase the use of air transportation in Brazil. AccordingBrazil is the fifth largest domestic aviation market in the world and according to the ANAC, there were 38.746.0 million domestic enplanements and 5.85.1 million international enplanements on Brazilian carriers in Brazil in 2005,2007, out of a total population of approximately 184 million, according to the Brazilian Geographical and Statistical Institute (Instituto Brasileiro de Geografia e Estatística—IBGE). In contrast, according to the U.S. Department of Transportation, the United States had 669.8681 million domestic enplanements and 68.889 million international enplanements in 2005,2007, out of a total population of approximately 297304 million, based on the latest U.S. census figures.

     Most long-distance public travel services within Brazil are provided by interstate bus companies. In 2005, Brazil’s domestic airline industry transported almost 38 million passengers, as compared to over 141 million passengers transported by interstate bus companies in 2005, according to the National Ground Transportation Agency (Agência Nacional de Transportes Terrestres). Brazil has no meaningful interstate passenger rail services.28

Table of Contents

     The business travel segment is the largest component of Brazilian air transportation demand and the most profitable in the market. According to company data, business travel represented approximately 70%65% of the total demand for domestic air travel in 2006,2008, which we believe is significantly higher than the business travel portion of domestic air travel in the global aviation sector. According to data collected from the ANAC, flights between Rio de Janeiro and São Paulo accounted for 12.2%9.6% of all domestic passengers in 2005.2007. The ten busiest routes accounted for 29.5%25.9% of all domestic air passengers in 20062007, while the ten busiest airports accounted for 75.6%72,0% and 75.1%74% of all domestic passenger traffic through INFRAERO airports in terms of arrivals and departures in 20052007 and 2008, respectively.

     In light of economic growth, increased passenger volumes and the soccer world cup scheduled for 2014 in Brazil, the Brazilian airport infrastructure will need substantial improvements. In addition, in parts of 2006 respectively.and 2007, technical and operational problems in the Brazilian civil aviation system, including air traffic control, airspace coordination and airport administration adversely affected airline operations. Various measures, such as hiring and training of additional air-traffic control personnel, investments in new systems and additional terminal and runway capacity in congested airports, have been taken by the relevant governmental authorities and discussions are currently ongoing with a view to possible additional changes in the organizational structure of the aviation infrastructure system.

     The table below sets forth information about the ten busiest routes for air travel in Brazil during 2005.2007 and 2006.