SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the month of July 2021
(Commission File No. 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)
Praça Comandante Linneu Gomes, Portaria 3, Prédio 24
Jd. Aeroporto
04630-000 São Paulo, São Paulo
Federative Republic of Brazil
(Address of registrant’s principal executive offices)
Indicate by check mark whether the registrant files or will file
annual reports under cover Form 20-F or Form 40-F.
Form 20-F ___X___ Form 40-F ______
Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under
the Securities Exchange Act of 1934.
Yes ______ No ___X___
Parent Company and Consolidated
Quarterly Information (ITR)
GOL Linhas Aéreas Inteligentes S.A.
June 30, 2021
with Review Report on the Quarterly Information
Gol Linhas Aéreas Inteligentes S.A.
Parent Company and Consolidated Quarterly Information (ITR)
June 30, 2021
Contents
Comments on the Performance | 2 |
Report of the Statutory Audit Committee (SAC) | 6 |
Statement of the Executive officers on the Parent Company and Consolidated Quarterly Information (ITR) | 7 |
Statement of the Executive officers on the Independent Auditors’ Review Report | 8 |
| Review Report of the Independent Auditors on the Quarterly Information (ITR) | 9 |
| Balance Sheets | 11 |
Income Statements | 13 |
Statements of Comprehensive Income (SCI) | 15 |
Statements of Changes in Shareholders’ Equity (SCSE) | 16 |
Statements of Cash Flows (SCF) | 17 |
Statements of Value Added (SVA) | 19 |
Notes to the Parent Company and Consolidated Quarterly Information (ITR) | 20 |
Comments on the Performance
GOL is intensely focused on improving its operations as the Company restores its network to meet the ramp-up in demand. “I am beyond thankful for our employees, the Team of Eagles, who are leading with care, clarity and confidence, resulting in successful management throughout the crisis, and placing the Company in a solid position in resuming its operations,” said Kakinoff.
Sales: Consolidated gross sales reached approximately R$1.7 billion in the 2Q21. GOL’s average daily sales reached R$18 million, which represents around 54% of pre-pandemic sales levels, R$300 million above 1Q21 and at the same levels of 4Q20. A traditionally weak quarter proved to be a period of recovery for the industry, which resumed growth in line with the downtrend in cases of Covid-19. During the pandemic, the Company maintained its guideline to invest in technology, having sustained aircraft occupancy close to 80%, even at the peak of the crisis, through robust software and data analytics. Furthermore, these investments are an important item in better pricing the tickets and managing the network.
Network and Fleet: GOL’s fleet currently has 94 737-800 aircraft, 23 737-700 aircraft and 10 Boeing 737 MAX aircraft. In June, the Company started operating the Boeing 737 MAX 8 in Congonhas, São Paulo, one of the most important and busiest airports in the country. As a result of its flexibility, GOL's network was redesigned with a focus on leisure demand, mainly in the Northeast, through the Salvador hub.
“We continue to prove that our standardized and flexible fleet is still the best strategy to meet demand fluctuations. We are getting greater value from our network than other carriers, and resuming operations with increased quality when compared to the pre-pandemic period. We also have fewer route overlaps with competitors, and can adjust our frequencies in booming markets almost instantaneously,” commented Celso Ferrer, Vice President of Operations.
GOL recently announced the acquisition of MAP Linhas Aéreas, a Brazilian domestic airline with routes to regional destinations, and from Congonhas Airport, to expand its network and capacity as it seeks to revitalize demand for leisure and business travel. With the acquisition, the Company further invests in the regional air transport market, especially in the Amazonia region. GOL maintains its traditional flexibility since there are no commitments regarding its fleet and staff.
“We believe that the acquisition of MAP is currently the best opportunity for rational consolidation in the Brazilian aviation market. From now on, we will remain focused on our organic growth strategy, stimulating demand in the business and leisure segments as Brazil emerges from the pandemic in order to expand our network,” added Kakinoff.
Customer experience: The Company stands out for human and intelligent relationships, which are important drivers that provide the best experience for Customers. “With technology as a major ally, the experience of flying with GOL is increasingly faster, simpler, and more independent. We remain the best choice for leisure and business travel,” said Eduardo Bernardes, Vice President of Sales, Marketing and Clients.
GOL’s Net Promoter Score (NPS) reached 43 in the 2Q21, a solid metric resulting from the best-in-market product and its highly engaged Customer service team.
Liquidity: The Company repaid approximately R$420 million of its principal amortizable debt in the second quarter of 2021 and, simultaneously, released assets with a fair value of US$250 million, demonstrating its commitment to strengthening its balance sheet. The acquisition of Smiles’ equity interest held by minority shareholders will boost cash generation and improve GOL’s creditworthiness.
Considering the amounts fundable from deposits and unencumbered assets, the Company’s potential sources of liquidity resulted in approximately R$5 billion of accessible liquidity. The average maturity of GOL’s long-term debt, excluding aircraft leases and perpetual notes, is approximately 3.4 years, with the main obligations already allocated to GOL’s cash flow. The net debt ratio (excluding Exchangeable Notes and perpetual bonds) to adjusted LTM EBITDA was 10.1x on June 30, 2021, representing the lowest leverage among its peers.
Furthermore, the Company has been working to strengthen margins, and has kept its fixed-costs low compared to the pre-pandemic period, in addition to converting its fixed payroll and leasing costs to variable. The strong and agile response to the pandemic in terms of liquidity was possible due to the work of strengthening the balance sheet over the last 5 years, which the Company has carried out diligently and continuously.
“Even in an atypical year, GOL stands out among the few global airlines for repaying approximately R$6.0 billion in debt since the beginning of 2020, its disciplined liquidity management and its ability to get value from the current assets. This strategy enables GOL to focus on growing with profitability, leaving the crisis with a lighter and stronger balance sheet, compared to its competitors,” said Richard Lark, Chief Financial Officer. “The absorption of Smiles’ loyalty program, together with the capital increase led by the controlling shareholders totaled approximately R$1.0 billion in new equity capital.”
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Leasing: During the second quarter, GOL maintained flexibility for the duration of its fixed monthly payments contracts remaining variable (power-by-the-hour). The agreements signed with its lessors allow the extension of the deferrals in order to be adjusted proportionally to the recovery of capacity during the year 2021, which enables a lower volume of payments. The efficient management of the lease contracts allowed the Company to record the lowest fleet indebtedness among local peers, and with the lowest commitment of dollars per aircraft.
Sustainability: GOL invests in several initiatives to mitigate its impacts, and it is the first airline in Latin America to affirm its commitment to zero carbon emissions by 2050, by using SAFs (Sustainable Aviation Fuels), and through operational and technical improvements that reduce GHG (Greenhouse Gases) emissions, in line with the guidelines of IATA and the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). Furthermore, it is the first airline to offer its passengers the option to offset carbon from their travels through a partnership with Moss, an environmental carbon credit platform. The emissions are offset with MCO2, a global token backed by blockchain, which offsets carbon emissions by supporting certified environmental projects in the Amazon.
Operating and Financial Indicators
| Traffic Data – GOL (in Millions) | 2Q21 | 2Q20 | % Var. | 6M21 | 6M20 | % Var. |
| RPK GOL – Total | 3,432 | 773 | 344.0% | 9,024 | 10,721 | -15.8% |
| RPK GOL – Domestic | 3,432 | 771 | 345.1% | 9,024 | 9,431 | -4.3% |
| RPK GOL – International | - | 2 | NM | - | 1,290 | NM |
| ASK GOL – Total | 4,033 | 990 | 307.4% | 11,032 | 13,452 | -18.0% |
| ASK GOL – Domestic | 4,033 | 986 | 309.0% | 11,032 | 11,668 | -5.5% |
| ASK GOL – International | - | 4 | NM | - | 1,784 | NM |
| GOL Load Factor – Total | 85.1% | 78.1% | 7.0 p.p. | 81.8% | 79.7% | 2.1 p.p. |
| GOL Load Factor – Domestic | 85.1% | 78.2% | 6.9 p.p. | 81.8% | 80.8% | 1.0 p.p. |
| GOL Load Factor – International | - | 56.2% | NM | 0.0% | 72.3% | NM |
| Operating Data | 2Q21 | 2Q20 | % Var. | 6M21 | 6M20 | % Var. |
| Revenue Passengers - Pax on Board ('000) | 2,922 | 627 | NM | 7,417 | 8,973 | -17.3% |
| Aircraft Utilization (Block Hours/Day) | 8.0 | 6.5 | 23.1% | 9.0 | 11.4 | -21.1% |
| Departures | 19,662 | 5,146 | 282.1% | 52,459 | 68,102 | -23.0% |
| Total Seats (‘000) | 3,504 | 821 | 326.8% | 9,248 | 11,655 | -20.7% |
| Average Stage Length (km) | 1,142 | 1,177 | -3.0% | 1,182 | 1,139 | 3.8% |
| Fuel Consumption (mm liters) | 113 | 30 | 276.7% | 305 | 393 | -22.4% |
| Full-time Employees (at Period End) | 13,754 | 15,981 | -13.9% | 13,754 | 15,981 | -13.9% |
| Average Operating Fleet(6) | 53 | 17 | 211.8% | 65 | 65 | 0.0% |
| On-time Departures | 96.3% | 96.1% | 0.2 p.p. | 96.3% | 96.9% | -0.6 p.p. |
| Flight Completion | 99.0% | 94.2% | 4.8 p.p. | 98.6% | 97.3% | 1.3 p.p. |
| Passenger Complaints (per 1,000 pax) | 1.35 | 5.99 | -77.5% | 0.97 | 4.53 | -78.6% |
| Lost Baggage (per 1,000 pax) | 1.89 | 2.07 | -8.7% | 1.86 | 2.21 | -15.8% |
| Financial Information | 2Q21 | 2Q20 | % Var. | 6M21 | 6M20 | % Var. |
| Net YIELD (R$ cents) | 25.86 | 31.48 | -17.9% | 25.53 | 29.71 | -14.1% |
| Net PRASK (R$ cents) | 22.01 | 24.58 | -10.5% | 20.88 | 23.67 | -11.8% |
| Net RASK (R$ cents) | 25.50 | 36.15 | -29.5% | 23.53 | 26.06 | -9.7% |
| CASK (R$ cents)(4) | 42.47 | 79.16 | -46.3% | 32.87 | 22.25 | 47.7% |
| CASK Ex-Fuel (R$ cents)(4) | 33.14 | 65.44 | -49.4% | 24.33 | 13.80 | 76.3% |
| Adjusted CASK(6) | 21.94 | 34.09 | -35.6% | 20.34 | 18.93 | 7.4% |
| Adjusted CASK(6) Ex-Fuel (R$ cents)(4) | 12.95 | 28.11 | -53.9% | 12.32 | 11.05 | 11.5% |
| Breakeven Load Factor(4) | NM | NM | NM | NM | NM | NM |
| Average Exchange Rate(1) | 5.2907 | 5.3854 | -1.8% | 5.3862 | 4.9218 | 9.4% |
| End of Period Exchange Rate(1) | 5.0022 | 5.4760 | -8.7% | 5.0022 | 5.4760 | -8.7% |
| WTI (Average per Barrel. US$)(2) | 66.10 | 28.00 | 136.1% | 62.21 | 36.82 | 69.0% |
| Price per Liter Fuel (R$)(3) | 3.35 | 2.19 | 53.0% | 3.00 | 2.74 | 9.5% |
| Gulf Coast Jet Fuel (Average per Liter, US$)(2) | 0.46 | 0.21 | 119.0% | 0.44 | 0.29 | 51.7% |
(1) Source: Brazilian Central Bank; (2) Source: Bloomberg; (3) Fuel expenses excluding hedge results and PIS/COFINS credits/liters consumed; (4) Excluding non-recurring expenses and Idle expenses. (5) Average operating fleet excluding aircraft in sub-leasing and MRO. Certain calculations may not match with the financial statements due to rounding. (6) Considers only expenses related to current operating levels.
Domestic market
GOL’s domestic demand was 3,432 million RPK, an increase of 344.0%, while the ASK supply increased 307.4% compared to 2Q20, and the load factor reached 85.1% in the quarter. The Company transported 2.9 million Customers in 2Q21, an increase of 366.0% compared to the same period in 2020.
| 3 |
International market
In 2Q21, the Company carried out non-regular charter flights for soccer teams in championships. As most country borders were closed, GOL did not offer regular international flights.
Volume of Departures and Total Seats
The total volume of the Company’s departures was 19,662, an increase of 282.1% over 2Q20. The total number of seats available to the market was 3.5 million in the second quarter of 2021, an increase of 326.8% quarter-over-quarter.
PRASK, Yield and RASK
Net PRASK decreased by 10.5% in the quarter when compared to 2Q20, reaching 22.01 cents (R$), mainly due to the higher volume of ASKs compared to the same period last year. GOL’s net RASK was 25.50 cents (R$) in 2Q21, a decrease of 29.5% compared to 2Q20 and a 13.8% increase over 1Q21. Net yield decreased 17.9% compared to 2Q20, reaching 25.86 cents (R$), but increase 2.1% when compared to 1Q21.
Fleet
At the end of 2Q21, GOL's total fleet was 127 Boeing 737 aircraft, comprised of 117 NGs and ten (10) MAXs (operational). At the end of 2Q20, GOL's total fleet was 130 aircraft, of which seven (7) were MAXs (non-operational). The average age of the Company's fleet was 11.3 years at the end of 2Q21.
GOL does not operate widebody aircraft, and has no aircraft financed via the capital markets, EETCs or finance leases. Its operating fleet is 100% composed of narrow body aircraft financed via operating leases.
| Final | 2Q21 | 2Q20 | Var. | 1Q21 | Var. |
| B737s | 127 | 130 | -3 | 127 | 0 |
| B737-7 NG | 23 | 23 | 0 | 23 | 0 |
| B737-8 NG | 94 | 100 | -6 | 96 | -2 |
| B737-8 MAX 8 | 10 | 7 | 3 | 8 | 2 |
As of June 31, 2021, GOL had 95 firm orders for the acquisition of Boeing 737 MAX aircraft, of which 73 were orders for 737 MAX-8 and 22 orders were for 737 MAX-10. The Company's fleet plan returns up to six (6) operational aircraft by the end of 2021, with the flexibility to return even more aircraft if necessary
| Fleet Plain | 2021E | 2022E | 2023E | >2024E | Total |
| Operating Fleet at the End of the Year | 128 | 131 | |||
| Aircraft Commitments (R$ MM) | 899.3 | 3,543.1 | 19,125.2 | 23,567.6 |
During the second quarter, GOL maintained flexibility on its fixed monthly payments via variable (power-by-the-hour) contracts. The agreements signed with its lessors allow for the extension of deferrals in order to be adjusted proportionally to the recovery of capacity during 2021. Leasing remeasurement took into account the new payment flows, the discount rate and the exchange rate on the date of the contractual changes. The calculated effects were recorded as an increase in the lease liability in the amount of R$47.4 million, with a corresponding decrease in fixed assets.
Glossary of Industry Terms
| · | AIRCRAFT LEASING: an agreement through which a company (the lessor) acquires a resource chosen by its client (the lessee) for subsequent rental to the latter for a determined period. |
| · | AVAILABLE SEAT KILOMETERS (ASK): The aircraft seating capacity is multiplied by the number of kilometers flown. |
| · | BARREL OF WEST TEXAS INTERMEDIATE (WTI): Intermediate oil from Texas, a region that serves as a reference to the name for concentrating oil exploration in the USA. WTI is used as a reference point in oil for the US derivatives markets. |
| · | BRENT: Oil produced in the North Sea, traded on the London Stock Exchange and used as a reference in the European and Asian derivatives markets. |
| · | TOTAL CASH: Total cash, financial investments, and restricted cash in the short- and long-term. |
| · | OPERATING COST PER AVAILABLE SEAT KILOMETER (CASK): operating expenses divided by the total number of available seat kilometers. |
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| · | OPERATING COST PER AVAILABLE SEAT KILOMETER EX-FUEL (CASK EX-FUEL): operating cost divided by the total number of available seat kilometers excluding fuel expenses. |
| · | AVERAGE STAGE LENGTH: It is the average number of kilometers flown per stage performed. |
| · | EXCHANGEABLE SENIOR NOTES (ESN): Securities convertible into shares. |
| · | AIRCRAFT CHARTER: Flight operated by a Company that is out of its normal or regular operation. |
| · | BLOCK HOURS: Time in which the aircraft is in flight, plus taxi time. |
| · | LESSOR: The party renting a property or other asset to another party, the lessee. |
| · | LONG-HAUL FLIGHTS: Long-distance flights (in GOL’s case, flights of more than four hours’ duration). |
| · | REVENUE PASSENGERS: total number of passengers on board who have paid more than 25% of the full flight fare. |
| · | REVENUE PASSENGER KILOMETERS PAID (RPK): sum of the products of the number of paying passengers on a given flight and the length of the flight. |
| · | PDP: Credit for financing prepayments for the acquisition of aircraft. |
| · | Load Factor: Percentage of the aircraft’s capacity used in terms of seats (calculated by dividing the RPK/ASK). |
| · | Break-Even Load Factor: Load factor required for operating revenues to correspond to operating expenses. |
| · | Aircraft Utilization Rate: Average number of hours per day that the aircraft was in operation. |
| · | Passenger Revenue per Available Seat Kilometer (PRASK): total passenger revenue divided by the total number of available seat kilometers. |
| · | Operating Revenue per Available Seat Kilometers (RASK): The operating revenue is divided by the total number of available seat kilometers. |
| · | Sale-leaseback: A financial transaction whereby a resource is sold and then leased back, enabling the use of the resource without owning it. |
| · | SLOT: The right of an aircraft to take off or land at a given airport for a determined period. |
| · | Sub-Lease: An arrangement whereby a lessor in a rent agreement leases the item rented to a fourth party. |
| · | Freight Load Factor (FLF): Measure of capacity utilization (% of AFTKs used). Calculated by dividing FTK by AFTK. |
| · | Freight Tonne Kilometers (FTK): The demand for cargo transportation, calculated as the weight of the cargo in tons multiplied by the total distance traveled. |
| · | Available Freight Tonne Kilometer (AFTK): Weight of the cargo in tons multiplied by the kilometers flown. |
| · | Yield per Passenger Kilometer: The average value paid by a passenger to fly one kilometer. |
Disclaimer
This release contains forward-looking statements relating to the prospects of the business, estimates for operating and financial income (expenses), and those related to growth prospects of GOL, which are, by nature, subject to significant risks and uncertainties. The estimates and forecasts in this document involve known and unknown risks, uncertainties, contingencies, and other factors, many of which are beyond GOL’s control and which may lead the results, performances, or events to be substantially different from those expressed or implied in these statements. The forward-looking statements in this document are based on several assumptions related to GOL’s current and future business strategies and GOL’s future operating environment and are not a guarantee of future performance. GOL does not issue any statement or provide any guarantee that the results anticipated by the estimates in this document will be equivalent to those effectively achieved by GOL. Although GOL believes that the estimates here are reasonable, they may prove incorrect, and the final results may differ. These are merely estimates and projections and, as such, are based exclusively on management’s expectations for GOL. Such forward-looking statements depend, substantially, on external factors and risks presented in the disclosure documents filed by GOL, apply exclusively to the date they were issued and are, therefore, subject to change without prior notice.
Non-Accounting Measures
To be consistent with industry practice, the Company discloses so-called non-GAAP financial measures, which are not recognized under IFRS or other accounting standards, including “Net Debt”, “Total Liquidity” and “EBITDA”. GOL��s Management believes that disclosure of non-GAAP measures provides useful information to investors, financial analysts, and the public in their review of its operating performance and their comparison of its operating performance to the operating performance of other airlines and other industries. However, these non-GAAP items do not have standardized meanings and may not be directly comparable to similarly-titled items adopted by other companies. Potential investors should not rely on information not recognized under IFRS as a substitute for the GAAP measures of earnings or liquidity in making an investment decision.
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Report of the Statutory Audit Committee (“SAC”)
The Statutory Audit Committee of Gol Linhas Aéreas Inteligentes S.A., in compliance with its legal and statutory obligations, has reviewed the Parent Company and Consolidated Quarterly Information (ITR) for the three-month and sixth-month periods ended June 30, 2021. Based on the procedures we have undertaken and considering the independent auditors’ review report issued by Grant Thornton Auditores Independentes and the information and explanations we have received during the quarter, we conclude that these documents can be submitted to the assessment of the Board of Directors.
São Paulo, July 28, 2021
André Béla Jánszky
Member of the Statutory Audit Committee
Antônio Kandir
Member of the Statutory Audit Committee
Germán Pasquale Quiroga Vilardo
Member of the Statutory Audit Committee
| 6 |
Statement of the Executive Officers on the Parent Company and Consolidated Quarterly Information (ITR)
Under the provisions of CVM Instruction 480/09, the executive officers state that they have discussed, reviewed, and approved the Parent Company and Consolidated Quarterly Information (ITR) for the three-month and sixth-month periods ended June 30, 2021.
São Paulo, July 28, 2021
Paulo Sérgio Kakinoff
Chief Executive Officer
Richard Freeman Lark Jr.
Executive Vice President, Chief Financial Officer, and Investor Relations Officer
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Statement of the Executive officers on the Independent Auditors’ Review Report
Under the provisions of CVM Instruction 480/09, the Executive Board states that it has discussed, reviewed, and agreed with the conclusion of the review report from the independent auditor, Grant Thornton Auditores Independentes, on the Parent Company and Consolidated Quarterly Information (ITR) for the three-month and sixth-month periods ended June 30, 2021.
São Paulo, July 28, 2021
Paulo Sérgio Kakinoff
Chief Executive Officer
Richard Freeman Lark Jr.
Executive Vice President, Chief Financial Officer, and Investor Relations Officer
| 8 |
(Free translation from the original issued in Portuguese. In the event of any discrepancies, the Portuguese language version shall prevail.)
Independent auditor’s report on review of interim financial information
Grant Thornton Auditores Independentes
Av. Eng. Luís Carlos Berrini, 105 - 12o andar Itaim Bibi, São Paulo (SP) Brasil
T +55 11 3886-5100 |
To the Board of directors and shareholders of
Gol Linhas Aéreas Inteligentes S.A.
São Paulo – SP
Introduction
We have reviewed the accompanying individual and consolidated interim financial information of Gol Linhas Aéreas Inteligentes S.A. (the Company), comprised in the Quarterly Information Form for the quarter ended June 30, 2021, comprising the balance sheet as of June 30, 2021 and the respective statements of income and of comprehensive income for the periods of three and six months then ended and of changes in shareholders’ equity and of cash flows for the period of six months then ended, including the footnotes.
Management is responsible for the preparation of the individual interim financial information in accordance with the NBC TG 21 – Interim Financial Reporting and of the consolidated interim financial information in accordance with the NBC TG 21 and with the international standard IAS 34 – Interim Financial Reporting, as issued by the International Accounting Standards Board (Iasb), such as for the presentation of these information in accordance with the standards issued by the Brazilian Exchange Securities Commission, applicable to the preparation of interim financial information. Our responsibility is to express a conclusion on this interim financial information based on our review.
Review scope
We conducted our review in accordance with the Brazilian and International standards on reviews of interim information (NBC TR 2410 – Review of Interim Financial Information Performed by the Independent Auditor of the Entity and ISRE 2410 – Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). The review of interim information consists of making inquiries, primarily of persons responsible for the financial and accounting matters and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with the audit standards and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion on the individual interim financial information
Based on our review, nothing has come to our attention that causes us to believe that the individual interim financial information included in the quarterly information form referred to above has not been prepared, in all material respects, in accordance with NBC TG 21 applicable to the preparation of interim financial information, and presented in accordance with the standards issued by the Brazilian Securities and Exchange Commission.
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Conclusion on the consolidated interim financial information
Based on our review, nothing has come to our attention that causes us to believe that the consolidated interim financial information included in the quarterly information form referred to above has not been prepared, in all material respects, in accordance with NBC TG 21 and IAS 34 applicable to the preparation of interim financial information, and presented in accordance with the standards issued by the Brazilian Securities and Exchange Commission.
Emphasis of matter
Significant uncertainty as to the ability to continue as a going concern
We draw attention to Note 1, which states that the individual and consolidated interim financial information were prepared under the assumption of going concern. As described in the aforementioned note, the Company has faced recurring reductions in operations, mainly due to the effects of the COVID-19 pandemic, with a significant decrease in demand (a 28% reduction in passengers revenues in the first semester of 2021 compared to the first semester quarter of 2020), and recorded net working capital deficit and equity deficiency as of June 30, 2021 which, together with other events and conditions, indicate the existence of material uncertainty that may cast significant doubt about the Company’s ability to continue as a going concern. The plans and actions being developed by Management to restore the Company’s financial economic balance and financial position are described in Note 1. The individual and consolidated interim financial information do not include any adjustment that may arise from the result of such uncertainty. Our review conclusion is not qualified regarding this matter.
Other matters
Statements of value added
The quarterly information referred to above includes the individual and consolidated statements of value added for the period of six months ended June 30, 2021, prepared under the responsibility of the Company's management and presented as supplementary information for the purposes of IAS 34.
These statements were submitted to the same review procedures in conjunction with the review of the Company's interim financial information in order to conclude they are reconciliated to the interim financial information and to the accounting records, as applicable, and whether the structure and content are in accordance with the criteria established in the NBC TG 09 - Statement of Value Added. Based on our review, nothing has come to our attention that causes us to believe that the accompanying statements of value added were not prepared, in all material respects, in accordance with the individual and consolidated interim financial information taken as a whole.
São Paulo, July 28, 2021
Octavio Zampirollo Neto
Assurance Partner
Grant Thornton Auditores Independentes
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 | Balance Sheets June 30, 2021 and December 31, 2020 (In thousand of Reais) |
| Parent Company | Consolidated | ||||
| Assets | Note | June 30, 2021 | December 31, 2020 | June 30, 2021 | December 31, 2020 |
| Current | |||||
| Cash and Cash Equivalents | 6 | 448,648 | 423,937 | 760,269 | 662,830 |
| Financial Investments | 7 | 103 | 236 | 22,838 | 628,343 |
| Restricted Cash | 8 | 4,442 | 4,194 | 269,131 | 355,769 |
| Trade Receivables | 9 | - | - | 717,408 | 739,699 |
| Inventories | 10 | - | - | 212,814 | 195,638 |
| Advances to Suppliers and Third-Parties | 11 | 53 | 10,441 | 198,813 | 318,769 |
| Taxes to Recover | 12 | 1,627 | 6,295 | 265,357 | 186,955 |
| Rights from Derivative Transactions | 34.2 | - | - | - | 12,526 |
| Dividends and Interest on Shareholders’ Equity to Receive | - | 24,120 | - | - | |
| Other Credits | 9,109 | 9,640 | 123,531 | 144,822 | |
| Total Current | 463,982 | 478,863 | 2,570,161 | 3,245,351 | |
| Noncurrent | |||||
| Financial Investments | 7 | - | - | 168 | 992 |
| Restricted Cash | 8 | 3 | 7 | 44,684 | 188,838 |
| Deposits | 14 | 46,902 | 118,261 | 1,856,128 | 2,058,455 |
| Advances to Suppliers | 11 | - | - | 97,417 | 89,701 |
| Taxes to Recover | 12 | 15,260 | 12,102 | 114,120 | 318,404 |
| Deferred Taxes | 13 | 53,542 | 53,492 | 53,772 | 53,563 |
| Other Credits | - | - | 31,889 | 34,338 | |
| Credits with Related Parties | 28.1 | 5,985,898 | 4,897,331 | - | - |
| Rights from Derivative Transactions | 34.2 | 63,574 | 87,663 | 63,574 | 116,283 |
| Investments | 15 | - | 574,717 | - | 815 |
| Property, Plant & Equipment | 16 | 168,499 | 68,660 | 4,979,649 | 4,960,288 |
| Intangible Assets | 17 | - | - | 1,757,598 | 1,747,108 |
| Total Noncurrent | 6,333,678 | 5,812,233 | 8,998,999 | 9,568,785 | |
| Total | 6,797,660 | 6,291,096 | 11,569,160 | 12,814,136 | |
The accompanying notes are an integral part of the Parent Company and Consolidated Quarterly Information (ITR).
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| | Balance Sheets June 30, 2021 and December 31, 2020 (In thousand of Reais) |
| Parent Company | Consolidated | ||||
| Liabilities | Note | June 30, 2021 | December 31, 2020 | June 30, 2021 | December 31, 2020 |
| Current | |||||
| Loans and Financing | 18 | 147,278 | 638,964 | 1,773,004 | 2,353,279 |
| Leases to Pay | 19 | - | - | 1,864,831 | 1,317,008 |
| Suppliers | 20 | 64,573 | 72,702 | 1,562,946 | 1,612,536 |
| Labor Obligations | 169 | 181 | 351,203 | 334,670 | |
| Taxes to Collect | 21 | 358 | 292 | 61,279 | 73,614 |
| Landing Fees | - | - | 937,371 | 907,958 | |
| Advance Ticket Sales | 22 | - | - | 1,999,013 | 2,050,799 |
| Frequent-Flyer Program | 23 | - | - | 1,280,022 | 1,258,502 |
| Advances from Customers | - | - | 54,878 | 27,897 | |
| Provisions | 24 | - | - | 252,046 | 169,381 |
| Obligations with Derivative Transactions | 34.2 | - | - | - | 5,297 |
| Other Liabilities | 53 | - | 381,582 | 287,275 | |
| Total Current | 212,431 | 712,139 | 10,518,175 | 10,398,216 | |
| Noncurrent | |||||
| Loans and Financing | 18 | 8,095,433 | 6,990,749 | 8,521,006 | 7,623,687 |
| Leases to Pay | 19 | - | - | 5,831,098 | 6,267,184 |
| Suppliers | 20 | - | - | 10,234 | 32,658 |
| Labor Obligations | - | - | 30,239 | - | |
| Taxes to Collect | 21 | - | - | 28,039 | 32,362 |
| Frequent-Flyer Program | 23 | - | - | 344,760 | 322,460 |
| Provisions | 24 | - | - | 1,363,988 | 1,353,515 |
| Deferred Taxes | 13 | - | - | 206,695 | 219,634 |
| Obligations to Related Parties | 28.1 | 12,693 | 8,791 | - | - |
| Provision for Investment Losses | 15 | 13,795,822 | 12,670,479 | - | - |
| Other Liabilities | 427,581 | 316,030 | 461,226 | 331,479 | |
| Total Noncurrent | 22,331,529 | 19,986,049 | 16,797,285 | 16,182,979 | |
| Shareholders’ Equity | |||||
| Share Capital | 25.1 | 4,039,336 | 3,009,436 | 4,039,336 | 3,009,436 |
| Shares to Issue | 2,088 | 1,180 | 2,088 | 1,180 | |
| Treasury Shares | 25.2 | (41,514) | (62,215) | (41,514) | (62,215) |
| Capital Reserves | 195,680 | 207,246 | 195,680 | 207,246 | |
| Equity Valuation Adjustments | (1,071,030) | (577,369) | (1,071,030) | (577,369) | |
| Accumulated Losses | (18,870,860) | (16,985,370) | (18,870,860) | (16,985,370) | |
| Negative Shareholders’ Equity (Deficit) Attributable to the Parent Company | (15,746,300) | (14,407,092) | (15,746,300) | (14,407,092) | |
| Non-Controlling Shareholders | - | - | - | 640,033 | |
| Total Shareholders’ Equity (Deficit) | (15,746,300) | (14,407,092) | (15,746,300) | (13,767,059) | |
| Total | 6,797,660 | 6,291,096 | 11,569,160 | 12,814,136 | |
The accompanying notes are an integral part of the Parent Company and Consolidated Quarterly Information (ITR).
| 12 |
| | Statements of Comprehensive Income (Expenses) Quarters ended June 30, 2021 and 2020 (In thousands of Brazilian Reais - R$) |
RE
| Parent Company | ||||||
| Three-month period ended | Six-month period ended | |||||
| Note | June 30, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | ||
| Operating Revenue (Expenses) | ||||||
| Selling Expenses | (393) | - | (393) | - | ||
| Administrative Expenses | (76,835) | (2,171) | (104,415) | (7,170) | ||
| Other Revenues and Expenses, Net | (9) | (49) | 480 | 376,259 | ||
| Total Operating Expenses | 30 | (77,237) | (2,220) | (104,328) | 369,089 | |
| Equity Income (Expenses) | 15 | 387,393 | (1,572,913) | (1,709,777) | (3,790,552) | |
| Operating Profit (Loss) before Financial Income (Expenses) and Income Taxes | 310,156 | (1,575,133) | (1,814,105) | (3,421,463) | ||
| Financial Income (Expenses) | ||||||
| Financial Revenue | 43,039 | 149,228 | 194,859 | 766,144 | ||
| Financial Expenses | (167,066) | (406,941) | (402,417) | (741,200) | ||
| Financial Revenues (Expenses), Net | 31 | (124,027) | (257,713) | (207,558) | 24,944 | |
| Financial Income (Expenses) before Exchange Rate Change, Net and before Income Tax and Social Contribution | 186,129 | (1,832,846) | (2,021,663) | (3,396,519) | ||
| Exchange Rate Change, Net | 31 | 460,872 | (161,161) | 136,123 | (882,424) | |
| Loss before Income Tax and Social Contribution | 647,001 | (1,994,007) | (1,885,540) | (4,278,943) | ||
| Income Tax and Social Contribution | ||||||
| Current | - | (2,030) | - | (3,078) | ||
| Deferred | (4,088) | (876) | 50 | (3,161) | ||
| Total Income Tax and Social Contribution | 13 | (4,088) | (2,906) | 50 | (6,239) | |
| Net Profit (Loss) for the Period | 642,913 | (1,996,913) | (1,885,490) | (4,285,182) | ||
| Basic Net Profit (Loss) | 26 | |||||
| Per Common Share | 0.050 | (0.169) | (0.149) | (0.362) | ||
| Per Preferred Share | 1.768 | (7.222) | (5.253) | (12.668) | ||
| Diluted Net Profit (Loss) | 26 | |||||
| Per Common Share | 0.050 | (0.169) | (0.149) | (0.362) | ||
| Per Preferred Share | 1.765 | (7.222) | (5.253) | (12.668) | ||
The accompanying notes are an integral part of the parent company and consolidated interim financial information.
| 13 |
| | Statements of Comprehensive Income (Expenses) Quarters ended June 30, 2021 and 2020 (In thousands of Brazilian Reais - R$) |
| Consolidated | ||||||
| Three-month period ended | Six-month period ended | |||||
| Note | June 30, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | ||
| Net Revenue | ||||||
| Passenger Transportation | 887,574 | 243,303 | 2,303,852 | 3,184,636 | ||
| Cargo and Others | 140,798 | 114,545 | 292,147 | 320,939 | ||
| Total Net Revenue | 29 | 1,028,372 | 357,848 | 2,595,999 | 3,505,575 | |
| Cost from Services | 30 | (1,243,943) | (502,006) | (2,879,188) | (3,081,916) | |
| Gross Profit (Loss) | (215,571) | (144,158) | (283,189) | 423,659 | ||
| Operating Revenue (Expenses) | ||||||
| Selling Expenses | (101,046) | (66,217) | (204,825) | (235,174) | ||
| Administrative Expenses | (432,030) | (239,440) | (795,223) | (567,717) | ||
| Other Revenues and Expenses, Net | (61,602) | (447,785) | (49,516) | 507,053 | ||
| Total Operating Expenses | 30 | (594,678) | (753,442) | (1,049,564) | (295,838) | |
| Operating Profit (Loss) before Financial Income (Expenses) and Income Taxes | (810,249) | (897,600) | (1,332,753) | 127,821 | ||
| Financial Income (Expenses) | ||||||
| Financial Revenue | 20,231 | 196,401 | 163,651 | 894,647 | ||
| Financial Expenses | (478,857) | (722,757) | (1,047,355) | (1,721,213) | ||
| Financial Revenues (Expenses), Net | 31 | (458,626) | (526,356) | (883,704) | (826,566) | |
| Financial Income (Expenses) before Exchange Rate Change, Net and before Income Tax and Social Contribution | (1,268,875) | (1,423,956) | (2,216,457) | (698,745) | ||
| Exchange Rate Change, Net | 31 | 1,938,545 | (570,024) | 401,305 | (3,513,428) | |
| Loss before Income Tax and Social Contribution | 669,670 | (1,993,980) | (1,815,152) | (4,212,173) | ||
| Income Tax and Social Contribution | ||||||
| Current | (16,757) | (11,580) | (45,588) | (35,853) | ||
| Deferred | 5,122 | 8,479 | 12,984 | (10,664) | ||
| Total Income Tax and Social Contribution | 13 | (11,635) | (3,101) | (32,604) | (46,517) | |
| Net Profit (Loss) for the Period | 658,035 | (1,997,081) | (1,847,756) | (4,258,690) | ||
| Net Profit (Loss) attributable to: | ||||||
| Shareholders of the Parent Company | 642,913 | (1,996,913) | (1,885,490) | (4,285,182) | ||
| Non-Controlling Shareholders | 15,122 | (168) | 37,734 | 26,492 | ||
| Basic Net Profit (Loss) | 26 | |||||
| Per Common Share | 0.050 | (0.169) | (0.149) | (0.362) | ||
| Per Preferred Share | 1.768 | (7.222) | (5.253) | (12.668) | ||
| Diluted Net Profit (Loss) | 26 | |||||
| Per Common Share | 0.050 | (0.169) | (0.149) | (0.362) | ||
| Per Preferred Share | 1.765 | (7.222) | (5.253) | (12.668) | ||
The accompanying notes are an integral part of the parent company and consolidated interim financial information.
| 14 |
| | Statements of Comprehensive Income (Expenses) Quarters ended June 30, 2021 and 2020 (In thousands of Brazilian Reais - R$) |
| Parent Company | |||||
| Three-month period ended | Six-month period ended | ||||
| June 30, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | ||
| Net Profit (Loss) for the period | 642,913 | (1,996,913) | (1,885,490) | (4,285,182) | |
| Other Comprehensive Income that will be Reversed to Income (Expenses) | |||||
| Cash Flow Hedge, Net of Income Tax and Social Contribution | 319,060 | (1,060) | 415,782 | (1,078,349) | |
| Actuarial losses from pension plans and post-employment benefits | - | 27,287 | - | 27,287 | |
| Cumulative Adjustment of Conversion into Subsidiaries | 521 | (275) | 537 | (275) | |
| 319,581 | 25,952 | 416,319 | (1,051,337) | ||
| Total Comprehensive Income (Expenses) for the Period | 962,494 | (1,970,961) | (1,469,171) | (5,336,519) | |
| Consolidated | |||||
| Three-month period ended | Six-month period ended | ||||
| June 30, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | ||
| Net Profit (Loss) for the period | 658,035 | (1,997,081) | (1,847,756) | (4,258,690) | |
| Other Comprehensive Income that will be Reversed to Income (Expenses) | |||||
| Cash Flow Hedge, Net of Income Tax and Social Contribution | 319,060 | (1,060) | 415,782 | (1,078,349) | |
| Actuarial losses from pension plans and post-employment benefits | - | 27,287 | - | 27,287 | |
| Cumulative Adjustment of Conversion into Subsidiaries | 780 | (275) | 808 | (275) | |
| 319,840 | 25,952 | 416,590 | (1,051,337) | ||
| Total Comprehensive Income (Expenses) for the Period | 977,875 | (1,971,129) | (1,431,166) | (5,310,027) | |
| Comprehensive Income (Expenses) attributable to: | |||||
| Shareholders of the Parent Company | 962,494 | (1,970,961) | (1,469,171) | (5,336,519) | |
| Non-Controlling Shareholders | 15,381 | (168) | 38,005 | 26,492 | |
The accompanying notes are an integral part of the parent company and consolidated interim financial information.
| 15 |
| | Statements of Changes in Shareholders’ Equity Periods ended June 30, 2021 and 2020 (In thousands of Brazilian Reais - R$) |
| Parent Company and Consolidated | ||||||||||||||
Capital reserves | Equity valuation adjustments | |||||||||||||
| Share Capital | Shares to be issued | Treasury shares | Bonus on transfer of stock options | Special premium reserve of subsidiary | Share-based payments | Unrealized hedge gains | Post-Employment Benefit | Other comprehensive income | Gains on change in investment | Accumulated losses | Deficit attributable to shareholders’ equity of the parent company | Smiles’ non-controlling interests | Total | |
| Balances as of December 31, 2019 | 3,008,178 | 584 | (102,543) | 17,497 | 83,229 | 124,550 | (530,043) | (41,045) | - | 759,335 | (10,996,413) | (7,676,671) | 571,254 | (7,105,417) |
| Other comprehensive income (loss), net | - | - | - | - | - | - | (1,078,349) | 27,287 | (275) | - | - | (1,051,337) | (278) | (1,051,615) |
| Net Profit (Loss) for the period | - | - | - | - | - | - | - | - | - | (4,285,182) | (4,285,182) | 26,492 | (4,258,690) | |
| Total Comprehensive Income Loss for the period | - | - | - | - | - | - | (1,078,349) | 27,287 | (275) | - | (4,285,182) | (5,336,519) | 26,214 | (5,310,305) |
Capital increase per option period options | 727 | (727) | - | - | - | - | - | - | - | - | - | - | - | - |
| Advances for future capital increase | - | 278 | - | - | - | - | - | - | - | - | 278 | - | 278 | |
| Treasury shares transferred | - | - | 40,007 | - | - | (40,007) | - | - | - | - | - | - | - | - |
| Equity interest dilution effects | - | - | - | - | 548 | - | - | - | - | - | (690) | (142) | - | (142) |
| Stock option exercised | - | - | - | - | - | 10,405 | - | - | - | - | - | 10,405 | 328 | 10,733 |
| Balances as of June 30, 2020 | 3,008,905 | 135 | (62,536) | 17,497 | 83,777 | 94,948 | (1,608,392) | (13,758) | (275) | 759,335 | (15,282,285) | (13,002,649) | 597,796 | (12,404,853) |
| Balances as of December 31, 2020 | 3,009,436 | 1,180 | (62,215) | 17,497 | 83,229 | 106,520 | (1,311,076) | (26,669) | 564 | 759,812 | (16,985,370) | (14,407,092) | 640,033 | (13,767,059) |
| Other comprehensive income (loss), net | - | - | - | - | - | - | 415,782 | - | 537 | - | - | 416,319 | 271 | 416,590 |
| Net Profit (Loss) for the period | - | - | - | - | - | - | - | - | - | - | (1,885,490) | (1,885,490) | 37,734 | (1,847,756) |
| Total Comprehensive Income Loss for the period | - | - | - | - | - | - | 415,782 | - | 537 | - | (1,885,490) | (1,469,171) | 38,005 | (1,431,166) |
| Stock option exercised | - | - | - | - | - | 8,547 | - | - | - | - | - | 8,547 | 263 | 8,810 |
Capital increase per stock options period | - | 908 | - | - | - | - | - | - | - | - | - | 908 | - | 908 |
| Dividends and interest shareholders on equity paid by Smiles | - | - | - | - | - | - | - | - | - | - | - | - | (236,992) | (236,992) |
| Treasury shares sold | - | - | 867 | (279) | - | - | - | - | - | - | - | 588 | - | 588 |
| Treasury shares transferred | - | - | 19,834 | (6,198) | - | (13,636) | - | - | - | - | - | - | - | - |
| Acquisition of shares from non-controlling shareholders | 606,839 | - | - | 744,450 | - | - | - | - | - | (909,980) | - | 441,309 | (441,309) | - |
| Preferred shares withdrawn | - | - | - | (744,450) | - | - | - | - | - | - | - | (744,450) | - | (744,450) |
| Capital increase | 423,061 | - | - | - | - | - | - | - | - | - | - | 423,061 | - | 423,061 |
| Balances as of June 30, 2021 | 4,039,336 | 2,088 | (41,514) | 11,020 | 83,229 | 101,431 | (895,294) | (26,669) | 1,101 | (150,168) | (18,870,860) | (15,746,300) | - | (15,746,300) |
The accompanying notes are an integral part of the parent company and consolidated interim financial information.
| 16 |
| | Cash Flow Statements Periods ended June 30, 2021 and 2020 (In thousands of Brazilian Reais - R$) |
| Parent Company | Consolidated | |||
| June 30, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | |
| Net loss for the period | (1,885,490) | (4,285,182) | (1,847,756) | (4,258,690) |
| Adjustment to reconcile net (loss) income to net cash provided by operating activities | ||||
| Depreciation – Aeronautical ROUs | - | - | 280,221 | 452,342 |
| Depreciation and amortization - Other | - | - | 354,417 | 566,239 |
| Allowance (reversal) for doubtful accounts | - | - | (1,081) | 1,440 |
| Provision for legal proceedings | - | - | 154,604 | 113,569 |
| Provision for inventory obsolescence | - | - | 54 | 73 |
| Provision for losses with supplier advances | - | (4,640) | ||
| Recovery of extemporaneous credits | - | - | (57,422) | (126,675) |
| Adjustment to present value of assets and liabilities | - | - | 36,529 | 27,443 |
| Deferred taxes | (50) | 3,161 | (12,984) | 10,664 |
| Equity | 1,709,777 | 3,790,552 | - | - |
| Share-based payments | - | - | 8,810 | 10,405 |
| Leaseback | - | - | - | (112,591) |
| Actuarial Losses from post-employment benefits | - | - | 8,707 | 6,005 |
| Exchange and monetary variations, net | (135,204) | 1,455,387 | (398,198) | 3,439,014 |
| Interest on debt and financial lease | 335,048 | 186,192 | 898,511 | 660,101 |
| Provision for aircraft and engine return | - | - | 157,892 | 81,227 |
| Provision for maintenance reserve | 63,361 | - | 176,363 | 75,276 |
| Results of derivatives recognized in the statement of income | 21,587 | 119,528 | 80,357 | 690,643 |
| Unrealized hedge results – ESN(*) | (124,954) | (409,136) | (124,954) | (409,136) |
| Provision for labor obligations | - | - | 94,490 | 53,091 |
| Disposals of property, plant and equipment and intangible assets | - | 108,538 | 1,583 | 33,489 |
| Other provisions | (537) | 213 | (2,240) | 45,579 |
| Adjusted Net Income | (16,462) | 969,253 | (196,737) | 1,359,508 |
| Changes in operating assets and liabilities: | ||||
| Trade receivables | - | - | 20,192 | 705,431 |
| Short-term investments | 1,376 | 511 | 15,987 | 121,002 |
| Inventories | - | - | (17,230) | (19,029) |
| Advance to suppliers and third parties | 10,388 | (14) | 116,881 | (69,469) |
| Deposits | 5,438 | (1,522) | (35,040) | (189,850) |
| Recoverable taxes | 1,510 | 6,968 | 183,304 | (3,651) |
| Variable Leases | - | - | 17,794 | - |
| Suppliers | (8,632) | (4,042) | (48,721) | 215,317 |
| Suppliers - forfaiting | - | - | - | (152,162) |
| Advance from ticket sales | - | - | (51,786) | (383,879) |
| Mileage program | - | - | 43,820 | 353,313 |
| Advances from customers | - | - | 26,981 | (2,401) |
| Labor Charges | (12) | (100) | (47,718) | (96,675) |
| Landing fees | - | - | 29,413 | (39,134) |
| Taxes obligation | 66 | (17,597) | 23,814 | 2,236 |
| Derivatives liabilities | - | - | 133,331 | (545,300) |
| Payments for lawsuits and aircraft return | - | - | (237,982) | (103,964) |
| Other assets (liabilities) | 119,365 | 2,537 | 270,934 | (51,676) |
| Interest paid | (326,520) | (223,770) | (378,944) | (281,153) |
| Income tax paid | - | (2,665) | (40,472) | (29,176) |
| Net Cash Provided (Consumed) by Operating Activities | (213,483) | 729,559 | (172,179) | 789,288 |
| 17 |
| | Cash Flow Statements Periods ended June 30, 2021 and 2020 (In thousands of Brazilian Reais - R$) |
| Parent Company | Consolidated | |||
| June 30, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | |
| Receivable loans from related parties | (1,196,212) | (1,604,676) | - | - |
| Investments in subsidiary | - | - | 606,115 | (483,112) |
| Restricted cash | (244) | 41 | 32,522 | (529,874) |
| Receipt of Dividends and Interest on Shareholders’ Equity through Subsidiary | 287,128 | 15,002 | - | - |
| Advances for future capital increases in controlled entities | (151,000) | - | - | - |
| Advances for property, plant and equipment acquisition, net | - | - | (29,377) | (56,782) |
| Property, plant and equipment acquisitions | (111,429) | (8,904) | (104,276) | (450,142) |
| Return – PDP – Boeing Agreement | 11,590 | 136,962 | 11,590 | 136,962 |
| Acquisition of intangible assets | - | - | (51,877) | (32,366) |
| Net cash flows used in investing activities | (1,160,167) | (1,461,575) | 464,697 | (1,415,314) |
| Loan funding | 1,501,569 | - | 1,512,521 | 449,062 |
| Loan and financing payments | (499,663) | (405,878) | (572,792) | (699,748) |
| Lease payments – aeronautical | - | - | (515,891) | (517,795) |
| Lease payments - other | (9,007) | (10,107) | ||
| (Payment) derivative receipt | - | - | - | 21,800 |
| Disposal of treasury shares | 588 | - | 588 | - |
| Acquisition of shares from non-controlling shareholders | - | - | (744,450) | - |
| Dividends and interest paid to non-controlling shareholders | - | - | (260,131) | (14,811) |
| Capital increase from shareholders | 423,061 | - | 423,061 | - |
| Shares to be issued | 908 | 278 | 908 | 278 |
| Net cash flows (used in) from financing activities | 1,426,463 | (405,600) | (165,193) | (771,321) |
| Exchange variation on cash held in foreign currencies | (28,102) | 146,028 | (29,886) | 167,814 |
Net cash (decrease) increase and cash equivalents | 24,711 | (991,588) | 97,439 | (1,229,533) |
| Cash and cash equivalents at the beginning of the period | 423,937 | 1,016,746 | 662,830 | 1,645,425 |
| Cash and cash equivalents at the end of the period | 448,648 | 25,158 | 760,269 | 415,892 |
(*) Exchangeable Senior Notes. Transactions that do not affect cash are presented in Note 35 of these financial statements.
| ||||
The accompanying notes are an integral part of the parent company and consolidated interim financial information.
| 18 |
| | Statement of Value Added Periods ended June 30, 2021 and 2020 (In thousands of Brazilian Reais - R$) |
| Parent Company | Consolidated | |||
| June 30, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | |
| Revenues | ||||
| Passengers, cargo and other | - | - | 2,735,660 | 3,650,199 |
| Other operating revenues | 480 | 376,259 | 93,373 | 542,014 |
| Allowance for doubtful accounts | - | - | 1,081 | (1,439) |
| 480 | 376,259 | 2,830,114 | 4,190,774 | |
| Inputs acquired from third parties (including ICMS and IPI) | ||||
| Suppliers of aircraft fuel | - | - | (972,651) | (1,181,699) |
| Materials, energy, outsourced services and others | (94,825) | (5,291) | (1,301,860) | (814,132) |
| Aircraft insurance | - | - | (24,381) | (18,697) |
| Sales and marketing | (345) | (366) | (129,577) | (161,042) |
| Gross value added (distributed) | (94,690) | 370,602 | 401,645 | 2,015,204 |
| Depreciation – aeronautical ROUs | - | - | (280,221) | (452,342) |
| Depreciation and amortization - other | - | - | (354,417) | (566,239) |
| Value added (distributed) produced | (94,690) | 370,602 | (232,993) | 996,623 |
| Value-added received in transfer | ||||
| Result of equity income | (1,709,777) | (3,790,552) | - | - |
| Financial income | 239,992 | 766,144 | 217,649 | 894,647 |
| Value added (distributed) for distribution | (1,564,475) | (2,653,806) | (15,344) | 1,891,270 |
| Distribution of value-added: | ||||
| Salaries | 9,417 | 1,048 | 674,093 | 540,024 |
| Benefits | - | 1 | 100,975 | 83,237 |
| FGTS | - | - | 37,742 | 16,748 |
| Personnel | 9,417 | 1,049 | 812,810 | 640,009 |
| Federal taxes | 1,875 | 6,755 | 269,796 | 251,867 |
| State taxes | - | - | 7,461 | 7,130 |
| Municipal taxes | - | - | 1,218 | 1,857 |
| Tax, charges and contributions | 1,875 | 6,755 | 278,475 | 260,854 |
| Interest and Exchange rate variation – aeronautical leases | 309,723 | 1,623,572 | 145,646 | 2,390,077 |
| Interest and Exchange rate variation – other | 539,459 | 2,828,305 | ||
| Rent | - | - | 55,860 | 29,418 |
| Other | - | - | 162 | 1,297 |
| Third-party capital remuneration | 309,723 | 1,623,572 | 741,127 | 5,249,097 |
| Net loss for the period | (1,885,490) | (4,285,182) | (1,885,490) | (4,285,182) |
| Net income (loss) for the period attributable to non-controlling interests | - | - | 37,734 | 26,492 |
| Remuneration of own capital | (1,885,490) | (4,285,182) | (1,847,756) | (4,258,690) |
| Value added (distributed) for distribution | (1,564,475) | (2,653,806) | (15,344) | 1,891,270 |
The accompanying notes are an integral part of the parent company and consolidated interim financial information.
| 19 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
| 1. | Operating Context |
Gol Linhas Aéreas Inteligentes S.A. (“Company” or “GOL”) is a limited liability company incorporated on March 12, 2004 under Brazilian laws. The Company’s bylaws states that the corporate purpose is exercising the equity control of GOL Linhas Aéreas S.A. (“GLA”), which explores regular and non-regular flight transportation services of passengers, cargo and mailbags, domestically or internationally; development of loyalty programs; among others.
The Company’s shares are traded on B3 S.A. - Brasil, Bolsa, Balcão (“B3”) and on the New York Stock Exchange (“NYSE”) under the ticker GOLL4 and GOL, respectively. The Company adopts B3’s Special Corporate Governance Practices Level 2 and is part of the Special Corporate Governance (“IGC”) and Special Tag Along (“ITAG”) indexes, created to distinguish companies that commit to special corporate governance practices.
The Company’s official headquarters are located at Praça Comandante Linneu Gomes, s/n, portaria 3, prédio 24, Jardim Aeroporto, São Paulo, Brazil.
| 1.1. | Impacts and Management’s Measures regarding Covid-19 |
The pandemic triggered by Covid-19 continues to significantly impact the Global economic activity in fiscal year 2021. In Brazil, the recent increase in the number of cases and deaths, linked to the discovery continues to be impacted by the pandemic triggered by Covid-19, mainly due to the uncertainties related to the emergence of new variants, caused state and municipal authorities to expand restrictive measures on circulation and restrict the operation of non-essential activities. Evolution in the cases’ number and occupation in the hospital network, which directly affects the demand for air tickets in the leisure and corporate markets.
The second quarter of 2021, historically a period of low season for the airline industry, proved to be a turning point for demand recovery after a strong impact caused by the second wave of Covid-19, considering the increase in sales and search for flights on search platforms, mainly resulting from the intensification in the pace of vaccination observed in the country, which currently has an average of more than 1.5 million vaccines administered per day and more than 45% of the population having already received the first dose. According to press media consortium from data of Public Health Secretariat.
GOL's operations reflected an increase in the volume of flights of 78% from 165 daily flights operated in in the first half of April to 295 at the second half of June 2021. The daily sales volume also reflected an increase from R$7 million per day to R$17 million per day in the same period. Since the beginning of the pandemic, GOL, through the readjustment of its air network, has maintained a consistent occupancy rate at a level close to 80%. The flexible business model based on a single type of fleet is essential to keep up with reductions of more than 90% in passenger demand observed during lockdown periods and the installation of sanitary barriers.
The Company, through its Executive Committee, which is entirely formed by the management board members, works promptly to support society, monitor demand, and define financial and operational strategies.
In this second quarter of 2021, GOL also completed important initiatives to strengthen its capital structure, such as: (i) acquisition of non-controlling shareholders in Smiles; (ii) issue (retap) of an additional Senior Secured Notes of US$300 million; (iii) capital increase of R$423 million, led by the Company's controlling shareholders and with participation in the subscription by minority shareholders and; (iv) full payment of the remaining balance of its principal amortizable debt, guaranteed financing, in the amount of R$410 million in principal and interest, with the release of assets in guarantee. The completion of these operations will provide better financial flexibility for the Company and sustain its liquidity through the resumption of the volume of its operations for the second half of 2021.
| 20 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
In 2021, Gol maintains the initiative to transport Covid-19 vaccines for free – with GOLLOG – and health professionals who work directly in the fight against the pandemic, besides crediting 1,000 Smiles miles to each GOL segment flown at no cost. There are also active and strict protocols for aircraft hygiene and safety and health, together with actions to reduce human contact throughout the entire chain.
The Management works continuously towards people’s health and integrity, managing the cash and has enough funds to meet financial obligations in the next twelve months. However, the scenario remains challenging due to uncertainties on the pandemic, recovery of the Brazilian economy, and demand in the airline industry.
Following WHO guidelines to the letter, the Company is currently working with its ecosystem to help advance the vaccination calendar, which should lead to the resumption of economic activity, as seen in initial forecasts in countries with advanced immunization.
| 1.1.1 | Impacts on the Parent Company and Consolidated Quarterly Information |
As already mentioned, the impacts caused by the pandemic were immediate and severe to the Company, with the main consequence being the reduction in the operational network, in response to the drop in demand, which can be verified by the decrease in net revenue and reduction in the Company's margins. The table below details the reclassifications made in the period, which are directly related to the Covid-19 pandemic and additional disclosures:
| Consolidated – June 30, 2021 | ||||||
| Three months | Six months | |||||
| Statements of income - recassifications | Cost of rendered services | Other income and expenses, net | Cost of rendered services | Other income and expenses, net | ||
| Flight equipment depreciation – idleness | (a) | 80,535 | (80,535) | 143,210 | (143,210) | |
| Personnel expenses - idleness | (a) | 320 | (320) | 320 | (320) | |
| (a) | Due to the drop in the number of flights operated, where the Company incurred with the burden of time, by analogy to the provisions of CPC 16 (R1) - Inventories, equivalent to IAS 2, expenses and depreciation of flight equipment not directly related to the revenues generated in the period, called idleness, were reclassified from the group of costs of services to the group of other revenues and expenses, net. |
Like all other business organizations, the Company cannot foresee the duration of the pandemic and the extent of the continuous impacts caused by it on future business, results, and cash generation. For this reason, when preparing this quarterly information, the Management considered the most recent forecasts available, duly reflected in the Company’s business plans. In the period ended June 30, 2021, no adjustment was needed regarding impairments on the Company’s Recoverable taxes, Deferred tax assets, Property, plant & equipment, and Intangible assets.
| 1.2. | Capital Structure and Net Current Capital |
The net working capital consolidated on June 30, 2021, is negative by R$7,948,014 (negative by R$7,152,865 on December 31, 2020). The variation is mainly due to financial investments in the amount of R$605,505, and a higher balance of leases payable totaling R$547,823, due to the liquidity management and the drop in operations from the economic crisis caused by the pandemic, partially offset by the rebalancing of debts, which resulted in a reduction of R$580,275 in the balance of short-term loans and financing. Of the negative net working capital as of June 30, 2021, R$3,279,035 refers to advances from ticket sales and the mileage program, (R$3,309,301 on December 31, 2020), which are expected to be substantially recognized with the Company’s services.
| 21 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
On June 30, 2021, the Company also had a deficit attributable to equity holders of the parent company of R$15,746,300 (R$14,407,092 on December 31, 2020). The variation observed is mainly due to the pandemic’s impacts on the Company’s operations, with a loss of R$1,885,490 attributable to the controlling shareholders in the six-month period ended June 30, 2021. This impact was partially offset by the capital increase promoted by the Company's shareholders in the amount of R$423,061.
The operations of the Company are sensitive to changes in the economic scenario and to the volatility of the Real, given that around 95.4% of its indebtedness (loans and financing and leases) are exposed to the U.S. dollar (“US$”) and 35.2% of its costs are also pegged to the U.S. currency, and its ability to adjust the price of fees charged from its customers to recapture the change of the US$ depends on the rational (offer) capacity and behavior of competitors.
Over the past four years, Management has taken a series of measures to adapt the size of its fleet to demand, matching the supply of seats with the level of demand, thus promoting the maintenance of high occupancy rates, reducing costs and adapting the capital structure, as well as, executing structuring initiatives of its balance sheet, largely completed in the second quarter of 2021 and that will provide better financial flexibility as of the second half of 2021.
With the outbreak of the pandemic, which led to an unprecedented economic crisis, Management reorganized the Company’s businesses. By continuously monitoring Covid-19’s impacts on economic activity, the Company works promptly to ensure business sustainability, considering the market’s management and the Company’s financial position.
In addition to the continuous monitoring of operations and sales, with a focus on economic balance, given the uncertain scenario, Management monitors possible measures to rebalance net working capital for the second half of 2021. Such measures, in case adopted, will have the purpose of optimizing the capital structure, and the definition will be based on a detailed assessment of the economic situation and perspectives of that particular moment.
Our unaudited interim condensed consolidated financial statements have been prepared on the assumption of the Company as a going concern, which includes the continuity of operations, realization of assets and compliance with liabilities and commitments in the usual course of business, in conformity with the business plan prepared by Management, reviewed and approved by the Board of Directors.
Although there is still a substantial uncertainty about how long it will take the airline industry to recover, and that leads to material uncertainty on our ability to continue as a going concern, the unaudited interim condensed consolidated financial statements as of June 30, 2021, don’t include any adjustment that may result from inability to continue operating.
| 1.3. | Corporate Structure |
The corporate structure of the Company and its subsidiaries, on June 30, 2021, is shown below:
| 22 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
The Company’s equity interest in the capital of its subsidiaries, on June 30, 2021, is shown below:
| Entity | Date of incorporation | Location | Principal activity | Type of control | % of interest in the capital stock in the capital stock | |
| June 30, 2021 | December 31, 2020 | |||||
| GAC | March 23, 2006 | Cayman Islands | Aircraft acquisition | Direct | 100.00 | 100.00 |
| Gol Finance Inc. | March 16, 2006 | Cayman Islands | Fundraising | Direct | 100.00 | 100.00 |
| Gol Finance | June 21, 2013 | Luxembourg | Fundraising | Direct | 100.00 | 100.00 |
| GLA | April 9, 2007 | Brazil | Flight transportation | Direct | 100.00 | 100.00 |
| AirFim | November 7, 2003 | Brazil | Investment fund | Indirect | 100.00 | 100.00 |
| GTX | February 8, 2021 | Brazil | Equity investments | Indirect | 100.00 | - |
| Smiles Fidelidade | August 1, 2011 | Brazil | Loyalty program | Direct | 52.60 | 52.60 |
| Smiles Viagens | August 10, 2017 | Brazil | Tourism agency | Indirect | 52.60 | 52.60 |
| Smiles Fidelidade Argentina (a) | November 7, 2018 | Argentina | Loyalty program | Indirect | 52.60 | 52.60 |
| Smiles Viagens Argentina (a) | November 20, 2018 | Argentina | Tourism agency | Indirect | 52.60 | 52.60 |
| Fundo Sorriso | July 14, 2014 | Brazil | Investment fund | Indirect | 52.60 | 52.60 |
| Companies in Shareholding: | ||||||
| SCP Trip (b) | April 27, 2012 | Brazil | On-board magazine | - | - | 60.00 |
| (a) | Companies with functional currency in Argentine pesos (ARS). |
| (b) | GLA has cancelled its investment in SCP Trip in February, 2021. |
| (c) | In May, 2021, GOL transfered direct control (52.60% of the capital) of Smiles Fidelidade to its subsidiary GLA. In June, 2021, the Company completes the corporate transaction for the acquisition of minority interest, see note 1.4 |
The subsidiaries GAC Inc., GOL Finance and GOL Finance Inc. are entities incorporated with the specific purpose of continuing the financial operations and related to the Company's fleet. They do not have an independent management structure and are unable to make independent decisions. Thus, the assets and liabilities of these entities are consolidated in the parent company.
| 23 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
The subsidiaries Smiles Fidelidade S.A. and Smiles Viajes Y Turismo S.A., both headquartered in Buenos Aires, Argentina, incorporated and controlled by Smiles Fidelidade S.A, have the purpose to promote operations of the Smiles Program and the sale of airline tickets in that country.
The subsidiary Smiles Fidelidade also controls Smiles Viagens e Turismo S.A. (“Smiles Viagens”), whose main purpose is intermediating travel organization services, by booking or selling airline tickets, accommodation, tourism packages, among others.
The investment funds Airfim and Fundo Sorriso, controlled by GLA and Smiles Fidelidade, respectively, have the characteristic of an exclusive fund and act as an extension of the subsidiaries to carry out operations with derivatives and investments, so that the Company consolidates the assets and liabilities of this fund in its financial statements.
GTX S.A., directly controlled by GLA, is in a pre-operational stage and its corporate purpose is to manage its own assets and participate in the capital of other companies.
| 1.4. | Corporate reorganization plan |
On June 04, 2021, Smiles Fidelidade became a wholly owned subsidiary of GLA as a result of the proposed merger of shares approved by Smiles and GOL shareholders.
The merger proposal included the following steps, which were implemented concurrently and interdependently:
| · | incorporation of Smiles Fidelidade shares by GLA, issuing preferred shares and redeemable preferred shares of GLA to the shareholders of Smiles Fidelidade; |
| · | incorporation of GLA’s shares by the Company, issuing preferred shares and redeemable preferred shares of the Company to GLA’s shareholders; and |
| · | redemption of GLA’s and the Company's redeemable preferred shares, with cash payment based on the redemption of the Company's redeemable preferred shares to the shareholders of Smiles Fidelidade. |
On April 28, 2021, the period for exercising the right of withdrawal expired, which was exercised on 176 preferred shares of GOL and 28,220 common shares of Smiles, whose total amount of R$299 was settled on May 12, 2021.
On May 25, 2021, the Company transferred to GLA the control of Smiles Fidelidade S.A. through a capital increase in the amount of R$350,075.
Considering the choice of Smiles' minority shareholders among the available exchange ratios, on June 04, 2021, GOL issued 22,433,975 new preferred shares, 25,707,301 class B preferred shares and 33,113,683 class C preferred shares. Classes B and C were redeemed and settled in cash on June 23, 2021 for the total amount of R$744,450.
| 1.5. | Acquisition of MAP Transportes Aéreos |
On June 08, 2021, GOL entered into an agreement to acquire MAP Transportes Aéreos Ltda. (“MAP”), a Brazilian domestic airline with flight routes to regional destinations and São Paulo´s Congonhas Airport, considering the Company's commitment to expand Brazilian demand for passenger air transport and an unparalleled market opportunity for rational consolidation in the Brazilian aviation market, as the country's economy recovers from Covid-19.
| 24 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
MAP will be acquired for R$28 million, to be paid upon satisfaction of all closing conditions, through 100,000 preferred shares (GOLL4) at R$28.00 per share and R$25 million in cash to be paid in twenty-four monthly installments. At closing, the Company will assume up to R$100 million in MAP's financial obligations.
The main benefits of this transaction are: (i) expansion to new routes; (ii) offering higher seat density to historically underserved markets; and (iii) enhancing cost-efficient operations.
The transaction closing is subject to approval by the National Civil Aviation Agency (ANAC) and by the Administrative Council for Economic Defense (CADE). Therefore, on June 30, 2021 there are no impacts from this transaction on the interim condensed consolidated financial information statements.
| 1.6. | Compliance program |
In December 2016 as a result of investigations involving the Company, GOL signed an agreement ("Agreement") with the Brazilian Federal Public Ministry, through which the Company agreed to pay fines and make improvements to its compliance program, in return for the commitment of the Brazilian Federal Public Ministry agreed not to file any lawsuits related to activities under the Agreement, as disclosed in the financial statements for the years ended December 31, 2017, 2018, 2019 and 2020.
The Company voluntarily informed the U.S. Department of Justice ("DOJ"), the Securities and Exchange Commission ("SEC") and the Brazilian Securities and Exchange Commission ("CVM") about the Agreement and the external and independent investigation conducted by an independent committee of the Company.
The investigation, completed in April 2017, revealed that immaterial payments were made to politically exposed people and the competent authorities were duly reported. None of the current employees, representatives or members of the Management and Board of Directors knew of any illegal purpose behind any of the transactions identified, or of any illegal benefit to the Company arising from the transactions under investigation.
The Company will keep reporting any future developments regarding this issue, as well as monitor the analyses already started by these agencies, which may impose new fines and possibly other sanctions to the Company.
Since 2016, the Company has adopted several measures to strengthen and expand its internal control and compliance, detailed in the financial statements for the years ended December 31, 2017, 2018, 2019 and 2020. In addition, Management constantly reinforces with its employees, customers and suppliers its commitment to continuous improvement in its internal control programs and compliance.
There were no further developments on the subject during the period ended June 30, 2021.
| 2. | Message from Management, basis of preparation and presentation of the parent company and consolidated quarterly information |
The Company’s parent company and consolidated quarterly information were prepared in accordance with the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”).
| 25 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
The Company’s parent company and consolidated quarterly information were prepared using the Brazilian Real (“R$”) as the functional and presentation currency. Figures are expressed in thousands of Brazilian reais, except when stated otherwise. The items disclosed in foreign currencies are duly identified, when applicable.
The preparation of the Company’s parent company and consolidated quarterly information requires Management to make judgments, use estimates, and adopt assumptions affecting the stated amounts of revenues, expenses, assets, and liabilities. However, the uncertainty inherent in these judgments, assumptions, and estimates could give rise to results that require a material adjustment of the book value of certain assets and liabilities in future reporting fiscal years.
The Company is continually reviewing its judgments, estimates, and assumptions.
Management, when preparing these parent company and consolidated quarterly information, used the following disclosure criteria, considering regulatory aspects and the relevance of the transactions to understand the changes in the Company’s economic and financial position and its performance since the end of the fiscal year ended December 31, 2020, as well as the restatement of relevant information included in the annual financial statements related to the year ended December 31, 2020 disclosed on March 17, 2021.
Management confirms that all the material information in these parent company and consolidated quarterly information are being demonstrated and corresponds to the information used by Management in the development of its business management activities.
The parent company and consolidated quarterly information have been prepared based on historical cost, with the exception of the following material items recognized in the statements of financial positions:
· short-term investments classified as cash and cash equivalents measured at fair value;
· short-term investments mainly comprising exclusive investment funds, measured at fair value;
· restricted cash measured at fair value;
· derivative financial instruments measured at fair value; and
· investments accounted for using the equity method.
The Company’s parent company and consolidated quarterly information relating for the period ended 30 June, 2021, has been prepared assuming that it will continue as a going concern, realizing assets and settling liabilities in the normal course of business, as per Note 1.2.
| 3. | Approval of the Parent Company and Consolidated Quarterly Information |
The Board of Directors authorized this Parent Company and Consolidated Quarterly Information (ITR) at a Meeting held on July 28, 2021.
| 4. | Summary of Significant Accounting Practices |
The Parent Company and Consolidated Quarterly Information (ITR) presented herein was prepared based on policies, accounting practices and estimate calculation methods adopted and presented in detail in the annual financial statements related to the year ended December 31, 2020, issued on March 17, 2021.
| 26 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
| 4.1. | New Accounting Standards and Pronouncements Adopted in the Current Year |
On the first quarter of 2021, CPC issued the Standards Technical Review Nr. 17 resulting from the “Reform of Reference Interest Rate - Phase 2”, duly approved by CVM, through CVM Resolution 18/2021, effective for fiscal years beginning after January 1, 2021.
On March 31, 2021, IASB extended the possibility of applying the practical expedient with benefits granted to tenants in lease agreements for years beginning on or after April 1, 2021, with early adoption allowed.
Both changes did not impact the Company’s quarterly information. Additionally, in the period ended June 30, 2021, standards or pronouncements issued in previous periods with an impact on the Company’s quarterly information did not enter into force.
| 4.2. | Foreign Currency Transactions |
Foreign currency transactions are recorded at the exchange rate change prevailing on the transactions' date. Monetary assets and liabilities designated in foreign currency are calculated based on the exchange rate change on the balance sheet date. Any difference resulting from the translation of currencies is recorded under the item “Exchange rate change, net” in the income statement for the period.
The main exchange rates in reais in effect on the base date of this Parent Company and Consolidated Quarterly Information (ITR) are as follows:
| Final Rate | Average Rate | |||
| June 30, 2021 | December 31, 2020 | June 30, 2021 | December 31, 2020 | |
| U.S. Dollar | 5.0022 | 5.1967 | 5.3842 | 5.1425 |
| Argentinian Peso | 0.0523 | 0.0617 | 0.0591 | 0.0622 |
| 5. | Seasonality |
Under normal economic and social conditions, the Company expects revenues and operating income (expense) from its flights to be at their highest levels in the summer and winter holiday periods, in January and July, respectively, and during the last weeks of December and in the year-end holiday period. Domestic demand, mainly from the corporate sector, is highly linked to the level of economic activity in Brazil (GDP). Given the high proportion of fixed costs, this seasonality tends to drive changes in operating income (expense) across the fiscal-year quarters. In the current context, considering all current unpredictability and uncertainty, the operations have shown a behavior negatively correlated with the number of cases and deaths caused by Covid-19. In other words, in the pandemic context, the recovery of the normalized behavior of demand in periods of high season will depend not only on the historical seasonality between the different months, but also on the observation of the reduction in the curve of cases and deaths.
| 6. | Cash and Cash Equivalents |
| Parent Company | Consolidated | |||
| June 30, 2021 | December 31, 2020 | June 30, 2021 | December 31, 2020 | |
| Cash and bank deposits | 25,513 | 374,271 | 75,761 | 428,812 |
| Cash equivalents | 423,135 | 49,666 | 684,508 | 234,018 |
| Total | 448,648 | 423,937 | 760,269 | 662,830 |
| 27 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
The breakdown of cash equivalents is as follows:
| Parent Company | Consolidated | |||
| June 30, 2021 | December 31, 2020 | June 30, 2021 | December 31, 2020 | |
| Local currency | ||||
| Private bonds | 417,709 | 49,014 | 627,338 | 170,359 |
| Automatic deposits | 5,426 | 652 | 57,145 | 59,936 |
| Total local currency | 423,135 | 49,666 | 684,483 | 230,295 |
| Foreign currency | - | |||
| Private bonds | - | - | 25 | 3,723 |
| Total foreign currency | - | - | - | - |
| - | - | 25 | 3,723 | |
| Total | ||||
| Local currency | 423,135 | 49,666 | 684,508 | 234,018 |
| 7. | Financial Investments |
| Weighted average profitability (p.a.) | Parent Company | Consolidated | |||
| June 30, 2021 | December 31, 2020 | June 30, 2021 | December 31, 2020 | ||
| Local currency | |||||
| Government bonds | 95.2% of CDI | - | - | 168 | 22,465 |
| Investment funds | 95.4% of CDI | 103 | 236 | 22,823 | 603,698 |
| Total local currency | 103 | 236 | 22,991 | 626,163 | |
| Foreign currency | |||||
| Private bonds | - | - | - | 2,415 | |
| Investment funds | 28.8% | - | - | 15 | 757 |
| Total foreign currency | - | - | 15 | 3,172 | |
| Total | 103 | 236 | 23,006 | 629,335 | |
| Current | 103 | 236 | 22,838 | 628,343 | |
| Non Current | - | - | 168 | 992 | |
| 28 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
| 8. | Restricted Cash |
Weighted average weighted (p.a.) | Parent Company | Consolidated | |||
| June 30, 2021 | December 31, 2020 | June 30, 2021 | December 31, 2020 | ||
| Local currency | |||||
| Import financing | 98.0% of CDI | - | - | 60,697 | 213,153 |
| Letter of guarantee - legal proceedings | 84.7% of CDI | 4,445 | 4,201 | 55,282 | 56,440 |
| Letter of credit – maintenance deposit | 98.1% of CDI | - | - | 156,467 | 155,184 |
| Working capital | 99.8% of CDI | - | - | 9,711 | 52,927 |
| Total local currency | 4,445 | 4,201 | 282,157 | 477,704 | |
| Foreign currency | |||||
| Exim loan | 0.2% | - | - | 30,065 | 31,206 |
| Letter of guarantee - legal proceedings | - | - | - | 1,593 | - |
| Hedge margin | - | - | - | - | 35,697 |
| Total foreign currency | - | - | 31,658 | 66,903 | |
| Total | 4,445 | 4,201 | 313,815 | 544,607 | |
| Current | 4,442 | 4,194 | 269,131 | 355,769 | |
| Non Current | 3 | 7 | 44,684 | 188,838 | |
The decrease in restricted cash linked to import financing and working capital loan, in the period ended June 30, 2021, refers to using the asset to pay for debt operations to which they were linked.
| 9. | Trade Receivables |
| Consolidated | ||
| June 30, 2021 | December 31, 2020 | |
| Local currency | ||
| Credit card administrators | 295,319 | 318,869 |
| Travel agencies | 297,523 | 266,086 |
| Cargo agencies | 28,632 | 29,902 |
| Airline partner companies | 9,118 | 8,877 |
| Other | 20,406 | 13,845 |
| Total local currency | 650,998 | 637,579 |
| Foreign currency | ||
| Credit card administrators | 52,589 | 77,616 |
| Travel agencies | 14,524 | 13,960 |
| Cargo agencies | 46 | 122 |
| Airline partner companies | 6,751 | 19,464 |
| Other | 9,466 | 9,005 |
| Total foreign currency | 83,376 | 120,167 |
| Total | 734,374 | 757,746 |
| Allowance for expected loss on trade receivables accounts | (16,966) | (18,047) |
| Total trade receivables | 717,408 | 739,699 |
| 29 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
The aging list of trade receivables, net of allowance for expected loss on trade receivables accounts, is as follows:
| Consolidated | ||
| June 30, 2021 | December 31, 2020 | |
| Not yet due | ||
| Until 30 days | 419,785 | 459,338 |
| D 31 to 60 days | 104,797 | 88,893 |
| 61 to 90 days | 27,572 | 33,121 |
| 91 to 180 days | 55,038 | 54,832 |
| 181 to 360 days | 32,671 | 41,484 |
| Above 360 days | 125 | 256 |
| Total to be due | 639,988 | 677,924 |
| Overdue | ||
| Until 30 days | 28,148 | 10,278 |
| 31 to 60 days | 5,168 | 21,677 |
| 61 to 90 days | 16,156 | 13,501 |
| 91 to 180 days | 10,117 | 11,474 |
| 181 to 360 days | 13,741 | 785 |
| Above 360 days | 4,090 | 4,060 |
| Total overdue | 77,420 | 61,775 |
| Total | 717,408 | 739,699 |
The changes in the expected loss on trade receivables are as follows:
| Consolidated | ||
| June 30, 2021 | December 31, 2020 | |
| Balance at the beginning of the period | (18,047) | (16,952) |
| (Additions) Exclusions | 1,081 | (1,095) |
| Balance at the end of the period | (16,966) | (18,047) |
| 10. | Inventories |
| Consolidated | ||
| June 30, 2021 | December 31, 2020 | |
| Consumables | 20,343 | 14,533 |
| Parts and maintenance materials | 174,995 | 181,105 |
| Advances to suppliers | 17,476 | - |
| Total | 212,814 | 195,638 |
The changes in the provision for obsolescence are as follows:
| Consolidated | ||
| June 30, 2021 | December 31, 2020 | |
| Balances at the beginning of the period | (12,862) | (14,302) |
| Additions | (54) | (702) |
| Write-offs | 7,331 | 2,142 |
| Balances at the end of the period | (5,585) | (12,862) |
| 30 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
| 11. | Advances to Suppliers and Third-Parties |
| Parent Company | Consolidated | |||
| June 30, 2021 | December 31, 2020 | June 30, 2021 | December 31, 2020 | |
| Advance to domestic suppliers | 8 | - | 216,128 | 290,664 |
| Advances to international suppliers | 45 | 10,441 | 31,170 | 68,873 |
| Advance for materials and repairs | - | - | 48,932 | 48,933 |
| Total | 53 | 10,441 | 296,230 | 408,470 |
| Current | 53 | 10,441 | 198,813 | 318,769 |
| Non-current | - | - | 97,417 | 89,701 |
| 12. | Taxes to Recover |
| Parent Company | Consolidated | ||||
| June 30, 2021 | December 31, 2020 | June 30, 2021 | December 31, 2020 | ||
| Prepaid income and social contribution taxes to recover | 16,669 | 18,335 | 93,249 | 109,231 | |
| PIS and COFINS to recover(*) | - | - | 271,228 | 387,033 | |
| Value Added Tax (VAT), abroad | - | - | 3,390 | 3,998 | |
| Other | 218 | 62 | 11,610 | 5,097 | |
| Total | 16,887 | 18,397 | 379,477 | 505,359 | |
| Current | 1,627 | 6,295 | 265,357 | 186,955 | |
| Non-current | 15,260 | 12,102 | 114,120 | 318,404 | |
(*) During the period ended June 30, 2021, the subsidiary GLA recorded PIS and COFINS extemporaneous tax credits, in the total amount of R$57,422 (R$126,675 for the period ended December 31, 2020).
| 31 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
| 13. | Deferred Taxes |
| 13.1. | Deferred Tax Assets (Liabilities) |
The positions of deferred assets and liabilities are presented below and comply with the enforceable offset legal rights that consider taxes levied by the same tax authority under the same tax entity.
| Parent Company | Consolidated | ||||||
| December 31, 2020 | Results | June 30, 2021 | December 31, 2020 | Results | Exchange rate variation(*) | June 30, 2021 | |
| Deferred assets | |||||||
| Income tax losses carry forward | 37,921 | - | 37,921 | 37,921 | - | - | 37,921 |
| Negative basis of social contribution | 13,650 | - | 13,650 | 13,650 | - | - | 13,650 |
| Temporary differences: | |||||||
| Provision for losses on other credits | 2,004 | 53 | 2,057 | 2,004 | 53 | - | 2,057 |
| Provision for legal proceedings and tax liabilities | (83) | (3) | (86) | (83) | (3) | - | (86) |
| Others | - | - | - | 71 | (5) | 164 | 230 |
| Total deferred taxes - Assets | 53,492 | 50 | 53,542 | 53,563 | 45 | 164 | 53,772 |
| Deferred liabilities | |||||||
| Temporary differences: | |||||||
| Breakage provision | - | - | - | (193,498) | 892 | - | (192,606) |
| Flight rights | - | - | - | (353,226) | - | - | (353,226) |
| Depreciation of engines and parts for aircraft maintenance | - | - | - | (194,789) | (3,969) | - | (198,758) |
| Reversal of goodwill amortization for tax purposes | - | - | - | (127,659) | - | - | (127,659) |
| Derivative transactions | - | - | - | (28,902) | 43,490 | - | 14,588 |
| Allowance for doubtful accounts | - | - | - | 201,446 | (3,521) | - | 197,925 |
| Provision for legal proceedings and tax liabilities | - | - | - | 124,723 | 17,000 | - | 141,723 |
| Aircraft return | - | - | - | 190,778 | (21,390) | - | 169,388 |
| Aircraft leases and other | - | - | - | 10,586 | (3,797) | - | 6,789 |
| Unrealized profits | - | - | - | 69,843 | 6,326 | - | 76,169 |
| Other | - | - | - | 81,064 | (22,092) | - | 58,972 |
| Total deferred taxes - Liabilities | - | - | - | (219,634) | 12,939 | - | (206,695) |
| Total effect of deferred taxes on income | - | 50 | - | - | 12,984 | - | - |
(*) Exchange variation recognized in other comprehensive income.
| 32 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
Management considers that the deferred assets and liabilities recognized on June 30, 2021, arising from temporary differences, will be realized in proportion to the realization of their bases and the expectation of future results.
Management estimates that deferred tax credits, recorded on tax losses and negative social contribution basis, will be realized as follows:
| Year | Amount |
| 2023 | 5,034 |
| 2024 | 12,183 |
| 2025 | 9,981 |
| 2025 onwards | 24,373 |
| Total | 51,571 |
The direct subsidiary GLA has tax losses and negative bases of social contribution in the determination of taxable profit, to be offset against 30% of future annual tax profits, with no prescription period, not recorded in the balance sheet, in the following amounts:
| GLA | ||
| June 30, 2021 | December 31, 2020 | |
| Acumulated income tax losses | 9,587,143 | 8,401,388 |
| Negative basis of social contribution | 9,587,143 | 8,401,388 |
| Potential tax credit | 3,259,629 | 2,856,472 |
The reconciliation of tax expenses and calculation of the loss before income tax and social contribution by the nominal tax rate for three-month and six-month periods ended June 30, 2021 and 2020 is as follows:
| Parent Company | ||||
| Three-month period ended | Six-month period ended | |||
| June 30, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | |
| (Loss) income before income tax and social contribution | 647,001 | (1,994,007) | (1,885,540) | (4,278,943) |
| Combined nominal tax rate | 34% | 34% | 34% | 34% |
| Income tax and social contribution combined tax rate | (219,980) | 677,962 | 641,084 | 1,454,841 |
| Adjustments to calculate the effective tax rate: | ||||
| Equity | 131,714 | (534,790) | (581,324) | (1,288,788) |
| Difference of tax rate on the result of subsidiaries | (43,546) | (90,929) | (75,772) | 69,914 |
| Nontaxable revenues (expenses), net | (21,377) | (203) | (23,100) | (407) |
| Exchange variation on foreign investments | 163,130 | (54,946) | 53,192 | (241,799) |
| Benefit (not constituted) on tax losses, negative social contribution base and temporary differences | (14,029) | - | (14,030) | - |
| Income tax and social contribution | (4,088) | (2,906) | 50 | (6,239) |
| Income tax and social contribution | ||||
| Current | - | (2,030) | - | (3,078) |
| Deferred | (4,088) | (876) | 50 | (3,161) |
| Total income and social contribution taxes | (4,088) | (2,906) | 50 | (6,239) |
| 33 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
| Consolidated | ||||
| Three-month period ended | Three-month period ended | |||
| June 30, 2021 | June 30, 2021 | June 30, 2021 | June 30, 2021 | |
| (Loss) income before income tax and social contribution | 669,670 | (1,993,980) | (1,815,152) | (4,212,173) |
| Combined nominal tax rate | 34% | 34% | 34% | 34% |
| Income tax and social contribution combined tax rate | (227,687) | 677,953 | 617,152 | 1,432,139 |
| Adjustments to calculate the effective tax rate: | ||||
| Difference of tax rate on the result of subsidiaries | (39,715) | (95,653) | (75,102) | 65,190 |
| Nontaxable revenues (expenses), net | (33,570) | (45,195) | (68,689) | 4,999 |
| Exchange variation on foreign investments | 131,631 | (46,987) | 31,862 | (178,954) |
| Benefit (not constituted) on tax losses, negative social contribution base and temporary differences | 157,706 | (493,219) | (537,827) | (1,369,891) |
| Income tax and social contribution | (11,635) | (3,101) | (32,604) | (46,517) |
| Income tax and social contribution | ||||
| Current | (16,757) | (11,580) | (45,588) | (35,853) |
| Deferred | 5,122 | 8,479 | 12,984 | (10,664) |
| Total income and social contribution taxes | (11,635) | (3,101) | (32,604) | (46,517) |
| 14. | Deposits |
| Parent Company | Consolidated | |||
| June 30, 2021 | December 31, 2020 | June 30, 2021 | December 31, 2020 | |
| Maintenance deposits | - | - | 958,601 | 1,032,418 |
| Judicial deposits | 44,400 | 49,838 | 601,808 | 667,565 |
| Deposits in guarantee for lease agreements | 2,502 | 68,423 | 295,719 | 358,472 |
| Total | 46,902 | 118,261 | 1,856,128 | 2,058,455 |
| 14.1. | Maintenance deposits |
The Company makes deposits in U.S. dollars for the maintenance of aircraft and engines, which will be used in future events as established in certain lease agreements.
Maintenance deposits do not exempt the Company, as a lessee, from contractual obligations related to the maintenance or the risk associated with operating activities. These deposits can be replaced by bank guarantees or letters of credit (SBLC - stand by letter of credit) according to the conditions established in the aircraft lease. The Company has the right to choose to carry out the maintenance internally or through its suppliers.
The Company has two categories of maintenance deposits:
· Maintenance guarantee: refers to one-time deposits that are refunded at the end of the lease, and can also be used in maintenance events, depending on negotiations with lessors. The balance of these deposits on June 30, 2021 was R$248,316 (R$273,311 on December 31, 2020).
· Maintenance reserve: refers to amounts paid monthly based on the use of components and can be used in maintenance events as set by an agreement. On June 30, 2021, the balance referring to such reserves was R$710,285 (R$759,107 on December 31, 2020).
| 34 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
| 14.2. | Court Deposits |
Court deposits and blocks represent guarantees of tax, civil and labor lawsuits, kept in court until the resolution of the disputes to which they are related. Part of the court deposits refers to civil and labor lawsuits arising from succession requests in lawsuits filed against Varig S.A. or also labor lawsuits filed by employees who do not belong to GLA or any related party. Considering that Management does not believe that the Company is legally responsible for such claims, the release of the court deposits has been claimed.
| 14.3. | Deposits in guarantee for lease agreements |
As required by the lease agreements, the Company makes guarantee deposits (in U.S. dollars) to the leasing companies, which can be redeemed if replaced by other bank guarantees or fully redeemed at maturity.
| 15. | Investments |
| 15.1. | Breakdown of Investments |
| Parent Company | Consolidated | |||
| GLA | Smiles Fidelidade (1) | Trip (2) | ||
| Relevant information of the subsidiaries as of June 30, 2021 | ||||
| Total number of shares | 2,762,566,614 | - | - | |
| Share capital | 5,511,194 | - | - | |
| Interest | 100.0% | - | - | |
| Shareholders’ Equity (deficit) | (13,795,934) | - | - | |
| Unrealized profits (a) | - | - | - | |
| Adjusted Shareholders’ Equity (b) | (13,795,934) | - | - | |
| Net income (loss) for the period | (1,747,480) | 57,753 | - | |
| Unrealized profits in the period (a) | - | 7,324 | - | |
| Adjusted net income for the period (b) | (1,747,480) | 37,703 | - | |
| Relevant information of the subsidiaries as of December 31, 2020 | ||||
| Total number of shares | 5,262,335,049 | 124,158,953 | - | |
| Share capital | 4,554,280 | 254,610 | 1,318 | |
| Interest | 100.0% | 52.60% | 60.0% | |
| Shareholders’ Equity (deficit) | (12,670,479) | 1,350,329 | 1,359 | |
| Unrealized profits (a) | - | (135,578) | - | |
| Adjusted Shareholders’ Equity (b) | (12,670,479) | 574,717 | 815 | |
| Relevant information of the subsidiaries as of June 30, 2021 | ||||
| Net income (loss) for the period | (3,834,212) | 55,902 | - | |
| Unrealized profits in the period (a) | - | 14,252 | - | |
| Adjusted net income for the period (b) | (3,834,212) | 43,660 | - | |
| (1) | In may 2021,the Company transferred the control over Smiles Fidelidade to its subsidiary GLA, as demonstrated within the table below. As a consequence, information related to shareholders equity and shares positions was not presented in June 30, 2021. The net income (loss) for the period, unrealized profits and adjusted net income for the period include only the effects from january to april of 2021, considering the interest of 52.60% in the capital owned by the Company. |
| (2) | GLA discontinued the investment on Trip in 2021. |
(a) Corresponds to transactions involving revenue from mileage redemption for airline tickets by members in the Smiles Program which, for the purposes of consolidated quarterly information are only accrued when program members are actually transported by GLA.
(b) Adjusted shareholders’ equity and net income for the adjusted period corresponds to the percentage of total equity and net income for unrealized profits.
| 35 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
| 15.2. | Changes in Investments |
| Parent Company | Consolidated | |||
| GLA | Smiles Fidelidade | GLA | Smiles Fidelidade | |
| Balances as of December 31, 2020 | (12,670,479) | 574,717 | (12,095,762) | 815 |
| Advance for future capital increase | 151,000 | - | 151,000 | - |
| Result of equity income | (1,747,480) | 37,703 | (1,709,777) | - |
| Unrealized gains on hedges | 415,782 | - | 415,782 | - |
| Foreign exchange variation on investment conversion abroad | 107 | 430 | 537 | - |
| Dividends and interests | - | (263,008) | (263,008) | - |
| Share-based payments | 8,314 | 233 | 8,547 | - |
| Investment write off | - | - | - | (815) |
| Transfer of control – Smiles Fidelidade (a) | 350,075 | (350,075) | - | - |
| Transactions with non-controlling shareholders – Capital increase (b) | 1,351,289 | - | 1,351,289 | - |
| Transactions with non-controlling shareholders – Equity valuation adjustments (b) | (909,980) | - | (909,980) | - |
| Preferred shares withdrawn – Corporate reorganization (c) | (744,450) | - | (744,450) | - |
| Balances as of June 30, 2021 | (13,795,822) | - | (13,795,822) | - |
| (a) | In May 25, 2021, the Company transferred to GLA the control over Smiles Fidelidade S.A. through a capital increase in the amount of R$350,075. |
| (b) | In June 04, 2021, the Company concluded the reorganization step to acquire the shares of the minority investors of Smiles. This transaction involved a compensation of R$1,351,289 (of which R$606,839 in preferred shares and R$744,450 in preferred redeemable shares). The book value of this acquisition was R$441,309, which resulted in an equity valuation adjustment of R$909,980, recorded directly in the subsidiarys’ shareholders equity. |
| (c) | The redeemable preferred shares were liquidated in cash in June 23, 2021. |
| 16. | Property, Plant & Equipment |
| 16.1. | Parent Company |
On June 30, 2021, the balance of property, plant and equipment was R$168,499 in subsidiary GAC (R$68,660 on December 31, 2020), mainly due to advances in aircraft acquisition.
| 36 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
| 16.2. | Consolidated |
| December 31, 2020 | June 30, 2021 | ||||||||||
| Weighted average rate (p.a.) | Historical cost | Accumulated depreciation | Net opening balance | Additions | Contractual amendments | Depreciation | Write-off | Net ending balance | Historical cost | Accumulated depreciation | |
| Flight equipment | |||||||||||
| Aircraft – ROU (1) with no purchase option | 20.29% | 4,020,709 | (1,420,648) | 2,600,061 | 428,632 | 47,417 | (271,624) | - | 2,804,486 | 4,455,675 | (1,651,189) |
| Spare parts and engines - Own (4) (5) | 6.95% | 1,964,411 | (837,048) | 1,127,363 | 23,010 | - | (66,182) | (1,323) | 1,082,868 | 1,983,222 | (900,354) |
| Spare parts and engines – ROU | 33.55% | 84,329 | (47,940) | 36,389 | 2,026 | - | (8,597) | - | 29,818 | 82,717 | (52,899) |
| Aircraft and engine improvements | 46.78% | 3,206,385 | (2,282,042) | 924,343 | 90,613 | - | (227,918) | - | 787,038 | 3,157,822 | (2,370,784) |
| Tools | 10.00% | 55,821 | (28,697) | 27,124 | 404 | - | (1,965) | (11) | 25,552 | 56,196 | (30,644) |
| 9,331,655 | (4,616,375) | 4,715,280 | 544,685 | 47,417 | (576,286) | (1,334) | 4,729,762 | 9,735,632 | (5,005,870) | ||
| Property, plant and equipment in use | |||||||||||
| Vehicles | 20.00% | 11,264 | (9,572) | 1,692 | 377 | - | (285) | - | 1,784 | 11,641 | (9,857) |
| Machinery and equipment | 10.00% | 62,841 | (48,417) | 14,424 | 40 | - | (1,441) | - | 13,023 | 62,862 | (49,839) |
| Furniture and fixtures | 10.00% | 32,790 | (20,483) | 12,307 | 24 | - | (996) | (44) | 11,291 | 32,502 | (21,211) |
| Computers and peripherals – Own | 20.00% | 47,487 | (35,837) | 11,650 | 99 | - | (1,860) | (5) | 9,884 | 47,219 | (37,335) |
| Computers and peripherals – ROU | 26.58% | 21,992 | (15,460) | 6,532 | - | - | (3,052) | - | 3,480 | 21,992 | (18,512) |
| Communication equipment | 10.00% | 2,233 | (1,871) | 362 | 5 | - | (55) | (8) | 304 | 2,216 | (1,912) |
| Security equipment | 10.00% | 55 | (32) | 23 | - | - | (2) | - | 21 | 55 | (34) |
| Third-party property improvements – CMA (3) | 12.05% | 107,637 | (107,637) | - | - | - | - | - | - | 107,637 | (107,637) |
| Third-party property improvements | 20.31% | 75,714 | (49,328) | 26,386 | 25 | - | (4,959) | - | 21,452 | 75,725 | (54,273) |
| Third-party property – ROU | 33.96% | 27,867 | (15,834) | 12,033 | - | 32 | (4,337) | - | 7,728 | 27,899 | (20,171) |
| Construction in progress | 14,837 | - | 14,837 | 5 | - | - | (170) | 14,672 | 14,672 | - | |
| 404,717 | (304,471) | 100,246 | 575 | 32 | (16,987) | (227) | 83,639 | 404,420 | (320,781) | ||
| Impairment losses (2) | - | (34,330) | - | (34,330) | 3,699 | - | - | - | (30,631) | (30,631) | - |
| Total | 9,702,042 | (4,920,846) | 4,781,196 | 548,959 | 47,449 | (593,273) | (1,561) | 4,782,770 | 10,109,421 | (5,326,651) | |
| Advances to suppliers | - | 179,092 | - | 179,092 | 29,377 | - | - | (11,590) | 196,879 | 196,879 | - |
| Total Property, plant and equipment | 9,881,134 | (4,920,846) | 4,960,288 | 578,336 | 47,449 | (593,273) | (13,151) | 4,979,649 | 10,306,300 | (5,326,651) | |
(1) ROU - Right of Use
(2) Refers to provisions for impairment losses for rotable items (spare parts), classified under “Parts and spare engines", recorded by the Company in order to present its assets according to the actual capacity for the generation of expected future benefits.
(3) CMA - Maintenance Center - Confins/MG
(4) As of June 30, 2021, the balance of spare parts is granted as a guarantee to Secured Notes 2026, according to Note 18.
(5) As of June 30, 2021, 19 engines of the Company are granted as a guarantee to the Spare Engine Facility and the Loan Facility, according to Note 18.
| 37 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
17. Intangible Assets
The breakdown of and changes in intangible assets are as follows:
| Consolidated | ||||||||||
| December 31, 2020 | June 30, 2021 | |||||||||
| Weighted average rate (p.a.) | Historical cost | Accumulated amortization | Net opening balance | Additions | Write-off | Amortization | Net ending balance | Historical cost | Accumulated amortization | |
| Cost | ||||||||||
| Goodwill | - | 542,302 | - | 542,302 | - | - | - | 542,302 | 542,302 | |
| Slots | - | 1,038,900 | - | 1,038,900 | - | - | - | 1,038,900 | 1,038,900 | |
| Software | 25.73% | 507,734 | (345,661) | 162,073 | 51,877 | (22) | (40,365) | 173,563 | 496,829 | (323,266) |
| Others | 20.00% | 10,000 | (6,167) | 3,833 | - | - | (1,000) | 2,833 | 10,000 | (7,167) |
| Total | 2,098,936 | (351,828) | 1,747,108 | 51,877 | (22) | (41,365) | 1,757,598 | 2,088,031 | (330,433) | |
The balances of goodwill and airport operating rights (slots) were tested for impairment on December 31, 2020 through the discounted cash flow for each cash-generating unit, giving rise to the value in use. The results obtained were compared with the carrying amount of each cash-generating unit and, as a result, the Company did not recognize impairment losses on its CGUs.
In order to assess the recoverable value, assets are grouped at the lowest levels for which there are separately identifiable cash flows (Cash-Generating Units – “CGUs”). In order to determine the carrying amount of each cash-generating unit, the Company considers the intangible assets recorded and all necessary tangible assets to conduct the business, given that it will only generate economic benefits by using the combination of both.
| 38 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
18. Loans and financing
The breakdown of and changes in short and long-term debt are as follows:
| Parent Company | |||||||||||||||
| December 31, 2020 | June 30, 2021 | ||||||||||||||
| Maturity | Interest rate p.a. | Current | Non-current | Total | Funding | Unrealized gain (loss) from ESN | Payments | Interest incurred | Interest paid | Exchange rate change | Amortization of cost and premium | Total | Current | Non-current | |
| Em US$: | |||||||||||||||
| Secured funding | 12/2021 | 9.50% | 484,113 | - | 484,113 | - | - | (499,663) | 17,000 | (17,745) | 16,295 | - | - | - | - |
| ESN 2024 (1) | 07/2024 | 3.75% | 37,960 | 1,896,854 | 1,934,814 | - | (124,954) | - | 98,139 | (43,636) | (78,149) | (15) | 1,786,199 | 36,540 | 1,749,659 |
| Senior Notes 2025 | 01/2025 | 7.00% | 98,521 | 3,340,316 | 3,438,837 | - | - | - | 122,502 | (124,577) | (128,037) | 4,596 | 3,313,321 | 94,833 | 3,218,488 |
| Senior Secured Notes 2026 | 06/2026 | 8.00% | 1,848 | 953,802 | 955,650 | 1,501,569 | - | - | 108,332 | (103,935) | (114,145) | 9,972 | 2,357,443 | - | 2,357,443 |
| Perpetual bonds | - | 8.75% | 16,522 | 799,777 | 816,299 | - | - | - | 36,269 | (36,627) | (30,193) | - | 785,748 | 15,905 | 769,843 |
| Total | 638,964 | 6,990,749 | 7,629,713 | 1,501,569 | (124,954) | (499,663) | 382,242 | (326,520) | (334,229) | 14,553 | 8,242,711 | 147,278 | 8,095,433 | ||
(1) Exchangeable Senior Notes refer to note 34.2.
| 39 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
| Consolidated | |||||||||||||||
| December 31, 2020 | June 30, 2021 | ||||||||||||||
| Maturity | Interest rate p.a. | Current | Non-current | Total | Funding | Unrealized gain (loss) from ESN | Payments | Interest incurred | Interest paid | Exchange rate change | Amortization of cost and premium | Total | Current | Non-current | |
| Em R$: | |||||||||||||||
| Debentures | 03/2022 | 5.20% (3) | 440,918 | 146,170 | 587,088 | - | - | - | 16,064 | (18,149) | - | 2,799 | 587,802 | 587,802 | - |
| Working Capital | 10/2025 | 9.06% | 239,615 | 17,275 | 256,890 | - | - | (64,671) | 9,422 | (10,381) | - | - | 191,260 | 177,881 | 13,379 |
| Em US$: | |||||||||||||||
| Secured funding | 06/2021 | 9.50% | 484,113 | - | 484,113 | - | - | (499,663) | 17,000 | (17,745) | 16,295 | - | - | - | - |
| Import financing | 07/2021 | 5.04% | 783,659 | - | 783,659 | - | - | (152,258) | 15,717 | (18,873) | (14,238) | - | 614,007 | 614,007 | - |
| Financing with Ex-lm Bank collateral | 12/2022 | 0.84% | 194,786 | 49,958 | 244,744 | - | - | (51,403) | 1,255 | (1,360) | (7,839) | 2,905 | 188,302 | 164,295 | 24,007 |
| ESN 2024 (1) | 07/2024 | 3.75% | 37,960 | 1,896,854 | 1,934,814 | - | (124,954) | - | 98,139 | (43,636) | (78,149) | (15) | 1,786,199 | 36,540 | 1,749,659 |
| Spare engine facility | 09/2024 | 2.49% | 22,771 | 197,009 | 219,780 | - | - | - | 2,811 | (1,524) | (8,262) | 141 | 212,946 | 34,349 | 178,597 |
| Senior notes 2025 | 01/2025 | 7.00% | 98,521 | 3,340,316 | 3,438,837 | - | - | - | 122,502 | (124,577) | (128,037) | 4,596 | 3,313,321 | 94,833 | 3,218,488 |
| Senior secured notes 2026 | 06/2026 | 8.00% | 1,848 | 953,802 | 955,650 | 1,501,569 | - | 108,332 | (103,935) | (114,145) | 9,972 | 2,357,443 | - | 2,357,443 | |
| Loan facility | 03/2028 | 4.73% | 32,566 | 233,135 | 265,701 | - | - | (3,067) | 5,468 | (2,419) | (8,829) | 128 | 256,982 | 47,392 | 209,590 |
| Perpetual bonds (2) | - | 8.75% | 16,522 | 789,168 | 805,690 | 10,952 | - | - | 36,213 | (36,345) | (30,762) | - | 785,748 | 15,905 | 769,843 |
| Total | 2,353,279 | 7,623,687 | 9,976,966 | 1,512,521 | (124,954) | (771,062) | 432,923 | (378,944) | (373,966) | 20,526 | 10,294,010 | 1,773,004 | 8,521,006 | ||
(1) Exchangeable Senior Notes see Note 34.2.
(2) On December 31, 2020 It includes the elimination of related parties, considering securities of this issue, carried out by Gol Finance, held by GLA, totaling R$10,609. These securities were resold in the period ended June 30, 2021, therefore there is no elimination on this date.
(3) These securities are divided into three series: Series 1 with a CDI rate of 120%; Series 2 with CDI rate + 5.40% p.a. and Series 3 with CDI rate + 4.90% p.a..
| 40 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
The total parent company and consolidated loans and financing on June 30, 2021, includes funding costs and premiums totaling R$220,626 and R$230,763, respectively (R$173,086 and R$189,195 on December 31, 2020) that will be amortized over the term of their loans and financing. The total also includes amortized goodwill and fair value of the derivative financial instrument, referring to ESN 2024, totaling R$36,228 and R$205,838, respectively, on June 30, 2021 (R$42,226 and R$346,030, respectively, on December 31, 2020).
| 18.1. | New loans and financing contracted and renegotiated during the period ended June 30, 2021 |
The renegotiations detailed below were evaluated under IFRS 9 - “Financial Instruments” and did not meet the definitions to derecognize the liabilities (with the original financial liability extinguished and a new financial liability recognized).
| 18.1.1. | Debentures |
On March 26, 2021, the Annual Debenture Holders' Meeting decided to postpone the payment of series 3 with maturity on March 28, 2021, to April 7, 2021, totaling R$147,913, and suspend the early maturity of the installment of series 1, also maturing on March 28, 2021, and also totaling R$147,920.
On April 6, 2021, at the General Meeting of Debenture Holders, it was decided to postpone the payment of series 3 maturing on April 07, 2021 to May 12, 2021, in the amount of R$295,833 with new remuneration of CDI + 4.90 % a.a.
On May 11, 2021, at the General Meeting of Debenture Holders, the payment of series 3 maturing on May 12, 2021 was again postponed to June 26, 2021.
On June 25, 2021, the General Meeting of Debenture Holders resolved to postpone the payment of series 3 maturing on June 26, 2021 to August 10, 2021.
| 18.1.2. | Working capital – Lines of credit |
During the period ended June 30, 2021, the Company, through its subsidiary GLA, renegotiated the due dates of this type of agreement, placing promissory notes as collateral for the transactions. These transactions have as purpose maintaining and managing the company's working capital, and the main change was the maturity date and interest rate, as disclosed in the previous table.
| 18.1.3. | Import financing |
During the period ended June 30, 2021, the Company, through its subsidiary GLA, raised funds and renegotiated the due dates of this type of agreement, impacting the interest rate, disclosed in table above, and keeping promissory notes as collateral for the transactions, which are part of a credit line maintained by GLA for engine maintenance, import financing in order to purchase spare parts and aircraft equipment.
| 18.1.4. | Senior Secured Notes 2026 |
In May 2021, the Company raised Senior Secured Notes, as part of an additional issuance and consolidated of the Senior Secured Notes issued in December 2020, bearing interest of 8.00% p.a. and maturity in June 2026.
| 41 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
| Operation date | Principal | Costs | Interest rate (p.a.) | Date - Maturity | ||
| (US$ thousands) | (R$ thousands) | (US$ thousands) | (R$ thousands) | |||
| May 11, 2021 | 300,000 | 1,569,660 | 13,019 | 68,091 | 8.00% | June 30, 2026 |
| 18.2. | Loans and Financing – Non-Current |
On June 30, 2021, the maturities of loans and financing recorded in non-current liabilities were as follows:
| 2022 | 2023 | 2024 | 2025 | 2025 onwards | Without maturity date | Total | |
| Parent Company | |||||||
| In US$: | |||||||
| ESN 2024 | - | - | 1,749,659 | - | - | - | 1,749,659 |
| Senior Notes 2025 | - | - | - | 3,218,488 | - | - | 3,218,488 |
| Senior Secured Notes 2026 | - | - | - | - | 2,357,443 | - | 2,357,443 |
| Perpetual Bonds | - | - | - | - | - | 769,843 | 769,843 |
| Total | - | - | 1,749,659 | 3,218,488 | 2,357,443 | 769,843 | 8,095,433 |
| Consolidated | |||||||
| Em R$: | |||||||
| Working capital – Lines of credit | 4,152 | 4,644 | 2,500 | 2,083 | - | - | 13,379 |
| Em US$: | |||||||
| Financing with Ex-lm Bank collateral | 24,007 | - | - | - | - | - | 24,007 |
| Spare engine facility | - | - | 1,749,659 | - | - | - | 1,749,659 |
| ESN 2024 | 11,149 | 22,299 | 145,149 | - | - | - | 178,597 |
| Senior notes 2025 | - | - | - | 3,218,488 | - | - | 3,218,488 |
| Senior secured notes 2026 | - | - | - | - | 2,357,443 | - | 2,357,443 |
| Loan facility | 15,044 | 30,948 | 31,991 | 33,113 | 98,494 | - | 209,590 |
| Perpetual bonds | - | - | - | - | - | 769,843 | 769,843 |
| Total | 54,352 | 57,891 | 1,929,299 | 3,253,684 | 2,455,937 | 769,843 | 8,521,006 |
The fair value of debt on June 30, 2021, is as follows:
| Parent Company | Consolidated | |||
| Book value (*) | Fair value | Book value (*) | Fair value | |
| Debêntures VII | - | - | 587,802 | 591,666 |
| ESN 2024 | 1,786,199 | 1,976,859 | 1,786,199 | 1,976,859 |
| Senior Notes 2025 | 3,313,321 | 3,232,496 | 3,313,321 | 3,232,496 |
| Senior Secured Notes 2026 | 2,357,443 | 2,545,269 | 2,357,443 | 2,545,269 |
| Perpetual bonds | 785,748 | 689,834 | 785,748 | 689,834 |
| Other loans and financing | - | - | 1,463,497 | 1,463,497 |
| Total | 8,242,711 | 8,444,458 | 10,294,010 | 10,499,621 |
(*) Total net of funding costs.
| 18.3. | Covenants |
The Company has financial covenants in Debentures VII, which obligation to measure such indicators is semiannual. A waiver was granted by Debenture Holders regarding the non-compliance with the financial rates and limits set.
| 42 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
| 19. | Leases Payable |
On June 30, 2021, the balance of leases payable includes: (i) R$31,249 relating to variable payments, not included in the measurement of liabilities, and short-term leases (R$16,252 on December 31, 2020), which fall under the exemption provided for in IFRS 16; and (ii) R$7,664,680 referring to the present value on this date of future lease payments (R$7,567,940 on December 31, 2020).
The breakdown and changes in the present value of future lease payments are shown below:
| Consolidated | |||||||||||||
| December 31, 2020 | June 30,2021 | ||||||||||||
| Weighted average rate (p.a.) | Current | Non-current | Total | Additions | Contractual amendment | Payments | Deposit in guarantee | Interest incurred | Exchange rate change | Total | Current | Not Current | |
| In R$: | |||||||||||||
| Leases without purchase option | 13.13% | 32,530 | 14,985 | 47,515 | - | 32 | (9,007) | - | 3,214 | - | 41,754 | 31,096 | 10,658 |
| Total | 32,530 | 14,985 | 47,515 | - | 32 | (9,007) | - | 3,214 | - | 41,754 | 31,096 | 10,658 | |
| In US$: | |||||||||||||
| Leases without purchase option | 11.97% | 1,268,226 | 6,252,199 | 7,520,425 | 430,658 | 47,417 | (515,891) | (5,329) | 441,848 | (296,202) | 7,622,926 | 1,802,486 | 5,820,440 |
| Total | 1,268,226 | 6,252,199 | 7,520,425 | 430,658 | 47,417 | (515,891) | (5,329) | 441,848 | (296,202) | 7,622,926 | 1,802,486 | 5,820,440 | |
| Total Leases | 1,300,756 | 6,267,184 | 7,567,940 | 430,658 | 47,449 | (524,898) | (5,329) | 445,062 | (296,202) | 7,664,680 | 1,833,582 | 5,831,098 | |
In the three-month and six-month periods ended June 30, 2021, the Company directly recognized in the cost from services, totaling R$14,427 e R$31,111, respectively, related to short-term leases and variable payments, on a straight-line basis.
| 43 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
The future payments of lease agreements are detailed as follows:
| Without purchase option | ||
| June 30, 2021 | December 31, 2020 | |
| 2021 | 1,562,699 | 2,102,771 |
| 2022 | 2,013,608 | 1,982,685 |
| 2023 | 1,670,573 | 1,642,264 |
| 2024 | 1,291,179 | 1,260,405 |
| 2025 | 1,046,907 | 1,018,896 |
| Thereafter | 3,008,085 | 2,701,509 |
| Total minimum lease payments | 10,593,051 | 10,708,530 |
| Less total interest | (2,897,122) | (3,124,338) |
| Present value of minimum lease payments | 7,695,929 | 7,584,192 |
| Less current portion | (1,864,831) | (1,317,008) |
| Non-current portion | 5,831,098 | 6,267,184 |
| 19.1. | Sale-Leaseback Transactions |
During the six-month period ended June 30, 2021, the Company did not carry out sale-leaseback transactions. In the six-month period ended June 30, 2020 the Company recognized a net gain of R$ 372,712 and R$594,587 at parent company and consolidated respectively, from the sale-leaseback transactions of 11 aircraft, recorded in the statement of operations in the group of “Other income (expenses), net”, refer to note 30.
| 20. | Suppliers |
| Parent Company | Consolidated | |||
| June 30, 2021 | December 31, 2020 | June 30, 2021 | December 31, 2020 | |
| Local currency | 50,711 | 48,345 | 1,165,214 | 1,164,193 |
| Foreign currency | 13,862 | 24,357 | 407,966 | 481,001 |
| Total | 64,573 | 72,702 | 1,573,180 | 1,645,194 |
| Current | 64,573 | 72,702 | 1,562,946 | 1,612,536 |
| Non-current | - | - | 10,234 | 32,658 |
| 21. | Taxes to Collect |
| Parent Company | Consolidated | |||
| June 30, 2021 | December 31, 2020 | June 30, 2021 | December 31, 2020 | |
| PIS and COFINS | 277 | 216 | 23,935 | 23,647 |
| Installment payments - PRT and PERT | - | - | 37,375 | 41,641 |
| Withholding income tax on salaries | 41 | 43 | 17,550 | 33,011 |
| ICMS | - | - | 251 | 472 |
| Income and social contribution taxes payable | - | - | 3,847 | 13 |
| Other | 40 | 33 | 6,360 | 7,192 |
| Total | 358 | 292 | 89,318 | 105,976 |
| Current | 358 | 292 | 61,279 | 73,614 |
| Non-current | - | - | 28,039 | 32,362 |
| 44 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
| 22. | Advance Ticket Sales |
On June 30, 2021, the balance of advance ticket sales classified in current liabilities was R$1,999,013 (R$2,050,799 on December 31, 2020) and is represented by 5,941,658 tickets sold and not yet used (6,691,911 on December 31, 2020) with an average use of 120 days (102 days on December 31, 2020).
Balances of advance ticket sales are shown net of breakage corresponding to R$274,197 on June 30, 2021 (R$299,188 on December 31, 2020).
On June 30, 2021, the Company has reimbursements to pay related to non-performed transports in the amount of R$326,978 (R$253,963 on December 31, 2020), recorded as Other liabilities in current liabilities.
| 23. | Frequent-Flyer Program |
| Consolidated | ||
| June 30, 2021 | December 31, 2020 | |
| Mileage program | 2,187,188 | 2,145,097 |
| Others | 5,496 | 5,817 |
| Breakage | (567,902) | (569,952) |
| Total | 1,624,782 | 1,580,962 |
| Current | 1,280,022 | 1,258,502 |
| Non-current | 344,760 | 322,460 |
Breakage consists of estimating miles that have a high potential to expire due to their expected non-use. IFRS 15 – “Revenue from Contract with Customers”, provides for the recognition of revenue by the estimate (breakage) over the contractual period, therefore, before the redemption of miles, given that this is not expected before expiration.
| 24. | Provisions |
| Post-employment benefits | Aircraft and engine return | Legal proceedings (a) | Total | |
| Balances on December 31, 2020 | 99,549 | 1,030,915 | 392,432 | 1,522,896 |
| Recognition (reversal) of provision | 8,707 | 168,218 | 154,604 | 331,529 |
| Provisions used | - | (134,813) | (103,169) | (237,982) |
| Adjustment to present value | - | 36,529 | - | 36,529 |
| Exchange rate change | - | (37,335) | 397 | (36,938) |
| Balances on June 30, 2021 | 108,256 | 1,063,514 | 444,264 | 1,616,034 |
| On June 30, 2021 | ||||
| Current | - | 252,046 | - | 252,046 |
| Non-current | 108,256 | 811,468 | 444,264 | 1,363,988 |
| Total | 108,256 | 1,063,514 | 444,264 | 1,616,034 |
| On December 31, 2020 | ||||
| Current | - | 169,381 | - | 169,381 |
| Non-current | 99,549 | 861,534 | 392,432 | 1,353,515 |
| Total | 99,549 | 1,030,915 | 392,432 | 1,522,896 |
| (a) | The provisions used consider write-offs due to the revaluation of estimates and settled processes. |
| 45 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
| 24.1. | Post-Employment Benefit |
The Company offers to its employees health care plans that, due to complying with current laws, generate obligations with post-employment benefits.
The actuarial assumptions applied when measuring the post-employment benefit remain the same as those disclosed in the annual financial statements related to the year ended December 31, 2020.
| Consolidated | |
| June 30, 2021 | |
| Current service cost recognized in income (expenses) | 4,785 |
| Cost of interests recognized in income (expenses) | 3,922 |
| Total | 8,707 |
| 24.2. | Provisions for Aircraft and Engine Return |
Such provision considers the costs that meet the contractual conditions for the return of engines maintained under operating leases, as well as the costs to reconfigure aircraft when returned as described in the return conditions of the lease agreements. The initial recognition is capitalized against property, plant and equipment, under the item "Aircraft and engine improvements".
| 24.3. | Provision for Legal Proceedings |
In June 30, 2021, the Company and its subsidiaries are involved in certain legal matters arising from the regular course of their business, which include civil, administrative, tax, social security, and labor lawsuits.
The Company classifies the risk of loss in legal proceedings as probable, possible, or remote. The provision recorded in relation to such lawsuits is set by the Company's Management, based on the analysis of its legal counsel, and reasonably reflects the estimated probable losses.
If the Company has lawsuits whose values are not known or reasonably estimated, but the likelihood of loss is probable, these will not be recorded, but their nature will be disclosed.
The Company's Management believes that the provision for tax, civil and labor risks, recorded in accordance with IAS 37, is sufficient to cover possible losses on administrative and judicial proceedings, as shown below:
| Consolidated | ||||
| Probable loss | Possible loss | |||
| June 30, 2021 | December 31, 2020 | June 30, 2021 | December 31, 2020 | |
| Civil | 96,511 | 100,806 | 70,286 | 64,181 |
| Labor | 322,976 | 269,297 | 213,832 | 238,702 |
| Tax | 24,777 | 22,329 | 613,357 | 574,356 |
| Total | 444,264 | 392,432 | 897,475 | 877,239 |
Details about the relevant lawsuits were disclosed in the annual financial statements related to the year ended December 31, 2020. In the period ended June 30, 2021, there were no changes regarding new proceedings or reclassification of the relevant risk of loss.
| 46 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
| 25. | Shareholders’ Equity |
| 25.1. | Share Capital |
On June 4, 2021, the Company's Board of Directors deliberated the increase of capital stock in the amount of R$606,839, as a result of the corporate reorganization for the merger of Smiles, with the issuance, by the Company, of 22,433,975 new preferred shares , 25,707,301 class B preferred shares and 33,113,683 class C preferred shares, with class B and C shares redeemed in the June’s month, within the scope of the approved merger proposal.
On June 15, 2021, the Directors’ Board ratified the capital increase, in the amount of R$423,061 with the issuance of 171,136,137 common shares and 12,581,185 preferred shares. In this same act, the 171,136,137 common shares were converted into 4,889,603 preferred shares issued by the Company, at the ratio of 35 common shares to 1 preferred share.
On June 30, 2021, the capital stock amount was R$4,039,336, represented by 3,177,611,730 shares, of which 2,863,682,710 common shares and 313,929,020 preferred shares (R$3,009,436, represented by 3,137,706,967 shares, of which 2,863,682,710 common shares and 274,024,257 preferred shares on December 31, 2020). The capital stock is reduced of share issuing costs in the amount of R$155,618 on June 30, 2021 and December 31, 2020.
The Company’s shares are held as follows:
| June 30, 2021 | December 31, 2020 | |||||
| Common shares | Preferred shares | Total | Common shares | Preferred shares | Total | |
| Fundo Volluto (2) | 100.00% | - | 20.67% | 100.00% | - | 22.99% |
| Mobi FIA (2) | - | 32.85% | 26.06% | - | 37.57% | 28.93% |
| Path Ltd. (2) | - | 3.46% | 2.74% | - | - | - |
| Capital International | - | 5.07% | 4.02% | - | - | - |
| AirFrance - KLM | - | 1.35% | 1.07% | - | 1.55% | 1.19% |
| Others | - | 1.54% | 1.22% | - | 1.91% | 1.47% |
| Market | - | 55.73% | 44.20% | - | 58.97% | 45.41% |
| Total | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% |
(1) In the context of Exchangeable senior notes 2024, issued in 2019, as a result of transactions related to the ADS lending facility, Bank of America Corporation acquired 33,863,549 preferred shares, representing 10.8% of total preferred shares on June 30, 2021.
(2) Refers to legal entities controlled by the controlling shareholders (Constantino family).
The authorized share capital on June 30, 2021 is R$6 billions. Within the authorized limit, the Company can, once approved by the Board of Directors, increase its capital regardless of any amendment to its by-laws, by issuing shares, without necessarily maintaining the proportion between the different types of shares. Under the law terms, in case of capital increase within the authorized limit, the Board of Directors will determine the issuance conditions, including pricing and payment terms.
| 25.2. | Treasury Shares |
On June 30, 2021, the Company had 1,217,285 treasury shares, totaling R$41,514 (1,824,034 shares totaling R$62,215 on December 31, 2020). On June 30, 2021, the closing market price for treasury shares was R$22.96 (R$24.94 on December 31, 2020).
| 47 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
| 25.3. | Interim dividends – Smiles Fidelidade |
On March 25, 2021, the Smiles Fidelidade’s Board of Directors decided to distribute interim dividends in the amount of R$500,000, of which R$236,992 were allocated to minority shareholders and fully paid on April 16, 2021.
| 26. | Earnings (Loss) per Share |
The Company's earnings (loss) per share was determined as follows:
| Parent Company and Consolidated | ||||||
| Three-month period ended | ||||||
| June 30, 2021 | June 30, 2020 | |||||
| Common shares | Preferred shares | Total | Common shares | Preferred shares | Total | |
| Numerator | ||||||
| Net income (loss) for the period attributed to controlling shareholders | 144,024 | 498,889 | 642,913 | (380,114) | (1,616,799) | (1,996,913) |
| Denominator | ||||||
| Weighted average number of outstanding shares (in thousands) | 2,863,683 | 282,200 | 2,253,594 | 223,863 | - | |
| Effect of dilutable titles | - | 430 | - | - | - | |
| Adjusted weighted average number of outstanding shares and diluted presumed conversions (in thousands) | 2,863,683 | 282,630 | 2,253,594 | 223,863 | ||
| In Brazilian Real (R$) | ||||||
| Basic earnings (loss) per share | 0.050 | 1.768 | (0.169) | (7.222) | ||
| Diluted earnings (loss) per share | 0.050 | 1.765 | (0.169) | (7.222) | ||
| Parent Company and Consolidated | ||||||
| Six-month period ended | ||||||
| June 30, 2021 | June 30, 2020 | |||||
| Common shares | Preferred shares | Total | Common shares | Preferred shares | Total | |
| Numerator | ||||||
| Loss for the period attributed to controlling shareholders | (427,886) | (1,457,604) | (1,885,490) | (815,688) | (3,469,494) | (4,285,182) |
| Denominator | ||||||
| Weighted average number of outstanding shares (in thousands) | 2,863,683 | 277,503 | 2,253,594 | 273,873 | ||
| Adjusted weighted average number of outstanding shares and diluted presumed conversions (in thousands) | 2,863,683 | 277,503 | 2,253,594 | 273,873 | ||
| In Brazilian Real (R$) | ||||||
| Basic earnings (loss) per share | (0.149) | (5.253) | (0.362) | (12.668) | ||
| Diluted earnings (loss) per share | (0.149) | (5.253) | (0.362) | (12.668) | ||
| 48 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
| 27. | Share-Based Compensation |
The conditions of the stock option and restricted share plans granted to the Company’s Executive Officers were disclosed in detail in the annual financial statements related to the year ended December 31, 2020, and did not change during the period ended June 30, 2021.
The changes in plans for the period ended June 30, 2021, are as follows:
| 27.1. | Stock Option Plan – GOL |
| Number of stock options | Weighted average exercise price | |
| Outstanding options on December 31, 2020 | 7,529,612 | 11.59 |
| Options exercised | (111,557) | 3.99 |
| Options canceled and adjustments in estimated prescribed rights | 57,664 | 15.36 |
| Outstanding options on June 30, 2021 | 7,475,719 | 11.66 |
| Number of options exercisable on: | ||
| December 31, 2020 | 5,752,726 | 10.32 |
| June 30, 2021 | 6,011,535 | 10.74 |
The expenses recognized in the statement of operations for the period corresponding to the stock option plan in the three-month and six-month periods ended June 30, 2021, were R$1,838 and R$4,626, respectively (R$2,594 and R$5,694 in the three-month and six-month periods ended June 30, 2020).
| 27.2. | Restricted Share Plan – GOL |
| Restricted shares | |
| Restricted shares transferable on December 31, 2020 | 1,203,483 |
| Transferred shares (*) | (595,976) |
| Canceled shares and adjustments to the estimate of expired rights | 82,662 |
| Transferable Restricted Shares on June 30, 2021 | 690,169 |
(*) During the period ended June 30, 2021, the Company transferred 581,499 shares via equity instruments (treasury shares) and the amount of R$397 was paid in cash equivalent to 14,477 shares.
The expense recognized in the statement of operations for the period corresponding to the restricted share plans in the three-month and six-month periods ended June 30, 2021, were R$1,471 and R$3,518 respectively(R$2,491 and R$4,083 in the three-month and six-month periods ended June 30, 2020).
| 27.3. | Stock Option Plan – Smiles Fidelidade |
There were no changes to options outstanding in the period ended June 30, 2021. On this date, the average exercise price, adjusted for earnings distributions, is R$41.36 (R$48.42 on December 31, 2020).
During the three-month and six-month periods ended June 30, 2021, the Company recorded R$333 and R$666, respectively, in equity related to share-based compensation with a corresponding entry in the statement of operations (R$1.195 in the period ended June 30, 2020).
| 49 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
Additionally, referenced in the Company’s shares, executives and employees are granted a complementary cash-settled bonus, as a way of strengthening their commitment and productivity with the incomes (expenses). On June 30, 2021, the balance of this obligation totaled R$2,846 (R$1,881 on December 31, 2020) recorded under “Salaries, wages and benefits”, referenced to 135,012 equivalent Company’s shares (R$119,784 on December 31, 2020). The same amount was recorded under “Salaries, wages and benefits” in the statement of operations related to these bonuses (R$1,502 in the period ended June 30, 2020).
| 28. | Transactions with Related Parties |
| 28.1. | Loan Agreements - Noncurrent Assets and Liabilities |
The parent company maintains assets and liabilities from loan agreements with its subsidiary GLA without interest, as shown in the table below:
| Assets | Liabilities | ||||||
| Creditor | Debtor | Type of Transaction | Interest Rate (p.a.) | June 30, 2021 | December 31, 2020 | June 30, 2021 | December 31, 2020 |
| GOL | GLA | Mútuo | 3.42% | 897,049 | 915,226 | 6,694 | - |
| GAC | GLA | Mútuo | (*) | 1,262,171 | 1,347,546 | 5,999 | 8,791 |
| Gol Finance | GLA | Mútuo | 3.99% | 3,826,678 | 2,634,559 | - | - |
| Total | 5,985,898 | 4,897,331 | 12,693 | 8,791 | |||
(*) According to the local legislation, the Company applies symbolic interest rates.
Additionally, on June 30, 2021, the Company had no balance of dividends, and interest on shareholders’ equity receivable (R$24,120 on December 31, 2020).
In addition to the values above, the following table shows the other balances between the Companies eliminated in the Consolidated:
| Balances | ||||||
| Creditor | Debtor | Type of Transaction | Maturity of the Agreements | Interest Rate (p.a.) | June 30, 2021 | December 31, 2020 |
| Gol Finance | GOL | Bônus de subscrição(*) | 07/2024 | - | 602,350 | 602,350 |
| Gol Finance Inc. | GAC | Mútuo | 01/2023 | 8.64% | 1,122,587 | 1,149,501 |
| Gol Finance | GAC | Mútuo | 03/2025 | 3.83% | 1,039,748 | 1,157,009 |
| Gol Finance | Gol Finance Inc. | Mútuo | 04/2023 | 1.92% | 482,098 | 305,702 |
| Gol Finance Inc. | Gol Finance | Mútuo | 07/2020 | 11.70% | 1,737 | 1,805 |
| Smiles Fidelidade | GLA | Compra antecipada de passagens | 12/2032 | 4.79% | 2,065,622 | 2,011,291 |
| Smiles Fidelidade | GLA | Venda de milhas | 12/2032 | - | 6,742 | 9,627 |
| Smiles Fidelidade | GLA | Taxa de administração | 12/2032 | - | 247 | 308 |
| Smiles Fidelidade | GLA | Carta acordo de indenização | - | - | 530 | 530 |
| GLA | Smiles Fidelidade | Serviços compartilhados | 12/2032 | - | 6,880 | 6,363 |
| GLA | Smiles Fidelidade | Repasse | 12/2032 | - | 23,561 | 15,683 |
| Smiles Fidelidade | Smiles Viagens | Dividendos | - | - | 267 | 267 |
| Smiles Viagens | Smiles Fidelidade | Repasses | - | - | 4,159 | 414 |
| Smiles Argentina | Smiles Fidelidade | Repasses | - | - | 6,796 | 5,152 |
| Total | 5,363,324 | 5,266,002 | ||||
(*) Through Gol Equity Finance, the subsidiary Gol Finance acquired warrants issued by the Company in the context of the issue of Exchangeable Senior Notes.
| 28.2. | Transportation and Consulting Services |
In the course of its operations, the Company, by itself and through its subsidiaries, entered into agreements with the companies listed below, part of the same economic group as the Company:
| 50 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
· Expresso Caxiense S.A.: Provision of passenger transportation services in case of an interrupted flight, effective until March 9, 2023; and
· Viação Piracicabana Ltda.: Provision of passenger, baggage, crew, and employee transportation services between airports, effective until September 30, 2021.
On June 30, 2021, GLA recognized total expenses related to these services of R$1,601 (R$3,622 on June 30, 2020). On the same date, the balance payable to related companies, under “Suppliers”, was of R$4,965 (R$3,344 on December 31, 2020), and refers to transportation services with Viação Piracicabana Ltda and Expresso Caxiense S.A.
| 28.3. | Contracts Account Opening UATP (“Universal Air Transportation Plan”) to Grant Credit Limit |
The subsidiary GLA entered into UATP account opening agreements with the related parties indicated below: Aller Participações S.A.; BR Mobilidade Baixada Santista S.A. SPE; Breda Transportes e Serviços S.A.; Comporte Participações S.A.; Empresa Cruz de Transportes Ltda.; Empresa de Ônibus Pássaro Marrom S.A.; Empresa Princesa do Norte S.A.; Expresso Itamarati S.A.; Expresso Maringá do Vale S.A.; Expresso União Ltda.; Glarus Serviços Tecnologia e Participações S.A.; Limmat Participações S.A.; Quality Bus Comércio de Veículos S.A.; Super Quadra Empreendimentos Imobiliários S.A.; Thurgau Participações S.A.; Transporte Coletivo Cidade Canção Ltda.; Turb Transporte Urbano S.A.; Vaud Participações S.A.; and Viação Piracicabana Ltda.; all with no expiration date, whose purpose is to issue credits to purchase airline tickets issued by the Company. The UATP account (virtual card) is accepted as a payment means on the purchase of airline tickets and related services, seeking to simplify billing and make feasible payment between the participating companies.
The companies indicated above are owned by the individuals who control FIP Volutto and Mobi FIA, the main shareholders of the Company.
| 28.4. | Commercial Partnership and Maintenance Agreement |
At February 19, 2014, the Company signed an exclusive strategic partnership agreement for business cooperation with AirFrance-KLM. On January 1, 2017, the Company signed an extension of the scope for the inclusion of maintenance services. During the six-month period ended June 30, 2021, expenses with component maintenance incurred at the AirFrance-KLM workshop were R$34,420 (R$171,290 in the period ended June 30, 2020). On June 30, 2021, the Company has R$80,091 in the “Suppliers” account under current liabilities (R$72,519 on December 31, 2020).
| 28.5. | Guarantee-Provision Compensation Agreement |
On October 27, 2020, the Company, through its subsidiary Gol Finance, issued a debt (guaranteed financing) totaling US$250 million, which holds guarantee of assets granted by Mobi FIA, through the execution of the Pledge Agreement of Shares, Assets and Credit Rights and in consideration, it will receive remuneration from the Company, according to the terms agreed in the agreement. For additional information, see Note 18.
On June 30, 2021, this debt was fully paid and the guarantees were released from their pledge.
| 51 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
| 28.6. | Compensation of the Key Management Personnel |
| Consolidated | Consolidated | |||
| Three-month period ended | Six-month period ended | |||
| June 30, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | |
| Salaries, wages and benefits (*) | 16,066 | 4,197 | 29,637 | 17,164 |
| Related taxes and charges | 6,230 | 6,809 | 7,731 | 8,637 |
| Share-based compensation | 4,622 | 2,647 | 9,590 | 5,201 |
| Total | 26,918 | 13,653 | 46,958 | 31,002 |
(*) Includes compensation for members of the management, audit committee, and fiscal council.
| 29. | Revenue |
| Consolidated | ||||
| Three-month period ended | Six-month period ended | |||
| June 30, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | |
| Passenger transportation (*) | 919,445 | 251,263 | 2,382,290 | 3,277,761 |
| Cargo transportation | 81,900 | 44,769 | 167,044 | 145,125 |
| Mileage program | 82,836 | 79,655 | 171,100 | 189,546 |
| Other revenue | 7,500 | 7,457 | 15,226 | 37,767 |
| Gross Revenue | 1,091,681 | 383,144 | 2,735,660 | 3,650,199 |
| Related tax | (63,309) | (25,296) | (139,661) | (144,624) |
| Net Revenue | 1,028,372 | 357,848 | 2,595,999 | 3,505,575 |
(*) Of the total amount, the total of R$ 107,162 and R$219,308 for the three-month and six-month periods ended June 30, 2021, are made up of the revenue from non-attendance of passengers, rescheduling, ticket cancellation (R$ 17,697 and R$156,953 for the three-month and six-month periods ended June 30, 2020).
In the three-month and six-month periods ended June 30, 2021, revenues earned in the international market represent less than 10% of total revenues.
| 52 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
| 30. | Costs of Services and Operational Expenses |
| Parent Company | ||||
| Three-month period ended | Six-month period ended | |||
| June 30, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | |
| Selling Expenses | ||||
| Sales and Marketing | (48) | - | (48) | - |
| Other Selling Expenses | (345) | - | (345) | - |
| Total Selling Expenses | (393) | - | (393) | - |
| Administrative Expenses | ||||
| Salaries | (4,352) | (304) | (7,812) | (1,424) |
| Services | (6,378) | (494) | (24,545) | (2,672) |
| Other administrative expenses | (66,105) | (1,373) | (72,058) | (3,074) |
| Total Administrative Expenses | (76,835) | (2,171) | (104,415) | (7,170) |
| Other Operational Revenues (Expenses) | ||||
| Sale-Leaseback Transactions (a) | - | - | - | 372,712 |
| Other Operating Expenses | (9) | (49) | 480 | 3,547 |
| Total Other Operating Revenues and (Expenses), Net | (9) | (49) | 480 | 376,259 |
| Total | (77,237) | (2,220) | (104,328) | 369,089 |
| (a) | During the period of June 30, 2021, the Company did not realize sale-leaseback transactions During the period of June 30, 2020, the Company recorded a net gain of R$372,712 arising from sale-leaseback operations of 11 aircrafts negotiated within the period). |
| 53 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
| Consolidated | ||||
| Three-month period ended | Six-month period ended | |||
| June 30, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | |
| Cost of services provided | ||||
| Personnel | (296,421) | (56,859) | (608,467) | (510,175) |
| Aircraft fuel | (376,187) | (135,785) | (942,315) | (1,136,923) |
| Maintenance, material and repairs | (87,965) | (73,746) | (241,331) | (218,067) |
| Passenger costs | (118,574) | (27,183) | (226,590) | (203,224) |
| Services provided | (34,953) | (40,923) | (77,992) | (86,416) |
| Landing fees | (69,689) | (20,331) | (183,754) | (222,073) |
| Depreciation and amortization | (193,256) | (109,481) | (433,160) | (579,809) |
| Other operating costs | (66,898) | (37,698) | (165,579) | (125,229) |
| Total cost of services provided | (1,243,943) | (502,006) | (2,879,188) | (3,081,916) |
| Selling expenses | ||||
| Personnel | (7,708) | (4,248) | (13,830) | (13,677) |
| Services provided | (26,469) | (16,756) | (49,982) | (52,086) |
| Sales and marketing | (58,489) | (43,030) | (124,850) | (161,042) |
| Other selling expenses | (8,380) | (2,183) | (16,163) | (8,369) |
| Total selling expenses | (101,046) | (66,217) | (204,825) | (235,174) |
| Administrative expenses | ||||
| Salaries (a) | (165,550) | (92,125) | (311,814) | (224,603) |
| Services provided | (130,957) | (83,073) | (251,507) | (176,218) |
| Depreciation and amortization | (24,548) | (33,715) | (58,268) | (65,461) |
| Other administrative expenses | (110,975) | (30,527) | (173,634) | (101,435) |
| Total administrative expenses | (432,030) | (239,440) | (795,223) | (567,717) |
| Other operational revenues (expenses) | ||||
| Sale-leaseback transactions (b) | - | - | - | 594,587 |
| Boeing agreement expense recovery | - | - | - | 193,503 |
| Recovery of taxes paid | - | - | 59,874 | 143,293 |
| Idleness - depreciation and amortization | (80,535) | (347,349) | (143,210) | (347,349) |
| Idleness – personnel | (320) | (87,908) | (320) | (87,908) |
| Other operating expenses | 19,253 | (12,528) | 34,140 | 10,927 |
| Total other operating revenues and (expenses), net | (61,602) | (447,785) | (49,516) | 507,053 |
| Total | (1,838,621) | (1,255,448) | (3,928,752) | (3,377,754) |
| (a) | The Company recognizes compensation paid to members of the Audit Committee, the Board of Directors and the Fiscal Council in the "Salaries" line item. |
| (b) | Refer to note 19.1 |
| 54 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
| 31. | Financial Income (Expenses) |
| Parent Company | Consolidated | |||||||
| Three-month period ended | Six-month period ended | Three-month period ended | Six-month period ended | |||||
| June 30, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | |
| Financial revenue | ||||||||
| Gain on derivatives | - | - | - | - | - | 58,512 | 2,959 | 58,512 |
| Derivative gains - capped call (b) | - | 28,972 | - | 28,972 | - | 28,972 | - | 28,972 |
| Gains from short-term investments | 1,206 | 68 | 1,263 | 5,294 | 6,732 | 34,754 | 13,644 | 154,233 |
| Monetary variation | 554 | 632 | 737 | 948 | 4,613 | 3,156 | 9,628 | 7,807 |
| (-) Taxes on financial income (a) | (477) | (518) | (889) | (1,057) | (4,964) | (11,771) | (9,755) | (24,883) |
| Unrealized gains - conversion right – ESN (b) | 6,358 | 76,259 | 124,954 | 651,616 | 6,358 | 76,259 | 124,954 | 651,616 |
| Interest income | 32,395 | 39,179 | 62,796 | 71,906 | 3,817 | - | 3,817 | - |
| Other | 3,003 | 4,636 | 5,998 | 8,465 | 3,675 | 6,519 | 18,404 | 18,390 |
| Total financial income | 43,039 | 149,228 | 194,859 | 766,144 | 20,231 | 196,401 | 163,651 | 894,647 |
| Financial expenses | ||||||||
| Derivative losses | - | - | - | - | (464) | (63,270) | (1,045) | (417,798) |
| Derivative losses - capped call (b) | 24,520 | - | (21,587) | (148,500) | 24,520 | - | (21,587) | (148,500) |
| Unrealized loss - conversion right – ESN (b) | - | (242,480) | - | (242,480) | - | (242,480) | - | (242,480) |
| Interest on debt and others | (172,133) | (150,940) | (334,653) | (281,973) | (237,545) | (205,437) | (450,090) | (411,993) |
| Bank charges and expenses | (2,053) | (5,635) | (17,184) | (51,021) | (13,574) | (16,720) | (40,522) | (68,005) |
| Loss on short-term investments | - | - | - | - | - | (5,646) | - | (62,894) |
| Interest on leases | - | - | - | - | (217,735) | (164,150) | (445,058) | (302,539) |
| Other | (17,400) | (7,886) | (28,993) | (17,226) | (34,059) | (25,054) | (89,053) | (67,004) |
| Total financial expenses | (167,066) | (406,941) | (402,417) | (741,200) | (478,857) | (722,757) | (1,047,355) | (1,721,213) |
| Exchange rate variation, net | 460,872 | (161,161) | 136,123 | (882,424) | 1,938,545 | (570,024) | 401,305 | (3,513,428) |
| Total | 336,845 | (418,874) | (71,435) | (857,480) | 1,479,919 | (1,096,380) | (482,399) | (4,339,994) |
(a) Relative to taxes on financial income (PIS and COFINS), according to Decree 8,426 of April 1, 2015.
(b) See Note 34.2.
| 55 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
| 32. | Information by Segment |
The information below presents the summarized financial position of the reportable operating segments on June 30, 2021, and December 31, 2020:
| 32.1. | Assets and liabilities of the operating segments |
| June 30, 2021 | |||||
| Flight transportation | Smiles loyalty program | Total reportable segments | Eliminations | Total | |
| Assets | |||||
| Current | 2,053,651 | 1,641,478 | 3,695,129 | (1,124,968) | 2,570,161 |
| Non-current | 9,445,840 | 1,103,156 | 10,548,996 | (1,549,997) | 8,998,999 |
| Total assets | 11,499,491 | 2,744,634 | 14,244,125 | (2,674,965) | 11,569,160 |
| Liabilities | |||||
| Current | 9,925,745 | 1,495,411 | 11,419,114 | (900,940) | 10,518,175 |
| Non-current | 17,320,046 | 571,587 | 17,891,633 | (1,094,346) | 16,797,285 |
| Total equity (deficit) | (15,746,300) | 679,678 | (15,066,734) | (679,678) | (15,746,300) |
| Total liabilities and deficit | 11,499,491 | 2,744,634 | 14,244,125 | (2,674,964) | 11,569,160 |
| December 31, 2020 | |||||
| Flight Transportation | Smiles Frequent-Flyer Program | Combined Operating Segments | Eliminations | Total Consolidated | |
| Assets | |||||
| Current | 2,059,655 | 2,453,838 | 4,513,493 | (1,268,142) | 3,245,351 |
| Noncurrent | 10,040,986 | 908,246 | 10,949,232 | (1,380,447) | 9,568,785 |
| Total Assets | 12,100,641 | 3,362,084 | 15,462,725 | (2,648,589) | 12,814,136 |
| Liabilities | |||||
| Current | 9,975,367 | 1,502,179 | 11,477,546 | (1,079,330) | 10,398,216 |
| Noncurrent | 16,532,366 | 509,577 | 17,041,943 | (858,964) | 16,182,979 |
| Shareholders’ Equity (Deficit) | (14,407,092) | 1,350,328 | (13,056,764) | (710,295) | (13,767,059) |
| Total Liabilities and Shareholders’ Equity (Deficit) | 12,100,641 | 3,362,084 | 15,462,725 | (2,648,589) | 12,814,136 |
| 56 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
| 32.2. | Income (Expenses) of the Operating Segments |
| Six-month period ended June 30, 2021 | |||||
| Flight transportation | Smiles loyalty program (b) | Total reportable segments | Eliminations | Total consolidated | |
| Revenue | |||||
| Passenger (a) | 2,166,194 | - | 2,166,194 | 137,658 | 2,303,852 |
| Cargo and other (a) | 168,014 | - | 168,014 | (17,324) | 150,690 |
| Mileage program (a) | - | 315,296 | 315,296 | (173,839) | 141,457 |
| Revenue | 2,334,208 | 315,296 | 2,649,504 | (53,505) | 2,595,999 |
| Operating costs and expenses | |||||
| Salaries, wages and benefits | (893,710) | (40,721) | (934,431) | - | (934,431) |
| Aircraft fuel | (942,315) | - | (942,315) | - | (942,315) |
| Landing fees | (183,754) | - | (183,754) | - | (183,754) |
| Aircraft, traffic and mileage servicing | (326,013) | (93,612) | (419,625) | 40,144 | (379,481) |
| Passenger service expenses | (226,590) | - | (226,590) | - | (226,590) |
| Sales and marketing | (86,570) | (32,986) | (119,556) | (5,294) | (124,850) |
| Maintenance, materials and repairs | (241,331) | - | (241,331) | - | (241,331) |
| Depreciation and amortization | (616,723) | (17,915) | (634,638) | - | (634,638) |
| Other income (expenses), net | (259,465) | (1,897) | (261,362) | - | (261,362) |
| Total operating costs and expenses | (3,776,471) | (187,131) | (3,963,602) | 34,850 | (3,928,752) |
| Equity results | 67,876 | - | 67,876 | (67,876) | - |
| Operating result before financial result, net and income tax and social contribution | (1,374,387) | 128,165 | (1,246,222) | (86,531) | (1,332,753) |
| Financial income (expenses) | |||||
| Financial income | 157,930 | 42,811 | 200,741 | (37,090) | 163,651 |
| Financial expenses | (1,083,838) | (607) | (1,084,445) | 37,090 | (1,047,355) |
| Total financial income (expenses) | (925,908) | 42,204 | (883,704) | - | (883,704) |
| Income (loss) before exchange rate variation, net and income tax and social contribution | (2,300,295) | 170,369 | (2,129,926) | (86,531) | (2,216,457) |
| Exchange rate variation, net | 398,761 | 2,544 | 401,305 | - | 401,305 |
| Income (loss) before income tax and social contribution | (1,901,534) | 172,913 | (1,728,621) | (86,531) | (1,815,152) |
| Income tax and social contribution | 16,044 | (54,976) | (38,932) | 6,328 | (32,604) |
| Net income (loss) for the period | (1,885,490) | 117,937 | (1,767,553) | (80,203) | (1,847,756) |
| Attributable to equity holders of the parent | (1,885,490) | 80,203 | (1,805,287) | (80,203) | (1,885,490) |
| Attributable to non-controlling interests of Smiles | - | 37,734 | 37,734 | - | 37,734 |
| 57 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
| Six-month period ended June 30, 2020 | |||||
| Flight transportation | Smiles loyalty program (b) | Total reportable segments | Eliminations | Total consolidated | |
| Revenue | |||||
| Passenger (a) | 3,136,765 | - | 3,136,765 | 47,871 | 3,184,636 |
| Cargo and other (a) | 170,964 | - | 170,964 | (39,571) | 131,393 |
| Mileage program (a) | - | 227,889 | 227,889 | (38,343) | 189,546 |
| Revenue | 3,307,729 | 227,889 | 3,535,618 | (30,043) | 3,505,575 |
| Operating costs and expenses | |||||
| Salaries, wages and benefits | (796,056) | (40,307) | (836,363) | - | (836,363) |
| Aircraft fuel | (1,136,923) | - | (1,136,923) | - | (1,136,923) |
| Landing fees | (222,073) | - | (222,073) | - | (222,073) |
| Aircraft, traffic and mileage servicing | (288,612) | (81,207) | (369,819) | 55,099 | (314,720) |
| Passenger service expenses | (203,224) | - | (203,224) | - | (203,224) |
| Sales and marketing | (129,965) | (27,540) | (157,505) | (3,537) | (161,042) |
| Maintenance, materials and repairs | (218,067) | - | (218,067) | - | (218,067) |
| Depreciation and amortization | (1,003,699) | (14,882) | (1,018,581) | - | (1,018,581) |
| Other income (expenses), net | 732,307 | 932 | 733,239 | - | 733,239 |
| Total operating costs and expenses | (3,266,312) | (163,004) | (3,429,316) | 51,562 | (3,377,754) |
| Equity results | 43,660 | - | 43,660 | (43,660) | - |
| Operating result before financial result, net and income tax and social contribution | 85,077 | 64,885 | 149,962 | (22,141) | 127,821 |
| Financial income (expenses) | |||||
| Financial income | 880,745 | 44,566 | 925,311 | (30,664) | 894,647 |
| Financial expenses | (1,740,867) | (11,126) | (1,751,993) | 30,780 | (1,721,213) |
| Total financial income (expenses) | (860,122) | 33,440 | (826,682) | 116 | (826,566) |
| Income (loss) before exchange rate variation, net and income tax and social contribution | (775,045) | 98,325 | (676,720) | (22,025) | (698,745) |
| Exchange rate variation, net | (3,511,199) | (2,130) | (3,513,329) | (99) | (3,513,428) |
| Income (loss) before income tax and social contribution | (4,286,244) | 96,195 | (4,190,049) | (22,124) | (4,212,173) |
| Income tax and social contribution | 1,062 | (40,293) | (39,231) | (7,286) | (46,517) |
| Net income for the period | (4,285,182) | 55,902 | (4,229,280) | (29,410) | (4,258,690) |
| Attributable to equity holders of the parent | (4,285,182) | 29,410 | (4,255,772) | (29,410) | (4,285,182) |
| Attributable to non-controlling interests of Smiles | - | 26,492 | 26,492 | - | 26,492 |
| (a) | Eliminations are related to transactions between GLA and Smiles Fidelidade. |
| (b) | Incluides depreciation and amortization expenses in the amount of R$449,226 in the period ended June,30,2021 allocated to the following segments: R$433,160 for flight transportation and R$16,066 for the Smiles lovalty program (R$489,703 and R$6,587 in the period ended June,30,2020, respectively). |
| (c) | Includes depreciation and amortization expenses in the amount of R$42,202 in the period ended June 30, 2021 allocated to the following segments: R$40,353 for flight transportation and R$1,849 for the Smiles loyalty program (R$30,578 and R$898 in the period ended June 30, 2020, respectively). |
| (d) | Includes depreciation and amortization charges (idle) totaling R$143,210 for the period ended June 30, 2021, allocated entirely in the air transportation segment (R$347,439 in the period ended June 30, 2020). |
In the stand-alone financial statements of the subsidiary Smiles Fidelidade, which represents the segment Smiles loyalty program, and in the information provided to the relevant decision makers, the revenue recognition occurs upon redemption of the miles by the participants. Under the perspective of Smiles Fidelidade, this measurement is appropriate given that this is when the revenue recognition cycle is complete. At this point, Smiles has transferred to its suppliers the obligation to provide services or deliver products to its customers.
However, from a consolidated perspective, the revenue recognition cycle related to miles exchanged for flight tickets is only complete when the passengers are effectively transported. Therefore, for purposes of reconciliation with the consolidated assets, liabilities and income and expenses, as well as for purposes of equity method of accounting and for consolidation purposes, the Company performed, in addition to elimination entries, consolidating adjustments to adjust the accounting practices related to Smiles’ revenues. In this case, under consolidated perspective, the mileages that were used to redeem airline tickets are only recognized as revenue when passengers are transported, in accordance with accounting practices and policies adopted by the Company.
| 58 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
| 33. | Commitments |
On June 30, 2021 and December 31, 2020, the Company had 95 firm orders for aircraft acquisitions with Boeing. These aircraft acquisition commitments include estimates for contractual price increases during the construction phase. The approximate amount of firm orders in the current period considers an estimate of contractual discounts, and corresponds to around R$23,567,598 (R$23,269,198 on December 31, 2020) corresponding to US$4,711,446 on June 30, 2021 (US$4,447,687 on December 31, 2020) and are segregated as follows:
| Consolidated | ||
| June 30, 2021 | December 31, 2020 | |
| 2022 | 899,270 | - |
| 2023 | 3,543,090 | 3,353,702 |
| 2024 onwards | 19,125,238 | 19,915,496 |
| Total | 23,567,598 | 23,269,198 |
Of the total commitments presented above, the Company should disburse the amount of R$8,371,226 (corresponding to US$1,673,509 on June 30, 2021) as advances for aircraft acquisition, according to the financial flow below:
| Consolidated | ||
| June 30, 2021 | December 31, 2020 | |
| 2021 | 182,092 | 184,951 |
| 2022 | 1,475,197 | 1,287,077 |
| 2023 | 2,697,202 | 2,657,000 |
| 2024 onwards | 4,016,735 | 4,186,740 |
| Total | 8,371,226 | 8,315,768 |
The Company leases its entire aircraft fleet through a combination of leases without a purchase option. On June 30, 2021, the total fleet consisted of 127 aircraft.
| 34. | Financial Instruments and Risk Management |
Operational activities expose the Company and its subsidiaries to market risk, credit risk and liquidity risk. These risks can be mitigated by using exchange swap derivatives, futures and options contracts based on oil, U.S. dollar and interest markets.
Financial instruments are managed by the Financial Policy Committee (“CPF”) in line with the Risk Management Policy approved by the Risk Policy Committee (“CPR”) and submitted to the Board of Directors.
The details regarding how the Company manages risks have been widely presented in the annual financial statements related to the year ended December 31, 2020. Since then, there have been no changes.
| 59 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
| 34.1. | Accounting Classifications of Financial Instruments |
The accounting classifications of the Company's consolidated financial instruments on June 30, 2021, and December 31, 2020, are shown below:
| Parent Company | Consolidated | |||||||
| Measured at fair value through profit or loss | Amortized cost (d) | Measured at fair value through profit or loss | Amortized cost (d) | |||||
| June 30, 2021 | December 31, 2020 | June 30, 2021 | December 31, 2020 | June 30, 2021 | December 31, 2020 | June 30, 2021 | December 31, 2020 | |
| Ativo | 31/03/2021 | 31/1020 | ||||||
| Cash and bank deposits | 25,513 | 374,271 | - | - | 75,761 | 428,812 | - | - |
| Cash equivalents | 423,135 | 49,666 | - | - | 684,508 | 234,018 | - | - |
| Short-term investments | 103 | 236 | - | - | 23,006 | 629,335 | - | - |
| Restricted cash | 4,445 | 4,201 | - | - | 313,815 | 544,607 | - | - |
| Trade receivables | - | - | - | - | - | - | 717,408 | 739,699 |
| Derivatives assets | 63,574 | 87,663 | - | - | 63,574 | 128,809 | - | - |
| Deposits (a) | - | - | 2,502 | 68,423 | - | - | 1,254,320 | 1,390,890 |
| Dividends and interest shareholders on equity | - | - | - | 24,120 | - | - | - | - |
| Credits with related parties | - | - | 5,985,898 | 4,897,331 | - | - | - | - |
| Other credits and amounts | - | - | 9,109 | 9,640 | - | - | 155,420 | 179,160 |
| Passivo | ||||||||
| Loans and financing (b) | 205,838 | 346,030 | 8,036,873 | 7,283,683 | 205,838 | 346,030 | 10,088,172 | 9,630,936 |
| Leases payable | - | - | - | - | - | - | 7,695,929 | 7,584,192 |
| Suppliers | - | - | 64,573 | 72,702 | - | - | 1,573,180 | 1,645,194 |
| Derivatives liabilities | - | - | - | - | - | 5,297 | - | - |
| Obligations to related parties | - | - | 12,693 | 8,791 | - | - | - | - |
| Other liabilities | - | - | 427,634 | 316,030 | - | - | 842,808 | 618,754 |
| (a) | Excludes judicial deposits, as described in note 14. |
| (b) | The amount as of June 30, 2021 and December 31, 2020, classified as measured at fair value through profit or loss, is related to the derivative contracted through Exchange Senior Notes. |
| 60 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
In the period ended June 30, 2021, there was no change in the classification between categories of the financial instruments.
| 34.2. | Derivative and Non-Derivative Financial Instruments |
The Company's derivative financial instruments were recognized as follows in the balance sheet:
| Derivatives | Non-derivative | ||||||
| Fuel | Interest rate | Foreign curency rate | Capped call | ESN | Revenue hedge | Total | |
| Fair value changes | |||||||
| Derivatives assets (liabilities) on December 31, 2020 | 34,166 | - | 1,683 | 87,663 | (346,030) | - | (222,518) |
| Gains (losses) recognized in income (expenses) | - | - | 635 | (21,587) | 132,470 | - | 111,518 |
| Gains (losses) recognized as exchange rate change | - | - | - | (2,502) | 7,722 | - | 5,220 |
| Gains (losses) recognized in equity valuation adjustments | 96,847 | - | - | - | - | - | 96,847 |
| Receipts during the period | (131,013) | - | (2,318) | - | - | - | (133,331) |
| Derivatives assets (liabilities) on June 30, 2021 | - | - | - | 63,573 | (205,838) | - | (142,264) |
| Derivative assets | - | - | - | 63,574 | - | - | 63,574 |
| Loans and financing | - | - | - | - | 205,838 | - | 205,838 |
| Changes in the adjustment of equity valuation | |||||||
| Balance on December 31, 2020 | (164,789) | (303,207) | - | - | - | (843,080) | (1,311,076) |
| Fair value adjustments during the period | 96,847 | - | - | - | - | - | 96,847 |
| Adjustments of hedge accounting of revenue | - | - | - | - | - | 259,345 | 259,345 |
| Net reversal to income (expenses) | 55,384 | 3,236 | - | - | - | 970 | 59,590 |
| Balances on June 30, 2021 | (12,558) | (299,971) | - | - | - | (582,765) | (895,294) |
| Effects on income (expenses) | (55,384) | (3,236) | 635 | (24,090) | 140,192 | (260,315) | (202,197) |
| Net Revenue | - | - | - | - | - | (150) | (150) |
| Fuel | (57,637) | - | - | - | - | - | (57,637) |
| Financial results | 2,253 | (3,236) | - | (21,587) | 132,470 | - | 109,900 |
| Exchange rate variation, net | - | - | 635 | (2,502) | 7,722 | (260,165) | (254,310) |
The Company may adopt hedge accounting for derivatives contracted to hedge cash flow and that qualify for this classification as per IFRS 9 – “Financial Instruments”.
On June 30, 2021, the Company adopts cash flow hedge for the interest rate (mainly the Libor interest rates), and for aeronautical fuel protection and future revenue in U.S. Dollars.
Cash flow hedges are scheduled for realization and, therefore, reclassification to expense according to the following periods:
| 2021 | 2022 | 2023 | 2024 | 2025 onwards | |
| Fuel | (1,090) | (11,468) | - | - | - |
| Interest Rate | (8,530) | (21,297) | (26,205) | (26,043) | (217,896) |
| Revenue Hedge | (20,677) | (155,293) | (263,645) | (143,150) | - |
| Total | (30,297) | (188,058) | (289,850) | (169,193) | (217,896) |
| 61 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
| 34.3. | Market Risks |
| 34.3.1. | Fuel |
The aircraft fuel prices fluctuate due to the volatility of the price of crude oil by product price fluctuations. To mitigate such risks, the Company may use derivative financial instruments. On June 30, 2021, the Company didn’t have derivatives to protect this exposure.
| 34.3.2. | Interest Rate |
The Company is mainly exposed to lease transactions indexed to changes in the Libor rate until the aircraft is received. To mitigate such risks, the Company can use derivative financial instruments. On June 30, 2021, the Company didn’t have derivatives to protect against interest rate exposure.
On June 30, 2021, the Company held financial investments and loans and financing with different types of fees. Its sensitivity analysis of non-derivative financial instruments examined the impact on annual interest rates only for positions with material amounts on June 30, 2021 that were exposed to fluctuations in interest rates, as the scenarios below show. The amounts show the impacts on Income (Expenses) according to the scenarios adopted below:
| Short-term investments net of financial debt (a) | ||
| Risk | CDI rate drop | Libor rate increase |
| Reference rates | 4.15% | 0.08% |
| Exposure amount (probable scenario) (b) | 186,788 | (2,867,820) |
| Remote favorable scenario (-25%) | 234 | 579 |
| Possible favorable scenario (-10%) | 94 | 231 |
| Possible adverse scenario (+10%) | (94) | (231) |
| Remote adverse scenario (+25%) | (234) | (579) |
| (a) | Refers to the sum of the amounts invested and raised in the financial market and indexed to the CDI and Libor rates. |
| (b) | Book balances recorded as of June 30, 2021. |
| 62 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
| 34.3.3. | Exchange Rate |
Foreign currency risk derives from the possibility of unfavorable fluctuation of foreign currency to which the Company’s liabilities or cash flows are exposed. The Company is mainly exposed to the exchange rate change of the U.S. dollar.
The Company’s foreign currency exposure is summarized below:
| Parent Company | Consolidated | |||
| June 30, 2021 | December 31, 2020 | June 30, 2021 | December 31, 2020 | |
| Ativos | ||||
| Cash equivalents, short-term investments and restricted cash | 26,933 | 374,979 | 86,180 | 491,258 |
| Trade receivables | - | - | 83,376 | 120,167 |
| Deposits | 2,502 | 68,423 | 1,254,320 | 1,390,890 |
| Derivatives assets | 63,574 | 87,663 | 63,574 | 128,809 |
| Total do ativo | 93,009 | 531,065 | 1,487,450 | 2,131,124 |
| Liabilities | ||||
| Loans and financing | (8,242,711) | (7,629,713) | (9,514,948) | (9,132,988) |
| Operating leases | - | - | (7,654,355) | (7,536,677) |
| Suppliers | (13,862) | (24,357) | (407,966) | (481,001) |
| Provision for aircraft and engine return | - | - | (1,063,514) | (1,030,915) |
| Derivatives liabilities | - | - | - | (5,297) |
| Total liabilities | (8,256,573) | (7,654,070) | (18,640,783) | (18,186,878) |
| Exchange exposure | (8,163,564) | (7,123,005) | (17,153,333) | (16,055,754) |
| Commitments not recorded in the statements of financial position | ||||
| Future obligations resulting from firm aircraft orders | (23,567,598) | (23,269,198) | (23,567,598) | (23,269,198) |
| Total | (23,567,598) | (23,269,198) | (23,567,598) | (23,269,198) |
| Total foreign currency exposure - R$ | (31,731,162) | (30,392,203) | (40,720,931) | (39,324,952) |
| Total foreign currency exposure - US$ | (6,343,441) | (5,848,366) | (8,140,604) | (7,567,293) |
| Exchange rate (R$/US$) | 5.0022 | 5.1967 | 5.0022 | 5.1967 |
On June 30, 2021, the Company adopted the closing exchange rate of R$5.0022/US$1.00 as a likely scenario. The table below shows the sensitivity analysis and the effect on income (expenses) of exchange rate fluctuations in the exposure amount of the period on June 30, 2021:
| Effect on Income (Expenses) | |||
| Exchange rate | Parent Company | Consolidated | |
| Net liabilities exposed to the risk of appreciation of the U.S. dollar | |||
| Dollar depreciation (-25%) | 3.7517 | 2,040,891 | 4,288,333 |
| Dollar depreciation (-10%) | 4.5020 | 816,356 | 1,715,333 |
| Dollar appreciation (+10%) | 5.5024 | (816,356) | (1,715,333) |
| Dollar appreciation (+25%) | 6.2528 | (2,040,891) | (4,288,333) |
| 63 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
| 34.3.4. | Capped Call |
The Company, through Gol Equity Finance, in the context of the pricing of the ESN issued on March 26, April 17 and July 17, 2019, contracted private derivative transactions (Capped call) with part of the note subscribers with the purpose of minimizing the potential dilution of the Company’s preferred shares and ADSs.
| 34.4. | Credit Risk |
Credit risk is inherent in the Company’s operating and financing activities, mainly in cash and cash equivalents, short-term investments and trade receivables. Financial assets classified as cash, cash equivalents and financial investments are deposited with counterparties that have a local minimum investment grade rating in the assessment made by the S&P or Moody's agencies (between AAA and AA-), as established by risk management policies.
Credit limits are set for all customers based on internal credit rating criteria and carrying amounts represent the maximum credit risk exposure. Customer creditworthiness is assessed based on an internal system of extensive credit rating. Outstanding trade receivables are frequently monitored by the Company.
Derivative financial instruments are contracted in the over-the-counter market (OTC) with counterparties rated investment grade or higher, or in a commodities and futures exchange (B3 or NYMEX), thus substantially mitigating credit risk. The Company's obligation is to evaluate counterparty risk involved in financial instruments and periodically diversify its exposure.
| 34.5. | Liquidity risk |
The Company is exposed to liquidity risk in two distinct ways: (i) market prices, which vary in accordance with the types of assets and markets where they are traded, and (ii) cash flow liquidity risk related to difficulties in meeting the contracted operating obligations at the maturity dates. In order to manage liquidity risk, the Company invests its funds in liquid assets (government bonds, CDBs and investment funds with daily liquidity) and its Cash Management Policy requires the weighted average maturity of its debt to be longer than the weighted average term of its investment portfolio term.
The schedules of financial liabilities held by the Company on June 30, 2021 and December 31, 2020 are as follows:
| Parent Company | |||||
| Less than 6 months | 6 to 12 months | 1 to 5 years | More than 5 years | Total | |
| Loans and financing | 147,278 | - | 7,325,590 | 769,843 | 8,242,711 |
| Suppliers | 64,573 | - | - | - | 64,573 |
| Obligations to related parties | - | - | 12,693 | - | 12,693 |
| Other liabilities | 53 | - | 427,581 | - | 427,634 |
| As of June 30, 2021 | 211,904 | - | 7,765,864 | 769,843 | 8,747,611 |
| Loans and financing | 638,965 | - | 6,201,580 | 789,168 | 7,629,713 |
| Suppliers | 72,702 | - | - | - | 72,702 |
| Obligations to related parties | 8,791 | - | - | - | 8,791 |
| Other liabilities | - | - | 316,030 | - | 316,030 |
| As of December 31, 2020 | 720,458 | - | 6,517,610 | 789,168 | 8,027,236 |
| 64 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
| Consolidated | |||||
| Less than 6 months | 6 to 12 months | 1 to 5 years | More than 5 years | Total | |
| Loans and financing | 1,570,337 | 202,667 | 8,460,767 | 60,239 | 10,294,010 |
| Suppliers | 1,175,629 | 689,202 | 4,295,309 | 1,535,789 | 7,695,929 |
| Obligations to related parties | 1,562,946 | - | 10,234 | - | 1,573,180 |
| Other liabilities | 381,582 | - | 461,227 | - | 842,809 |
| As of June 30, 2021 | 4,690,494 | 891,869 | 13,227,537 | 1,596,028 | 20,405,928 |
| Loans and financing | 2,120,462 | 232,817 | 6,804,167 | 819,520 | 9,976,966 |
| Leases to pay | 647,850 | 669,158 | 4,763,614 | 1,503,570 | 7,584,192 |
| Suppliers | 1,612,536 | - | 32,658 | - | 1,645,194 |
| Derivative obligations | 5,297 | - | - | - | 5,297 |
| Other liabilities | 287,275 | - | 331,479 | - | 618,754 |
| As of December 31, 2020 | 4,673,420 | 901,975 | 11,931,918 | 2,323,090 | 19,830,403 |
| 34.6. | Capital Management |
The Company seeks alternatives to capital in order to meet its operational needs, aiming a capital structure that considers suitable parameters for the financial costs, the maturities of funding and its guarantees. The Company monitors its financial leverage ratio, which corresponds to net indebtedness, including short and long-term loans and financing and leases. The following table shows the financial leverage:
| Consolidated | ||
| June 30, 2021 | December 31, 2020 | |
| Total Loans and Financing | 10,294,010 | 9,976,966 |
| Total Leases Payable | 7,695,929 | 7,584,192 |
| (-) Cash and Cash Equivalents | (760,269) | (662,830) |
| (-) Financial Investments | (23,006) | (629,335) |
| (-) Restricted cash | (313,815) | (544,607) |
| Net Debt | 16,892,849 | 15,724,386 |
| 35. | Non-Cash Transactions |
| Parent Company | ||
| June 30, 2021 | June 30, 2020 | |
| Share-based payment (investments/share-based payment) | 8,547 | 10,405 |
| Unrealized result of derivatives (investments/equity valuation adjustment) | 415,782 | (1,078,439) |
| Actuarial Losses from post-employment benefits | - | 27,287 |
| Capital increase with shares issued to non-controlling shareholders | 606,839 | - |
| Results on treasury shares disposal | 279 | - |
| Treasury shares transfer | 19,834 | - |
| 65 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
| Consolidated | ||
| June 30, 2021 | June 30, 2020 | |
| Acquisition of property, plant and equipment through financing (fixed assets / loans and financing) | - | 25,974 |
| Debt amortization with restricted cash (restricted cash / loans and financing) | 198,270 | - |
| Debt amortization with applied deposits (deposits / lease payables) | (8,126) | - |
| Right to use flight equipment (fixed assets / leases payable) | 430,658 | 131,014 |
| Financial lease agreement renegotiation (fixed assets/leases payable) | 47,449 | 156,424 |
| Actuarial Losses from post-employment benefits | - | 27,287 |
| Leaseback (Fixed assets/leases) | - | (35,316) |
| Forfaiting (forfaiting/loans) | - | (359,337) |
| Provision for aircraft return (fixed assets / provisions) | 10,326 | - |
| Unrealized result of derivatives (derivative rights/equity valuation adjustment) | 415,782 | 810,199 |
| Capital increase with shares issued to non-controlling shareholders | 606,839 | - |
| Constitution of capital reserves | 744,450 | - |
| Results on treasury shares disposal | 279 | - |
| Treasury shares transfer | 19,834 | - |
| 66 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
| 36. | Liabilities from Financing Activities |
The changes in the liabilities of the Company’s financing activities are shown below for the period ended June 30, 2021, and 2020:
| 36.1. | Parent Company |
| June 30, 2021 | |||||||||
| Adjustment to profit | Non cash transactions | ||||||||
| Opening balance | Net cash flows (used in) from financing activities | Net cash flow from operating activities | Exchange rate variation, net | Provision for interest and cost amortization | Unrealized derivatives results | Capital increase from non-controlling shareholders | Results on disposal and transfer of treasury shares | Closing balance | |
| Loans and financing | 7,629,713 | 1,001,906 | (326,520) | (334,229) | 396,795 | (124,954) | - | - | 8,242,711 |
| Share capital | 3,009,436 | 423,061 | - | - | - | - | 606,839 | - | 4,039,336 |
| Shares to be issued | 1,180 | 908 | - | - | - | - | - | - | 2,088 |
| Shares in Treasury | (62,215) | 588 | - | - | - | - | - | 20,113 | (41,514) |
| |||||||||
| June 30, 2020 | |||||||||
| Adjustment to profit | |||||||||
| Opening balance | Net cash flows (used in) from financing activities | Net cash flow from operating activities | Exchange rate variation, net | Provision for interest and cost amortization | Unrealized derivatives results | Closing balance | |||
| Loans and financing | 6,595,140 | (405,878) | (223,770) | 2,224,607 | 286,666 | (409,136) | 8,067,629 | ||
| 67 |
| | Notes on the Parent Company and Consolidated Quarterly Information (ITR) June 30, 2021 (In thousands of Brazilian Reais - R$, except when otherwise indicated) |
| 36.2. | Consolidated |
| June 30, 2021 | ||||||||||||
| Non cash transactions | Adjustment to profit | |||||||||||
| Opening balance | Net cash flows (used in) from financing activities | Net cash used in operating activities | Property, plant and equipment acquisition through new agreements and contractual amendment | Transaction with non-controlling shareholders and sale/transfer of treasury shares | Amortization with related assets | Distribution of interim dividends | Exchange rate changes, net | Provision for interest and cost amortization | Unrealized income (expenses) on derivatives | Closing balance | ||
| Loans and financing | 9,976,966 | 939,729 | (378,944) | - | - | (198,270) | - | (373,966) | 453,449 | (124,954) | 10,294,010 | |
| Leases | 7,584,192 | (524,898) | 17,794 | 478,107 | - | (8,126) | - | (296,202) | 445,062 | - | 7,695,929 | |
| Dividends and interest on shareholders’ equity to pay (1) | 23,139 | (260,131) | - | - | - | - | 236,992 | - | - | - | - | |
| Share capital | 3,009,436 | 423,061 | - | - | 606,839 | - | - | - | - | - | 4,039,336 | |
| Shares to be issued | 1,180 | 908 | - | - | - | - | - | - | - | - | 2,088 | |
| Actions in Treasury | (62,215) | 588 | - | - | 20,113 | - | - | - | - | - | (41,514) | |
| Capital reserves | 207,246 | (744,450) | 8,547 | - | 724,337 | - | - | - | - | - | 195,680 | |
| (1) | The amount is recorded in the Other liabilities group, in current liabilities. |
| June 30, 2020 | ||||||||||||||
| Non cash transactions | Adjustment to profit | |||||||||||||
| Opening balance | Net cash flows (used in) from financing activities | Net cash flows used in operating activities | Property, plant, and equipment acquisition through financing | Debtor risk | Gains (losses) recognized in the adjustment of equity valuation | Write-offs | Exchange rate changes, net | Provision for interest and cost amortization | Write-offs and contractual amendments | Unrealized income (expenses) on derivatives | Closing balance | |||
| Loans and financing | 8,409,841 | (250,686) | (276,623) | 25,974 | 359,337 | - | - | 2,673,698 | 351,037 | - | (409,136) | 10,883,442 | ||
| Leases | 6,052,780 | (527,902) | (4,530) | 104,055 | - | - | (120,947) | 2,088,048 | 309,064 | 156,424 | - | 8,056,992 | ||
| Derivatives | (127,119) | 21,800 | (545,300) | - | - | 810,199 | - | (20,709) | - | - | 101,228 | 240,099 | ||
| 68 |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: July 26, 2021
| GOL LINHAS AÉREAS INTELIGENTES S.A. | ||
| By: | /s/ Richard F. Lark, Jr. | |
Name: Richard F. Lark, Jr. Title: Investor Relations Officer | ||