Document and Entity Information
Document and Entity Information | 12 Months Ended |
Dec. 31, 2017shares | |
Entity Registrant Name | AZUL SA |
Entity Central Index Key | 1,432,364 |
Document Type | 20-F |
Document Period End Date | Dec. 31, 2017 |
Amendment Flag | false |
Current Fiscal Year End Date | --12-31 |
Entity Well-known Seasoned Issuer | No |
Entity Voluntary Filers | No |
Entity Current Reporting Status | Yes |
Entity Filer Category | Non-accelerated Filer |
Document Fiscal Year Focus | 2,017 |
Document Fiscal Period Focus | FY |
Common shares | |
Entity Common Stock, Shares Outstanding | 928,965,058 |
Preferred shares | |
Entity Common Stock, Shares Outstanding | 321,753,720 |
Consolidated Balance Sheets
Consolidated Balance Sheets - BRL (R$) R$ in Millions | Dec. 31, 2017 | Dec. 31, 2016 |
Current assets | ||
Cash and cash equivalents (Note 6) | R$ 762.3 | R$ 549.2 |
Short-term investments (Note 7) | 1,036.1 | 331.2 |
Restricted investments (Note 8) | 8.8 | 53.4 |
Trade and other receivables (Note 9) | 914.4 | 673.3 |
Inventories (Note 10) | 150.4 | 107.1 |
Taxes recoverable | 112.9 | 44.5 |
Derivative financial instruments (Note 21) | 10.3 | 17.6 |
Prepaid expenses (Note 11) | 109.8 | 97.5 |
Related parties (Note 12) | 73.2 | |
Other current assets | 125.9 | 36.8 |
Total current assets | 3,304.1 | 1,910.6 |
Non-current assets | ||
Related parties (Note 12) | 9.7 | 9.2 |
Long-term investments (Note 21) | 836 | 753.2 |
Restricted investments (Note 8) | 108.6 | |
Security deposits and maintenance reserves (Note 13) | 1,259.1 | 1,078 |
Derivative financial instruments (Note 21) | 410.5 | 4.1 |
Prepaid expenses (Note 11) | 4.5 | 6.9 |
Other non-current assets | 206 | 147.4 |
Property and equipment (Note 14) | 3,325.5 | 3,440 |
Intangible assets (Note 15) | 961 | 942.6 |
Total non-current assets | 7,012.3 | 6,490 |
Total assets | 10,316.4 | 8,400.6 |
Current liabilities | ||
Loans and financing (Note 17) | 568.2 | 985.2 |
Accounts payable | 953.5 | 1,034.3 |
Air traffic liability (Note 18) | 1,287.4 | 949.4 |
Salaries, wages and benefits | 246.3 | 186.5 |
Insurance premiums payable | 24.4 | 24.3 |
Taxes payable | 44.4 | 64.8 |
Federal tax installment payment program (Note 16) | 9.8 | 6.5 |
Derivative financial instruments (Note 21) | 48.5 | 211.1 |
Financial liabilities at fair value through profit and loss (Note 22) | 44.7 | |
Other current liabilities | 151.7 | 110.9 |
Total current liabilities | 3,334.2 | 3,617.7 |
Non-current liabilities | ||
Loans and financing (Note 17) | 2,921.7 | 3,049.3 |
Derivative financial instruments (Note 21) | 378.4 | 20.2 |
Deferred income taxes (Note 16) | 326.9 | 181.5 |
Federal tax installment payment program (Note 16) | 105.4 | 75.6 |
Provision for tax, civil and labor risk (Note 28) | 73.2 | 76.4 |
Other non-current liabilities | 343 | 377.9 |
Total non-current liabilities | 4,148.6 | 3,780.9 |
Equity | ||
Issued capital (Note 19) | 2,163.4 | 1,488.6 |
Capital reserve | 1,898.9 | 1,291 |
Treasury shares (Note 19) | (2.7) | |
Other comprehensive loss (Note 19) | (11.2) | (33.8) |
Accumulated losses | (1,214.8) | (1,743.8) |
Total equity | 2,833.6 | 1,002 |
Total liabilities and equity | R$ 10316.4 | R$ 8400.6 |
Consolidated Income Statements
Consolidated Income Statements - BRL (R$) R$ in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Operating revenue (Note 23) | |||
Passenger revenue | R$ 6695.3 | R$ 5786.8 | R$ 5575.3 |
Other revenue | 1,094.2 | 883.1 | 682.5 |
Net revenue | 7,789.5 | 6,669.9 | 6,257.8 |
Operating expenses | |||
Aircraft fuel | (1,848.2) | (1,560.2) | (1,917.6) |
Salaries, wages and benefits | (1,296.2) | (1,091.9) | (1,042.1) |
Aircraft and other rent | (1,181.7) | (1,160.9) | (1,171.3) |
Landing fees | (490.6) | (442.7) | (382.6) |
Traffic and customer servicing | (357.8) | (327.3) | (307.9) |
Sales and marketing | (309.5) | (276.2) | (258.2) |
Maintenance materials and repairs | (568.1) | (708.7) | (643.9) |
Depreciation and amortization | (299.8) | (301.2) | (218) |
Other operating expenses, net (Note 25) | (572.5) | (456.5) | (483.8) |
Total operating expenses | (6,924.4) | (6,325.6) | (6,425.4) |
Operating income (loss) | 865.1 | 344.3 | (167.6) |
Financial result (Note 24) | |||
Financial income | 94.8 | 51.1 | 43.2 |
Financial expense | (524) | (731.2) | (685.9) |
Derivative financial instruments, net | (90.4) | 10.8 | (82.8) |
Foreign currency exchange, net | 57.9 | 179.7 | (184.3) |
Financial result | (461.7) | (489.6) | (909.8) |
Result from related parties transactions, net (Note 12d) | 194.4 | 163 | |
Net income (loss) before income tax and social contribution | 597.8 | 17.7 | (1,077.4) |
Income tax and social contribution (Note 16) | 2.9 | 8.7 | (1.4) |
Deferred income tax and social contribution | (71.7) | (152.7) | 3.9 |
Net income (loss) | R$ 529.0 | R$ 126.3 | R$ 1074.9 |
Common shares | |||
Financial result (Note 24) | |||
Basic net income (loss) per share (Note 20) | R$ 0.02 | R$ 0.01 | R$ 0.07 |
Diluted net income (loss) per share (Note 20) | 0.02 | (0.01) | (0.07) |
Preferred shares | |||
Financial result (Note 24) | |||
Basic net income (loss) per share (Note 20) | 1.68 | (0.55) | (5.42) |
Diluted net income (loss) per share (Note 20) | R$ 1.64 | R$ 0.55 | R$ 5.42 |
Consolidated Statement of Other
Consolidated Statement of Other Comprehensive Income (loss) - BRL (R$) R$ in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Consolidated Statement of Other Comprehensive Income (loss) | |||
Net income (loss) | R$ 529.0 | R$ 126.3 | R$ 1074.9 |
Other comprehensive loss to be reclassified to profit or loss in subsequent periods: | |||
Changes in fair value of cash flow hedges, net of tax | 22.6 | 59 | (56.6) |
Total comprehensive income (loss) | R$ 551.6 | R$ 67.3 | R$ 1131.5 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Equity - BRL (R$) R$ in Millions | Issued capital | Capital Reserve | Treasury shares | Cash flow hedge reserve | Accumulated losses | Total |
Beginning balance at Dec. 31, 2014 | R$ 474.0 | R$ 521.3 | R$ 36.2 | R$ 542.6 | R$ 416.5 | |
Net profit (loss) | (1,074.9) | (1,074.9) | ||||
Other comprehensive income (loss) | (56.6) | (56.6) | ||||
Total comprehensive income (loss) | (56.6) | (1,074.9) | (1,131.5) | |||
Issued capital (Note 19) | 5.4 | 307.6 | 313 | |||
Share-based payment expense (Note 27) | 9.8 | 9.8 | ||||
Ending balance at Dec. 31, 2015 | 479.4 | 838.7 | (92.8) | (1,617.5) | (392.2) | |
Net profit (loss) | (126.3) | (126.3) | ||||
Other comprehensive income (loss) | 59 | 59 | ||||
Total comprehensive income (loss) | 59 | (126.3) | (67.3) | |||
Issued capital (Note 19) | 985.2 | 487.9 | 1,473.1 | |||
Share issuance costs (Note 19) | (21.5) | (21.5) | ||||
Capitalization of reserve (Note 19) | 24 | (24) | ||||
Share-based payment expense (Note 27) | 9.9 | 9.9 | ||||
Ending balance at Dec. 31, 2016 | 1,488.6 | 1,291 | (33.8) | (1,743.8) | 1,002 | |
Net profit (loss) | 529 | 529 | ||||
Other comprehensive income (loss) | 22.6 | 22.6 | ||||
Total comprehensive income (loss) | 22.6 | 529 | 551.6 | |||
Issued capital (Note 19) | 661.5 | 646.5 | 1,308 | |||
Issuance of shares due exercise of stock options (Note 19) | 13.3 | 4.6 | 17.9 | |||
Share issuance costs (Note 19) | (71.3) | (71.3) | ||||
Treasury shares (Note 19) | R$ 2.7 | (2.7) | ||||
Share-based payment expense (Note 27) | 28.1 | 28.1 | ||||
Ending balance at Dec. 31, 2017 | R$ 2163.4 | R$ 1898.9 | R$ 2.7 | R$ 11.2 | R$ 1214.8 | R$ 2833.6 |
Consolidated Statement of Cash
Consolidated Statement of Cash Flows - BRL (R$) R$ in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Cash flows from operating activities | |||
Net income (loss) | R$ 529.0 | R$ 126.3 | R$ 1074.9 |
Adjustments to reconcile net loss to cash flows provided by (used in) operating activities | |||
Depreciation and amortization (Note 14 and 15) | 299.8 | 301.2 | 218 |
Write-off of fixed assets and intangibles (Note 14 and 15) | 42.2 | 63.4 | 34.8 |
Results unrealized from derivative financial instruments | (166.6) | 41.1 | 158.4 |
Share-based payment expenses | 28.1 | 9.9 | 9.8 |
Exchange (gain) and losses on assets and liabilities denominated in foreign currency | (62.5) | (528.4) | 302.2 |
Interest (income) and expenses on assets and liabilities | 222.1 | 360.7 | 299.2 |
Deferred income tax and social contribution | 71.7 | 135.3 | (3.9) |
Allowance for doubtful accounts (Note 9) | 1.6 | (2.8) | 3 |
Provision for tax, civil and labor risks (Note 28) | 78.4 | 53.7 | 60.1 |
Provision for inventory (Note 10) | (6.2) | 2.9 | (1.3) |
Provision for return of aircrafts and engines | (53.3) | 10.7 | |
Profit on sale of property and equipment (Note 14) | (75.4) | (119.6) | (80.3) |
Changes in operating assets and liabilities | |||
Trade and other receivables, net | (242.7) | (20.1) | 0.1 |
Inventories | (37.1) | (17.5) | (3) |
Security deposits and maintenance reserves | (168.9) | (69) | (60) |
Prepaid expenses | (20) | 35 | (70) |
Recoverable taxes | (68.4) | (1.9) | (10.1) |
Other assets | (141.1) | 183.2 | (179.4) |
Accounts payable | (93.5) | (17.8) | 170.3 |
Salaries, wages and employee benefits | 59.9 | 28.4 | (12.5) |
Insurance premiums payable | 0.1 | (7.8) | 4.2 |
Taxes payable | (20.4) | (31.1) | 12.5 |
Federal installment payment program | 116.3 | (6.5) | (8.3) |
Air traffic liability | 338.1 | 71.5 | 46.2 |
Provision taxes, civil and labor risks (Note 28) | (81.6) | (59.1) | (45.8) |
Other liabilities | (5.7) | 171.7 | 109.4 |
Interest paid | (301.9) | (342.8) | (287.1) |
Net cash (used) provided by operating activities | 295.3 | 54 | (397.7) |
Short-term investment | |||
Acquisition of short-term investments | (3,673.7) | (679) | (515.2) |
Disposal of short-term investments | 3,044.2 | 377.3 | 994.7 |
Long-term investment | |||
Acquisition of long-term investments from related party (Note 12) | (360.8) | ||
Acquisition of long-term investments | 1.1 | (1.1) | |
Restricted investments | 120.9 | (70.6) | (24) |
Proceeds from sale of property and equipment | 177.3 | 532 | 248.3 |
Acquisition of intangibles (Note 15) | (56.1) | (56.3) | (52.7) |
Acquisition of property and equipment (Note 14) | (589.5) | (385.8) | (1,193.6) |
Net cash used in investing activities | (975.8) | (644.3) | (542.5) |
Debentures | |||
Proceeds | 200 | 146.6 | 196.6 |
Repayment | (1,153.2) | (150) | (50) |
Loans and financing | |||
Proceeds | 1,750.1 | 833 | 1,194 |
Repayment | (1,090.3) | (1,399.1) | (1,026.9) |
Issued capital, net of issued cost (Note 1 and 19) | 1,231.3 | 1,451.6 | 313 |
Loan to shareholder (Note 12) | (73.2) | (9.2) | |
Sales and leaseback | 39.5 | 534.4 | |
Net cash provided by financing activities | 856.8 | 526.6 | 1,161.1 |
Exchange gain and (losses) on cash and cash equivalents | 36.8 | (23.6) | 26.6 |
Net (decrease) increase in cash and cash equivalents | 213.1 | (87.3) | 247.5 |
Cash and cash equivalents at the beginning of the year | 549.2 | 636.5 | 389 |
Cash and cash equivalents at the end of the year | 762.3 | 549.2 | R$ 636.5 |
Treasury shares | |||
Loans and financing | |||
Redemption of preferred shares (Note 22)/Treasury shares (Note 19) | (2.7) | ||
Preferred shares | |||
Loans and financing | |||
Redemption of preferred shares (Note 22)/Treasury shares (Note 19) | R$ 44.7 | R$ 346.3 |
Operations
Operations | 12 Months Ended |
Dec. 31, 2017 | |
Operations | |
Operations | 1. Operations Azul S.A. (“Azul”) is a corporation headquartered at Av. Marcos Penteado de Ulhôa Rodrigues, 939, in the city of Barueri, in the state of São Paulo, Brazil. Azul was incorporated on January 3, 2008 and is a holding company for providers of airline passenger and cargo services. Azul and its subsidiaries are collectively referred to as the “Company”. Azul Linhas Aéreas Brasileiras S.A. (“ALAB”), a 100% owned subsidiary incorporated on January 3, 2008, has operated passenger and cargo air transportation in Brazil since beginning operations on December 15, 2008. Canela Investments LLC (“Canela”), a 100% owned special purpose entity, headquartered in the state of Delaware, United States of America, was incorporated on February 28, 2008, to acquire aircraft outside of Brazil and lease them to ALAB. The Company’s shares are traded on the BM&FBOVESPA and American Depositary Share (“ADS”) on the New York Stock Exchange (“NYSE”). The consolidated financial statements are comprised of the individual financial statements of the entities as presented below: % equity interest Entities Main activities Country of December 31, December 31, Azul Linhas Aéreas Brasileiras S.A. (ALAB) Airline operations Brazil % % Azul Finance LLC (a) Aircraft financing United States % % Azul Finance 2 LLC (a) Aircraft financing United States % % Azul Services LLC (a) (b) Aircraft financing United States — % Blue Sabiá LLC (a) Aircraft financing United States % % ATS Viagens e Turismo Ltda. (a) Package holidays Brazil % % Azul SOL LLC (a) Aircraft financing United States % % Azul Investment LLP (a) Group financing United States % — Fundo Garoupa (c) Exclusive investment fund Brazil % % Fundo Safira (a) Exclusive investment fund Brazil % % Fundo Azzurra (a) Exclusive investment fund Brazil % % Canela Investments LLC (Canela) (a) (d) Aircraft financing United States % % Canela 336 LLC (e) Aircraft financing United States % % Canela 407 LLC (e) Aircraft financing United States % % Canela 429 LLC (e) Aircraft financing United States % % Canela Turbo One LLC (e) (f) Aircraft financing United States — % Canela Turbo Two LLC (e) (g) Aircraft financing United States — % Canela Turbo Three LLC (e) Aircraft financing United States % % Daraland S.A. (a) Holding Uruguai % — Encenta S.A. (Azul Uruguai) (h) Airline operations Uruguai % — TudoAzul S.A. Loyalty programs Brazil % % (a) Azul’s investment is held indirectly through ALAB. (b) Company extinguished on December 27, 2017. (c) Azul’s investment is held 1% directly and 99% through ALAB. (d) Transfer of ownership from Azul to ALAB on December 1, 2017. (e) ALAB’s investments are held indirectly through Canela. (f) Company extinguished on December 19, 2017. (g) Company extinguished on May 9, 2017. (h) Investments are held indirectly through Daraland. Initial Public Offering - IPO On April 19, 2017, the Company concluded the global offering of 96,239,837 of its preferred shares, of which 63,000,000 preferred shares were offered by Azul and 33,239,837 preferred shares were offered by the selling shareholders, consisting of an international and a Brazilian offering. The initial offering price was R$21.00 per preferred share and US$20.06 per ADS (each ADS represents three preferred shares) calculated at the exchange rate of R$3.1409 per US$1.00 as of April 10, 2017. Shares have been traded on the São Paulo Stock Exchange (BM&FBOVESPA) and the New York Stock Exchange (NYSE) since April 11, 2017, under the symbols “AZUL4” and “AZUL”, respectively. Net proceeds, excluding underwriting discounts, commissions totaled R$1,265.0. A portion of the net proceeds of the offering is being used to repay certain indebtedness held by the international underwriters, the Brazilian underwriters and/or their affiliates. Global offering by selling shareholders The Company announced in September 20, 2017, the closing of offering by its selling shareholders of 40,630,186 of Company´s preferred shares in a global offering, consisting of an international offering and a Brazilian offering. The preferred shares were offered directly and in the form of American depositary shares, or ADSs, each of which representing three preferred shares. The Brazilian offering of 8,018,839 preferred shares and the international offering of 10,870,449 ADSs (representing 32,611,347 preferred shares) both closed on September 19, 2017. One of the selling shareholders also granted the underwriters a 30-day option to purchase up to 4,063,019 additional preferred shares, which was exercised on September 15, 2017 with respect to 4,063,017 preferred shares in the form of 1,354,339 ADSs. The global offering price was R$27.96 per preferred share and US$26.75 per ADS. The Global offering by selling shareholders did not impact the Company’s equity position, as the costs associated to the offer were reimbursed by the selling shareholders. Senior notes On October 19th, Azul Investments LLP priced an offering of US$400.0 million aggregate principal amount of 5.875% senior unsecured notes due 2024. This transaction is part of Azul’s liability management strategy and net proceeds will be used for debt refinancing and general corporate purposes. Strategic Partnerships Empresa Brasileira de Correios e Telégrafos (Brazil’s Postal Service) On December 20, 2017, ALAB and Correios (Brazil’s Postal Service) signed a memorandum of understanding for the creation of a private integrated logistics solutions company, Azul will own a 50.01% stake of the new company and Correios the remaining 49.9%. With the existing demand already served by ALAB and Correios, the new company anticipates to handle approximately 100 thousand tons of cargo per year. Both companies expect to have cost savings, operating efficiency and revenue gains, improving the service offer to the consumer. The memorandum of understanding will be submitted to the Brazilian authorities and appropriate government bodies for approval. Only after their consent, the new company will be established and its activities are expected to initiate by the end of 2018. |
Basis of preparation of financi
Basis of preparation of financial statements | 12 Months Ended |
Dec. 31, 2017 | |
Basis of preparation of financial statements | |
Basis of preparation of financial statements | 2. Basis of preparation of financial statements The consolidated financial statements of the Company for the years ended December 31, 2017 and 2016, were authorized for issuance by the executive board of directors on April 24, 2018. The consolidated financial statements were prepared in accordance with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and in Brazilian Reais, which is the functional currency of the Company. The financial statements were prepared using the historical cost basis, except for certain financial instruments, which are measured at fair value. The Company has adopted all standards and interpretations issued by the IASB and the IFRS Interpretations Committee that were in effect on December 31, 2017. |
Significant accounting policies
Significant accounting policies | 12 Months Ended |
Dec. 31, 2017 | |
Significant accounting policies | |
Significant accounting policies | 3. Significant accounting policies 3.1. Basis for consolidation The consolidated financial statements comprise the financial statements of the Azul and its subsidiaries as at December 31, 2017. Control is achieved when the Company is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Company controls an investee if and only if the Company has: · Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee) · Exposure, or rights, to variable returns from its involvement with the investee, and · The ability to use its power over the investee to affect its returns. The Company re-assesses whether or not it controls an investee when facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when assets, liabilities, income and expenses of a subsidiary acquired during the year are included in the statement of comprehensive loss from the date the Company gains control, and ceases on the date the Company loses control of the subsidiary. When necessary, adjustments are made to the financial statements of subsidiaries to align their accounting policies with those of the Company. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Company are eliminated in full on consolidation. 3.2. Cash and cash equivalents Cash and cash equivalents are held in order to meet short-term cash commitments and not for investment or other purposes. The Company considers as cash equivalents deposits or instruments, which are readily convertible into a known cash amount and subject to an insignificant risk of change in value. The Company considers as cash equivalents, instruments with original maturities of less than three months. 3.3. Financial instruments - initial recognition and subsequent measurement i) Financial assets Initial recognition and measurement Financial assets are classified as financial assets at fair value through profit or loss, loans and receivables, investments held to maturity, financial assets available for sale, or derivatives designated as hedging instruments. Financial assets are classified at inception in one of the above mentioned categories. Financial assets are initially recognized at fair value plus transaction costs directly attributable to the acquisition of the financial assets, with the exception of financial assets recorded at fair value through profit or loss. The financial assets of the Company include cash and cash equivalent, short-term investments, restricted investments, loans and trade and other receivables, as well as derivative financial instruments. Subsequent measurement The subsequent measurement of financial assets depends on their classification. Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held for trading if they are expected to be sold in the short-term. This category includes short-term investments, restricted investments and derivative financial instruments entered into by the Company that do not meet the criteria for hedge accounting as defined by IAS 39. Financial assets at fair value through profit or loss are recorded at fair value on the statement of financial position at fair value, with corresponding gains or losses recognized in the statements of operations. The Company classifies financial assets at fair value through profit or loss because it intends to trade them in the short term. Reclassification to loans and receivables, available for sale or held to maturity depends on the nature of the asset. Financial assets designated at fair value through profit or loss using the fair value option at the moment of presentation cannot be reclassified after initial recognition. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments. After initial measurement, these financial assets are recorded at amortized cost using the effective interest method, less impairment losses. The amortized cost is calculated taking into account any discount or premium on acquisition and fees or costs incurred. The amortization of the effective interest method is recorded as financial income in the statements of operations. Impairment losses are recognized as financial expenses in the statements of operations. Derecognition Financial assets, or where appropriate, part of a financial asset or part of a group of similar financial assets, are derecognized when: · The rights to receive cash flows from the assets have expired; or · The Company has transferred their rights to receive cash flows of the assets and (a) the Company has substantially transferred all the risks and benefits of the assets, or (b) the Company has not transferred or retained substantially all the risks and benefits related to the assets, but has transferred control of the assets. When the Company has transferred their rights to receive cash flows from assets and has not transferred or retained substantially all the risks and rewards relating to an asset, that asset is recognized to the extent of the continuing involvement of the Company. In this situation, the Company also recognizes an associated liability. The transferred assets and associated liabilities are measured based on the rights and obligations that the Company has retained. Continuing involvement that takes the form of a guarantee on the assets transferred is measured by the original book value of the assets or the maximum payment that may be required from the Company, whichever is lower. ii) Impairment of financial assets At every statement of financial position date, the Company assesses if there is any objective evidence of impairment of financial assets or groups of financial assets. A financial asset or group of financial assets is considered impaired if there is objective evidence of a lack of recoverability as the result of one or more events that occurred after initial recognition (“loss event”) and when this event has an impact on future estimated cash flows of a financial asset that can be reasonably estimated. Evidence of impairment loss may include an indication that counterparties are experiencing significant financial difficulty, late payments, defaults, bankruptcy or a likelihood that these entities will file for bankruptcy or other types of financial reorganization. iii) Financial liabilities Initial recognition and measurement Financial liabilities are classified as financial liabilities at fair value through profit or loss, loans and borrowing, or as derivatives classified as hedge instruments, as appropriate. The Company determines the classification of its financial liabilities upon initial recognition. Financial liabilities are initially recognized at fair value. Loans, financing, and debentures are recognized at fair value deducted from, directly related transaction costs. Financial liabilities of the Company include accounts payable and other accounts payable, loans and financing, debentures and derivative financial instruments. Subsequent measurement The subsequent measurement of financial liabilities depends on their classification, as follows: Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include financial liabilities held for trading, financial liabilities designated upon initial recognition at fair value through profit or loss and loans designated as “hedge item” in a fair value hedge. Financial liabilities are classified as held for trading if they are acquired for the purpose of short term settlement. This category includes derivative financial instruments contracted by the Company that do not meet the criteria for hedge accounting as defined by IAS 39. Gains and losses in liabilities held for trading are recognized in the statements of operations. Loans and borrowings (including debentures) After initial recognition, interest-bearing loans, financing and debentures are subsequently measured at amortized cost, using the effective interest rate method. Gains and losses are recognized in the statement of operations when the liabilities are derecognized as well as through the effective interest rate amortization process. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. The effective interest rate amortization is included as finance expenses in the statement of operations. Derecognition A financial liability is derecognized when the obligation under the liability is discharged, cancelled, or expires. When an existing financial liability is replaced by another from the same lender with substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability, with the difference in the corresponding book values recognized in the statements of operations. iv) Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount reported in the consolidated financial position if there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, to realize the assets and settle the liability simultaneously. v) Fair value of financial instruments The fair value of financial instruments actively traded in organized financial markets is determined based on prices quoted in the market at close of business at the statement of financial position date, not including the deduction of transaction costs. The fair value of financial instruments for which there is no active market is determined using valuation techniques. These techniques can include use of recent market transactions, references to the current fair value of other similar instruments, analysis of discounted cash flows, or other valuation models. An analysis of the fair value of financial instruments and more details about how they are calculated are described in Note 5. 3.4. Derivative financial instruments and hedge accounting Initial recognition and subsequent measurement The Company uses derivative financial instruments, such as currency forward contracts options, forward contracts, and interest rate swaps to hedge its foreign currency risks and interest rate risk as well as commodity price risk. Derivative financial instruments are recognized initially at fair value on the date when the derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are presented as financial assets when the instrument’s fair value is positive and as financial liabilities when fair value is negative. Any gains or losses from changes in the fair value of derivatives during the year are recorded directly in the statements of operations for the period, except for the effective portion of cash flow hedges that are recognized directly in other comprehensive loss. These gains or losses are then recorded in the statements of operations when the hedge item affects the statements of operations. The following classifications are used for hedge accounting purposes: · Fair value hedge when hedging against exposure to changes in fair value of recognized assets or liabilities, or an unrecognized firm commitment. · Cash flow hedge when providing protection against changes in cash flows that is attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction which may affect the income or foreign currency risk in an unrecognized firm commitment. On inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting, as well as the Company’s objective and risk management strategy for undertaking the hedge. The documentation includes identification of the hedge instrument, the item or transaction being hedged, the nature of the risk being hedged, the nature of the risks excluded by the hedge, a prospective statement of the effectiveness of the hedge relationship and how the Company will assess the effectiveness of the changes in the hedging instruments fair value in offsetting the exposure to changes in the fair value of the item being hedged or cash flows attributable to the risk being hedged. It is expected that these hedges are highly effective in offsetting any changes in fair value or cash flows, and they are continually assessed to determine whether they actually have been highly effective over all the reporting periods for which they were designated. Hedges that meet the criteria for hedge accounting are accounted for as follows: Fair value hedge The gain or loss resulting from changes in fair value of a hedge instrument (for derivative hedge instrument) or the foreign exchange component of its carrying amount measured in accordance with IAS 21 (for non-derivative hedge instrument) is recognized in the statements of operations. The gain or loss from the hedge item attributable to the hedged risk should adjust the carrying amount of the hedged item and is also recognized in the statements of operations. If the hedged item is derecognized, the unamortized fair value is recognized immediately in the statement of operations. When an unrecognized firm sales commitment is designated as a hedged item in a hedge relationship, the change in fair value of the firm sales commitment attributable to the hedge risk is recognized as a financial asset or as a financial liability, with the recognition of a corresponding gain or loss in the statements of operations. The accumulated balance in the statement of financial position resulting from successive changes in fair value of the firm sales commitment attributable to the hedged risk will be transferred to the balance of the hedged item upon its recognition (recognition of balance of accounts payable or accounts receivable). The Company holds interest rate swaps to hedge against its exposure to changes in fair value of some of its aircraft financing (Note 21). Cash flow hedge The effective portion of a gain or loss from the hedge instrument is recognized directly in other comprehensive loss while any ineffective portion of the hedge is recognized immediately in financial income (expenses). The amounts recorded in other comprehensive loss are transferred to the statement of operations in tandem with the hedged transaction impact on profit or loss, for example when a forecasted sale occurs or when the income or expense being hedged is recognized. When the hedged item is the cost of a non-financial asset or non-financial liability, the amounts recorded as other comprehensive loss are transferred to initial carrying amount of the non-financial assets or liability. If the occurrence of the forecast transaction or firm commitment is no longer likely, the amounts previously recognized in other comprehensive loss are transferred to the statement of operations. If the hedge instrument expires or is sold, terminated, exercised without replacement or rollover, or if its designation as a hedge is revoked, any cumulative gain or loss previously recognized in comprehensive loss remains deferred in other comprehensive loss until the forecast transaction or firm commitment affects profit or loss. The Company uses swap contracts to hedge against its exposure to the risk of changes in interest rates related to its finance lease transactions. Current and non-current classification Derivative instruments that are not classified as effective hedge instruments are classified as current, non-current or segregated into current or non-current portions based on the underlying contractual cash flows. · When the Company expects to maintain a derivative as an economic hedge (and do not apply hedge accounting) for a period exceeding 12 months after the statement of financial position date, the derivative is classified as non-current (or segregated into current and non-current portions), consistent with the classification of the underlying item. · Embedded derivatives that are not closely related to the host contract are classified in a manner consistent with the cash flows of the host contract. · Derivative instruments that are designated as and are effective hedge instruments are classified consistently with the classification of the underlying hedged item. The derivative instrument is segregated into current and non-current portion only if a reliable allocation can be made. 3.5. Inventories Inventories consist of aircraft maintenance parts, snack supplies and uniforms. Inventories are valued at cost or net realizable value, whichever is lower, net of any provision for inventory. 3.6. Taxes Income tax expense, deferred tax assets and liabilities reflect management’s best assessment of estimated current and future taxes to be paid. Significant management judgment is required to determine the amount of deferred tax assets that can be recognized and the tax rates used, based upon the likely timing and the level of future taxable profits together with future tax planning strategies. Provisions for income tax and social contribution are based on the taxable income of the year considering the offset of tax loss carryforwards, up to the limit of 30% of annual taxable income. Tax rates and tax laws used to calculate the amounts are those in force at the statement of financial position dates. The income from foreign subsidiaries is subject to taxation pursuant to local tax rates and legislation. In Brazil, these incomes are taxed according to Law 12.973/14. Deferred income taxes and social contribution arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future. Deferred income tax assets and liabilities are measured at tax rates that are expected to be applicable in the year that the assets will be realized or the liability settled, based on tax rates (and tax law) enacted or substantially enacted on each statement of financial position date. The book value of the deferred tax assets is presented net if there is a legal or contractual right to offset tax assets against tax liabilities and deferred taxes are related to the same taxable entity and is reviewed on each statement of financial position date and written off to the extent that it is no longer probable that taxable profits will be available to allow that all or part of the deferred taxes assets will be used. Unrecognized deferred tax assets are reassessed on each statement of financial position date and are recognized to the extent that it becomes probable that future taxable profit will allow that the deferred tax assets be recovered. Deferred income tax and social contribution relating to equity items are recognized directly in equity. The Company assesses on a regular basis the tax status of situations in which tax law requires interpretation and records provisions if appropriate. 3.7. Foreign currency transactions The consolidated financial statements are presented in Brazilian reais (R$), which is the Company’s functional currency. Transactions in foreign currencies are initially translated into Brazilian reais using the exchange rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency using the exchange rates prevailing at the statement of financial position date. Non-monetary items denominated in foreign currency at historical cost basis are translated into the functional currency using the exchange rates on the dates of original transactions. Non-monetary items denominated in foreign currency measured at fair value are translated using the exchange rates prevailing on the date of determination of fair value. Differences arising on settlement or transaction of monetary items are recognized in the statement of operations. Changes in fair value of the hedging instruments are recorded using the accounting treatment described in note 3.4. “Derivative financial instruments and hedge accounting”. 3.8. Property and equipment Assets included in property and equipment are stated at acquisition or construction cost including interest and other financial charges, net of accumulated depreciation and accumulated impairment losses, if any. Pre-payments for aircraft under construction, including interest and finance charges incurred during the manufacturing period of the aircraft and leasehold improvements, are also recorded in property and equipment. The Company receives credits from manufacturers on acquisition of certain aircraft and engines that may be used for the payment of maintenance services. These credits are recorded as a reduction of the cost of acquisition of the related aircraft and engines and against other accounts receivable. These amounts are then charged to expense or recorded as an asset, when the credits are used to purchase additional goods or services. In the case of operating leases, these credits are deferred and recorded as a reduction of operating lease expenses on a straight line basis during the term of the respective agreement. Owned aircraft are recorded at cost of acquisition and are subject to impairment testing, if there are impairment indicators. Aircraft equipment, rotables and tools, including reparable spare parts with useful lives that exceed one year, are recorded as property, plant and equipment at cost of acquisition. Aircraft lease agreements are accounted for as either operating or finance leases (note 3.12). Depreciation is calculated using the straight-line method over the estimated useful lives of the assets as follows: Aircraft 12 years Leasehold improvements 5 years Aircraft equipment 12 years Computer equipment and peripherals 5 years Tools 5 years Heavy maintenance — engines 5 to 6 years Heavy maintenance — structural checks 2 to 10 years Engines 12 years Furniture and fixtures 10 years Simulators 20 years Vehicles 5 years The net book value and useful life of assets and the depreciation methods are reviewed at the end of each year and adjusted prospectively, if necessary. The Company considers that its aircraft have four major components; airframe, engines, heavy maintenance and structural checks. The Company allocates a maintenance cost component to engines and structural checks as a portion of the total aircraft cost at the moment of acquisition. This component is depreciated over its useful life, which is the period extending up to the next heavy maintenance or structural check or the remaining useful life of the engines, whichever is shorter. The Company has maintenance contracts for its engines that cover all significant maintenance activities. The Company has “power-by-the-hour” type contracts, such agreements estipulate a rate for maintenance per hour flown, which are paid in accordance with the total hours flown when maintenance occurs. Repairs and routine maintenance are expensed in the period in which they are incurred. Significant maintenance costs are capitalized when it is likely that they will result in future economic benefits that exceed the originally assessed performance target for existing assets of the Company. Capitalized maintenance cost is depreciated over the period of time from when they were capitalized through the next scheduled significant maintenance event. Heavy maintenance on aircraft held under operating lease is expensed at the time of the event, and it is recorded in the “maintenance material and repair” line items. Depreciation expense of major capitalized maintenance expenses is recorded in “Depreciation and amortization” in the consolidated statement of operations. An item of property, plant and equipment and any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is recognized in “Other operating expenses, net”. 3.9. Business Combinations The Company accounts for business combinations using the acquisition method. The cost of an acquisition is measured as the sum of the consideration transferred, based on its fair value on the acquisition date. Costs directly attributable to the acquisition are expensed as incurred. The assets acquired and liabilities assumed are measured at fair value, classified and allocated according to the contractual terms, economic circumstances and relevant conditions on the acquisition date. Goodwill is measured as the excess of the consideration transferred over the fair value of net assets acquired. If the consideration transferred is smaller than the fair value of net assets acquired, the difference is recognized as a gain on bargain purchase in the statement of operations. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the years ended December 31, 2017 and 2016, the Company has not completed any business combination transaction. For combinations between entities under common control, the Company accounts under the Predecessor Accounting Method. Assets and liabilities of the acquired entity are stated at predecessor carrying values. These intra-group transactions have no impact in the consolidated financial statements. 3.10. Intangible assets Separately acquired intangible assets are measured at cost on initial recognition. After initial recognition, intangible assets are stated at cost, less any accumulated amortization and accumulated impairment losses. Internally generated intangible assets are not capitalized. The useful life of intangible assets is assessed as definite or indefinite. Intangible assets with definite useful lives are amortized over their estimated useful lives and tested for impairment, whenever there is an indication of any loss in the economic value of the assets. The period and method of amortization for intangible assets with definite lives are reviewed at least at the end of each fiscal year or when there are indicators of impairment. Changes in estimated useful lives or expected consumption of future economic benefits embodied in the assets are considered to modify the amortization period or method, as appropriate, and treated as changes in accounting estimates. The amortization of intangible assets with definite lives is recognized in the statements of operations in the expense category consistent with the use of intangible assets (Note 15). Intangible assets with indefinite useful lives are not amortized, but are tested for impairment at each year-end or whenever there is an indicator that their carrying amount cannot be recovered. The assessment is reviewed annually to determine whether the indefinite useful life continues to be supportable. If not, the change in useful life from the indefinite to definite is made on a prospective basis. Gains and losses resulting from the disposal of intangible assets are measured as the difference between the net disposal proceeds and the book value of assets, and are recognized in the statements of operations. In connection with the acquisition of TudoAzul (former TRIP), the Company identified airport operating licenses as having indefinite useful lives. The fair value of Pampulha, Santos Dumont and Fernando de Noronha airports operating licenses were recognized at fair value at the acquisition date. Fair value of operating licenses was based on estimated discounted future cash flows. Operating licenses are considered to have indefinite useful lives due to several factors, including requirements for necessary permits to operate within Brazil and limited landing rights availability in Brazil’s most important airports regarding traffic volume. 3.11. Impairment of non-financial assets The Company performs an annual review for impairment indicators in order to assess events or changes in economic, technological, or operating conditions which may indicate that an asset is not recoverable. If any, those indicators are identified when performing the annual impairment testing and the Company estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash generating unit’s (CGU) fair value less cost to sell and its value in use. When the carrying amount of intangibles exceed its recoverable amount, an impairment charge is recorded and the asset is written down to its recoverable amount. The Company operates as a single CGU. In estimating the value in use of assets, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the weighted average cost of capital for the industry in which the cash-generating unit operates. The fair value less cost to sell is determined, whenever possible, based on a firm sales agreement carried out on an arm’s length basis between known and interested parties, adjusted for expenses attributable to asset sales, or when there is no firm sale commitment, based on the market price of an active market or most recent transaction price of similar assets. For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that previously recognized impairment losses no longer exist or have decreased. If such indication exists, the Company estimates the recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. The following assets have specific characteristics for impairment testing: Goodwill Goodwill is tested for impairment annually or when circumstances indicate that the carrying value may not be recoverable. Impairment is determined for goodwill by assessing the recoverable amount of the single CGU taking the Company as a whole. When the recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognized. Impairment losses relating to goodwill cannot be reversed in future periods. Intangible assets Intangible assets with indefinite useful lives are tested for impairment annually at the CGU level, and when circumstances indicate that the carrying value may be impaired. 3.12. Leases A lease is classified at the inception date as a finance lease or an operating lease. The leases of property and equipment in which the Company substantially hold the risks and rewards incidental to ownership are classified as finance leases. Finance leases are capitalized at the commencement of the lease at the inception date fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized in finance expenses in the statement of operations. The present value of the minimum lease payments, is calculated using the implicit interest rate when it is clearly identified in the lease agreement. The leased assets are depreciated over the remaining economic useful life of the leased assets or the contractual term, whenever there is no reasonable certainty that the Company will obtain ownership of the property at the end of the contractual term, whichever is shorter. An operating lease is a lease other than a finance lease. Operating lease payments (including direct costs and incentives received from the lessor of each contract) are recognized as an operating expense on a straight-line basis over the lease term. A sale and leaseback transaction involves the sale of an asset and leasing back the same asset. Gains or l |
Significant accounting judgment
Significant accounting judgments, assumptions and estimates | 12 Months Ended |
Dec. 31, 2017 | |
Significant accounting judgments, assumptions and estimates | |
Significant accounting judgments, assumptions and estimates | 4. Significant accounting judgments, assumptions and estimates Judgments The preparation of consolidated financial statements of the Company requires management to make judgments and estimates and adopt assumptions that affect the reports amounts of revenue, expenses, assets, liabilities and disclosures of contingent liabilities at the date of the financial statements. Uncertainty relating to these assumptions and estimates could lead to amounts that require a significant adjustment to the book value of assets or liabilities affected in future periods. In the process of applying the Company’s accounting policies, management has made the following judgments, which have the most significant effect on the amounts recognized in the consolidated financial statements: Lease classification The Company has assessed the classification of leases between finance and operating based on the terms and conditions of each arrangement. A lease agreement is classified as a finance lease when significant risk and rewards of the ownership of the aircraft are transferred; otherwise the contract is accounted for as an operating lease. Estimates and assumptions The main assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, involving a significant risk of causing a material adjustment of the book value of assets and liabilities within the next financial year are discussed below: Breakage The Company recognizes revenue from tickets sold that are expected to expire unused based on historical data and experience. Estimating expected breakage requires management to make judgment, among other things, the extent to which historical experience is an indication of the customer behavior. Annually, or more frequently as the experience data suggests, management reassesses the historical data and makes required improvements. Impairment of non-financial assets An impairment loss exists when the book value of assets or cash-generating unit exceeds its recoverable amount, which is the higher of fair value less sales costs and value in use. The calculation of fair value less sales costs is based on information available of transaction for sale of similar assets or market price less additional costs for disposing of assets. The calculation of value in use is based on the discounted cash flow model. Cash flows are derived from the budget for the next five years and do not include reorganization activities to which the Company have not yet been committed or significant future investments that will improve the basis of assets of the cash-generating unit subject matter of test. The recoverable amount is sensitive to the discount rate used in the method of discounted cash flow and expected future cash receipts and growth rate used for extrapolation. Transactions with share-based payments The Company measures the cost of transactions settled with its own shares with employees based on the fair value of such shares at the grant date or at each reporting date, as applicable. The Company must estimate at each reporting date the quantity of awards expected to be vested considering performance and non-market vesting conditions. Estimating the fair value of share-based payments requires determining the most appropriate assessment model for the grant of shares, which depends on the terms and conditions of the grant. This also requires determining the inputs used in the valuation models, including the option’s expected life, volatility, dividend income, and related assumptions. The assumptions and models used to estimate the fair value of share-based payments are disclosed in Note 27. Provisions for tax, civil and labor risks The Company recognizes provisions for civil and labor suits. The assessment of probability of loss includes assessing the available evidence and jurisprudence, the hierarchy of laws and most recent court decisions, and their relevance in the legal system, or the assessment of independent counsels. Provisions are reviewed and adjusted to take into account changes in circumstances such as the applicable limitation period, findings of tax inspections and additional exposures identified based on new issues or decisions of courts (Note 28). Fair value of financial instruments When the fair value of assets and liabilities presented in the statement of financial position cannot be obtained in an active market it is determined using valuation techniques, including the discounted cash flow model. The data for these methods is based on those prevailing in the market, when possible. However, when it is not feasible, a certain level of judgment is required to establish fair value. Judgment includes considerations on the data used, for example, liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the fair value of the financial instruments. “TudoAzul” Program - Loyalty Plan As described in Note 3.18, the Company accounts for “ TudoAzul ” loyalty program using the deferred revenue method. Under the deferred revenue method, the Company accounts for awarded points as a separately identifiable component of the sales transactions in which they are granted and recognizes the fair value of all outstanding points as of the issuance date, regardless of how they originated. The fair value of the points is deferred until they are redeemed for an award (Note 18). Provision for return of aircraft and engines For aircraft under operating leases, the Company is contractually required to return the equipment at a predefined level of operational capability. The aircraft return cost provision is estimated based on expenditures incurred in aircraft reconfiguration (interior and exterior), licensing and technical certification, painting etc., according to return terms. The engine’s return cost provision is estimated based on evaluation and minimum contractual conditions of the equipment that should be returned to the lessor, considering not only the historical costs incurred, but also the equipment conditions at the time of evaluation. Determination of useful life and significant components of property and equipment The Company believes that important aircraft parts need to be separated, including engines, their respective scheduled heavy maintenance and structural checks. These parts are depreciated in accordance with the useful lives defined in the fleet renovation plan and the maintenance schedule. |
Financial risk management objec
Financial risk management objectives and policies | 12 Months Ended |
Dec. 31, 2017 | |
Financial risk management objectives and policies | |
Financial risk management objectives and policies | 5. Financial risk management objectives and policies The main financial liabilities of the Company, other than derivatives, are loans, debentures and accounts payable. The main purpose of these financial liabilities is to finance operations as well as finance the acquisition of aircraft. The Company has trade accounts receivable and other accounts receivable that result directly from its operations. The Company also has investments available for trading and contracts derivative transactions such as currency forwards and swaps in order to reduce the exposure to foreign exchange fluctuations. The Company’s senior management supervises the management of market, credit and liquidity risks. All activities with derivatives for risk management purposes are carried out by experts with skills, experience and appropriate supervision. It is the Company’s policy not to enter in to derivatives transactions for speculative purposes. a) Market risk Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk consists of three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments exposed to market risk include loans payable, deposits, financial instruments measured at fair value through profit or loss and derivative financial instruments. a.1) Interest rate risk Interest rate risk is the risk that the fair value of future results of a financial instrument fluctuates due to changes in market interest rates. The exposure of the Company to the risk of changes in market interest rates refers primarily to long-term obligations subject to variable interest rates. The Company manages interest rate risk by monitoring the future projections of interest rates on its loans, financing and debentures as well as on its operating leases. To mitigate this risk, the Company has used derivative instruments aimed at minimizing any negative impact of variations in interest rates. Sensitivity to interest rates The table below shows the sensitivity to possible changes in interest rates, keeping all other variables constant in the Company’s income before taxes, that are impacted by loans payable subject to variable interest rates. For the sensitivity analysis, the Company utilized the following assumptions: · LIBOR based debt: weighted average interest rate of 4.2% p.a. · CDI based debt: weighted average interest rate of 10.2% p.a. We estimated the impact on profit and loss and equity for the year ended December 31, 2017 resulting from variation of 25% and 50% on the weighted average rates, as shown below: 25% -25% 50% -50% Interest expense ) ) a.2) Currency risk Currency risk is the risk that the fair value of future dollar denominated commitments vary according to the fluctuation of the foreign exchange rate. The exposure of the Company to changes in exchange rates relates primarily to the U.S dollar denominated loans and financing, net of investments in the U.S. dollar, and also to operating expenses originated in U.S. dollar. The Company is also exposed to changes in the exchange rate of the Euro through its investment in the TAP Convertible Bonds (Note 12). The Company manages its currency risk by using derivative financial instruments seeking to hedge up to twelve months of its projected non-operational activities. The Company continuously monitors the net exposure in foreign currency and, when deemed appropriate, enters into arrangements to hedge the projected non-operating cash flow for up to 12 months to minimize its exposure. During the year ended December 31, 2017 the Company had entered and settle NDF contracts ( balance on December 31, 2016 — US$80 million) to protect itself from currency fluctuations. The Company’s nominal foreign exchange exposure is shown below: Exposure to U.S. dollar Exposure to Euro December 31, December 31, 2017 2016 2017 2016 Assets Cash and cash equivalents and short-term Investments — — Security deposits and maintenance reserves — — Long-term investments (Note 21) — — Financial instruments — — Other assets — — Total assets Liabilities Accounts payable ) ) — — Loans and financing (*) ) ) — — Other liabilities ) ) — — Purchase of TAP Convertible Bonds option issued (Note 21) — — — ) Related parties Total liabilities ) ) — ) Derivatives (NDF) - notional — — Net exposure ) (*) As of December 31, 2017, US dollar denominated working capital loans totaling R$1,383.7 were swapped to Brazilian Reais, resulting in an effective total debt denominated in foreign currency of R$1,226.1 (equivalent 35.1%) and a total in R$ of R$2,263.8 (equivalent 64.9%). Sensitivity to exchange rates At December 31, 2017, the Company used the closing exchange rate of R$3.3080/US$1.00 and R$3.9693/EUR1.00. We present below a sensitivity analysis considering a variation of 25% and 50% over the existing rates: 25% -25% 50% -50% Exposure in US$ R$4.1350/US$ R$2.4810/US$ R$4.9620/US$ R$1.6540/US$ Effect on exchange rate variation ) ) 25% -25% 50% -50% Exposure in EUR R$4.9616/EUR R$2.9770/EUR R$5.9540/EUR R$1.9847/EUR Effect on exchange rate variation ) ) a.3) Risks related to variations in prices of aircraft fuel The volatility of prices of aircraft fuel is one of the most significant financial risks for airlines. The company’s fuel price risk management aims to balance the airline exposure to its market peers, so that the airline is neither overly affected by a sudden increase in prices nor is unable to capitalize on a substantial fall in fuel prices. The Company manages the risk related to fuel price volatility either through forward looking fixed-price contracts directly with a supplier, or derivative contracts negotiated with banks. The company may use derivative contracts for oil or its sub products. Fuel price sensitivity The table below sets out the sensitivity of the Company’s fuel hedges to substantial changes in the oil markets, maintaining all other variables constant as of December 31, 2017. The analysis considers a change in oil prices, in Reais, relative to the market average for the current period and projects the impact on the Company’s financial instruments, stemming from a variation of 25% and 50% in the oil prices, as follows: Change in Oil prices in Reais 25% -25% 50% -50% Impact on fuel hedges ) ) a.4) Risk related to changes in the fair value of TAP Convertible Bonds Since the TAP Convertible Bonds contain a conversion option into shares of TAP, the Company is exposed to changes in the fair value of TAP. The acquisition of the TAP Convertible Bonds is part of the commercial strategy of the Company of creating synergies between the Company and TAP by having the option to become a direct shareholder of TAP in case the stock price of TAP increases and is economically advantageous to convert the debt into TAP shares. b) Credit risk Credit risk is inherent in operating and financial activities of the Company, mainly represented under the headings of: trade receivables, cash and cash equivalents, including bank deposits. The credit risk of “trade receivables” is comprised of amounts payable by major credit card companies, and also trade receivables from travel agencies, and sales payable in installments. The Company usually assesses the corresponding risks of financial instruments and diversifies the exposure. Financial instruments are held with counterparties that are rated at least A in the assessment made by S&P and Fitch, or, mostly, are hired in futures and commodities stock exchange, which substantially mitigates the credit risk. TAP Convertible Bonds are secured by liens over certain intangible assets. c) Liquidity risk Liquidity risk takes on two distinct forms: market and cash flow liquidity risk. The first is related to current market prices and varies in accordance with the type of asset and the markets where they are traded. Cash flow liquidity risk, however, is related to difficulties in meeting the contracted operating obligations at the agreed dates. As a way of managing the liquidity risk, the Company invests its funds in liquid assets (government bonds, CDBs, and investment funds with daily liquidity), and the Cash Management Policy establishes that the Company’s and its subsidiaries’ weighted average debt maturity should be higher than the weighted average maturity of the investment portfolio. The schedule of financial liabilities held by the Company is as follows: December 31, 2017 Immediate Until 6 7 to 12 1 to 5 years More than 5 Total Loans and financing Accounts payable — — Liabilities from derivative transaction — Provisions — — — Capital management The Company’s assets may be financed through equity or third-party financing. If the Company opts for equity capital it may use funds from contributions by shareholders or through selling its equity instruments. The use of third-party financing is an option to be considered mainly when the Company believes that the cost would be less than the return generated by an acquired asset. It is important to ensure that the Company maintains an optimized capital structure, provides financial solidity while providing for the viability of its business plan. As a capital-intensive industry with considerable investment in assets with a high aggregated value, it is natural for companies in the aviation sector to report a high degree of leverage. The Company manages capital through leverage ratios, which is defined by the Company as net debt divided by the sum of net debt and total equity. Management seeks to maintain this ratio at levels equal to or lower than industry levels. Management includes in the net debt the loans and financing (includes debentures) less cash and cash equivalents, restricted cash, short and long-term investments and current and noncurrent restricted investments. The Company’s capital structure is comprised of its net indebtedness defined as total loans and financing (includes debentures) and operating leases net of cash and cash equivalents, restricted cash, short and long-term investments and current and noncurrent restricted investments. Capital is defined as equity and net indebtedness. The Company is not subject to any externally imposed capital requirements. The Company defines total capital as total net equity and net debt as detailed below: December 31, 2017 2016 Equity Cash and cash equivalents (Note 6) ) ) Short-term investments (Note 7) ) ) Long-term investments (Note 21) ) ) Restricted financial investments (Note 8) (*) ) ) Financial liabilities at fair value through profit and loss (Note 22) — Loans and financing (Note 17) (*) Net debt Total capital (*) |
Cash and cash equivalents
Cash and cash equivalents | 12 Months Ended |
Dec. 31, 2017 | |
Cash and cash equivalents | |
Cash and cash equivalents | 6. Cash and cash equivalents Cash and cash equivalents are comprised of the following: December 31, 2017 2016 Cash and bank deposits Cash equivalents Bank Deposit Certificate - CDB Investments funds — The balances of cash and bank deposits represent amounts deposited in checking accounts with Brazilian banks. The CDB investments are indexed to the Brazilian Interbank Deposit Certificate (“CDI”) and are repayable on demand. Investment funds is comprised of CDB’s investments and repurchase agreements, denominated in Reais, with financial institutions (deposit certificates). Cash equivalents investments are classified as financial assets at fair value through profit or loss. |
Short term investments
Short term investments | 12 Months Ended |
Dec. 31, 2017 | |
Short term investments | |
Short term investments | 7. Short term investments Investments are comprised of: December 31, 2017 2016 Other short-term investments Investment funds Investment funds is comprised of Brazilian government bonds and bank notes, denominated in Reais, with financial institutions (deposit certificates) and debentures issued by B and BB+ risk rated companies bearing an accumulated average interest rate of 103.5% of CDI - Interbank Deposit Certificate rate. Brazilian government bonds are comprised of National Treasury Bills (“LTN”), National Financial Bills (“LFT”) and National Treasury Notes (“NTN”). Short-term investments are classified as financial assets at fair value through profit or loss. |
Restricted investments
Restricted investments | 12 Months Ended |
Dec. 31, 2017 | |
Restricted investments | |
Restricted investments | 8. Restricted investments Restricted financial investments are comprised of deposits to guarantee some of our loans (FINEM to purchase aircraft, engines and equipment) required by certain financial institutions, which were invested in floating rate CDBs - Bank Certificate Deposits and DI — Investments linked to the Interbank Deposit interest rate. The return on these investments varies from 100.0% to 101.0% of the CDI rate. |
Trade and other receivables
Trade and other receivables | 12 Months Ended |
Dec. 31, 2017 | |
Trade and other receivables | |
Trade and other receivables | 9. Trade and other receivables December 31, 2017 2016 Credit cards Travel agencies Other receivables Allowance for doubtful accounts ) ) Accounts receivable from credit card companies are received in installments of up to twelve months. Installment receivables which are due more than 60 days amounted to R$573.6 at December 31, 2017 (December 31, 2016 — R$353.9). Average days-sales-outstanding was 36 days for the year ended December 31, 2017 (December 31, 2016 - 32 days). Generally, interest is charged on sales receivable in installments with more than six months. The Company enters into factoring transactions with banks or credit card management companies, in order to obtain funds for working capital. During the year ended December 31, 2017 the Company factored accounts receivable from credit cards with a face value of R$3,153.8 (December 31, 2016 - R$4,717.4). Because these receivables are from credit card companies and present a low credit risk, we were able to sell these receivables without any risk to the Company in the event of default by the customers. As such, the accounts receivable were derecognized in full and the discount interest cost recognized in the statement of operations, under financial expenses, for an amount of R$35.3 for the year ended December 31, 2017 (December 31, 2016 - R$97.7). The changes in the allowance for doubtful accounts are as follows: December 31, 2017 2016 Balance at the beginning of the year Increases Reversals ) ) Balance at the end of the year The schedule of accounts receivables are as follows: December 31, 2017 2016 Not yet due Up to 90 days Over 91 days |
Inventories
Inventories | 12 Months Ended |
Dec. 31, 2017 | |
Inventories | |
Inventories | 10. Inventories December 31, 2017 2016 Parts and maintenance materials Catering and uniforms Inventory provision ) ) |
Prepaid expenses
Prepaid expenses | 12 Months Ended |
Dec. 31, 2017 | |
Prepaid expenses | |
Prepaid expenses | 11. Prepaid expenses December 31, 2017 2016 Insurance premium Aircraft and engine leases Guarantee commission Other Non-current Current Aircraft and engine lease prepayments are comprised of costs of aircraft lease agreements that are expensed on a straight line basis over the lease term. |
Related parties
Related parties | 12 Months Ended |
Dec. 31, 2017 | |
Related parties | |
Related parties | 12. Related parties a) Compensation of key management personnel Key management personnel include board of director members, officers and executive committee members. The compensation paid or payable to officers and directors services is as follows: For the year ended December 31, 2017 2016 Salaries and wages Bonus Share-based compensation and restricted share units plans b) Guarantees granted The Company granted guarantees for some property rental agreements entered into by three of its executive officers, the amounts involved are not material. c) Maintenance agreements ALAB entered into Maintenance Agreements to aircraft with a TAP Manutenção e Engenharia Brasil S/A (“TAP ME”). TAP ME is part of the same economic group as TAP. The total value of maintenance services acquired by the Company pursuant to such Maintenance Agreements during the year ended December 31, 2017 was R$83.3 (December 31, 2016 - R$126.0). d) Codeshare Agreement During the year ended December 31, 2015, ALAB signed a codeshare agreement with TAP and United, which will provide transport of passengers whose tickets have been issued by one of the airlines and the service is performed by the other. e) Loan agreements receivable On September 2, 2016 the Company entered into a loan agreement with a shareholder in the amount of US$2.8 million (December 31, 2017 - R$9.7). This agreement bears interest at a rate of Libor plus 2.3% p.a. and matures in 2019. On November 24, 2017 the Company entered into a loan agreement with HNA, the borrower, in the amount of US$22 million (December 31, 2017 - R$73.2). This agreement bears a one time upfront fee of 1% of the principal and interest at a rate of 1.0% per calendar month, and matures in 364 days from the signing date. The loan is guaranteed by a pledge of 25,472,852 preferred shares of Azul owned by HNA. f) Transactions with TAP The Company entered into certain transactions with TAP as described below: For the year ended 2017 2016 Aircraft sublease (i) ) ) TAP Convertible Bonds (ii) i. Aircraft sublease In March 2016, the Company subleased fifteen aircraft to its related party TAP. Seven of the fifteen leases had been executed at a time when the market for regional aircraft was higher than when the related seven subleases were executed. As a result, although the Company believes that the rates in these seven subleases represented approximate market rates at the time of their execution, the Company will receive from TAP an amount lower than the amount that the Company has to pay under the related leases. This difference considering the total term of sublease contracts discounted to its net present value was R$68.9 in December 31, 2017 (December 31, 2016 — R$115.6) and recorded as a provision for the obligations under onerous leases, as required by IAS 37 “Provisions, Contingent Liabilities and Contingent Assets”, representing the remaining amount of the future unavoidable costs under the leases. The loss recognized in “result from related party transaction, net” in the year ending December 31, 2016 relates to the creation of the onerous lease provision. The gain recognized in the year ending December 31, 2017 is mainly driven by i) a reversal of part of the provision which relates to costs that are expected to be avoidable should the company exercise an early termination option of the contracts with the lessor net of related fine and; ii) an update of the estimates used in the calculation of the present value of the liability based on the latest available information. In July 2017, the Company subleased two additional aircraft to TAP. These aircraft are owned by the Company and the rates in these leases represented market rates at the time of their execution. Additionally, two of the fifteen initially subleased aircraft was returned TAP, resulting in a total of fifteen aircraft subleased to TAP as of December 31, 2017. For the fifteen subleases, over the year ended December 31, 2017, amounts received from TAP from the subleases amounted to R$113.4, and amounts paid to the lessors of the related aircrafts totaled R$138.0. ii. TAP Convertible Bonds On March 14, 2016, the Company acquired series A convertible bonds issued by TAP (the “TAP Convertible Bonds”) for an amount of €90 million. The TAP Convertible Bonds are convertible, in whole or in part at, the option of Azul into new shares representing the share capital of TAP benefiting from enhanced preferential economic rights (the “TAP Shares”). Upon full conversion, the TAP Shares will represent 6.0% of the total and voting capital of TAP, with the right to receive dividends or other distributions corresponding to 41.25% of distributable profits of TAP. The option is exercisable starting in July 2016. The TAP Convertible Bonds mature 10 years from their issuance and bear interest at an annual rate of 3.75% until June 20, 2016 and at rate of 7.5% thereafter. Accrued interest remains unpaid until the earlier of the maturity date or early redemption of the bonds. TAP has the right to early redeem the TAP Convertible Bonds if not yet converted and upon the earlier of (i) occurrence of an IPO, or (ii) 4 years from issuance of the TAP Convertible Bonds provided that TAP should be in compliance with certain financial covenants. The TAP Convertible Bonds will be redeemed at their principal amount together with the accrued unpaid interest. The TAP Convertible Bonds, as well as the option to convert them into TAP Shares, were classified as a single financial asset recorded at changes in the fair value through profit or loss, under “Result from related parties transactions, net”, classified in “Long term investments”. For the year ended December 31, 2017, the net result from changes in the fair value of TAP Convertible Bonds was a net gain of R$202.9 including a gain from the derecognition of the financial liability for HNA’s option on TAP Convertible Bonds of R$154.4 (Note 21), due to the lack of option exercise from HNA. g) Hainan Airlines Holding Co. Ltd. On February 5, 2016, the Company entered into an Investment Agreement with Hainan Airlines Holding Co. Ltd (“HNA”), under which HNA committed to make a contribution for a total amount of US$450 million (equivalent to R$1,753.9 on February 5, 2016). The Investment Agreement consists of the following: i) Capital contribution On March 14, 2016, the Company received approx. US$100 million (equivalent to R$360.8) related to a subordinated loan convertible to Azul class D preferred shares and on the same date acquired €90 million (equivalent to R$360.8) in Series A convertible bonds issued by TAP. During the year ended December 31, 2016 the Company converted the loan into increase to issued capital in the amount of R$324.8 and received approx. US$350 million (equivalent to R$660.4). Such amount was used for (i) the subscription of 63,241,900 class D preferred shares of Azul, amounting to R$985.2 and (ii) R$487.9 allocated to the “Capital reserve” account (Note 19). Under the terms of the agreement, HNA had the option to acquire part of the economic benefits of TAP Convertible Bonds at a notional value of €30 million. The option matured on December 2, 2017 and was not exercised. The fair value of this option, previously recognized as a financial liability (Note 21) was recognized as a gain in “Result from related parties transactions, net” in the amount of R$154.4. ii) Aggregate economic interest in TAP Following Parpública — Participações Públicas’ (“Parpública”), an entity controlled by the Portuguese Government, exercise of its option to subscribe €30 million of TAP convertible loans, in order to re-establish HNA’s indirect shareholding of TAP, the Company agreed to transfer to HNA, Atlantic Gateway securities or other instruments acceptable to HNA representing at the time of issuance an aggregate 3% economic interest in TAP on a fully diluted basis immediately following the transfer (“Settlement Transaction”). This obligation, valued at €6.9 million (R$26.0). h) Related parties Guarantees ALAB entered into a Deed of Guarantee and Indemnity as of September 15, 2017, in connection with the obligations and liabilities related to the operating lease agreements of three A350-900XW aircraft entered into by Hong Kong Airlines and Beijing Capital Airlines, companies of the HNA Group, shareholder of the Company, and Wilmington Trust SP Services (Dublin) Limited. i) Operating lease agreements As of September 12, 2017, ALAB entered into Operating Lease Agreements to five A330 neo aircraft with Avolon Aerospace Leasing Ltd (“Avolon”). Avolon is part of the same economic group as HNA. The Company carried out an extensive pricing process with the main players in the international aircraft leasing market, including Avolon’s competitors. Upon completion of this process, the transaction with Avolon presented the best terms and conditions for the Company. This transaction has been completed on arms’ length terms that would be applicable in transactions with third parties. |
Security deposits and maintenan
Security deposits and maintenance reserves | 12 Months Ended |
Dec. 31, 2017 | |
Security deposits and maintenance reserves | |
Security deposits and maintenance reserves | 13. Security deposits and maintenance reserves December 31, 2017 2016 Security deposits Maintenance reserve deposits Security deposits and maintenance reserve deposits are denominated in US dollars and adjusted for changes to foreign exchange rates. Security deposits are related to aircraft lease contracts and will be refunded to the Company when the aircraft is returned at the end of the lease agreement. Maintenance reserve deposits are paid under certain aircraft leases to be held as collateral in advance of the performance of major maintenance activities and are reimbursable upon completion of the related maintenance event, under certain conditions. As of December 31, 2017 maintenance reserve deposits are likely to be recoverable as they are lower than the expected cost of the related next maintenance event that the reserves are intended to collateralize. During the year ended December 31, 2017 the Company recognized a write-off of R$9.6 (December 31, 2016 - R$4.0) in the “Maintenance materials and repairs” in the income statements line item for maintenance reserve deposits that are not likely to be reimbursed in relation to aircraft that went through their last maintenance event prior to their return. The Company replaced some of its security deposits and maintenance reserves deposits for bank guarantees, and was refunded an amount of R$25.3 and R$32.6, respectively as of December 31, 2017 (December 31, 2016 - R$21.1 and R$62.6 respectively). Presented below are the changes in the security deposits and maintenance reserve deposits balance: Maintenance Security deposits Total Balance at December 31, 2015 Additions Refunds from sublease (*) — ) ) Write-offs ) ) ) Refunds/returns ) ) ) Foreign exchanges variations ) ) ) Balance at December 31, 2016 Additions Refunds from sublease (*) — Write-offs ) — ) Refunds/returns ) ) ) Foreign exchanges variations Balance at December 31, 2017 (*) refers to the net amount received and refunds from TAP in relation to security deposits of subleased aircraft. |
Property and equipment
Property and equipment | 12 Months Ended |
Dec. 31, 2017 | |
Property and equipment | |
Property and equipment | 14. Property and equipment Property and equipment are mainly comprised of “aircraft and engines” and aircraft equipment. “Aircraft and engines” refers to owned aircraft and capitalized heavy maintenance and structural checks related to owned aircraft. During the year ended December 31, 2017, the Company entered into sale and leaseback transactions on owned aircraft and engines. The gain associated with the aircraft sale and leaseback transactions, net of selling expenses of R$75.4 (December 31, 2016 — R$51.9) was recognized in “Other operating expenses, net”. The non-cash impact of this transaction amounted to R$325.1, relating to the outstanding debt on the aircraft which was transferred to the buyer at the time of the sale. During the year ended December 31, 2017 the loss associated with the sale and leaseback transactions which resulted in finance leases amounted to R$4.2 was recorded in “Other liabilities” and will be recognized in income over the lease term of 120 months average. During the year ended December 31, 2016, the Company sold some of its owned aircraft and engines. The gain associated with the sale transactions of R$70.7, was recognized in “Other operating expenses, net”. During the year ended December 31, 2016, the Company amended certain terms of aircraft lease agreements previously classified as operating leases that resulted in the classification of such agreements to finance leases. The financial statement impact was an increase of R$449.8 in “aircraft and engines” with a corresponding entry to “loans and financing”. a) Breakdown December 31, 2017 2016 Cost Accumulated Net amount Net amount Leasehold improvements ) Equipment and facilities ) Vehicles ) Furniture and fixtures ) Aircraft equipment ) Aircraft and engines ) Advance payments for acquisition of aircrafts — Construction in progress — ) b) Changes in property and equipment balances are as follows Cost December 31, Acquisitions Disposals/ Transfers December 31, Leasehold improvements — Equipment and facilities ) — Vehicles ) — Furniture and fixtures — — Aircraft equipment ) Aircraft and engines ) Advance payments for acquisition of aircrafts ) — Construction in progress — ) ) — Accumulated depreciation December 31, Depreciation Disposals/ Transfers December 31, Leasehold improvements ) ) — — ) Equipment and facilities ) ) — ) Vehicles ) ) — ) Furniture and fixtures ) ) — — ) Aircraft equipment ) ) — ) Aircraft and engines ) ) — ) ) ) — ) For owned aircraft, we employ the deferral method that consists in the capitalization of heavy maintenance and structural checks cost. Under this method, the cost of major maintenance and structural checks is capitalized and amortized as a component of depreciation and amortization expense until the next major maintenance event. Heavy maintenance and structural checks on aircraft held under operating lease is expensed as incurred, and it is recorded in the “maintenance material and repair” line items. The next major maintenance and structural check event is estimated based on the average maintenance costs and timing of the next scheduled maintenance event as suggested by the manufacturer and according to the fleet’s historical performance in the Company, and may change based on changes in aircraft utilization and changes in suggested manufacturer maintenance intervals. In addition, these assumptions can be affected by unplanned incidents that could damage a major component to the extent that would require a major maintenance event prior to a scheduled maintenance event. Based on technical analysis and to reflect the Company’s current outlook for the use of its assets, the average useful life of certain engine major maintenance events was extended from five to six years. The change in useful life was calculated prospectively. The amortization of deferred maintenance expenses over major maintenance expenditures and structural checks and the maintenance expenses incurred for the year ended December, 31, 2017 and 2016, both representing total maintenance expenses for the period, are presented as follows: December 31, 2017 2016 Amortization of capitalized maintenance costs ) ) Maintenance materials and repairs ) ) ) ) As of December 31, 2017, the Company performed an impairment analysis. No impairment of property and equipment was recognized as a result of such impairment analysis. |
Intangible assets
Intangible assets | 12 Months Ended |
Dec. 31, 2017 | |
Intangible assets | |
Intangible assets | 15. Intangible assets a) Breakdown December 31, 2017 2016 Cost Accumulated Net amount Net amount Goodwill (i) — Airport operating licenses (ii) — Software ) ) b) Changes in intangible assets balances are as follows : Costs December 31, Acquisitions Disposals/ Transfers December 31, Goodwill (i) — — — Airport operating licenses (ii) — — — Software ) — ) — Accumulated amortization December 31, Amortization Disposals/ Transfers December 31, Software ) ) — — ) ) ) — — ) (i) Refers to goodwill recorded in the acquisition of TudoAzul (former TRIP) in 2012. The amount of R$753.5 represents the excess of the consideration transferred over the fair value of the net assets acquired and liabilities assumed. (ii) As part of the purchase price allocation of TudoAzul (former TRIP) acquisition, the Company recognized a separate intangible asset for the airport operating licenses. These intangible assets were deemed to have an indefinite life. Impairment of goodwill and Airport operating licenses Goodwill of acquisition of TudoAzul (former TRIP) The Company performed its annual impairment tests as of December 31, 2017. The Company assessed that the most appropriate method for estimating the recoverable amount of the Company’s single CGU (cash-generating unit) is by using the income approach through the discounted cash flows method, resulting in the value in use. In order to determine the book value of the CGU, the Company adds the intangible assets recorded, given that it will only generate economic benefits by using the combination of both. The Company allocates goodwill and airport operating services to the cash-generating unit as follows: December 31, 2017 2016 Goodwill Airport Goodwill Airport Book value Book value — CGU — — Value in use Discount rate before taxes % % % % Perpetuity growth rate % % % % The assumptions used in the impairment tests of goodwill and other intangible assets are consistent with the Company’s operating plans and internal projections over a five-year period, and for longer periods the Company assumed growth rate in perpetuity. These assumptions are both reviewed and approved by Management. The discounted cash flow that determined the value of the CGU was prepared in accordance with the Company’s business plan, which was approved in December 15, 2017. The Company took into consideration the following assumptions: · Fleet and capacity : considers operational fleet plan, aircraft utilization and capacity per flight; · Passenger revenue : considers the historical revenue per flown seat kilometer assuming the Company’s growth plan; · Operational costs : considers key performance indicators per cost line, aligned with Company’s growth plan as well as macroeconomic variables (as described below); · Investment needs : aligned to the Company’s business plan. The Company also considered forecasted market variables such as GDP (source: Central Bank of Brazil), the U.S. Dollar to Brazilian reais exchange rate (source: Central Bank of Brazil), the price of a barrel of kerosene (source: Bloomberg) and interest rates (source: Bloomberg). The result of the impairment test, which includes a sensitivity analysis of the main variables, showed that the estimated recoverable amount is higher than carrying value of net assets allocated to the cash generating unit, and therefore no impairment was recognized as of December 31, 2017. |
Income tax and social contribut
Income tax and social contribution | 12 Months Ended |
Dec. 31, 2017 | |
Income tax and social contribution | |
Income tax and social contribution | 16. Income tax and social contribution a) Income tax and social contribution Year ended December 31, 2017 2016 Income/(loss) before income tax and social contribution Combined tax rate % % Income tax and social contribution statutory rate ) ) Adjustments to calculate the effective tax rate: Taxable profit on foreign subsidiaries ) ) Exchange differences on foreign subsidiaries Unrecorded deferred tax on tax loss and on temporary differences ) Permanent differences ) ) Deferred Income Tax on Tax Losses utilized in the PERT (*) — Reversal of provisions for uncertain tax provisions (**) — Other Total income tax and social contribution expenses ) ) Current income tax and social contribution Deferred income tax and social contribution ) ) ) ) (*) Use of tax losses in the Federal Installment payment program (“PERT”) (**) Reversal of income tax provision prescribed considering the five-years statute of limitation b) Breakdown of deferred income tax and social contribution December 31, 2017 2016 Deferred tax liabilities On temporary differences Provision for tax, civil and labor risks Deferred revenue of TudoAzul program ) ) Aircraft lease expense ) ) Depreciation of aircraft and engines ) Exchange rate ) ) Deferred gain related to aircraft sold Cash flow hedge (*) Fair value of TAP convertible bonds ) ) Provision for onerous contract Financial instruments ) Fair value of aircraft ) ) Fair value of slots ) ) Other on business combination fair value adjustment ) ) Others Net deferred tax (liabilities) ) ) Deferred tax assets on net operating losses Net deferred tax (liabilities) ) ) (*) Deferred tax recorded in “Other comprehensive income (loss)” The Company offsets tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority. The Company has income tax losses that are available indefinitely for offsetting against future taxable profits, as follows: December 31, 2017 2016 Net tax losses Income tax loss carryforwards (25%) Social contribution negative base tax carryforwards (9%) Deferred income tax assets on tax losses have not been recognized as there is no evidence of recoverability in the near future, except for R$126.1 related to 30% of the deferred tax liability balance as of December 31, 2017 in accordance to the limit provided by the tax law. During the year ended December 31, 2017 the Company used tax loss carryforwards for an amount of R$244.5 after adhering to the “PERT” (Provisional Measure 783/17 converted into Law 13,496/17), which is an installment payment program for federal taxes and other debts administrated by Local Government Authorities (“PGFN” and “RFB”). The balance of the debts included in all Federal Installment Payment Programs (REFIS and PERT) is as follows: December 31, 2017 2016 Air navigation fees (REFIS) Air navigation fees (PERT) — Total Current Non-current |
Loans and financing
Loans and financing | 12 Months Ended |
Dec. 31, 2017 | |
Loans and financing | |
Loans and financing | 17. Loans and financing December 31, 2017 2016 Loans Debentures Non-current Current Interest-bearing loans, financing and debentures are measured at amortized cost, using the effective interest rate method. 17.1. Loans Guarantees Interest Final maturity December 31, December Denominated in foreign currency - US$ Purchase of aircraft Chattel mortgage LIBOR plus “spread” of 2.55% to 4.00% p.a. 03/2025 Finance lease Chattel mortgage LIBOR plus spread of 2.05% to 5.50% p.a. 12/2027 Working capital (*) (**) (a) Receivables of Azul and cash collateral LIBOR plus fixed interest of 2.39% to 5.86% p.a. and fixed to 5.90%p.a 04/2024 FINIMP Letter of Credit 5.4% p.a . 11/2017 — Denominated in local currency - R$ Purchase of aircraft (FINEM, FINAME) (*) Investments and chattel mortgage of aircraft Fixed of 3.50% to 6.50% p.a. 05/2025 Working capital Receivables of Azul 5.0% fixed p.a to 126% of CDI 07/2021 Finance lease Chattel mortgage CDI plus fixed spread of 3.87% p.a. 04/2019 Total in R$ Current position Non-current position (*) Includes the effect of fair value hedge, a gain of R$4.7 (December 31, 2016 — loss of R$13.2). (**) As of December 31, 2017, US dollar denominated working capital loans totaling R$1,383.7 were swapped to Brazilian Reais, resulting in an effective total debt denominated in foreign currency of R$1,226.1 (equivalent 35.1%) and a total in R$ of R$2,263.8 (equivalent 64.9%). (***) FINIMP is a credit operation to import finance. FINEM, FINAME are a special credit line from BNDES (the Brazilian development bank). a) Senior notes The Company offered US$400 million in unsecured senior notes. The senior notes were issued with interest rate of 5.875% per year and will mature on October 26, 2024, unless earlier redeemed in accordance with the terms of the notes. Interest on the notes will be payable semi-annually in arrears on April 26 and October 26 of each year, beginning on April 26, 2018. On December 14, 2017, the Company entered into derivative transactions with banks counterparties to swap the senior notes. More details see note 21. The details of this transaction is following: Senior notes Swap Currency US$ R$ Amount US$400 million R$1,314.6 Interest Fixed Floating Interest rate 99.1% of CDI b) Long term loans mature as follows: December 31, 2017 2016 2018 — 2019 2020 2021 After 2021 c) The following assets serve as guarantees to secure the financing agreements December 31, 2017 2016 Property and equipment (carrying value) used as collateral (Note 14) 17.2. Debentures December 31, Guarantees Interest Final 2017 2016 Fifth issue (*) Credit cards receivable 127% of CDI p.a. 09/2019 — Seventh issue (*) Credit cards receivable CDI + 2,85% p.a. 12/2018 — Eight issue Credit cards receivable CDI + 1.50% p.a. 01/2019 — Total Current position Non-current position (*) In the last quarter of 2017, the Company early redeemed the remaining balance of the fifth and seventh issue for an amount of R$973.5. Long term debentures mature as follows: December 31, 2017 2016 2018 — 2019 17.3. Finance leases Future minimum lease payments under finance leases together (included in loans) with the present value of minimum lease payments are as follows: December 31, 2017 2016 2017 — 2018 2019 2020 2021 After 2021 Total minimum lease payments Less finance charges ) ) Present value of minimum lease payments Less short-term portion Long-term portion Lease agreements under which the Company has substantially all the risks and rewards of ownership, were classified as finance leases. Finance leases were capitalized on lease inception at present value of the minimum lease payments. Some finance leases were designated as hedged objects in an effective cash flow hedging relationship. The Company used interest rate swaps to convert the floating US Libor rate to a fixed rate exposure, protecting the volatilities of its future cash flow. The interest rate swaps have the same maturity and common terms as the finance leases that they are hedging. See note 21 for more details. 17.4 Covenants As of December 31, 2017 the Company had an outstanding balance of R$497,4 in “loans and financing” subject to financial covenants related to leverage and debt coverage ratios. Both covenants are measured annually. Covenants relate to Ratios measured 8 th issuance of debentures (i) adjusted debt coverage ratio (ICSD) equal or higher to 1.2; and (ii) leverage ratio equal or lower than 5.5. 6 th issuance of Promissory Notes Aircraft financing As of December 31, 2017 the Company was in compliance with all the covenants related to financial transactions. |
Air traffic liability
Air traffic liability | 12 Months Ended |
Dec. 31, 2017 | |
Air traffic liability | |
Air traffic liability | 18. Air traffic liability Air traffic liability is comprised of the following: December 31, 2017 2016 Advance ticket sales TudoAzul program |
Equity
Equity | 12 Months Ended |
Dec. 31, 2017 | |
Equity. | |
Equity | 19. Equity a) Issued capital and authorized shares, all registered and without par value Company´s Common Preferred Class “A” Class “C” Class “D” At December 31, 2017 — — At December 31, 2016 — Conversion of shares On February 3, 2017, the Company undertook a one for one stock conversion of all of our 10,843,792 Class C preferred shares and all of our 63,241,900 Class D preferred shares into Class A preferred shares. As a result, all Class A preferred shares were simultaneously renamed “preferred shares”. Each common share entitles its holder to 1 (one) vote in the General Shareholders’ Meeting. Preferred shares of any class are not entitled to vote. Preferred shares have: i) priority of reimbursement of capital upon liquidation; ii) the right to be included in a public offering of the Company for a purchase of shares upon transfer of the Company’s control for the same conditions as the common shareholders and for a price per share equivalent to seventy-five (75) times the price per share paid to the controlling shareholder; iii) in case of the Company’s liquidation, the right to receive amounts equivalent to seventy-five (75) times the price per common share upon splitting of the remaining assets among the shareholders; and iv) the right to receive dividends in an amount equivalent to seventy-five (75) times the price paid per common share. Stock Split On February 23, 2017, the Company’s shareholders approved the split of the shares in the proportion of two shares of the same class for each one currently existing all periods were adjusted to reflect the stock split. Issuance of shares and issued capital i. IPO On April 10, 2017, the Company approved a capital increase in the total amount of R$1,323.0 for the subscription of 63,000,000 preferred shares of Azul. On April 19, 2017, the Company concluded its global initial public offering (“IPO”) of 96,239,837 shares of preferred stock, of which 63,000,000 preferred shares were offered by Azul and 33,239,837 preferred shares were offered by selling shareholders, at an offering price of R$21.00 per preferred share and US$20.06 per ADS (each ADS represents three preferred shares). ii. Exercise of stock options During the year ended December 31, 2017, the Company approved shares issuance in the amount of R$13.3 comprised of 4,182,454 preferred shares in connection with the exercise of stock options. b) Share issuance costs As set forth Pronouncement CPC 08 — Costs of Transaction and Premium on the Issuance of Marketable Securities, the Company accounted for the underwriter fees and other offering costs directly attributable to the IPO as a deduction from equity, net of tax effects. The amounts recorded are as follows: December 31, Shared issued costs Tax credits from income tax and social contribution ) Shared issued costs, net Additional share issuance costs of R$26.0 were recognized in 2017 in relation to the obligation to HNA arising from the capital contribution in 2016 as explained in Note 12 g). c) Capital reserve c.1) Share-based payments: The share-based payment reserve is used to recognize the value of equity-settled share-based payments provided to employees, including key management personnel, as part of their compensation. For the exercise ended December 31, 2017, the Company recognized compensation expense for an amount of R$29.9 (December 31, 2016 — R$9.9) in “Salaries, wages and benefits”. c.2) As of December 31, 2016, the Company recognized the amount in excess of par value of the shares issued to HNA in capital reserves in the total amount of R$487.9. See Note 12 b) i. c.3) As of April 10, 2017, the Company recognized the amount in excess of par value of the shares issued to IPO in capital reserves in the total amount of R$646.5 net of foreign exchange loss of R$15.0. See Note 19. c.4) As of December 31, 2017, the Company recognized the amount in excess of par value of the shares issued to exercise for stock options in capital reserves in the total amount of R$10.2. c.5) As of December 31, 2017, the Company recognized the amount of R$5.6 relating to 781,225 shares issued to the Company key management personnel, in connection with the share based option plan, not yet fully paid for. d) Dividends According to the by-laws of the Company, unless the right is waived by all shareholders, the shareholders are guaranteed a minimum mandatory dividend equal to 0.1% of net income of the Company after the deduction of legal reserve, contingency reserves, and the adjustment prescribed by Law No. 6,404/76 (Brazilian Corporate Law). If the Company has accumulated losses, there will be no distribution of dividends. Interest paid on equity, which is deductible for income tax purposes, may be deducted from the minimum mandatory dividends to the extent that it has been paid or credited. Interest paid on equity is treated as dividend payments for accounting purposes. Dividends are subject to approval by the Annual Shareholders Meeting. The Company has not distributed dividends for the exercise ended December 31, 2017 and 2016. e) Other comprehensive loss Changes in fair value of derivative instruments designated as cash flow hedges are recognized in other comprehensive loss, net of tax effects, for a loss of R$11.2 and R$33.8, as of December 31, 2017 and 2016 (net of R$3.5 and R$17.4 tax effect) respectively. f) Treasury shares During the year ended of December 31, 2017, the Company acquired 103,000 treasury shares, totaling R$2.7. |
Income (loss) per share
Income (loss) per share | 12 Months Ended |
Dec. 31, 2017 | |
Income (loss) per share | |
Income (loss) per share | 20. Income (loss) per share Basic earnings or loss per common share are calculated by dividing net income (loss) attributable to the equity holders of Azul by the weighted average number of common shares outstanding during the year ended December 31, 2017 and 2016, including the conversion of the weighted average number of preferred shares outstanding during the year ended into common shares. Diluted earnings or loss per common share are calculated by dividing the net income (loss) attributable to the equity holders of Azul, by the weighted average number of common shares outstanding during the year ended December 31, 2017 and 2016, including the conversion of the weighted average number of preferred shares outstanding during the years into common shares, plus the weighted average number of common shares that would be issued on conversion of all the dilutive potential common shares into common shares. Basic earnings or loss per preferred share, are calculated by dividing net income (loss) attributable to the equity holders of Azul by the weighted average number of preferred shares outstanding during the year ended December 31, 2017 and 2016, including the conversion of the weighted average number of common shares outstanding during the years into preferred shares . Diluted earnings or loss per preferred share, are calculated by dividing the net income (loss) attributable to the equity holders of Azul, by the weighted average number of preferred shares outstanding during the year ended December 31, 2017 and 2016, including the conversion of the weighted average number of common shares outstanding during the years into preferred shares, plus the weighted average number of preferred shares that would be issued on conversion of all the dilutive potential preferred shares into preferred shares. The following table shows the calculation of income or loss per common and preferred share in thousands, except for values per share: December 31, 2017 2016 Numerator Net income (loss) ) Denominator Weighted average number of common shares Weighted average number of preferred shares 75 preferred shares (*) Weighted average number of preferred equivalent shares (*) Weighted average number of common equivalent shares (**) Weighted average number of shares that would have been issued at average market price Basic net income (loss) per common share ) Diluted net income (loss) per common share ) Basic net income (loss) per preferred share ) Diluted net income (loss) per preferred share ) (*) Refers to a participation in the total equity value of the Company, calculated as if all 928,965,058 common shares outstanding had been converted into 12,386,200 preferred shares at the conversion ratio of 75 common shares to 1.0 preferred share. (**) Refers to a participation in the total equity value of the Company, calculated as if the weighted average preferred shares outstanding had been converted into common shares at the conversion ratio of 75 common shares to 1.0 preferred share For the year ended December 31, 2016, potential 7,641,753 preferred shares, relating to shared-based option plan, were excluded from the calculation of diluted net loss per share because their effect would have been antidilutive. |
Financial instruments
Financial instruments | 12 Months Ended |
Dec. 31, 2017 | |
Disclosure of financial instruments | |
Financial instruments | 21. Financial instruments The Company has the following financial instruments: Book value Fair value December 31, December 31, Level 2017 2016 2017 2016 Assets: Short-term investments 1/2 1,036.1 331.2 1,036.1 331.2 Long term investments 1/3 836.0 753.2 836.0 753.2 Trade and other receivables 1 914.4 673.3 914.4 673.3 Restricted investments (*) 1 8.8 162.0 8.8 162.0 Derivative financial instruments (*) 2 420.8 21.7 420.8 21.7 Liabilities: Loans and financing (*) (a) 2 3,489.9 4,034.5 3,461.0 4,065.8 Accounts payable 1 953.5 1,034.3 953.5 1,034.3 Financial liabilities at fair value through profit and loss (Note 22) (**) 2 — 44.7 — 44.7 Derivative financial instruments (*) 2/3 426.9 231.3 426.9 231.3 (*) Includes current and non-current. (**) Refers to a private placement of preferred shares class B (See Note 22). (a) Balance of loans and financing includes: (i) Senior Notes: The entire amount related to the Bond “Senior Notes” was swapped from U.S. dollars to Reais. The swap was executed through an Interest Rate and Currency Swap, agreement, as shown below: Options Structure Coupon Payments Principal Payment Period Apr/2018 to Apr/2019 Oct/2019 to Oct/2024 Oct/2024 Notional US$12 million US$12 million US$400 million Put option bought — N/A Call option bough N/A N/A Call option sold — Both derivative instruments resulted in the full protection of the company against foreign currency fluctuations capped at R$4.7500 and a partial protection for amounts above this level while keeping the upside for a Brazilian real appreciation below the exchange rate of R$3.2865 for US$1.00. The options were financed, yielding a total hedging cost of 99.1% of CDI. For more details about these transactions, including individual Mark-to-Market amounts see “Forward foreign currency contract” and “Interest rate swap contract”. (ii) Some of the loans were swapped from U.S. dollars to Reais. The notional of the working capital loan was R$103.7, and its interest rate and currency swap generated an unrealized loss of R$2.4. More details see “Fair value hedge” and “Interest rate swap”. (iii) Cash flow hedge: Some finance leases were designated as the hedged objects in an effective cash flow hedging relationship. The Company hedged its interest exposure and swapped its exposure related to interest floating rates to fixed rates. The total notional of the finance leases was R$87.4 and its interest rate swaps generated an unrealized loss of R$14.7. More details see item, Cash flow hedge. The carrying value of cash equivalents, short and long-term investments, restricted investments, trade and other receivables and accounts payable approximate their fair value largely due to the short-term maturity of these instruments. Derivative financial instruments December 31, 2017 2016 Assets Liabilities Assets Liabilities Cash flow hedge Interest rate swap contract and heating oil forward contracts — ) — ) Fair value hedge Interest rate swap contract — ) Derivatives not designated as hedge HNA option on TAP economic interest (Note 12) — — — ) Interest rate swap contract (*) ) — Forward foreign currency contract (*) — — ) Heating oil forward contracts — — ) Foreign currency options (*) (**) ) — — ) ) (*) Financial Instruments in connection with the Senior Notes, with a total net liability R$6,1. The senior notes were swapped into Reais using a set of instruments, where the Company receives U.S.dollar at 5,875% and pays Reais at 99,1% of CDI. More details see item Derivatives not designated as hedge accounting’ (**) Includes R$1.3 from a call-spread option in connection with a US$15 million loan. This option swaps the loan to Reais, converting it from Libor 3M + 2,388% in U.S.Dollar to 124% of CDI + FX variation in Reais. The maturity of the derivative financial instruments held by the Company is as follows: December 31, 2017 Immediate Until 6 7 to 12 1 to 5 More than Total Assets from derivative transactions ) Liabilities from derivative transactions ) ) ) — ) Total derivative financial instruments ) ) ) ) Cash flow hedge As of December 31, 2017 and 2016, the Company had interest rate swaps designated as cash flow hedges to hedge against the effect of changes in the interest rate on a portion of the payments of operating leases and loans denominated in foreign currency in the next 12 months. Some finance leases and loan designated as hedged items in an effective cash flow hedging relationship. The Company hedged its interest exposure and swapped its exposure related to interest floating rates to fixed rates. The total notional of the finance leases and loan was R$87.4 (December 31, 2016 — R$273.3) and its interest rate swaps generated an unrealized loss of R$14.7 (December 31, 2016 — R$51.3). The Company has average Non deliverable forward — “NDF” contracts on the over-the-counter (OTC) Market with 2 different counterparties on the local market indexed to the Heating Oil forward contract traded in NYMEX. These contracts are traded in monthly tranches and provide partial coverage to the Company’s 2018 fuel exposure. During the year ended December 31, 2017, the remaining heating oil forecast transactions, amount of R$29.6 loss, was reclassified from equity to profit and loss. The positions were: December 31, 2017 Notional Asset Liability Fair value Cash flow hedge: Loans and financing LIBOR Fixed rate ) ) December 31, 2016 Notional Asset Liability Fair value Cash flow hedge: Loans and financing LIBOR Fixed rate ) Heating Oil — — ) ) The critical terms of the swap contracts matched with the terms of the hedged loans. Considering all transactions were deemed effective, the fair value changes on cash flow hedge were recorded in other comprehensive loss against derivative financial instruments in liabilities or assets. Changes in other comprehensive loss (cash flow hedge reserve) are detailed below: December 31, 2017 2016 Balance at the beginning of the year ) ) Transactions settled during the year Realization of deferral discontinued hedge — Fair value adjustment ) Deferred tax effect Balance at the end of the year ) ) Fair value hedge As of December 31, 2017 the Company had fixed to floating interest rate swap contracts with a notional amount of R$103.7 (December 31, 2016 - R$599.9). These contracts entitle the Company to receive fixed interest rates and pay floating interest based on CDI. Adjustment to fair value of these contracts resulted in the recognition of an unrealized gain of R$4.7 (December 31, 2016 — loss of R$13.2) which was recorded as financial expenses. The impact on the statement of operations was offset by a positive adjustment on the debt hedged. There was no ineffectiveness during the year ended December 31, 2017 and 2016. Derivatives not designated as hedge accounting i) Forward foreign currency contract The Company is exposed to the risk of changes in the U.S. dollars, and therefore entered into currency forward contracts, options and foreign currency swaps. These currency forward contracts are not designated for hedge accounting. During the year ended December 31, 2017, the Company had entered into NDF contracts of US$370 million to protect itself from currency fluctuations (December 31, 2016 - US$80 million) that generated an unrealized gain of R$219.9. ii) Foreign currency options The Company also has currency options with notional of US$544 million, of which US$529 million are in connection with the Senior Notes hedge, and the remaining US$15 million in connection to an dollar loan maturing in April, 2018. As of December 31, 2017, these options generated an unrealized gain of R$160.5 iii) HNA option on TAP Bonds economic interest The Company has issued an option for HNA amounting to €30 million to purchase up to 33% of the economic benefits of TAP Convertible Bonds. The option expired on December 2, 2017 and was not exercised. As such, the fair value of R$154.4 previously recorded in the derivative financial instruments in liabilities was recognized as a gain in “Result from related parties transactions, net”. More details see note 1 b. iv) Interest rate swap contract As of December 31, 2017 the Company had interest rate swap contracts in connection with the Senior Notes. Changes in fair value of these instruments resulted in the recognition of an unrealized loss of R$381.0 (December 2016 - R$17.2). v) Heating oil forward contracts As of December 31, 2017 the Company also had average NDF contracts on over-the-counter (OTC) Market with three different counterparties on the local market indexed to Heating Oil forward contract traded on the NYMEX, on monthly tranches, with a notional value of R$15.5 (December 31, 2016 - R$183.2). The fair value of these instruments amounted to an unrealized gain of R$4.5 (December 31, 2016 — loss of R$2.1). Fair value of financial instruments The Company applies the following hierarchy to determine the fair value of financial instruments: Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2: other techniques for which all data that have significant effect on the fair value recorded are observable, directly or indirectly; Level 3: techniques that use data that have significant effect on fair value recorded that are not based on observable market data. Assets measured at fair value December 31, Level 1 Level 2 Level 3 Financial assets at fair value Short-term investments — — Restricted investments (a) — — Long-term investments (c) — — Interest rate swap contract - fair value hedge option (b) — — Interest rate swap contract- not designated as hedge — — Forward foreign currency contract — — Foreign currency options Heating oil forward contracts — — Liabilities measured at fair value December 31, Level 1 Level 2 Level 3 Financial liabilities at fair value Interest rate swap contract - cash flow hedge ) — ) — Interest rate swap contract- not designated as hedge ) — ) — Foreign currency options ) — ) — December 31, Assets measured at fair value 2016 Level 1 Level 2 Level 3 Financial assets at fair value Short-term investments 331.2 331.2 — — Restricted investments 162.0 162.0 — — Long-term investments (c) 753.2 1.1 — 752.1 Interest rate swap contract - fair value hedge option (b) 4.5 — 4.5 — Interest rate swap contract- not designated as hedge 17.2 — 17.2 — Liabilities measured at fair value December 31, Level 1 Level 2 Level 3 Financial liabilities at fair value Financial liabilities at fair value through profit or loss ) — ) — Interest rate swap contract - cash flow hedge ) — ) — Interest rate swap contract - fair value hedge (b) ) — ) — HNA option TAP economic interest (d) ) — — ) Interest rate swap contract- not designated as hedge ) — ) — Heating oil forward contracts ) — ) — (a) Includes current and non-current. (b) Portion of the balances consist of loans from FINAME PSI, and standard FINAME presented at their value adjusted by the hedged risk, applying fair value hedge accounting rules. (c) The Company calculated the fair value of the call option based on a valuation for TAP and binomial model considering the term of option, discount rate and the market volatility of publicly traded comparable airlines, calculated on a 2 years average. The resulting amount of the binomial model calculated in Euros was converted into Reais using the period-end exchange rate. See Note 1 (d) The Company calculated the fair value of the put option by using the 12 months Libor rate as the coupon for the bond and applying it for the remaining time of the option. Level 3 financial assets reconciliation Changes in the fair value of the TAP Convertible Bonds is detailed below: December 31, 2017 2016 Balance at the beginning of the year — Acquisition cost (€90 million) (1.b.i) — Foreign currency exchange gain (loss) (*) ) Interest accrual (1.b.ii) (**) Net present value adjustment (1.b.ii) (**) ) ) Fair value of call-option (1.b.ii) (**) Balance at the end of the year (*) recorded in the “Foreign currency exchange, net” in the income statements line item. (**) recorded in the “Result from related parties transactions, net” in the income statements line item. Level 3 financial liability reconciliation Changes in the HNA option TAP economic interest is detailed below: December 31, 2017 2016 Balance at the beginning of the year ) — Fair value of call-option (1.b.ii) (*) — ) Derecognition of financial instrument (*) — Balance at the end of the year — ) (*) recorded in the “Result from related parties transactions, net” in the income statements line item. The option expired on December 2, 2017 and was not exercised, the fair value was reverted. |
Financial liabilities at fair v
Financial liabilities at fair value through profit and loss | 12 Months Ended |
Dec. 31, 2017 | |
Financial liabilities at fair value through profit and loss | |
Financial liabilities at fair value through profit and loss | 22. Financial liabilities at fair value through profit and loss Private placement On December 23, 2013, the Company concluded a private placement of class B preferred shares in the amount of R$239.4, mandatorily redeemable by the holders in the event of an IPO of the Company not occurring by December 27, 2016, for their nominal amount plus 72,5% interest. These shares were classified as short-term debt as of December 31, 2016. This financial instrument was designated as financial liabilities at fair value through profit or loss and the fair value of this financial instrument was recorded in “Financial liabilities at fair value through profit and loss”. During 2016, the class B preferred shares were redeemed and cancelled for a total amount of R$346.4, which comprised a principal amount of R$214.2 and interest accrued of R$132.2. In relation to the balance of remaining outstanding class B shares as of December 31, 2016, during the year the Company agreed with the holder to redeem and cancel those shares for a total amount of R$44.7, payment for which was due and paid in January 2017. As of December 31, 2016 the fair value to paid amounted to R$44.7. |
Operating revenue
Operating revenue | 12 Months Ended |
Dec. 31, 2017 | |
Operating revenue | |
Operating revenue | 23. Operating revenue Year ended December 31, 2017 2016 Revenue Passenger revenue Other revenue Gross revenue Taxes levied on Passenger revenue ) ) Other revenue ) ) Total taxes ) ) Net revenue |
Financial result
Financial result | 12 Months Ended |
Dec. 31, 2017 | |
Financial result | |
Financial result | 24. Financial result Year ended December 31, 2017 2016 Financial income Interest on short-term investments Federal tax installment payment program — Other Financial expenses Interest on loans ) ) Interest on factoring credit card and travel agencies receivables ) ) Interest on other operations ) ) Guarantee commission ) ) Loan costs amortization ) ) Other ) ) ) ) Derivative financial instruments, net ) Foreign exchange result, net Net financial expenses ) ) |
Other operating expenses, net
Other operating expenses, net | 12 Months Ended |
Dec. 31, 2017 | |
Other operating expenses, net | |
Other operating expenses, net | 25. Other operating expenses, net Year ended December 31, 2017 2016 Accommodation and meals IT services Professional services Taxes, civil and labor risks Aircraft insurance Flights interrupted Others (*) ) (*) The “Others” balance is pulverized. |
Commitments
Commitments | 12 Months Ended |
Dec. 31, 2017 | |
Commitments | |
Commitments | 26. Commitments a) Operating leases The Company has obligations arising from its operating lease agreements, denominated in US dollars, for aircraft and engines, totaling 114 aircraft and 17 engines as of December 31, 2017 (December 31, 2016 — 106 and 16 , respectively). The lease terms range from 60 to 144 months for Embraer, ATR and Airbus. Bank guarantees or cash deposits were used to guarantee payments under these agreements. Operating lease agreements require that the Company make periodic lease payments and do not include aircraft purchase options at the end of the agreements. These payments are denominated in U.S. dollars and are generally subject to LIBOR rate. The future minimum payments of non-cancellable operating leases for aircraft and engines are presented below: December 31, 2017 2016 Up to one year From one to five years More than five years For the year ended December 31, 2017 lease expense amounted to R$1,114.4 (December 31, 2016 - R$1,144.4) with a cash impact of R$1,092.5 (December 31, 2016 was R$1,117.9). The operating lease agreements do not have covenant restrictions. b) Commitments for future acquisition of aircraft The Company has purchase commitments for the acquisition of 73 aircraft (December 31, 2016 — 73), under which the following futures payments will be made: December 31, 2017 2016 Up to one year — — More than one year up to five years More than five years c) Letter of credits As of December 31, 2017, the Company had issued letters of credit totaling US$161 million (December 31, 2017 - R$533.2), in relation to security deposits and maintenance reserves. d) Related Parties Guarantees ALAB entered into a Deed of Guarantee and Indemnity in connection with the obligations and liabilities related to the operating lease agreements of three A350-900XW (See Note 12 f.) |
Share-based option plan
Share-based option plan | 12 Months Ended |
Dec. 31, 2017 | |
Share-based option plan | |
Share-based option plan | 27. Share-based option plan 27.1. Equity-settled awards 27.1.1. First share option plan The first share option plan (“First Option Plan”) of the Company was approved on a Shareholders’ Meeting held on December 11, 2009. The plan has a term of 10 years, and no option may be granted after this period. Exercise conditions of options issued under the First Option Plan require in addition to a vesting period of 4 years, the occurrence of an initial public offering (IPO) of the shares of the Company. 27.1.2. Second share option plan The second share option plan (“Second Option Plan”) was approved on a Shareholders’ Meeting held on June 30, 2014, as amended. Exercise conditions of options issued under the programs of the Second Option Plan, prior to Azul’s IPO, require in addition to a vesting period of 4 years, the occurrence of an initial public offering (IPO) of the shares of the Company. The options have an 8-year life. The options issued under the programs of the Second Option Plan, after Azul’s IPO, require a vesting period of 4 years. The options have a 10-year life and the exercise price shall equal to the lowest stock price traded in the stock market during the thirty (30) trading sessions prior to the options grant approved by the Board of Directors. 27.1.3. Third share option plan The third share option plan (“Third Option Plan”) was approved on a Shareholders’ Meeting held on March 10, 2017. Exercise conditions of options issued under the Third Option Plan require a vesting period of 5 years. The options have a 5-year life and options can only be exercised within15 days after each vesting anniversary. 27.1.4. Information about the fair value of share options and expense The grant-date fair value of share options has been measured using the Black-Scholes model applying, expected volatility has been calculated based on historical volatility of airline shares listed on stock exchanges in Brazil and Latin America. The inputs are mentioned below. First Option Plan 1 st program 2 nd program 3 rd program Total options granted Date of compensation committee Dec 11, 2009 Mar 24, 2011 April, 05, 2011 Total options outstanding Option exercise price R$3.42 R$6.44 R$6.44 Option fair value as of grant date R$1.93 R$4.16 R$4.16 Estimated volatility of the share price % % % Expected dividend % % % Risk-free rate of return % % % Average remaining maturity (in years) — — — Maximum life of the option 10 years 10 years 10 years Expected term considered for valuation 7 years 7 years 7 years Second Option Plan Third Option 1 st program 2 nd program 3 rd program 4 rd program 1 st program Total options granted Date of compensation committee June 30, 2014 July 01, 2015 July 01, 2016 July 06, 2017 Mar 14, 2017 Total options outstanding Option exercise price R$19.15 R$14.51 R$14.50 R$22.57 R$11.85 Option fair value as of grant date R$11.01 R$10.82 R$10.14 R$12.82 R$4.82 Estimated volatility of the share price % % % % % Expected dividend % % % % % Risk-free rate of return % % % % % Average remaining maturity (in years) Maximum life of the option 8 years 8 years 8 years 10 years 5 years Expected term considered for valuation 4.5 years 4.5 years 4.5 years 5.5 years 5 years Changes in stock options are disclosed below: Number of Weighted Balance as of December 31, 2015 R$ Granted R$ Balance as of December 31, 2016 R$ Granted R$ Cancelled ) R$ Exercised ) R$ Balance as of December, 31, 2017 R$ Number of options exercisable as of: December 31, 2016 R$ December 31, 2017 R$ Share-based compensation expensed recognized in the statement of operations during the year ended December 31, 2017 with respect to the share options amounted to R$19.9 (December 31, 2016 - R$9.9) in “Salaries, wages and benefits”. 27.2.Restricted share units The Shareholders’ Meeting held on June 30, 2014 approved a restricted share units plan (“RSU Plan”). Under the terms of the RSU Plan participants were granted a fixed monetary amount (in Reais) which would be settled in a quantity of preferred shares determined by dividing the monetary amount by the price per share of the preferred shares at IPO. Exercise conditions of RSUs required, in addition to a vesting period of four years, the occurrence of an IPO of the shares of the Company for the RSUs to become exercisable. The Company can settle the portion of the RSUs for which the vesting period was completed in cash or in shares. The fair value of the award, prior to the IPO, was determined at each statement of financial position date as the monetary amount of the awards in Reais discounted from the earliest date at which the Company could settle the amount in cash using the risk-free interest rate and the obligation was recorded as a liability. At the date of the IPO, the monetary amount of the awards was converted into units based on the IPO date fair value of the preferred shares. The related liability was reclassified to equity in line with the post IPO settlement method. Subsequent grants are measured based on the grant date fair value of the awards. 27.2.1. Information about the fair value of RSUs and expense Date of Total shares Total shares Fair value as 1 st program June 30, 2014 R$ 2 nd program July 01, 2015 R$ 3 rd program July 01, 2016 R$ 4 th program July 06, 2017 R$ Changes in RSU are disclosed below: Number of As of December 31, 2015 Granted Paid ) As of December 31, 2016 Granted Cancelled ) Paid ) As of December, 31, 2017 Share-based compensation expensed recognized in the statement of operations during the year ended December 31, 2017 with respect to the RSU amounted to R$10.0 (December 31, 2016 - R$5.3) in “Salaries, wages and benefits”. |
Provision for taxes, civil and
Provision for taxes, civil and labor risks | 12 Months Ended |
Dec. 31, 2017 | |
Provision for taxes, civil and labor risks | |
Provision for taxes, civil and labor risks | 28. Provision for taxes, civil and labor risks The Company is party to certain labor, civil and tax lawsuits for which appeals have been filed. Based on the Company’s external and internal legal counsels’ opinion, Management believes that the recorded provisions are sufficient to cover probable losses. In addition, the Company has made judicial deposits when required by court. These provisions are as follows: December 31, 2017 2016 Taxes Civil Labor Changes in these provisions are as follows: Total Balance at December 31, 2015 Provisions recognized Utilized provisions ) Balance at December 31, 2016 Provisions recognized Utilized provisions ) Balance at December 31, 2017 The total amount of claims, which according to management represent losses that are reasonably possible but not probable, for which no provision was recorded are as follow: December 31, 2017 2016 Taxes Civil Labor The Company’s management, together with its legal counsel, analyzes the proceedings on a case-by-case basis and records the amount of the provision for labor, civil and tax risk based on the probable cash disbursement for the related proceedings. a) Tax proceedings: among other tax proceedings the Company is arguing in court the non-levy of tax on goods and services (“ICMS”) related to the import of aircraft, engines, and flight simulators under leases that do not contain an option to purchase. These lease agreements involve lessors domiciled abroad. In the opinion of the Company´s management, the agreements expressly commit the Company to the return of the property to the lessor. Based on the Company´s assessment, management does not believe these transactions are subject to taxation. The Company has tax proceedings related to additional charge of 1% of COFINS on imports of aircraft and engines, in accordance with the provisions of Law 10,865 / 04, the application of COFINS at a zero rate for imports of aircraft and parts and parts. Management believes that the chances of loss is possible and therefore no provision was recorded for such amounts. b) Civil lawsuits: the Company is party to various types of civil lawsuits, for compensation claims in relation to flight delays, cancellations of flights, luggage and damage loss, and others. The Company and Aeroportos Brasil Viracopos S.A. (“ABV”) are part of a Terminal Transfer Incentive agreement, which establishes deadlines for ABV to deliver structural improvements at the new terminal at Viracopos airport. The agreement states that failure to comply with these deadlines would result in a fine of 40% applied to the amounts payable by the Company in relation to parking, landing and connection fees for aircraft during the time of non-compliance. Based on the terms of the agreement, the Company started applying the fine and discounting 40% of its payments to ABV on July 2017. On July 18, 2017, ABV filed a lawsuit against the Company alleging that the discount is abusive. An injunction ordered that a 20% direct discount and that the remaining 20% should be paid through judicial deposit. The Company and ABV are part of an Area Assignment Agreement (“ABV Agreement”) that provides that ABV will transfer an area for the construction of a hangar and aircraft parking space. Under the ABV Agreement, ABV will be responsible for earthmoving and paving services as well as the construction of an auxiliary lane connecting the site to a landing strip. In return, the Company makes a monthly rental payment. On October 02, 2017, ABV filed a lawsuit against the Company, requesting the termination of the ABV Agreement, alleging that the construction of the hangar and aircraft parking space did not occur and rental payments were overdue. The Company requested the review of the ABV Agreement, demanding that ABV fulfills its obligations under the agreement, including the earthmoving, paving services and the construction of the auxiliary lane. In addition, the Company is demanding the payment of a contractual fine and the losses and damages resulting from ABV’s default. ABV´s claims totaled approximately R$26.2 on December 31, 2017. The Company classifies the likelihood of loss as possible and thus has not recorded a provision. c) Labor lawsuits: the Company is party to various types of labor lawsuits, related to overtime, additional remuneration for undertaking hazardous activities and safety related payments and others. The Labor Prosecution’s Office filed on February 22, 2017 a lawsuit against the Company claiming that it had violated certain labor regulations, including limitations on daily working hours and rest periods. The claim totals approximately R$66.0 in punitive damages. The lawsuit is currently suspended and the Company is negotiating a Conduct Adjustment Declaration (Termo de Ajuste de Conduta or “TAC”). The Company classifies the likelihood of loss as possible. |
Insurance
Insurance | 12 Months Ended |
Dec. 31, 2017 | |
Insurance | |
Insurance | 29. Insurance The Company is advised by insurance consultants in the market in order to establish coverage compatible with its size and operations. As of December 31, 2017, the Company has the following insurance policies in place: Type Insured amounts Fire - property and equipment Civil liabilities |
Significant accounting polici36
Significant accounting policies (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
Significant accounting policies | |
Basis for consolidation | 3.1. Basis for consolidation The consolidated financial statements comprise the financial statements of the Azul and its subsidiaries as at December 31, 2017. Control is achieved when the Company is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Company controls an investee if and only if the Company has: · Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee) · Exposure, or rights, to variable returns from its involvement with the investee, and · The ability to use its power over the investee to affect its returns. The Company re-assesses whether or not it controls an investee when facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when assets, liabilities, income and expenses of a subsidiary acquired during the year are included in the statement of comprehensive loss from the date the Company gains control, and ceases on the date the Company loses control of the subsidiary. When necessary, adjustments are made to the financial statements of subsidiaries to align their accounting policies with those of the Company. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Company are eliminated in full on consolidation. |
Cash and cash equivalents | 3.2. Cash and cash equivalents Cash and cash equivalents are held in order to meet short-term cash commitments and not for investment or other purposes. The Company considers as cash equivalents deposits or instruments, which are readily convertible into a known cash amount and subject to an insignificant risk of change in value. The Company considers as cash equivalents, instruments with original maturities of less than three months. |
Financial instruments - initial recognition and subsequent measurement | 3.3. Financial instruments - initial recognition and subsequent measurement i) Financial assets Initial recognition and measurement Financial assets are classified as financial assets at fair value through profit or loss, loans and receivables, investments held to maturity, financial assets available for sale, or derivatives designated as hedging instruments. Financial assets are classified at inception in one of the above mentioned categories. Financial assets are initially recognized at fair value plus transaction costs directly attributable to the acquisition of the financial assets, with the exception of financial assets recorded at fair value through profit or loss. The financial assets of the Company include cash and cash equivalent, short-term investments, restricted investments, loans and trade and other receivables, as well as derivative financial instruments. Subsequent measurement The subsequent measurement of financial assets depends on their classification. Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held for trading if they are expected to be sold in the short-term. This category includes short-term investments, restricted investments and derivative financial instruments entered into by the Company that do not meet the criteria for hedge accounting as defined by IAS 39. Financial assets at fair value through profit or loss are recorded at fair value on the statement of financial position at fair value, with corresponding gains or losses recognized in the statements of operations. The Company classifies financial assets at fair value through profit or loss because it intends to trade them in the short term. Reclassification to loans and receivables, available for sale or held to maturity depends on the nature of the asset. Financial assets designated at fair value through profit or loss using the fair value option at the moment of presentation cannot be reclassified after initial recognition. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments. After initial measurement, these financial assets are recorded at amortized cost using the effective interest method, less impairment losses. The amortized cost is calculated taking into account any discount or premium on acquisition and fees or costs incurred. The amortization of the effective interest method is recorded as financial income in the statements of operations. Impairment losses are recognized as financial expenses in the statements of operations. Derecognition Financial assets, or where appropriate, part of a financial asset or part of a group of similar financial assets, are derecognized when: · The rights to receive cash flows from the assets have expired; or · The Company has transferred their rights to receive cash flows of the assets and (a) the Company has substantially transferred all the risks and benefits of the assets, or (b) the Company has not transferred or retained substantially all the risks and benefits related to the assets, but has transferred control of the assets. When the Company has transferred their rights to receive cash flows from assets and has not transferred or retained substantially all the risks and rewards relating to an asset, that asset is recognized to the extent of the continuing involvement of the Company. In this situation, the Company also recognizes an associated liability. The transferred assets and associated liabilities are measured based on the rights and obligations that the Company has retained. Continuing involvement that takes the form of a guarantee on the assets transferred is measured by the original book value of the assets or the maximum payment that may be required from the Company, whichever is lower. ii) Impairment of financial assets At every statement of financial position date, the Company assesses if there is any objective evidence of impairment of financial assets or groups of financial assets. A financial asset or group of financial assets is considered impaired if there is objective evidence of a lack of recoverability as the result of one or more events that occurred after initial recognition (“loss event”) and when this event has an impact on future estimated cash flows of a financial asset that can be reasonably estimated. Evidence of impairment loss may include an indication that counterparties are experiencing significant financial difficulty, late payments, defaults, bankruptcy or a likelihood that these entities will file for bankruptcy or other types of financial reorganization. iii) Financial liabilities Initial recognition and measurement Financial liabilities are classified as financial liabilities at fair value through profit or loss, loans and borrowing, or as derivatives classified as hedge instruments, as appropriate. The Company determines the classification of its financial liabilities upon initial recognition. Financial liabilities are initially recognized at fair value. Loans, financing, and debentures are recognized at fair value deducted from, directly related transaction costs. Financial liabilities of the Company include accounts payable and other accounts payable, loans and financing, debentures and derivative financial instruments. Subsequent measurement The subsequent measurement of financial liabilities depends on their classification, as follows: Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include financial liabilities held for trading, financial liabilities designated upon initial recognition at fair value through profit or loss and loans designated as “hedge item” in a fair value hedge. Financial liabilities are classified as held for trading if they are acquired for the purpose of short term settlement. This category includes derivative financial instruments contracted by the Company that do not meet the criteria for hedge accounting as defined by IAS 39. Gains and losses in liabilities held for trading are recognized in the statements of operations. Loans and borrowings (including debentures) After initial recognition, interest-bearing loans, financing and debentures are subsequently measured at amortized cost, using the effective interest rate method. Gains and losses are recognized in the statement of operations when the liabilities are derecognized as well as through the effective interest rate amortization process. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. The effective interest rate amortization is included as finance expenses in the statement of operations. Derecognition A financial liability is derecognized when the obligation under the liability is discharged, cancelled, or expires. When an existing financial liability is replaced by another from the same lender with substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability, with the difference in the corresponding book values recognized in the statements of operations. iv) Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount reported in the consolidated financial position if there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, to realize the assets and settle the liability simultaneously. v) Fair value of financial instruments The fair value of financial instruments actively traded in organized financial markets is determined based on prices quoted in the market at close of business at the statement of financial position date, not including the deduction of transaction costs. The fair value of financial instruments for which there is no active market is determined using valuation techniques. These techniques can include use of recent market transactions, references to the current fair value of other similar instruments, analysis of discounted cash flows, or other valuation models. An analysis of the fair value of financial instruments and more details about how they are calculated are described in Note 5. |
Derivative financial instruments and hedge accounting | 3.4. Derivative financial instruments and hedge accounting Initial recognition and subsequent measurement The Company uses derivative financial instruments, such as currency forward contracts options, forward contracts, and interest rate swaps to hedge its foreign currency risks and interest rate risk as well as commodity price risk. Derivative financial instruments are recognized initially at fair value on the date when the derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are presented as financial assets when the instrument’s fair value is positive and as financial liabilities when fair value is negative. Any gains or losses from changes in the fair value of derivatives during the year are recorded directly in the statements of operations for the period, except for the effective portion of cash flow hedges that are recognized directly in other comprehensive loss. These gains or losses are then recorded in the statements of operations when the hedge item affects the statements of operations. The following classifications are used for hedge accounting purposes: · Fair value hedge when hedging against exposure to changes in fair value of recognized assets or liabilities, or an unrecognized firm commitment. · Cash flow hedge when providing protection against changes in cash flows that is attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction which may affect the income or foreign currency risk in an unrecognized firm commitment. On inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting, as well as the Company’s objective and risk management strategy for undertaking the hedge. The documentation includes identification of the hedge instrument, the item or transaction being hedged, the nature of the risk being hedged, the nature of the risks excluded by the hedge, a prospective statement of the effectiveness of the hedge relationship and how the Company will assess the effectiveness of the changes in the hedging instruments fair value in offsetting the exposure to changes in the fair value of the item being hedged or cash flows attributable to the risk being hedged. It is expected that these hedges are highly effective in offsetting any changes in fair value or cash flows, and they are continually assessed to determine whether they actually have been highly effective over all the reporting periods for which they were designated. Hedges that meet the criteria for hedge accounting are accounted for as follows: Fair value hedge The gain or loss resulting from changes in fair value of a hedge instrument (for derivative hedge instrument) or the foreign exchange component of its carrying amount measured in accordance with IAS 21 (for non-derivative hedge instrument) is recognized in the statements of operations. The gain or loss from the hedge item attributable to the hedged risk should adjust the carrying amount of the hedged item and is also recognized in the statements of operations. If the hedged item is derecognized, the unamortized fair value is recognized immediately in the statement of operations. When an unrecognized firm sales commitment is designated as a hedged item in a hedge relationship, the change in fair value of the firm sales commitment attributable to the hedge risk is recognized as a financial asset or as a financial liability, with the recognition of a corresponding gain or loss in the statements of operations. The accumulated balance in the statement of financial position resulting from successive changes in fair value of the firm sales commitment attributable to the hedged risk will be transferred to the balance of the hedged item upon its recognition (recognition of balance of accounts payable or accounts receivable). The Company holds interest rate swaps to hedge against its exposure to changes in fair value of some of its aircraft financing (Note 21). Cash flow hedge The effective portion of a gain or loss from the hedge instrument is recognized directly in other comprehensive loss while any ineffective portion of the hedge is recognized immediately in financial income (expenses). The amounts recorded in other comprehensive loss are transferred to the statement of operations in tandem with the hedged transaction impact on profit or loss, for example when a forecasted sale occurs or when the income or expense being hedged is recognized. When the hedged item is the cost of a non-financial asset or non-financial liability, the amounts recorded as other comprehensive loss are transferred to initial carrying amount of the non-financial assets or liability. If the occurrence of the forecast transaction or firm commitment is no longer likely, the amounts previously recognized in other comprehensive loss are transferred to the statement of operations. If the hedge instrument expires or is sold, terminated, exercised without replacement or rollover, or if its designation as a hedge is revoked, any cumulative gain or loss previously recognized in comprehensive loss remains deferred in other comprehensive loss until the forecast transaction or firm commitment affects profit or loss. The Company uses swap contracts to hedge against its exposure to the risk of changes in interest rates related to its finance lease transactions. Current and non-current classification Derivative instruments that are not classified as effective hedge instruments are classified as current, non-current or segregated into current or non-current portions based on the underlying contractual cash flows. · When the Company expects to maintain a derivative as an economic hedge (and do not apply hedge accounting) for a period exceeding 12 months after the statement of financial position date, the derivative is classified as non-current (or segregated into current and non-current portions), consistent with the classification of the underlying item. · Embedded derivatives that are not closely related to the host contract are classified in a manner consistent with the cash flows of the host contract. · Derivative instruments that are designated as and are effective hedge instruments are classified consistently with the classification of the underlying hedged item. The derivative instrument is segregated into current and non-current portion only if a reliable allocation can be made. |
Inventories | 3.5. Inventories Inventories consist of aircraft maintenance parts, snack supplies and uniforms. Inventories are valued at cost or net realizable value, whichever is lower, net of any provision for inventory. |
Taxes | 3.6. Taxes Income tax expense, deferred tax assets and liabilities reflect management’s best assessment of estimated current and future taxes to be paid. Significant management judgment is required to determine the amount of deferred tax assets that can be recognized and the tax rates used, based upon the likely timing and the level of future taxable profits together with future tax planning strategies. Provisions for income tax and social contribution are based on the taxable income of the year considering the offset of tax loss carryforwards, up to the limit of 30% of annual taxable income. Tax rates and tax laws used to calculate the amounts are those in force at the statement of financial position dates. The income from foreign subsidiaries is subject to taxation pursuant to local tax rates and legislation. In Brazil, these incomes are taxed according to Law 12.973/14. Deferred income taxes and social contribution arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future. Deferred income tax assets and liabilities are measured at tax rates that are expected to be applicable in the year that the assets will be realized or the liability settled, based on tax rates (and tax law) enacted or substantially enacted on each statement of financial position date. The book value of the deferred tax assets is presented net if there is a legal or contractual right to offset tax assets against tax liabilities and deferred taxes are related to the same taxable entity and is reviewed on each statement of financial position date and written off to the extent that it is no longer probable that taxable profits will be available to allow that all or part of the deferred taxes assets will be used. Unrecognized deferred tax assets are reassessed on each statement of financial position date and are recognized to the extent that it becomes probable that future taxable profit will allow that the deferred tax assets be recovered. Deferred income tax and social contribution relating to equity items are recognized directly in equity. The Company assesses on a regular basis the tax status of situations in which tax law requires interpretation and records provisions if appropriate. |
Foreign currency transactions | 3.7. Foreign currency transactions The consolidated financial statements are presented in Brazilian reais (R$), which is the Company’s functional currency. Transactions in foreign currencies are initially translated into Brazilian reais using the exchange rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency using the exchange rates prevailing at the statement of financial position date. Non-monetary items denominated in foreign currency at historical cost basis are translated into the functional currency using the exchange rates on the dates of original transactions. Non-monetary items denominated in foreign currency measured at fair value are translated using the exchange rates prevailing on the date of determination of fair value. Differences arising on settlement or transaction of monetary items are recognized in the statement of operations. Changes in fair value of the hedging instruments are recorded using the accounting treatment described in note 3.4. “Derivative financial instruments and hedge accounting”. |
Property and equipment | 3.8. Property and equipment Assets included in property and equipment are stated at acquisition or construction cost including interest and other financial charges, net of accumulated depreciation and accumulated impairment losses, if any. Pre-payments for aircraft under construction, including interest and finance charges incurred during the manufacturing period of the aircraft and leasehold improvements, are also recorded in property and equipment. The Company receives credits from manufacturers on acquisition of certain aircraft and engines that may be used for the payment of maintenance services. These credits are recorded as a reduction of the cost of acquisition of the related aircraft and engines and against other accounts receivable. These amounts are then charged to expense or recorded as an asset, when the credits are used to purchase additional goods or services. In the case of operating leases, these credits are deferred and recorded as a reduction of operating lease expenses on a straight line basis during the term of the respective agreement. Owned aircraft are recorded at cost of acquisition and are subject to impairment testing, if there are impairment indicators. Aircraft equipment, rotables and tools, including reparable spare parts with useful lives that exceed one year, are recorded as property, plant and equipment at cost of acquisition. Aircraft lease agreements are accounted for as either operating or finance leases (note 3.12). Depreciation is calculated using the straight-line method over the estimated useful lives of the assets as follows: Aircraft 12 years Leasehold improvements 5 years Aircraft equipment 12 years Computer equipment and peripherals 5 years Tools 5 years Heavy maintenance — engines 5 to 6 years Heavy maintenance — structural checks 2 to 10 years Engines 12 years Furniture and fixtures 10 years Simulators 20 years Vehicles 5 years The net book value and useful life of assets and the depreciation methods are reviewed at the end of each year and adjusted prospectively, if necessary. The Company considers that its aircraft have four major components; airframe, engines, heavy maintenance and structural checks. The Company allocates a maintenance cost component to engines and structural checks as a portion of the total aircraft cost at the moment of acquisition. This component is depreciated over its useful life, which is the period extending up to the next heavy maintenance or structural check or the remaining useful life of the engines, whichever is shorter. The Company has maintenance contracts for its engines that cover all significant maintenance activities. The Company has “power-by-the-hour” type contracts, such agreements estipulate a rate for maintenance per hour flown, which are paid in accordance with the total hours flown when maintenance occurs. Repairs and routine maintenance are expensed in the period in which they are incurred. Significant maintenance costs are capitalized when it is likely that they will result in future economic benefits that exceed the originally assessed performance target for existing assets of the Company. Capitalized maintenance cost is depreciated over the period of time from when they were capitalized through the next scheduled significant maintenance event. Heavy maintenance on aircraft held under operating lease is expensed at the time of the event, and it is recorded in the “maintenance material and repair” line items. Depreciation expense of major capitalized maintenance expenses is recorded in “Depreciation and amortization” in the consolidated statement of operations. An item of property, plant and equipment and any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is recognized in “Other operating expenses, net”. |
Business Combinations | 3.9. Business Combinations The Company accounts for business combinations using the acquisition method. The cost of an acquisition is measured as the sum of the consideration transferred, based on its fair value on the acquisition date. Costs directly attributable to the acquisition are expensed as incurred. The assets acquired and liabilities assumed are measured at fair value, classified and allocated according to the contractual terms, economic circumstances and relevant conditions on the acquisition date. Goodwill is measured as the excess of the consideration transferred over the fair value of net assets acquired. If the consideration transferred is smaller than the fair value of net assets acquired, the difference is recognized as a gain on bargain purchase in the statement of operations. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the years ended December 31, 2017 and 2016, the Company has not completed any business combination transaction. For combinations between entities under common control, the Company accounts under the Predecessor Accounting Method. Assets and liabilities of the acquired entity are stated at predecessor carrying values. These intra-group transactions have no impact in the consolidated financial statements. |
Intangible assets | 3.10. Intangible assets Separately acquired intangible assets are measured at cost on initial recognition. After initial recognition, intangible assets are stated at cost, less any accumulated amortization and accumulated impairment losses. Internally generated intangible assets are not capitalized. The useful life of intangible assets is assessed as definite or indefinite. Intangible assets with definite useful lives are amortized over their estimated useful lives and tested for impairment, whenever there is an indication of any loss in the economic value of the assets. The period and method of amortization for intangible assets with definite lives are reviewed at least at the end of each fiscal year or when there are indicators of impairment. Changes in estimated useful lives or expected consumption of future economic benefits embodied in the assets are considered to modify the amortization period or method, as appropriate, and treated as changes in accounting estimates. The amortization of intangible assets with definite lives is recognized in the statements of operations in the expense category consistent with the use of intangible assets (Note 15). Intangible assets with indefinite useful lives are not amortized, but are tested for impairment at each year-end or whenever there is an indicator that their carrying amount cannot be recovered. The assessment is reviewed annually to determine whether the indefinite useful life continues to be supportable. If not, the change in useful life from the indefinite to definite is made on a prospective basis. Gains and losses resulting from the disposal of intangible assets are measured as the difference between the net disposal proceeds and the book value of assets, and are recognized in the statements of operations. In connection with the acquisition of TudoAzul (former TRIP), the Company identified airport operating licenses as having indefinite useful lives. The fair value of Pampulha, Santos Dumont and Fernando de Noronha airports operating licenses were recognized at fair value at the acquisition date. Fair value of operating licenses was based on estimated discounted future cash flows. Operating licenses are considered to have indefinite useful lives due to several factors, including requirements for necessary permits to operate within Brazil and limited landing rights availability in Brazil’s most important airports regarding traffic volume. |
Impairment of non-financial assets | 3.11. Impairment of non-financial assets The Company performs an annual review for impairment indicators in order to assess events or changes in economic, technological, or operating conditions which may indicate that an asset is not recoverable. If any, those indicators are identified when performing the annual impairment testing and the Company estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash generating unit’s (CGU) fair value less cost to sell and its value in use. When the carrying amount of intangibles exceed its recoverable amount, an impairment charge is recorded and the asset is written down to its recoverable amount. The Company operates as a single CGU. In estimating the value in use of assets, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the weighted average cost of capital for the industry in which the cash-generating unit operates. The fair value less cost to sell is determined, whenever possible, based on a firm sales agreement carried out on an arm’s length basis between known and interested parties, adjusted for expenses attributable to asset sales, or when there is no firm sale commitment, based on the market price of an active market or most recent transaction price of similar assets. For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that previously recognized impairment losses no longer exist or have decreased. If such indication exists, the Company estimates the recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. The following assets have specific characteristics for impairment testing: Goodwill Goodwill is tested for impairment annually or when circumstances indicate that the carrying value may not be recoverable. Impairment is determined for goodwill by assessing the recoverable amount of the single CGU taking the Company as a whole. When the recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognized. Impairment losses relating to goodwill cannot be reversed in future periods. Intangible assets Intangible assets with indefinite useful lives are tested for impairment annually at the CGU level, and when circumstances indicate that the carrying value may be impaired. |
Leases | 3.12. Leases A lease is classified at the inception date as a finance lease or an operating lease. The leases of property and equipment in which the Company substantially hold the risks and rewards incidental to ownership are classified as finance leases. Finance leases are capitalized at the commencement of the lease at the inception date fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized in finance expenses in the statement of operations. The present value of the minimum lease payments, is calculated using the implicit interest rate when it is clearly identified in the lease agreement. The leased assets are depreciated over the remaining economic useful life of the leased assets or the contractual term, whenever there is no reasonable certainty that the Company will obtain ownership of the property at the end of the contractual term, whichever is shorter. An operating lease is a lease other than a finance lease. Operating lease payments (including direct costs and incentives received from the lessor of each contract) are recognized as an operating expense on a straight-line basis over the lease term. A sale and leaseback transaction involves the sale of an asset and leasing back the same asset. Gains or losses related to sale-leaseback transactions classified as an operating leases upon the sale are immediately recognized as other (expense) income when it is clear that the transaction was at fair value. If the sale price is below fair value any gain or loss is recognized immediately, except if a loss is compensated by future lease payments at below market price, in which case, it is deferred and amortized in proportion to the lease payments over the contractual lease term. Gains or losses related to sale-leaseback transactions classified as financial lease, upon the sale, are deferred and amortized over the lease term. Sublease is an operation in which the Company has an original lease of a particular asset that is transferred to a third party generating a new lease under conditions that may be the same or different from the original lease. The original contract lease expense is recognized in the statement of operations under “Aircraft and other rent” and the income from the sublease under “Other revenues”. In certain circumstances, such as market conditions in which the contracts were negotiated, it may occur that the amount of rental expense paid is higher from the rental income received in the sublease agreement. For contracts in which this situation is identified, the Company records a provision for onerous contracts in accordance with IAS 37 - “Provisions, Contingent Liabilities and Contingent Assets”. |
Security deposits and maintenance reserves | 3.13. Security deposits and maintenance reserves a) Security deposits Security deposits are guarantee deposits held as collateral related to aircraft lease contracts paid to lessors at the inception of the lease agreement that will be refunded to the Company when the aircraft is returned to the lessor at the end of the lease agreement. Security deposits are denominated in U.S. Dollars and do not bear interest. b) Maintenance reserves Certain master lease agreements provide that we pay maintenance reserves to aircraft lessors to be held as collateral in advance of the performance of major maintenance activities. Maintenance reserve deposits are reimbursable to us upon completion of the maintenance event in an amount equal to the lesser of (1) the amount of the maintenance reserve held by the lessor associated with the specific maintenance event or (2) the qualifying costs related to the specific maintenance event. Substantially all of these maintenance reserve payments are calculated based on a utilization measure, such as flight hours or cycles, and are used solely to collateralize the lessor for maintenance. At the lease inception and at each statement of financial position date, we assess whether the maintenance reserve payments required by the master lease agreements are expected to be recovered through the performance of qualifying maintenance on the leased assets. Maintenance deposits expected to be recovered from lessors are reflected in security deposits and maintenance reserves in the accompanying statements of operations. We assess recoverability of amounts currently on deposit with a lessor, by comparing them to the amounts that are expected to be reimbursed at the time of the next maintenance event, and amounts not recoverable are considered maintenance costs. |
Provisions | 3.14. Provisions Provisions are recognized when the Company has a present legal or constructive obligation, as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount can be made. When the Company expects that the value of a provision will be reimbursed, in whole or in part, as for example under an insurance contract, the reimbursement is recognized as a separate asset but only when reimbursement is virtually certain. The expense relating to any provision is presented in the statements of operations, net of any reimbursement. The Company is party in other judicial and administrative proceedings. Provisions are set up for all legal claims related to lawsuits for which it is probable that an outflow of funds will be required to settle the legal claims obligation and a reasonable estimate can be made. The assessment of probability of loss includes assessing the available evidence, the hierarchy of laws, the most recent court decision and their relevance in the legal system, as well as the assessment of legal counsel. Lease contracts determine in what conditions the Company must return the leased aircraft to the lessor. The Company estimates a provision based on the projected future costs to be incurred to return the asset in an acceptable condition as contractually required, taking into consideration the current fleet and long term maintenance plans. |
Treasury shares | 3.15. Treasury shares Own equity instruments that are reacquired (treasury shares) are recognized at cost and deducted from equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Company own equity instruments. Any difference between the carrying amount and the consideration, if reissued, is recognized in the share premium. |
Employee benefits | 3.16. Employee benefits i) Executive bonus The Company records a provision for executive bonus, which payment is contingent to meeting predefined goals and it is recorded in the statement of operations under Salaries, wages and benefits. ii) Share-based payment The Company offered its executives share-based payments, to be settled with the Company shares, where the Company receives services provided by these professionals in consideration for share options and restricted stock units. The cost of equity settled awards with employees is measured based on the fair value as of the grant date. In order to determine the fair value of share options, the Company uses the Black-Scholes option pricing model (Note 27). The cost of equity settled awards is recognized together with a corresponding increase in equity, over the period in which performance and/or service conditions are fulfilled, ending on the date the employee acquires the full right to the award (vesting date). The cumulative expense for equity settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and management’s best estimate of the number of equity instruments that will be vested. The expense or credit in the statement of the operations for the period is recorded in “Salaries, wage and benefits” and represents the change in the accumulated expense recognized in the period. No expense is recognized for awards that do not vest, except for awards in which vesting is subject to a market or non-vesting condition. These are treated as vested, regardless of whether the market conditions are met or not, provided that all the other exercise conditions are met. When the terms of an equity settled award are modified, the minimum expense is that, that would have been recognized had the terms not been modified. An additional expense is recognized for any modification that increases the total fair value of the share based payment transaction or those otherwise benefits the employee, as measured at the date of modification. When an equity settled award is cancelled, it is treated as having vested on the cancellation date and any expense not recognized for the award is immediately recognized. This includes any award in which the non-vesting conditions within the control of the Company or the counterparty are not met. However, if a new plan replaces the plan canceled and designated as a replacement award on the date of grant, the canceled plan and the new plan are treated as if they were a modification to the original plan, as described in the previous paragraph. The cost of cash-settled transactions is measured initially at fair value at the grant date. This fair value is expensed over the service period with the recognition of a corresponding liability. The liability is remeasured to fair value at each reporting date up to, and including the settlement date, with changes in fair value recognized in the statement of the operations for the period in ‘Salaries, wage and benefits’. |
Revenue recognition | 3.17. Revenue recognition Flight revenue is recognized upon effective rendering of the transport service. Tickets sold and not used, corresponding to advanced ticket sales (air traffic liability) are recorded in current liabilities. Tickets expire in one year. The Company recognizes revenue for tickets sold upon the departure of the related scheduled flight and for tickets sold that are expected to expire unused (brakeage). The Company estimates the value of future refunds and exchanges, net of forfeitures for all unused tickets once the flight date has already passed. These estimates are based on historical data and experience from past events. The estimated future refunds and exchanges included in the account of advance ticket sales are compared monthly to actual refunds and exchange activities in order to monitor if the estimated amount of future refunds and exchanges is reasonable (Note 18). Other service revenues relate to ticket change fees, luggage fares, excess luggage, cargo transportation, Espaço Azul fee, charter and other services, which are recognized when services are rendered. |
"TudoAzul" Program | 3.18. “TudoAzul” Program Under the “TudoAzul” program customers accrue points based on the amount spent on tickets flown. The amount of points earned depends on TudoAzul membership status, market, flight, day-of-week, advance purchase, booking class and other factors, including promotional campaigns. The Company recognizes revenue on points that are estimated to expire unused. Points in general expire in 2 years after the date earned regardless of activity in the account. Upon the sale of a ticket, the Company recognizes a portion of the ticket sales as revenue when the transportation service occurs, as described in 3.17 above, and defers a portion corresponding to the points earned under the TudoAzul Program, in accordance with IFRIC 13, Customer Loyalty Programs in the account “Air Traffic Liabilities”. The Company determines the estimated selling price of the air transportation and points as if each element is sold on a separate basis. The total consideration from each ticket sale is then allocated to each of these elements individually on a pro rata basis. The Company’s estimated selling price of points is based on market prices of airfares offered to travel agencies with high volumes of transactions. The Company also sells points of the TudoAzul loyalty program to third parties. The related revenue is deferred and recognized as passenger revenue when points are redeemed and the related transportation service occurs. The fair value of a point is estimated on an annual basis using the average points redeemed and the estimated value of purchased tickets with the same or similar restrictions as frequent flyers awards. The Company recognizes revenue for points sold and awarded that will never be redeemed by program members. The Company estimates such amounts annually based upon the latest available information regarding redemption and expiration patterns. Points awarded or sold and not used are recorded in “Air traffic liability” (Note 18). The Company entered into transaction with a Brazilian Bank for advertisement of the Co-branded credit card. At December 31, 2017, revenues related to the Co-branded credit card was in the amount of R$2.2 (December 31, 2016 — R$1.5). |
Segment information | 3.19. Segment information IFRS 8 requires that operations are identified by segment based on internal reports that are regularity reviewed by the Company´s chief operating decision maker to allocate funds to segments and assess their performance. The operations of the Company consist of air transportation services in Brazil. The Company’s management allocates funds based on the consolidated results. The main assets generating revenue of the Company are its aircraft, from which revenue is generated in Brazil. Other revenues are basically derived from cargo operations, interest on installment sales, luggage fares, excess luggage, penalties for cancellation of tickets, and all items are directly attributed to air transport services. Based on how the Company manages its business and the way in which fund allocation decisions are taken, the Company has only one operating segment for financial reporting purposes. |
New and amended standards and interpretations | 3.20. New and amended standards and interpretations The Company applied for the first time certain standards and amendments, which are effective for annual periods beginning on or after 1 January 2017. The Company has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective. The nature and the effect of these changes are disclosed below: Amendments to IAS 7 Statement of Cash Flows: Disclosure Initiative The amendments require entities to provide disclosure of changes in their liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes (such as foreign exchange gains or losses). Amendments to IAS 12 Income Taxes: Recognition of Deferred Tax Assets for Unrealized Losses The amendments clarify that an entity needs to consider whether tax law restricts the sources of taxable profits against which it may make deductions on the reversal of deductible temporary difference related to unrealized losses. Furthermore, the amendments provide guidance on how an entity should determine future taxable profits and explain the circumstances in which taxable profit may include the recovery of some assets for more than their carrying amount. Annual Improvements Cycle - 2014-2016 Amendments to IFRS 12 Disclosure of Interests in Other Entities: Clarification of the scope of disclosure requirements in IFRS 12 The amendments clarify that the disclosure requirements in IFRS 12, other than those in paragraphs B10–B16, apply to an entity’s interest in a subsidiary, a joint venture or an associate (or a portion of its interest in a joint venture or an associate) that is classified (or included in a disposal group that is classified) as held for sale. |
Standards issued but not yet effective | 3.21. Standards issued but not yet effective IFRS 9 - Financial instruments In July 2014, the IASB issued the final version of IFRS 9 - Financial Instruments, which superseded IAS 39 - Financial Instruments: Recognition and Measurement and earlier versions of IFRS 9. IFRS 9 will be applicable for annual periods beginning on or after January 1, 2018. Except for hedge accounting, retrospective application is required, but comparative information is not required. For hedge accounting, the requirements are generally applied prospectively, with few exceptions. The Company plans to adopt the new standard on its effective date, with its impacts initially reflected on the interim financial statements for the period ended March, 31 2018. The Company plans to opt not to present comparative information showing the results from the adoption of IFRS 9. Classification and measurement The new standard sets out new requirements for the classification and measurement of financial assets and liabilities. Financial assets will be classified under three categories according to the Company’s business model for managing them, as well as their contractual cashflow characteristics. The categories are: (i) amortised cost; (ii) fair value through other comprehensive income (FVOCI); or (iii) fair value through profit or loss (FVTPL). For financial liabilities, the main change from IAS 39 is that IFRS 9 requires changes in the fair value of an entity’s own credit risk to be considered in other comprehensive income. The Company classified its financial assets and liabilities in accordance with the business models established in IFRS 9 and evaluated the contractual terms of those instruments not measured at fair value through profit or loss. The Company anticipates that the implementation of this aspect of the IFRS 9 will not have a significant impact on its net equity at the implementation date. Impairment The new impairment model requires the recognition of impairment provisions for financial assets not measured at fair value through profit or loss based on expected credit losses (ECL) rather than only incurred credit losses as is the case under IAS 39. The financial assets have been classified based on their nature and risk characteristics. The Company has opted for a simplified model for other receivables and will recognize the losses from possible events of default during the life of the receivables. The estimate of the expected loss is based on the Company’s historical credit losses, adjusted for management’s expectations about future economic conditions for the relevant period. The Company will evaluate individually term deposits recognized at amortized cost and related parties receivables which present no credit loss history. Based on the information available to date, the Company does not expect a significant increase in the allowance for doubtful accounts. Hedge accounting Under IFRS 9, the Company may opt to continue to apply IAS 39 requirements for hedge accounting, rather than adopting IFRS 9 requirements. At this date, the Company has not yet made the option to apply IFRS 9 requirements. The Company may opt to adopt IFRS 9 hedge accounting requirements at the beginning of any accounting period, including quarters. IFRS 15 - Revenue from Contracts with Customers IFRS 15, issued in May 2014, establishes a new constant five-step model, which will be applied to revenues from customer contracts. Under IFRS 15, revenues are recognized in an amount that reflects the consideration to which an entity expects to be entitled in exchange for the transfer of goods or services to a customer. The new revenue standard will replace all current revenue recognition requirements under IFRS. Full retrospective adoption or modified retrospective adoption is required for annual periods beginning on or after January 1, 2018. The Company plans to adopt the new standard on the effective date of its entry into force, using the modified adoption method. In the course of 2017, the Company performed a preliminary assessment of IFRS 15, which is subject to change as we implement the changes. The new standard will require the reclassification of ancillary revenues, such as baggage fees, administrative charges, upgrades and other travel related charges, that are currently classified in other revenue, to passenger revenue. In 2017 these revenues amounted to approximately R$0.6 billion. These ancillary fees are directly related to passenger travel and will no longer be considered distinct performance obligations separate from the passenger travel component. In this context, such ancillary revenues, which were previously recognized when sold, will be recognized when transportation is provided. We expect this change to increase our air traffic liability by approximately R$54 million at the time of the application of the new standard. We estimate the net impact of the deferral of the recognition of these ancillary revenues in 2017 to be approximately R$22 million. The Company is evaluating the new standard impact on the fair value of the point and the calculation of the breakage for the Company’s loyalty program (TudoAzul) We continue to evaluate this and the other impact to the financial statements due to the adoption of the new standard. IFRS 16 - Leases IFRS 16 was issued in January 2016 and replaces IAS - 17 Leasing operations, IFRIC 4 - Determining whether an agreement contains a lease, SIC - 15 - Operating leases (Incentives) and SIC - 27 — Evaluating the Substance of Transactions in the Legal Form of a Lease. IFRS 16 establishes the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single model in the balance sheet, similar to accounting for finance leases under IAS 17. The standard includes two exemptions of recognition for lessees - Leases of ‘low-value’ assets (e.g. personal computers) and short-term leases (i.e. lease terms of 12 months or less). The expected areas of impact on Company upon adoption of the new standard are: · Recognition of a right of use asset and a lease liability for operating leases on the Consolidated Balance Sheet. As of December 31, 2017, the Company has 120 aircraft and 21 engines classified as operating leases. · Recognition of depreciation and interest expense instead of operating lease rental expense in the Consolidated Financial Statements. In 2017, lease rental expenses related to aircraft under operating leases amounted to R$1.1 billion. · Capitalization of heavy maintenance and structural checks performed on aircraft under operating lease and depreciation of such assets in line with accounting policies applicable to owned aircraft and aircraft under finance lease. In 2017, expenses related to heavy maintenance and structural checks performed on aircraft under operating lease amounted to R$0.2 billion and were recognized under Maintenance materials and repairs within the Consolidated Statement of Operations. · The Company’s aircraft lease rental payments are predominantly denominated in USD. While the Company’s foreign currency cash flow risk for lease rental payments are unchanged, the adoption of IFRS 16 will result in foreign currency denominated lease liabilities recognized on the balance sheet revaluing in response to exchange rate fluctuations in the USD/BRL exchange rate. IFRS 16 is effective for annual periods beginning on or after January 1, 2019. IFRIC 22 — Foreign currency transactions and advance consideration In December 2016, the IASB issued IFRIC 22, which deals with the exchange rate to be used in transactions that involve consideration paid or received in advance denominated in foreign currency. The interpretation clarifies that the date of transaction is the date on which the company recognizes the non-monetary asset or liability. IFRIC 22 will be effective for annual periods beginning on or after January 1, 2018. The Company does not expect this interpretation to have significant impacts, as transactions with these characteristics already comply with this standard. IFRIC 23 — Uncertainty over income tax treatments In June 2017, the IASB issued IFRIC 23, which clarifies the application of requirements in IAS 12 “Income Taxes” when there is uncertainty over the acceptance of income tax treatments by the tax authority. The interpretation clarifies that, if it is not probable that the tax authority will accept the income tax treatments, the amounts of tax assets and liabilities shall be adjusted to reflect the best resolution of the uncertainty. IFRIC 23 will be effective for annual periods beginning on or after January 1, 2019, and the Company does not expect significant impacts from the adoption of this standard. |
Operations (Tables)
Operations (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Operations | |
Schedule of equity interest in subsidiaries of the company | % equity interest Entities Main activities Country of December 31, December 31, Azul Linhas Aéreas Brasileiras S.A. (ALAB) Airline operations Brazil % % Azul Finance LLC (a) Aircraft financing United States % % Azul Finance 2 LLC (a) Aircraft financing United States % % Azul Services LLC (a) (b) Aircraft financing United States — % Blue Sabiá LLC (a) Aircraft financing United States % % ATS Viagens e Turismo Ltda. (a) Package holidays Brazil % % Azul SOL LLC (a) Aircraft financing United States % % Azul Investment LLP (a) Group financing United States % — Fundo Garoupa (c) Exclusive investment fund Brazil % % Fundo Safira (a) Exclusive investment fund Brazil % % Fundo Azzurra (a) Exclusive investment fund Brazil % % Canela Investments LLC (Canela) (a) (d) Aircraft financing United States % % Canela 336 LLC (e) Aircraft financing United States % % Canela 407 LLC (e) Aircraft financing United States % % Canela 429 LLC (e) Aircraft financing United States % % Canela Turbo One LLC (e) (f) Aircraft financing United States — % Canela Turbo Two LLC (e) (g) Aircraft financing United States — % Canela Turbo Three LLC (e) Aircraft financing United States % % Daraland S.A. (a) Holding Uruguai % — Encenta S.A. (Azul Uruguai) (h) Airline operations Uruguai % — TudoAzul S.A. Loyalty programs Brazil % % (a) Azul’s investment is held indirectly through ALAB. (b) Company extinguished on December 27, 2017. (c) Azul’s investment is held 1% directly and 99% through ALAB. (d) Transfer of ownership from Azul to ALAB on December 1, 2017. (e) ALAB’s investments are held indirectly through Canela. (f) Company extinguished on December 19, 2017. (g) Company extinguished on May 9, 2017. (h) Investments are held indirectly through Daraland. |
Significant accounting polici38
Significant accounting policies (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Significant accounting policies | |
Summary of property and equipment | Aircraft 12 years Leasehold improvements 5 years Aircraft equipment 12 years Computer equipment and peripherals 5 years Tools 5 years Heavy maintenance — engines 5 to 6 years Heavy maintenance — structural checks 2 to 10 years Engines 12 years Furniture and fixtures 10 years Simulators 20 years Vehicles 5 years |
Financial risk management obj39
Financial risk management objectives and policies (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Financial risk management objectives and policies | |
Schedule of nominal foreign exchange exposure | Exposure to U.S. dollar Exposure to Euro December 31, December 31, 2017 2016 2017 2016 Assets Cash and cash equivalents and short-term Investments — — Security deposits and maintenance reserves — — Long-term investments (Note 21) — — Financial instruments — — Other assets — — Total assets Liabilities Accounts payable ) ) — — Loans and financing (*) ) ) — — Other liabilities ) ) — — Purchase of TAP Convertible Bonds option issued (Note 21) — — — ) Related parties Total liabilities ) ) — ) Derivatives (NDF) - notional — — Net exposure ) (*) As of December 31, 2017, US dollar denominated working capital loans totaling R$1,383.7 were swapped to Brazilian Reais, resulting in an effective total debt denominated in foreign currency of R$1,226.1 (equivalent 35.1%) and a total in R$ of R$2,263.8 (equivalent 64.9%). |
Schedule of financial liabilities by maturity | December 31, 2017 Immediate Until 6 7 to 12 1 to 5 years More than 5 Total Loans and financing Accounts payable — — Liabilities from derivative transaction — Provisions — — — |
Schedule of total capital | December 31, 2017 2016 Equity Cash and cash equivalents (Note 6) ) ) Short-term investments (Note 7) ) ) Long-term investments (Note 21) ) ) Restricted financial investments (Note 8) (*) ) ) Financial liabilities at fair value through profit and loss (Note 22) — Loans and financing (Note 17) (*) Net debt Total capital (*) |
Interest rate risk | |
Financial risk management objectives and policies | |
Schedule of sensitivity analysis for market risk | 25% -25% 50% -50% Interest expense ) ) |
Currency risk | |
Financial risk management objectives and policies | |
Schedule of sensitivity analysis for market risk | 25% -25% 50% -50% Exposure in US$ R$4.1350/US$ R$2.4810/US$ R$4.9620/US$ R$1.6540/US$ Effect on exchange rate variation ) ) 25% -25% 50% -50% Exposure in EUR R$4.9616/EUR R$2.9770/EUR R$5.9540/EUR R$1.9847/EUR Effect on exchange rate variation ) ) |
Aircraft fuel price risk | |
Financial risk management objectives and policies | |
Schedule of sensitivity analysis for market risk | Change in Oil prices in Reais 25% -25% 50% -50% Impact on fuel hedges ) ) |
Cash and cash equivalents (Tabl
Cash and cash equivalents (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Cash and cash equivalents | |
Schedule of cash and cash equivalents | December 31, 2017 2016 Cash and bank deposits Cash equivalents Bank Deposit Certificate - CDB Investments funds — |
Short term investments (Tables)
Short term investments (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Short term investments | |
Schedule of investments | December 31, 2017 2016 Other short-term investments Investment funds |
Trade and other receivables (Ta
Trade and other receivables (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Trade and other receivables | |
Schedule of trade and other receivables | December 31, 2017 2016 Credit cards Travel agencies Other receivables Allowance for doubtful accounts ) ) |
Schedule of changes in the allowance for doubtful accounts | December 31, 2017 2016 Balance at the beginning of the year Increases Reversals ) ) Balance at the end of the year |
Schedule of accounts receivables | December 31, 2017 2016 Not yet due Up to 90 days Over 91 days |
Inventories (Tables)
Inventories (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Inventories | |
Schedule of inventories | December 31, 2017 2016 Parts and maintenance materials Catering and uniforms Inventory provision ) ) |
Prepaid expenses (Tables)
Prepaid expenses (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Prepaid expenses | |
Schedule of prepaid expenses | December 31, 2017 2016 Insurance premium Aircraft and engine leases Guarantee commission Other Non-current Current |
Related parties (Tables)
Related parties (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Related parties | |
Schedule of compensation for key management personnel | For the year ended December 31, 2017 2016 Salaries and wages Bonus Share-based compensation and restricted share units plans |
Schedule of transactions with TAP | For the year ended 2017 2016 Aircraft sublease (i) ) ) TAP Convertible Bonds (ii) |
Security deposits and mainten46
Security deposits and maintenance reserves (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Security deposits and maintenance reserves | |
Schedule of security deposits and maintenance reserves | December 31, 2017 2016 Security deposits Maintenance reserve deposits |
Changes in security deposits and maintenance reserve deposits | Maintenance Security deposits Total Balance at December 31, 2015 Additions Refunds from sublease (*) — ) ) Write-offs ) ) ) Refunds/returns ) ) ) Foreign exchanges variations ) ) ) Balance at December 31, 2016 Additions Refunds from sublease (*) — Write-offs ) — ) Refunds/returns ) ) ) Foreign exchanges variations Balance at December 31, 2017 (*) refers to the net amount received and refunds from TAP in relation to security deposits of subleased aircraft. |
Property and equipment (Tables)
Property and equipment (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Property and equipment | |
Schedule of property and equipment | December 31, 2017 2016 Cost Accumulated Net amount Net amount Leasehold improvements ) Equipment and facilities ) Vehicles ) Furniture and fixtures ) Aircraft equipment ) Aircraft and engines ) Advance payments for acquisition of aircrafts — Construction in progress — ) |
Reconciliation of changes in property and equipment | Cost December 31, Acquisitions Disposals/ Transfers December 31, Leasehold improvements — Equipment and facilities ) — Vehicles ) — Furniture and fixtures — — Aircraft equipment ) Aircraft and engines ) Advance payments for acquisition of aircrafts ) — Construction in progress — ) ) — Accumulated depreciation December 31, Depreciation Disposals/ Transfers December 31, Leasehold improvements ) ) — — ) Equipment and facilities ) ) — ) Vehicles ) ) — ) Furniture and fixtures ) ) — — ) Aircraft equipment ) ) — ) Aircraft and engines ) ) — ) ) ) — ) |
Schedule of amortization of capitalized maintenance costs and repairs | December 31, 2017 2016 Amortization of capitalized maintenance costs ) ) Maintenance materials and repairs ) ) ) ) |
Intangible assets (Tables)
Intangible assets (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Intangible assets | |
Schedule of intangible assets and goodwill | December 31, 2017 2016 Cost Accumulated Net amount Net amount Goodwill (i) — Airport operating licenses (ii) — Software ) ) (i) Refers to goodwill recorded in the acquisition of TudoAzul (former TRIP) in 2012. The amount of R$753.5 represents the excess of the consideration transferred over the fair value of the net assets acquired and liabilities assumed. (ii) As part of the purchase price allocation of TudoAzul (former TRIP) acquisition, the Company recognized a separate intangible asset for the airport operating licenses. These intangible assets were deemed to have an indefinite life. |
Schedule of changes in intangible assets including goodwill | Costs December 31, Acquisitions Disposals/ Transfers December 31, Goodwill (i) — — — Airport operating licenses (ii) — — — Software ) — ) — Accumulated amortization December 31, Amortization Disposals/ Transfers December 31, Software ) ) — — ) ) ) — — ) (i) Refers to goodwill recorded in the acquisition of TudoAzul (former TRIP) in 2012. The amount of R$753.5 represents the excess of the consideration transferred over the fair value of the net assets acquired and liabilities assumed. (ii) As part of the purchase price allocation of TudoAzul (former TRIP) acquisition, the Company recognized a separate intangible asset for the airport operating licenses. These intangible assets were deemed to have an indefinite life. |
Schedule of allocation of goodwill and airport operating services to cash generating units | December 31, 2017 2016 Goodwill Airport Goodwill Airport Book value Book value — CGU — — Value in use Discount rate before taxes % % % % Perpetuity growth rate % % % % |
Income tax and social contrib49
Income tax and social contribution (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Income tax and social contribution | |
Schedule of income tax and social contribution | Year ended December 31, 2017 2016 Income/(loss) before income tax and social contribution Combined tax rate % % Income tax and social contribution statutory rate ) ) Adjustments to calculate the effective tax rate: Taxable profit on foreign subsidiaries ) ) Exchange differences on foreign subsidiaries Unrecorded deferred tax on tax loss and on temporary differences ) Permanent differences ) ) Deferred Income Tax on Tax Losses utilized in the PERT (*) — Reversal of provisions for uncertain tax provisions (**) — Other Total income tax and social contribution expenses ) ) Current income tax and social contribution Deferred income tax and social contribution ) ) ) ) (*) Use of tax losses in the Federal Installment payment program (“PERT”) (**) Reversal of income tax provision prescribed considering the five-years statute of limitation |
Schedule of breakdown of deferred income tax and social contribution | December 31, 2017 2016 Deferred tax liabilities On temporary differences Provision for tax, civil and labor risks Deferred revenue of TudoAzul program ) ) Aircraft lease expense ) ) Depreciation of aircraft and engines ) Exchange rate ) ) Deferred gain related to aircraft sold Cash flow hedge (*) Fair value of TAP convertible bonds ) ) Provision for onerous contract Financial instruments ) Fair value of aircraft ) ) Fair value of slots ) ) Other on business combination fair value adjustment ) ) Others Net deferred tax (liabilities) ) ) Deferred tax assets on net operating losses Net deferred tax (liabilities) ) ) (*) Deferred tax recorded in “Other comprehensive income (loss)” |
Schedule of income tax losses offsetting against future taxable profits | December 31, 2017 2016 Net tax losses Income tax loss carryforwards (25%) Social contribution negative base tax carryforwards (9%) |
Schedule of balance of debts included in all Federal Installment Payment Programs (REFIS and PERT) | December 31, 2017 2016 Air navigation fees (REFIS) Air navigation fees (PERT) — Total Current Non-current |
Loans and financing (Tables)
Loans and financing (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Loans and financing | |
Schedule of loans and financing | December 31, 2017 2016 Loans Debentures Non-current Current |
Schedule of loans | Guarantees Interest Final maturity December 31, December Denominated in foreign currency - US$ Purchase of aircraft Chattel mortgage LIBOR plus “spread” of 2.55% to 4.00% p.a. 03/2025 Finance lease Chattel mortgage LIBOR plus spread of 2.05% to 5.50% p.a. 12/2027 Working capital (*) (**) (a) Receivables of Azul and cash collateral LIBOR plus fixed interest of 2.39% to 5.86% p.a. and fixed to 5.90%p.a 04/2024 FINIMP Letter of Credit 5.4% p.a . 11/2017 — Denominated in local currency - R$ Purchase of aircraft (FINEM, FINAME) (*) Investments and chattel mortgage of aircraft Fixed of 3.50% to 6.50% p.a. 05/2025 Working capital Receivables of Azul 5.0% fixed p.a to 126% of CDI 07/2021 Finance lease Chattel mortgage CDI plus fixed spread of 3.87% p.a. 04/2019 Total in R$ Current position Non-current position (*) Includes the effect of fair value hedge, a gain of R$4.7 (December 31, 2016 — loss of R$13.2). (**) As of December 31, 2017, US dollar denominated working capital loans totaling R$1,383.7 were swapped to Brazilian Reais, resulting in an effective total debt denominated in foreign currency of R$1,226.1 (equivalent 35.1%) and a total in R$ of R$2,263.8 (equivalent 64.9%). (***) FINIMP is a credit operation to import finance. FINEM, FINAME are a special credit line from BNDES (the Brazilian development bank). |
Schedule of derivative transactions with banks counterparties to swap the senior notes | Senior notes Swap Currency US$ R$ Amount US$400 million R$1,314.6 Interest Fixed Floating Interest rate 99.1% of CDI |
Schedule of long term loans maturity | December 31, 2017 2016 2018 — 2019 2020 2021 After 2021 |
Schedule of assets serve as guarantees to secure the financing agreements | December 31, 2017 2016 Property and equipment (carrying value) used as collateral (Note 14) |
Schedule of debentures | December 31, Guarantees Interest Final 2017 2016 Fifth issue (*) Credit cards receivable 127% of CDI p.a. 09/2019 — Seventh issue (*) Credit cards receivable CDI + 2,85% p.a. 12/2018 — Eight issue Credit cards receivable CDI + 1.50% p.a. 01/2019 — Total Current position Non-current position (*) In the last quarter of 2017, the Company early redeemed the remaining balance of the fifth and seventh issue for an amount of R$973.5. |
Schedule of long term debentures maturity | December 31, 2017 2016 2018 — 2019 |
Schedule of finance leases | December 31, 2017 2016 2017 — 2018 2019 2020 2021 After 2021 Total minimum lease payments Less finance charges ) ) Present value of minimum lease payments Less short-term portion Long-term portion |
Schedule of covenants related to leverage and debt coverage ratios | Covenants relate to Ratios measured 8 th issuance of debentures (i) adjusted debt coverage ratio (ICSD) equal or higher to 1.2; and (ii) leverage ratio equal or lower than 5.5. 6 th issuance of Promissory Notes Aircraft financing |
Air traffic liability (Tables)
Air traffic liability (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Air traffic liability | |
Schedule of air traffic liability | December 31, 2017 2016 Advance ticket sales TudoAzul program |
Equity (Tables)
Equity (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Equity. | |
Schedule of issued capital and authorized shares, all registered and without par value | Company´s Common Preferred Class “A” Class “C” Class “D” At December 31, 2017 — — At December 31, 2016 — |
Schedule of share issuance costs | December 31, Shared issued costs Tax credits from income tax and social contribution ) Shared issued costs, net |
Income (loss) per share (Tables
Income (loss) per share (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Income (loss) per share | |
Schedule of income or loss per common and preferred share | December 31, 2017 2016 Numerator Net income (loss) ) Denominator Weighted average number of common shares Weighted average number of preferred shares 75 preferred shares (*) Weighted average number of preferred equivalent shares (*) Weighted average number of common equivalent shares (**) Weighted average number of shares that would have been issued at average market price Basic net income (loss) per common share ) Diluted net income (loss) per common share ) Basic net income (loss) per preferred share ) Diluted net income (loss) per preferred share ) (*) Refers to a participation in the total equity value of the Company, calculated as if all 928,965,058 common shares outstanding had been converted into 12,386,200 preferred shares at the conversion ratio of 75 common shares to 1.0 preferred share. (**) Refers to a participation in the total equity value of the Company, calculated as if the weighted average preferred shares outstanding had been converted into common shares at the conversion ratio of 75 common shares to 1.0 preferred share |
Financial instruments (Tables)
Financial instruments (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Disclosure of financial instruments | |
Schedule of financial instruments | Book value Fair value December 31, December 31, Level 2017 2016 2017 2016 Assets: Short-term investments 1/2 1,036.1 331.2 1,036.1 331.2 Long term investments 1/3 836.0 753.2 836.0 753.2 Trade and other receivables 1 914.4 673.3 914.4 673.3 Restricted investments (*) 1 8.8 162.0 8.8 162.0 Derivative financial instruments (*) 2 420.8 21.7 420.8 21.7 Liabilities: Loans and financing (*) (a) 2 3,489.9 4,034.5 3,461.0 4,065.8 Accounts payable 1 953.5 1,034.3 953.5 1,034.3 Financial liabilities at fair value through profit and loss (Note 22) (**) 2 — 44.7 — 44.7 Derivative financial instruments (*) 2/3 426.9 231.3 426.9 231.3 (*) Includes current and non-current. (**) Refers to a private placement of preferred shares class B (See Note 22). |
Schedule of senior notes swaps | Options Structure Coupon Payments Principal Payment Period Apr/2018 to Apr/2019 Oct/2019 to Oct/2024 Oct/2024 Notional US$12 million US$12 million US$400 million Put option bought — N/A Call option bough N/A N/A Call option sold — |
Schedule of derivative financial instruments | December 31, 2017 2016 Assets Liabilities Assets Liabilities Cash flow hedge Interest rate swap contract and heating oil forward contracts — ) — ) Fair value hedge Interest rate swap contract — ) Derivatives not designated as hedge HNA option on TAP economic interest (Note 12) — — — ) Interest rate swap contract (*) ) — Forward foreign currency contract (*) — — ) Heating oil forward contracts — — ) Foreign currency options (*) (**) ) — — ) ) (*) Financial Instruments in connection with the Senior Notes, with a total net liability R$6,1. The senior notes were swapped into Reais using a set of instruments, where the Company receives U.S.dollar at 5,875% and pays Reais at 99,1% of CDI. More details see item Derivatives not designated as hedge accounting’ (**) Includes R$1.3 from a call-spread option in connection with a US$15 million loan. This option swaps the loan to Reais, converting it from Libor 3M + 2,388% in U.S.Dollar to 124% of CDI + FX variation in Reais. |
Schedule of financial liabilities by maturity | December 31, 2017 Immediate Until 6 7 to 12 1 to 5 More than Total Assets from derivative transactions ) Liabilities from derivative transactions ) ) ) — ) Total derivative financial instruments ) ) ) ) |
Schedule of positions related to cash flow hedge | December 31, 2017 Notional Asset Liability Fair value Cash flow hedge: Loans and financing LIBOR Fixed rate ) ) December 31, 2016 Notional Asset Liability Fair value Cash flow hedge: Loans and financing LIBOR Fixed rate ) Heating Oil — — ) ) |
Schedule of changes in other comprehensive loss (cash flow hedge reserve) | December 31, 2017 2016 Balance at the beginning of the year ) ) Transactions settled during the year Realization of deferral discontinued hedge — Fair value adjustment ) Deferred tax effect Balance at the end of the year ) ) |
Schedule of fair value of financial instruments | Assets measured at fair value December 31, Level 1 Level 2 Level 3 Financial assets at fair value Short-term investments — — Restricted investments (a) — — Long-term investments (c) — — Interest rate swap contract - fair value hedge option (b) — — Interest rate swap contract- not designated as hedge — — Forward foreign currency contract — — Foreign currency options Heating oil forward contracts — — Liabilities measured at fair value December 31, Level 1 Level 2 Level 3 Financial liabilities at fair value Interest rate swap contract - cash flow hedge ) — ) — Interest rate swap contract- not designated as hedge ) — ) — Foreign currency options ) — ) — December 31, Assets measured at fair value 2016 Level 1 Level 2 Level 3 Financial assets at fair value Short-term investments 331.2 331.2 — — Restricted investments 162.0 162.0 — — Long-term investments (c) 753.2 1.1 — 752.1 Interest rate swap contract - fair value hedge option (b) 4.5 — 4.5 — Interest rate swap contract- not designated as hedge 17.2 — 17.2 — Liabilities measured at fair value December 31, Level 1 Level 2 Level 3 Financial liabilities at fair value Financial liabilities at fair value through profit or loss ) — ) — Interest rate swap contract - cash flow hedge ) — ) — Interest rate swap contract - fair value hedge (b) ) — ) — HNA option TAP economic interest (d) ) — — ) Interest rate swap contract- not designated as hedge ) — ) — Heating oil forward contracts ) — ) — (a) Includes current and non-current. (b) Portion of the balances consist of loans from FINAME PSI, and standard FINAME presented at their value adjusted by the hedged risk, applying fair value hedge accounting rules. (c) The Company calculated the fair value of the call option based on a valuation for TAP and binomial model considering the term of option, discount rate and the market volatility of publicly traded comparable airlines, calculated on a 2 years average. The resulting amount of the binomial model calculated in Euros was converted into Reais using the period-end exchange rate. See Note 1 (d) The Company calculated the fair value of the put option by using the 12 months Libor rate as the coupon for the bond and applying it for the remaining time of the option. |
Schedule of Level 3 financial assets reconciliation | December 31, 2017 2016 Balance at the beginning of the year — Acquisition cost (€90 million) (1.b.i) — Foreign currency exchange gain (loss) (*) ) Interest accrual (1.b.ii) (**) Net present value adjustment (1.b.ii) (**) ) ) Fair value of call-option (1.b.ii) (**) Balance at the end of the year (*) recorded in the “Foreign currency exchange, net” in the income statements line item. (**) recorded in the “Result from related parties transactions, net” in the income statements line item. |
Schedule of Level 3 financial liability reconciliation | December 31, 2017 2016 Balance at the beginning of the year ) — Fair value of call-option (1.b.ii) (*) — ) Derecognition of financial instrument (*) — Balance at the end of the year — ) (*) recorded in the “Result from related parties transactions, net” in the income statements line item. The option expired on December 2, 2017 and was not exercised, the fair value was reverted. |
Operating revenue (Tables)
Operating revenue (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Operating revenue | |
Schedule of operating revenue | Year ended December 31, 2017 2016 Revenue Passenger revenue Other revenue Gross revenue Taxes levied on Passenger revenue ) ) Other revenue ) ) Total taxes ) ) Net revenue |
Financial result (Tables)
Financial result (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Financial result | |
Schedule of financial result | Year ended December 31, 2017 2016 Financial income Interest on short-term investments Federal tax installment payment program — Other Financial expenses Interest on loans ) ) Interest on factoring credit card and travel agencies receivables ) ) Interest on other operations ) ) Guarantee commission ) ) Loan costs amortization ) ) Other ) ) ) ) Derivative financial instruments, net ) Foreign exchange result, net Net financial expenses ) ) |
Other operating expenses, net (
Other operating expenses, net (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Other operating expenses, net | |
Schedule of other operating expenses, net | Year ended December 31, 2017 2016 Accommodation and meals IT services Professional services Taxes, civil and labor risks Aircraft insurance Flights interrupted Others (*) ) (*) The “Others” balance is pulverized. |
Commitments (Tables)
Commitments (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Commitments | |
Schedule of minimum payments of non-cancellable operating leases | December 31, 2017 2016 Up to one year From one to five years More than five years |
Schedule of purchase commitments for the acquisition of aircraft | December 31, 2017 2016 Up to one year — — More than one year up to five years More than five years |
Share-based option plan (Tables
Share-based option plan (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Share-based option plan | |
Summary of measurement of grant date fair value of share options | First Option Plan 1 st program 2 nd program 3 rd program Total options granted Date of compensation committee Dec 11, 2009 Mar 24, 2011 April, 05, 2011 Total options outstanding Option exercise price R$3.42 R$6.44 R$6.44 Option fair value as of grant date R$1.93 R$4.16 R$4.16 Estimated volatility of the share price % % % Expected dividend % % % Risk-free rate of return % % % Average remaining maturity (in years) — — — Maximum life of the option 10 years 10 years 10 years Expected term considered for valuation 7 years 7 years 7 years Second Option Plan Third Option 1 st program 2 nd program 3 rd program 4 rd program 1 st program Total options granted Date of compensation committee June 30, 2014 July 01, 2015 July 01, 2016 July 06, 2017 Mar 14, 2017 Total options outstanding Option exercise price R$19.15 R$14.51 R$14.50 R$22.57 R$11.85 Option fair value as of grant date R$11.01 R$10.82 R$10.14 R$12.82 R$4.82 Estimated volatility of the share price % % % % % Expected dividend % % % % % Risk-free rate of return % % % % % Average remaining maturity (in years) Maximum life of the option 8 years 8 years 8 years 10 years 5 years Expected term considered for valuation 4.5 years 4.5 years 4.5 years 5.5 years 5 years |
Summary of changes in stock options | Number of Weighted Balance as of December 31, 2015 R$ Granted R$ Balance as of December 31, 2016 R$ Granted R$ Cancelled ) R$ Exercised ) R$ Balance as of December, 31, 2017 R$ Number of options exercisable as of: December 31, 2016 R$ December 31, 2017 R$ |
Summary of fair value of RSUs and expense | Date of Total shares Total shares Fair value as 1 st program June 30, 2014 R$ 2 nd program July 01, 2015 R$ 3 rd program July 01, 2016 R$ 4 th program July 06, 2017 R$ |
Summary of changes in RSUs | Number of As of December 31, 2015 Granted Paid ) As of December 31, 2016 Granted Cancelled ) Paid ) As of December, 31, 2017 |
Provision for taxes, civil an60
Provision for taxes, civil and labor risks (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Provision for taxes, civil and labor risks | |
Schedule of provisions | December 31, 2017 2016 Taxes Civil Labor |
Schedule of changes in taxes, civil and labor provisions | Total Balance at December 31, 2015 Provisions recognized Utilized provisions ) Balance at December 31, 2016 Provisions recognized Utilized provisions ) Balance at December 31, 2017 |
Schedule of amounts of claims for which no provision recorded | December 31, 2017 2016 Taxes Civil Labor |
Insurance (Tables)
Insurance (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Insurance | |
Schedule of types of insurance policies | As of December 31, 2017, the Company has the following insurance policies in place: Type Insured amounts Fire - property and equipment Civil liabilities |
Operations - Subsidiaries (Deta
Operations - Subsidiaries (Details) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
ALAB | ||
Equity interest in subsidiaries | ||
Equity interest owned (as a percentage) | 100.00% | 100.00% |
Azul Finance LLC | ||
Equity interest in subsidiaries | ||
Equity interest owned (as a percentage) | 100.00% | 100.00% |
Azul Finance 2 LLC | ||
Equity interest in subsidiaries | ||
Equity interest owned (as a percentage) | 100.00% | 100.00% |
Azul Services LLC | ||
Equity interest in subsidiaries | ||
Equity interest owned (as a percentage) | 100.00% | |
Blue Sabia LLC | ||
Equity interest in subsidiaries | ||
Equity interest owned (as a percentage) | 100.00% | 100.00% |
ATS Viagens e Turismo Ltda. | ||
Equity interest in subsidiaries | ||
Equity interest owned (as a percentage) | 99.90% | 99.90% |
Azul SOL LLC | ||
Equity interest in subsidiaries | ||
Equity interest owned (as a percentage) | 100.00% | 100.00% |
Azul Investment LLP | ||
Equity interest in subsidiaries | ||
Equity interest owned (as a percentage) | 100.00% | |
Fundo Garoupa | ||
Equity interest in subsidiaries | ||
Equity interest owned (as a percentage) | 100.00% | 100.00% |
Azul's investment held directly | 1.00% | |
Azul's investment held indirectly through ALAB | 99.00% | |
Fundo Safira | ||
Equity interest in subsidiaries | ||
Equity interest owned (as a percentage) | 100.00% | 100.00% |
Fundo Azzurra | ||
Equity interest in subsidiaries | ||
Equity interest owned (as a percentage) | 100.00% | 100.00% |
Canela | ||
Equity interest in subsidiaries | ||
Equity interest owned (as a percentage) | 100.00% | 100.00% |
Canela 336 LLC | ||
Equity interest in subsidiaries | ||
Equity interest owned (as a percentage) | 100.00% | 100.00% |
Canela 407 LLC | ||
Equity interest in subsidiaries | ||
Equity interest owned (as a percentage) | 100.00% | 100.00% |
Canela 429 LLC | ||
Equity interest in subsidiaries | ||
Equity interest owned (as a percentage) | 100.00% | 100.00% |
Canela Turbo One LLC | ||
Equity interest in subsidiaries | ||
Equity interest owned (as a percentage) | 100.00% | |
Canela Turbo Two LLC | ||
Equity interest in subsidiaries | ||
Equity interest owned (as a percentage) | 100.00% | |
Canela Turbo Three LLC | ||
Equity interest in subsidiaries | ||
Equity interest owned (as a percentage) | 100.00% | 100.00% |
Daraland S.A. | ||
Equity interest in subsidiaries | ||
Equity interest owned (as a percentage) | 100.00% | |
Azul Uruguai | ||
Equity interest in subsidiaries | ||
Equity interest owned (as a percentage) | 100.00% | |
TudoAzul S.A. | ||
Equity interest in subsidiaries | ||
Equity interest owned (as a percentage) | 100.00% | 100.00% |
Operations - Initial Public Off
Operations - Initial Public Offering and Global offering (Details) R$ / shares in Units, R$ in Millions | Sep. 20, 2017shares | Sep. 19, 2017shares | Sep. 15, 2017R$ / sharesshares | Apr. 19, 2017R$ / sharesshares | Dec. 31, 2017BRL (R$)shares | Sep. 15, 2017$ / shares | Apr. 19, 2017$ / sharesshares | Apr. 10, 2017R$ / $ |
Disclosure of classes of share capital | ||||||||
Number of preferred shares represented by each ADS | 3 | |||||||
Number of ADS offered in international offering | 10,870,449 | |||||||
Number of preferred shares issued in the form of ADS at the exercise of the underwriters option | 4,063,017 | |||||||
Number of ADS issued at the exercise of the underwriter's option | 1,354,339 | |||||||
Global offering price (per ADS) | $ / shares | $ 26.75 | |||||||
Preferred shares | ||||||||
Disclosure of classes of share capital | ||||||||
Number of shares issued | 321,753,720 | |||||||
Number of shares offered in global offering | 40,630,186 | |||||||
Number of shares offered in Brazilian offering | 8,018,839 | |||||||
Number of shares offered in international offering | 32,611,347 | |||||||
Number of days granted to underwriters to purchase additional shares | 30 days | |||||||
Maximum number of additional shares offered to underwriters | 4,063,019 | |||||||
Global offering price (per share) | R$ / shares | R$ 27.96 | |||||||
IPO | ||||||||
Disclosure of classes of share capital | ||||||||
Number of preferred shares represented by each ADS | 3 | 3 | ||||||
IPO | Preferred shares | ||||||||
Disclosure of classes of share capital | ||||||||
Number of shares issued | 96,239,837 | 96,239,837 | ||||||
Number of shares offered in IPO by entity | 63,000,000 | |||||||
Number of shares offered in IPO by selling shareholders | 33,239,837 | |||||||
Initial public offering price per share | R$ / shares | R$ 21.00 | |||||||
Initial public offering price per ADS | $ / shares | $ 20.06 | |||||||
Number of preferred shares represented by each ADS | 3 | 3 | ||||||
Exchange rate | R$ / $ | 3.1409 | |||||||
Net proceeds from issuance of preference shares | R$ | R$ 1265.0 |
Operations - Senior notes (Deta
Operations - Senior notes (Details) - Senior unsecured notes due 2024 - USD ($) $ in Millions | Dec. 31, 2017 | Oct. 19, 2017 |
Senior notes | ||
Interest rate (as a percent) | 5.875% | |
Azul Investment LLP | ||
Senior notes | ||
Principal amount | $ 400 | |
Interest rate (as a percent) | 5.875% |
Operations - Strategic Partners
Operations - Strategic Partnerships (Details) - Private integrated logistics solutions company item in Thousands | Dec. 20, 2017item |
Strategic Partnerships | |
Portion of ownership interest (as a percent) | 50.01% |
Anticipated number of tons of cargo per year | 100 |
Brazil's Postal Service | |
Strategic Partnerships | |
Portion of ownership interest (as a percent) | 49.90% |
Significant accounting polici66
Significant accounting policies - Taxes (Details) | Dec. 31, 2017 |
Significant accounting policies | |
Tax loss carryforwards up to annual taxable income (as a percent) | 30.00% |
Significant accounting polici67
Significant accounting policies - Property and equipment (Details) | 12 Months Ended |
Dec. 31, 2017component | |
Property and equipment | |
Number of aircraft major components | 4 |
Aircraft | |
Property and equipment | |
Estimated useful lives | 12 years |
Leasehold improvements | |
Property and equipment | |
Estimated useful lives | 5 years |
Aircraft equipment | |
Property and equipment | |
Estimated useful lives | 12 years |
Computer equipment and peripherals | |
Property and equipment | |
Estimated useful lives | 5 years |
Tools | |
Property and equipment | |
Estimated useful lives | 5 years |
Heavy maintenance - engine | Minimum | |
Property and equipment | |
Estimated useful lives | 5 years |
Heavy maintenance - engine | Maximum | |
Property and equipment | |
Estimated useful lives | 6 years |
Heavy maintenance - structural checks | Minimum | |
Property and equipment | |
Estimated useful lives | 2 years |
Heavy maintenance - structural checks | Maximum | |
Property and equipment | |
Estimated useful lives | 10 years |
Engines | |
Property and equipment | |
Estimated useful lives | 12 years |
Furniture and fixtures | |
Property and equipment | |
Estimated useful lives | 10 years |
Simulators | |
Property and equipment | |
Estimated useful lives | 20 years |
Vehicles | |
Property and equipment | |
Estimated useful lives | 5 years |
Significant accounting polici68
Significant accounting policies - Treasury shares (Details) R$ in Millions | 12 Months Ended |
Dec. 31, 2017BRL (R$) | |
Significant accounting policies | |
Gain (loss) on treasury shares | R$ 0.0 |
Significant accounting polici69
Significant accounting policies - Revenue recognition (Details) - BRL (R$) R$ in Millions | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Significant accounting policies | ||
Expiration period of tickets | 1 year | |
TudoAzul points expiration period | 2 years | |
Revenues related to the Co-branded credit card | R$ 2.2 | R$ 1.5 |
Significant accounting polici70
Significant accounting policies - Segment information (Details) | 12 Months Ended |
Dec. 31, 2017segment | |
Significant accounting policies | |
Number of operating segments | 1 |
Significant accounting polici71
Significant accounting policies - Hedge accounting (Details) R$ in Millions | 12 Months Ended | |||
Dec. 31, 2017BRL (R$)engineaircraft | Dec. 31, 2016BRL (R$) | Dec. 31, 2015BRL (R$) | Jan. 01, 2018BRL (R$) | |
Significant accounting policies | ||||
Passenger revenue | R$ 6695.3 | R$ 5786.8 | R$ 5575.3 | |
Air traffic liability | R$ 1287.4 | R$ 949.4 | ||
Number of aircraft under operating leases | aircraft | 120 | |||
Number of engines under operating leases | engine | 21 | |||
Increase (decrease) due to changes in accounting policy required by IFRSs | ||||
Significant accounting policies | ||||
Net impact of the deferral of the recognition of ancillary revenues | R$ 22.0 | |||
Increase (decrease) due to application of IFRS 15 | ||||
Significant accounting policies | ||||
Air traffic liability | R$ 54.0 | |||
Owned aircraft | ||||
Significant accounting policies | ||||
Expenses related to operating lease | 1,100 | |||
Heavy maintenance - structural checks | ||||
Significant accounting policies | ||||
Expenses related to operating lease | R$ 200.0 |
Financial risk management obj72
Financial risk management objectives and policies - Interest rate risk (Details) - Interest rate risk R$ in Millions | 12 Months Ended |
Dec. 31, 2017BRL (R$) | |
Percentage one | |
Financial risk management objectives and policies | |
Percentage of reasonably possible increase in risk assumption | 25.00% |
Percentage of reasonably possible decrease in risk assumption | (25.00%) |
Increase (decrease) in interest expenses due to reasonably possible increase in designated risk component | R$ 55.1 |
Increase (decrease) in interest expenses due to reasonably possible decrease in designated risk component | R$ 55.1 |
Percentage two | |
Financial risk management objectives and policies | |
Percentage of reasonably possible increase in risk assumption | 50.00% |
Percentage of reasonably possible decrease in risk assumption | (50.00%) |
Increase (decrease) in interest expenses due to reasonably possible increase in designated risk component | R$ 110.2 |
Increase (decrease) in interest expenses due to reasonably possible decrease in designated risk component | R$ 110.2 |
LIBOR | Weighted average | |
Financial risk management objectives and policies | |
Weighted average interest rate | 4.20% |
CDI | Weighted average | |
Financial risk management objectives and policies | |
Weighted average interest rate | 10.20% |
Financial risk management obj73
Financial risk management objectives and policies - Currency risk (Details) R$ in Millions, $ in Millions | 12 Months Ended | ||
Dec. 31, 2017BRL (R$)R$ / €R$ / $ | Dec. 31, 2016USD ($) | Dec. 31, 2016BRL (R$) | |
Financial risk management objectives and policies | |||
Total debt denominated in local currency | R$ 3489.9 | R$ 4034.5 | |
Currency risk | |||
Financial risk management objectives and policies | |||
Maximum derivative financial instruments hedging period | 12 months | ||
US dollar denominated working capital loans were swapped to local currency | R$ 1383.7 | ||
Total debt denominated in foreign currency | R$ 1226.1 | ||
Total debt denominated in foreign currency (as a percent) | 35.10% | ||
Total debt denominated in local currency | R$ 2263.8 | ||
Total debt denominated in local currency (as a percent) | 64.90% | ||
Currency risk | NDF contracts | |||
Financial risk management objectives and policies | |||
Notional amount | $ | $ 80 | ||
Currency risk | U.S.dollar | |||
Financial risk management objectives and policies | |||
Net exposure | R$ 73.4 | (674.1) | |
Exchange rate | R$ / $ | 3.3080 | ||
Currency risk | U.S.dollar | Total assets | |||
Financial risk management objectives and policies | |||
Net exposure | R$ 1879.7 | 1,619.1 | |
Currency risk | U.S.dollar | Cash and cash equivalents and short-term Investments | |||
Financial risk management objectives and policies | |||
Net exposure | 278.2 | 144.6 | |
Currency risk | U.S.dollar | Security deposits and maintenance reserves | |||
Financial risk management objectives and policies | |||
Net exposure | 1,237.4 | 1,061.1 | |
Currency risk | U.S.dollar | Financial instruments | |||
Financial risk management objectives and policies | |||
Net exposure | 49.5 | 322.3 | |
Currency risk | U.S.dollar | Other assets | |||
Financial risk management objectives and policies | |||
Net exposure | 314.6 | 91.1 | |
Currency risk | U.S.dollar | Total liabilities | |||
Financial risk management objectives and policies | |||
Net exposure | 3,030.3 | 2,553.9 | |
Currency risk | U.S.dollar | Accounts payable | |||
Financial risk management objectives and policies | |||
Net exposure | 255.6 | 313.5 | |
Currency risk | U.S.dollar | Loans and financing | |||
Financial risk management objectives and policies | |||
Net exposure | 2,609.8 | 2,143.7 | |
Currency risk | U.S.dollar | Other liabilities | |||
Financial risk management objectives and policies | |||
Net exposure | 164.9 | 96.7 | |
Currency risk | U.S.dollar | NDF contracts | |||
Financial risk management objectives and policies | |||
Net exposure | 1,224 | 260.7 | |
Currency risk | Euro | |||
Financial risk management objectives and policies | |||
Net exposure | R$ 836.0 | 597.7 | |
Exchange rate | R$ / € | 3.9693 | ||
Currency risk | Euro | Total assets | |||
Financial risk management objectives and policies | |||
Net exposure | R$ 836.0 | 752.1 | |
Currency risk | Euro | Long-term investments | |||
Financial risk management objectives and policies | |||
Net exposure | R$ 836.0 | 752.1 | |
Currency risk | Euro | Total liabilities | |||
Financial risk management objectives and policies | |||
Net exposure | 154.4 | ||
Currency risk | Euro | Purchase of TAP Convertible Bonds option issued | |||
Financial risk management objectives and policies | |||
Net exposure | R$ 154.4 | ||
Percentage one | Currency risk | U.S.dollar | |||
Financial risk management objectives and policies | |||
Exposure exchange rate, increase in risk component | 4.135% | ||
Exposure exchange rate, decrease in risk component | 2.481% | ||
Percentage of reasonably possible increase in risk assumption | 25.00% | ||
Percentage of reasonably possible decrease in risk assumption | (25.00%) | ||
Effect on exchange rate variation due to reasonably possible increase in exchange rates | R$ 18.4 | ||
Effect on exchange rate variation due to reasonably possible decrease in exchange rates | R$ 18.4 | ||
Percentage one | Currency risk | Euro | |||
Financial risk management objectives and policies | |||
Exposure exchange rate, increase in risk component | 4.9616% | ||
Exposure exchange rate, decrease in risk component | 2.977% | ||
Percentage of reasonably possible increase in risk assumption | 25.00% | ||
Percentage of reasonably possible decrease in risk assumption | (25.00%) | ||
Effect on exchange rate variation due to reasonably possible increase in exchange rates | R$ 209.0 | ||
Effect on exchange rate variation due to reasonably possible decrease in exchange rates | R$ 209.0 | ||
Percentage two | Currency risk | U.S.dollar | |||
Financial risk management objectives and policies | |||
Exposure exchange rate, increase in risk component | 4.962% | ||
Exposure exchange rate, decrease in risk component | 1.654% | ||
Percentage of reasonably possible increase in risk assumption | 50.00% | ||
Percentage of reasonably possible decrease in risk assumption | (50.00%) | ||
Effect on exchange rate variation due to reasonably possible increase in exchange rates | R$ 36.7 | ||
Effect on exchange rate variation due to reasonably possible decrease in exchange rates | R$ 36.7 | ||
Percentage two | Currency risk | Euro | |||
Financial risk management objectives and policies | |||
Exposure exchange rate, increase in risk component | 5.954% | ||
Exposure exchange rate, decrease in risk component | 1.9847% | ||
Percentage of reasonably possible increase in risk assumption | 50.00% | ||
Percentage of reasonably possible decrease in risk assumption | (50.00%) | ||
Effect on exchange rate variation due to reasonably possible increase in exchange rates | R$ 418.0 | ||
Effect on exchange rate variation due to reasonably possible decrease in exchange rates | R$ 418.0 |
Financial risk management obj74
Financial risk management objectives and policies - Risks related to variations in prices of aircraft fuel (Details) - Aircraft fuel price risk R$ in Millions | Dec. 31, 2017BRL (R$) |
Percentage one | |
Financial risk management objectives and policies | |
Percentage of reasonably possible increase in risk assumption | 25.00% |
Percentage of reasonably possible decrease in risk assumption | (25.00%) |
Impact on fuel hedges due to reasonably possible increase in designated risk component | R$ 9.4 |
Impact on fuel hedges due to reasonably possible decrease in designated risk component | R$ 0.5 |
Percentage two | |
Financial risk management objectives and policies | |
Percentage of reasonably possible increase in risk assumption | 50.00% |
Percentage of reasonably possible decrease in risk assumption | (50.00%) |
Impact on fuel hedges due to reasonably possible increase in designated risk component | R$ 14.4 |
Impact on fuel hedges due to reasonably possible decrease in designated risk component | R$ 5.4 |
Financial risk management obj75
Financial risk management objectives and policies - Liquidity risk (Details) - BRL (R$) R$ in Millions | Dec. 31, 2017 | Dec. 31, 2016 |
Loans and financing | ||
Schedule of maturity of financial liabilities | ||
Financial liabilities | R$ 3489.9 | R$ 4034.5 |
Accounts payable | ||
Schedule of maturity of financial liabilities | ||
Financial liabilities | 953.5 | 1,034.3 |
Derivative financial instruments. | ||
Schedule of maturity of financial liabilities | ||
Financial liabilities | 426.9 | R$ 231.3 |
Liquidity risk | ||
Schedule of maturity of financial liabilities | ||
Financial liabilities | 4,943.5 | |
Liquidity risk | Loans and financing | ||
Schedule of maturity of financial liabilities | ||
Financial liabilities | 3,489.9 | |
Liquidity risk | Accounts payable | ||
Schedule of maturity of financial liabilities | ||
Financial liabilities | 953.5 | |
Liquidity risk | Derivative financial instruments. | ||
Schedule of maturity of financial liabilities | ||
Financial liabilities | 426.9 | |
Liquidity risk | Provisions | ||
Schedule of maturity of financial liabilities | ||
Financial liabilities | 73.2 | |
Liquidity risk | Immediate | ||
Schedule of maturity of financial liabilities | ||
Financial liabilities | 753.3 | |
Liquidity risk | Immediate | Loans and financing | ||
Schedule of maturity of financial liabilities | ||
Financial liabilities | 102.6 | |
Liquidity risk | Immediate | Accounts payable | ||
Schedule of maturity of financial liabilities | ||
Financial liabilities | 629.1 | |
Liquidity risk | Immediate | Derivative financial instruments. | ||
Schedule of maturity of financial liabilities | ||
Financial liabilities | 21.6 | |
Liquidity risk | Until 6 months | ||
Schedule of maturity of financial liabilities | ||
Financial liabilities | 457.5 | |
Liquidity risk | Until 6 months | Loans and financing | ||
Schedule of maturity of financial liabilities | ||
Financial liabilities | 222 | |
Liquidity risk | Until 6 months | Accounts payable | ||
Schedule of maturity of financial liabilities | ||
Financial liabilities | 235.4 | |
Liquidity risk | Until 6 months | Derivative financial instruments. | ||
Schedule of maturity of financial liabilities | ||
Financial liabilities | 0.1 | |
Liquidity risk | 7 to 12 months | ||
Schedule of maturity of financial liabilities | ||
Financial liabilities | 359.5 | |
Liquidity risk | 7 to 12 months | Loans and financing | ||
Schedule of maturity of financial liabilities | ||
Financial liabilities | 243.7 | |
Liquidity risk | 7 to 12 months | Accounts payable | ||
Schedule of maturity of financial liabilities | ||
Financial liabilities | 89 | |
Liquidity risk | 7 to 12 months | Derivative financial instruments. | ||
Schedule of maturity of financial liabilities | ||
Financial liabilities | 26.8 | |
Liquidity risk | 1 to 5 years | ||
Schedule of maturity of financial liabilities | ||
Financial liabilities | 1,781 | |
Liquidity risk | 1 to 5 years | Loans and financing | ||
Schedule of maturity of financial liabilities | ||
Financial liabilities | 1,329.6 | |
Liquidity risk | 1 to 5 years | Derivative financial instruments. | ||
Schedule of maturity of financial liabilities | ||
Financial liabilities | 378.4 | |
Liquidity risk | 1 to 5 years | Provisions | ||
Schedule of maturity of financial liabilities | ||
Financial liabilities | 73 | |
Liquidity risk | Up to 5 years | ||
Schedule of maturity of financial liabilities | ||
Financial liabilities | 1,592.2 | |
Liquidity risk | Up to 5 years | Loans and financing | ||
Schedule of maturity of financial liabilities | ||
Financial liabilities | 1,592 | |
Liquidity risk | Up to 5 years | Provisions | ||
Schedule of maturity of financial liabilities | ||
Financial liabilities | R$ 0.2 |
Financial risk management obj76
Financial risk management objectives and policies - Capital management (Details) - BRL (R$) R$ in Millions | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
Disclosure of detailed information about financial instruments | ||||
Equity | R$ 2833.6 | R$ 1002.0 | R$ 392.2 | R$ 416.5 |
Net debt | 846.7 | 2,283.6 | ||
Total capital | 3,680.3 | 3,285.6 | ||
Cash and cash equivalent | ||||
Disclosure of detailed information about financial instruments | ||||
Financial assets | (762.3) | (549.2) | ||
Short-term investment | ||||
Disclosure of detailed information about financial instruments | ||||
Financial assets | (1,036.1) | (331.2) | ||
Long-term investments | ||||
Disclosure of detailed information about financial instruments | ||||
Financial assets | (836) | (753.2) | ||
Restricted financial investments | ||||
Disclosure of detailed information about financial instruments | ||||
Financial assets | (8.8) | (162) | ||
Financial liabilities held for trading at fair value through profit and loss | ||||
Disclosure of detailed information about financial instruments | ||||
Financial liabilities | 44.7 | |||
Loans and financing | ||||
Disclosure of detailed information about financial instruments | ||||
Financial liabilities | R$ 3489.9 | R$ 4034.5 |
Cash and cash equivalents (Deta
Cash and cash equivalents (Details) - BRL (R$) R$ in Millions | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
Cash and cash equivalents | ||||
Cash and bank deposits | R$ 160.4 | R$ 156.9 | ||
Cash equivalents | ||||
Bank Deposit Certificate - CDB | 290.8 | 392.3 | ||
Investments funds | 311.1 | |||
Total cash and cash equivalents | R$ 762.3 | R$ 549.2 | R$ 636.5 | R$ 389.0 |
Short term investments (Details
Short term investments (Details) - BRL (R$) R$ in Millions | Dec. 31, 2017 | Dec. 31, 2016 |
Short term investments | ||
Other short-term investments | R$ 57.4 | R$ 193.8 |
Investment funds | 978.7 | 137.4 |
Total short-term investments | R$ 1036.1 | R$ 331.2 |
CDI - Interbank Deposit Certificate rate | ||
Short term investments | ||
Accumulated average interest rate of debentures | 103.50% |
Restricted investments (Details
Restricted investments (Details) - CDI - Interbank Deposit Certificate rate | 12 Months Ended |
Dec. 31, 2017 | |
Minimum | |
Restricted investments | |
Return on restricted investment (as a percent) | 100.00% |
Maximum | |
Restricted investments | |
Return on restricted investment (as a percent) | 101.00% |
Trade and other receivables .(D
Trade and other receivables .(Details) - BRL (R$) R$ in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Trade and other receivables | |||
Credit cards | R$ 676.3 | R$ 457.7 | |
Travel agencies | 92.9 | 73.2 | |
Other receivables | 152.1 | 147.7 | |
Allowance for doubtful accounts | (6.9) | (5.3) | R$ 8.1 |
Total trade and other receivables | R$ 914.4 | R$ 673.3 | |
Maximum period for installments on credit card receivables | 12 months | ||
Average days-sales-outstanding (in days) | 36 days | 32 days | |
Minimum period after interest chargeable on installments | 6 months | ||
Face value of factored receivable from credit cards | R$ 3153.8 | R$ 4717.4 | |
Discount interest cost recognized on factored accounts receivable derecognized | 35.3 | 97.7 | |
Due more than 60 days | |||
Trade and other receivables | |||
Credit cards | R$ 573.6 | R$ 353.9 |
Trade and other receivables - C
Trade and other receivables - Changes in the allowance for doubtful accounts and accounts receivables (Details) - BRL (R$) R$ in Millions | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Trade and other receivables | ||
Balance at the beginning of the year | R$ 5.3 | R$ 8.1 |
Increases | 2.4 | 1.5 |
Reversals | (0.8) | (4.3) |
Balance at the end of the year | 6.9 | 5.3 |
Accounts receivables | 921.3 | 678.6 |
Not yet due | ||
Trade and other receivables | ||
Accounts receivables | 747.3 | 668.6 |
Up to 90 days | ||
Trade and other receivables | ||
Accounts receivables | 167.1 | 4.7 |
Over 91 days | ||
Trade and other receivables | ||
Accounts receivables | R$ 6.9 | R$ 5.3 |
Inventories (Details)
Inventories (Details) - BRL (R$) R$ in Millions | Dec. 31, 2017 | Dec. 31, 2016 |
Inventories | ||
Parts and maintenance materials | R$ 151.5 | R$ 116.8 |
Catering and uniforms | 11.6 | 9.2 |
Inventory provision | (12.7) | (18.9) |
Inventories | R$ 150.4 | R$ 107.1 |
Prepaid expenses (Details)
Prepaid expenses (Details) - BRL (R$) R$ in Millions | Dec. 31, 2017 | Dec. 31, 2016 |
Prepaid expenses | ||
Insurance premium | R$ 24.3 | R$ 24.0 |
Aircraft and engine leases | 42.3 | 37.9 |
Guarantee commission | 15.5 | 14.1 |
Other | 32.2 | 28.4 |
Total prepaid expenses | 114.3 | 104.4 |
Non-current | 4.5 | 6.9 |
Current | R$ 109.8 | R$ 97.5 |
Related parties - Key managemen
Related parties - Key management (Details) R$ in Millions | 12 Months Ended | |
Dec. 31, 2017BRL (R$)item | Dec. 31, 2016BRL (R$) | |
Transactions between related parties | ||
Salaries and wages | R$ 17.4 | R$ 16.7 |
Bonus | 6.7 | 6.2 |
Share-based compensation and restricted share units plans | 24.8 | 11.6 |
Total compensation | R$ 48.9 | R$ 34.5 |
Executive officers | ||
Transactions between related parties | ||
Number of related parties to whom guarantees granted by entity | item | 3 |
Related parties - Agreements (D
Related parties - Agreements (Details) R$ in Millions, $ in Millions | Nov. 24, 2017USD ($)shares | Dec. 31, 2017BRL (R$) | Dec. 31, 2016BRL (R$) | Sep. 02, 2016USD ($) |
Transactions between related parties | ||||
Loan agreement receivable, noncurrent | R$ 9.7 | R$ 9.2 | ||
Loan agreement receivable, current | 73.2 | |||
TAP ME | ||||
Transactions between related parties | ||||
Total value of maintenance services acquired pursuant to such Maintenance Agreements | 83.3 | R$ 126.0 | ||
Shareholder | Loans to shareholders | ||||
Transactions between related parties | ||||
Loan agreement receivable, noncurrent | 9.7 | $ 2.8 | ||
HNA | Loans to shareholders | ||||
Transactions between related parties | ||||
Loan agreement receivable, current | $ 22 | R$ 73.2 | ||
One time upfront fee (as a percent) | 1.00% | |||
Interest rate (as a percent) | 1.00% | |||
Maturity of loan receivable agreement | 364 days | |||
Preferred shares pledged as guarantee for loan | shares | 25,472,852 | |||
LIBOR | Shareholder | Loans to shareholders | ||||
Transactions between related parties | ||||
Variable spread on interest rate | 2.30% |
Related parties - TAP Transacti
Related parties - TAP Transactions (Details) € in Millions, R$ in Millions | Mar. 14, 2016EUR (€) | Jul. 31, 2017aircraft | Mar. 31, 2016aircraft | Jun. 20, 2016 | Dec. 31, 2017BRL (R$)aircraft | Dec. 31, 2017BRL (R$)aircraft | Dec. 31, 2016BRL (R$) | Dec. 31, 2015BRL (R$) |
Transactions between related parties | ||||||||
Total amount of related party transactions | R$ 194.4 | R$ 163.0 | ||||||
Acquisition of long-term investments | 360.8 | |||||||
Recognition of an gain (loss) | (90.4) | 10.8 | R$ 82.8 | |||||
TAP | ||||||||
Transactions between related parties | ||||||||
Aircraft sublease | (8.5) | (126) | ||||||
TAP Convertible Bonds | 202.9 | 289 | ||||||
Total amount of related party transactions | R$ 194.4 | 163 | ||||||
Number of aircraft subleased | aircraft | 2 | 15 | 15 | |||||
Number of onerous aircraft subleases executed | aircraft | 7 | |||||||
Number of subleased aircrafts returned | aircraft | 2 | |||||||
Total number of aircrafts subleased | aircraft | 15 | 15 | ||||||
Net present value of provision for future obligation costs under onerous aircraft subleases | R$ 68.9 | R$ 68.9 | R$ 115.6 | |||||
Amounts received from subleases | 113.4 | |||||||
Amount paid to external lessors | 138 | |||||||
Percentage of total and voting capital upon conversion of bonds | 6.00% | |||||||
Percentage of distributable profits for right to receive dividends or other distributions in investment company | 41.25% | |||||||
TAP | Purchase of TAP Convertible Bonds option issued | ||||||||
Transactions between related parties | ||||||||
TAP Convertible Bonds | 202.9 | |||||||
Acquisition of long-term investments | € | € 90 | |||||||
Maturity term of convertible bonds | 10 years | |||||||
Interest rate on convertible bonds (as a percent) | 3.75% | 7.50% | ||||||
Number of years for early redeem of Convertible Bonds | 4 years | |||||||
Recognition of an gain (loss) | R$ 154.4 |
Related parties - Hainan Airlin
Related parties - Hainan Airlines (Details) € in Millions, R$ in Millions, $ in Millions | Mar. 14, 2016EUR (€) | Mar. 14, 2016USD ($) | Mar. 14, 2016BRL (R$) | Feb. 05, 2016USD ($) | Feb. 05, 2016BRL (R$) | Dec. 31, 2017EUR (€)shares | Dec. 31, 2017BRL (R$) | Dec. 31, 2016USD ($)shares | Dec. 31, 2016BRL (R$)shares | Dec. 31, 2015BRL (R$) | Dec. 31, 2017BRL (R$)shares |
Transactions between related parties | |||||||||||
Proceeds from loan | R$ 1750.1 | R$ 833.0 | R$ 1194.0 | ||||||||
Acquisition of long-term investments | 360.8 | ||||||||||
Amount received on conversion of loan | 1,231.3 | 1,451.6 | 313 | ||||||||
Issue of equity | 1,308 | 1,473.1 | 313 | ||||||||
Recognition of an gain (loss) | (90.4) | 10.8 | (82.8) | ||||||||
HNA | |||||||||||
Transactions between related parties | |||||||||||
Committed contribution amount under Investment Agreement | $ 450 | R$ 1753.9 | |||||||||
Increase issued capital on conversion of loan | 324.8 | ||||||||||
Amount received on conversion of loan | $ 350 | R$ 660.4 | |||||||||
Aggregate economic interest on dilutive basis | 3.00% | 3.00% | |||||||||
Value of obligation | € 6.9 | R$ 26.0 | |||||||||
HNA | Purchase of TAP Convertible Bonds option issued | |||||||||||
Transactions between related parties | |||||||||||
Acquisition of long-term investments | € 90 | R$ 360.8 | |||||||||
Notional amount | € | 30 | ||||||||||
Gain recognized | 154.4 | ||||||||||
Parpublica Participacoes Publicas | |||||||||||
Transactions between related parties | |||||||||||
Exercise option to subscribe TAP convertible loans, in order to indirect shareholding of TAP | € | € 30 | ||||||||||
Preferred shares | |||||||||||
Transactions between related parties | |||||||||||
Number of shares issued | shares | 321,753,720 | 321,753,720 | |||||||||
Class D preferred share | |||||||||||
Transactions between related parties | |||||||||||
Number of shares issued | shares | 63,241,900 | 63,241,900 | |||||||||
Issue of equity | R$ 985.2 | ||||||||||
Capital Reserve | |||||||||||
Transactions between related parties | |||||||||||
Issue of equity | R$ 646.5 | 487.9 | R$ 307.6 | ||||||||
Capital Reserve | Class D preferred share | |||||||||||
Transactions between related parties | |||||||||||
Issue of equity | R$ 487.9 | ||||||||||
Subordinated convertible loan | Class D preferred share | |||||||||||
Transactions between related parties | |||||||||||
Proceeds from loan | $ 100 | R$ 360.8 |
Related parties - Guarantees an
Related parties - Guarantees and Lease Agreements (Details) - aircraft | Sep. 15, 2017 | Sep. 12, 2017 |
Companies of HNA group | ||
Transactions between related parties | ||
Number of aircrafts under operating leases agreements | 3 | |
Avolon Aerospace Leasing Ltd ("Avolon") | ||
Transactions between related parties | ||
Number of aircrafts under operating leases agreements | 5 |
Security deposits and mainten89
Security deposits and maintenance reserves (Details) - BRL (R$) R$ in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Security deposits and maintenance reserves | |||
Deposits | R$ 1259.1 | R$ 1078.0 | R$ 1215.7 |
Write-offs | 9.6 | 11.5 | |
Security deposits | |||
Security deposits and maintenance reserves | |||
Deposits | 181 | 219.8 | 298.6 |
Write-offs | 7.5 | ||
Refund for replacement of deposits | 25.3 | 21.1 | |
Maintenance reserve deposits | |||
Security deposits and maintenance reserves | |||
Deposits | 1,078.1 | 858.2 | R$ 917.1 |
Write-offs | 9.6 | 4 | |
Refund for replacement of deposits | R$ 32.6 | R$ 62.6 |
Security deposits and mainten90
Security deposits and maintenance reserves - Changes in security deposits and maintenance reserve deposits (Details) - BRL (R$) R$ in Millions | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Security deposits and maintenance reserves | ||
Balance at beginning of the period | R$ 1078.0 | R$ 1215.7 |
Additions | 317.2 | 358.6 |
Refunds from sublease | 3.3 | (28.8) |
Write-offs | (9.6) | (11.5) |
Refunds/returns | (150.5) | (260.9) |
Foreign exchanges variations | 20.7 | (195.1) |
Balance at end of the period | 1,259.1 | 1,078 |
Maintenance reserve deposits | ||
Security deposits and maintenance reserves | ||
Balance at beginning of the period | 858.2 | 917.1 |
Additions | 291.4 | 298.3 |
Write-offs | (9.6) | (4) |
Refunds/returns | (81) | (199.7) |
Foreign exchanges variations | 19.1 | (153.5) |
Balance at end of the period | 1,078.1 | 858.2 |
Security deposits | ||
Security deposits and maintenance reserves | ||
Balance at beginning of the period | 219.8 | 298.6 |
Additions | 25.8 | 60.3 |
Refunds from sublease | 3.3 | (28.8) |
Write-offs | (7.5) | |
Refunds/returns | (69.5) | (61.2) |
Foreign exchanges variations | 1.6 | (41.6) |
Balance at end of the period | R$ 181.0 | R$ 219.8 |
Property and equipment (Details
Property and equipment (Details) - BRL (R$) R$ in Millions | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Aircraft and engines | ||
Property and equipment | ||
Net selling expense | R$ 75.4 | R$ 51.9 |
Non-cash impact of sale and leaseback related to outstanding debt transferred to buyer at time of sale | 325.1 | |
Gain (loss) on sale of aircraft and engines | 70.7 | |
Financial statement impact of reclassification of leases | R$ 449.8 | |
Aircraft under finance lease | ||
Property and equipment | ||
Loss associated with sale and leaseback transactions | R$ 4.2 | |
Lease term (in years) | 120 months |
Property and equipment - Breakd
Property and equipment - Breakdown (Details) - BRL (R$) R$ in Millions | Dec. 31, 2017 | Dec. 31, 2016 |
Property and equipment | ||
Property, plant and equipment | R$ 3325.5 | R$ 3440.0 |
Leasehold improvements | ||
Property and equipment | ||
Property, plant and equipment | 71.6 | 67.4 |
Equipment and facilities | ||
Property and equipment | ||
Property, plant and equipment | 45.8 | 41 |
Vehicles | ||
Property and equipment | ||
Property, plant and equipment | 0.4 | 0.2 |
Furniture and fixtures | ||
Property and equipment | ||
Property, plant and equipment | 8.5 | 8.6 |
Aircraft equipment | ||
Property and equipment | ||
Property, plant and equipment | 647.8 | 547.7 |
Aircraft and engines | ||
Property and equipment | ||
Property, plant and equipment | 2,357 | 2,626.4 |
Advance payments for acquisition of aircrafts | ||
Property and equipment | ||
Property, plant and equipment | 148.9 | 100.4 |
Construction in progress | ||
Property and equipment | ||
Property, plant and equipment | 45.5 | 48.3 |
Gross carrying amount | ||
Property and equipment | ||
Property, plant and equipment | 4,122.4 | 4,117.4 |
Gross carrying amount | Leasehold improvements | ||
Property and equipment | ||
Property, plant and equipment | 117.9 | 97.3 |
Gross carrying amount | Equipment and facilities | ||
Property and equipment | ||
Property, plant and equipment | 112.8 | 95.2 |
Gross carrying amount | Vehicles | ||
Property and equipment | ||
Property, plant and equipment | 1.2 | 2.6 |
Gross carrying amount | Furniture and fixtures | ||
Property and equipment | ||
Property, plant and equipment | 17.2 | 15.7 |
Gross carrying amount | Aircraft equipment | ||
Property and equipment | ||
Property, plant and equipment | 908.7 | 741 |
Gross carrying amount | Aircraft and engines | ||
Property and equipment | ||
Property, plant and equipment | 2,770.2 | 3,016.9 |
Gross carrying amount | Advance payments for acquisition of aircrafts | ||
Property and equipment | ||
Property, plant and equipment | 148.9 | 100.4 |
Gross carrying amount | Construction in progress | ||
Property and equipment | ||
Property, plant and equipment | 45.5 | 48.3 |
Accumulated depreciation | ||
Property and equipment | ||
Property, plant and equipment | (796.9) | (677.4) |
Accumulated depreciation | Leasehold improvements | ||
Property and equipment | ||
Property, plant and equipment | (46.3) | (29.9) |
Accumulated depreciation | Equipment and facilities | ||
Property and equipment | ||
Property, plant and equipment | (67) | (54.2) |
Accumulated depreciation | Vehicles | ||
Property and equipment | ||
Property, plant and equipment | (0.8) | (2.4) |
Accumulated depreciation | Furniture and fixtures | ||
Property and equipment | ||
Property, plant and equipment | (8.7) | (7.1) |
Accumulated depreciation | Aircraft equipment | ||
Property and equipment | ||
Property, plant and equipment | (260.9) | (193.3) |
Accumulated depreciation | Aircraft and engines | ||
Property and equipment | ||
Property, plant and equipment | R$ 413.2 | R$ 390.5 |
Property and equipment - Change
Property and equipment - Changes in property and equipment balances (Details) R$ in Millions | 12 Months Ended |
Dec. 31, 2017BRL (R$) | |
Changes in property and equipment balances | |
Balance, beginning of period | R$ 3440.0 |
Balance, end of period | 3,325.5 |
Leasehold improvements | |
Changes in property and equipment balances | |
Balance, beginning of period | 67.4 |
Balance, end of period | 71.6 |
Equipment and facilities | |
Changes in property and equipment balances | |
Balance, beginning of period | 41 |
Balance, end of period | 45.8 |
Vehicles | |
Changes in property and equipment balances | |
Balance, beginning of period | 0.2 |
Balance, end of period | 0.4 |
Furniture and fixtures | |
Changes in property and equipment balances | |
Balance, beginning of period | 8.6 |
Balance, end of period | 8.5 |
Aircraft equipment | |
Changes in property and equipment balances | |
Balance, beginning of period | 547.7 |
Balance, end of period | 647.8 |
Aircraft and engines | |
Changes in property and equipment balances | |
Balance, beginning of period | 2,626.4 |
Balance, end of period | 2,357 |
Advance payments for acquisition of aircrafts | |
Changes in property and equipment balances | |
Balance, beginning of period | 100.4 |
Balance, end of period | 148.9 |
Construction in progress | |
Changes in property and equipment balances | |
Balance, beginning of period | 48.3 |
Balance, end of period | 45.5 |
Gross carrying amount | |
Changes in property and equipment balances | |
Balance, beginning of period | 4,117.4 |
Acquisitions | 645.5 |
Disposals/Write-offs | (640.5) |
Balance, end of period | 4,122.4 |
Gross carrying amount | Leasehold improvements | |
Changes in property and equipment balances | |
Balance, beginning of period | 97.3 |
Acquisitions | 17.7 |
Transfers | 2.9 |
Balance, end of period | 117.9 |
Gross carrying amount | Equipment and facilities | |
Changes in property and equipment balances | |
Balance, beginning of period | 95.2 |
Acquisitions | 17.8 |
Disposals/Write-offs | (0.2) |
Balance, end of period | 112.8 |
Gross carrying amount | Vehicles | |
Changes in property and equipment balances | |
Balance, beginning of period | 2.6 |
Acquisitions | 0.3 |
Disposals/Write-offs | (1.7) |
Balance, end of period | 1.2 |
Gross carrying amount | Furniture and fixtures | |
Changes in property and equipment balances | |
Balance, beginning of period | 15.7 |
Acquisitions | 1.5 |
Balance, end of period | 17.2 |
Gross carrying amount | Aircraft equipment | |
Changes in property and equipment balances | |
Balance, beginning of period | 741 |
Acquisitions | 180.5 |
Disposals/Write-offs | (18) |
Transfers | 5.2 |
Balance, end of period | 908.7 |
Gross carrying amount | Aircraft and engines | |
Changes in property and equipment balances | |
Balance, beginning of period | 3,016.9 |
Acquisitions | 352 |
Disposals/Write-offs | (615.3) |
Transfers | 16.6 |
Balance, end of period | 2,770.2 |
Gross carrying amount | Advance payments for acquisition of aircrafts | |
Changes in property and equipment balances | |
Balance, beginning of period | 100.4 |
Acquisitions | 53.8 |
Disposals/Write-offs | (5.3) |
Balance, end of period | 148.9 |
Gross carrying amount | Construction in progress | |
Changes in property and equipment balances | |
Balance, beginning of period | 48.3 |
Acquisitions | 21.9 |
Transfers | (24.7) |
Balance, end of period | 45.5 |
Accumulated depreciation | |
Changes in property and equipment balances | |
Balance, beginning of period | (677.4) |
Depreciation for the year | 262.5 |
Disposals/Write-offs | (143) |
Balance, end of period | (796.9) |
Accumulated depreciation | Leasehold improvements | |
Changes in property and equipment balances | |
Balance, beginning of period | (29.9) |
Depreciation for the year | (16.4) |
Balance, end of period | (46.3) |
Accumulated depreciation | Equipment and facilities | |
Changes in property and equipment balances | |
Balance, beginning of period | (54.2) |
Depreciation for the year | (12.9) |
Disposals/Write-offs | 0.1 |
Balance, end of period | (67) |
Accumulated depreciation | Vehicles | |
Changes in property and equipment balances | |
Balance, beginning of period | (2.4) |
Depreciation for the year | (0.1) |
Disposals/Write-offs | 1.7 |
Balance, end of period | (0.8) |
Accumulated depreciation | Furniture and fixtures | |
Changes in property and equipment balances | |
Balance, beginning of period | (7.1) |
Depreciation for the year | (1.6) |
Balance, end of period | (8.7) |
Accumulated depreciation | Aircraft equipment | |
Changes in property and equipment balances | |
Balance, beginning of period | (193.3) |
Depreciation for the year | (71.1) |
Disposals/Write-offs | 3.5 |
Balance, end of period | (260.9) |
Accumulated depreciation | Aircraft and engines | |
Changes in property and equipment balances | |
Balance, beginning of period | (390.5) |
Depreciation for the year | (160.4) |
Disposals/Write-offs | 137.7 |
Balance, end of period | R$ 413.2 |
Minimum | Heavy maintenance - engine | |
Changes in property and equipment balances | |
Average useful life | P5Y |
Maximum | Heavy maintenance - engine | |
Changes in property and equipment balances | |
Average useful life | P6Y |
Property and equipment - Mainte
Property and equipment - Maintenance expenses (Details) - BRL (R$) R$ in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Property and equipment | |||
Amortization of capitalized maintenance costs | R$ 63.2 | R$ 51.5 | |
Maintenance materials and repairs | (568.1) | (708.7) | R$ 643.9 |
Total maintenance expenses | (631.3) | R$ 760.2 | |
Impairment charges | R$ 0.0 |
Intangible assets (Details)
Intangible assets (Details) - BRL (R$) R$ in Millions | Dec. 31, 2017 | Dec. 31, 2016 |
Disclosure of reconciliation of changes in intangible assets and goodwill [line items] | ||
Intangible assets (Note 15) | R$ 961.0 | R$ 942.6 |
Goodwill | ||
Disclosure of reconciliation of changes in intangible assets and goodwill [line items] | ||
Intangible assets (Note 15) | 753.5 | 753.5 |
Airport operating licenses | ||
Disclosure of reconciliation of changes in intangible assets and goodwill [line items] | ||
Intangible assets (Note 15) | 82.2 | 82.2 |
Software | ||
Disclosure of reconciliation of changes in intangible assets and goodwill [line items] | ||
Intangible assets (Note 15) | 125.3 | 106.9 |
Gross carrying amount | ||
Disclosure of reconciliation of changes in intangible assets and goodwill [line items] | ||
Intangible assets (Note 15) | 1,092.9 | 1,037.3 |
Gross carrying amount | Goodwill | ||
Disclosure of reconciliation of changes in intangible assets and goodwill [line items] | ||
Intangible assets (Note 15) | 753.5 | 753.5 |
Gross carrying amount | Airport operating licenses | ||
Disclosure of reconciliation of changes in intangible assets and goodwill [line items] | ||
Intangible assets (Note 15) | 82.2 | 82.2 |
Gross carrying amount | Software | ||
Disclosure of reconciliation of changes in intangible assets and goodwill [line items] | ||
Intangible assets (Note 15) | 257.2 | 201.6 |
Accumulated amortization | ||
Disclosure of reconciliation of changes in intangible assets and goodwill [line items] | ||
Intangible assets (Note 15) | (131.9) | (94.7) |
Accumulated amortization | Software | ||
Disclosure of reconciliation of changes in intangible assets and goodwill [line items] | ||
Intangible assets (Note 15) | R$ 131.9 | R$ 94.7 |
Intangible assets - Changes in
Intangible assets - Changes in intangible assets balances (Details) R$ in Millions | 12 Months Ended |
Dec. 31, 2017BRL (R$) | |
Changes in intangible assets balances | |
Intangible assets and goodwill at beginning of period | R$ 942.6 |
Intangible assets and goodwill at end of period | 961 |
TudoAzul S.A. | |
Changes in intangible assets balances | |
Goodwill | 753.5 |
Goodwill | |
Changes in intangible assets balances | |
Intangible assets and goodwill at beginning of period | 753.5 |
Intangible assets and goodwill at end of period | 753.5 |
Airport operating licenses | |
Changes in intangible assets balances | |
Intangible assets and goodwill at beginning of period | 82.2 |
Intangible assets and goodwill at end of period | 82.2 |
Software | |
Changes in intangible assets balances | |
Intangible assets and goodwill at beginning of period | 106.9 |
Intangible assets and goodwill at end of period | 125.3 |
Gross carrying amount | |
Changes in intangible assets balances | |
Intangible assets and goodwill at beginning of period | 1,037.3 |
Acquisitions | 56.1 |
Disposals/Written-off | (0.5) |
Intangible assets and goodwill at end of period | 1,092.9 |
Gross carrying amount | Goodwill | |
Changes in intangible assets balances | |
Intangible assets and goodwill at beginning of period | 753.5 |
Intangible assets and goodwill at end of period | 753.5 |
Gross carrying amount | Airport operating licenses | |
Changes in intangible assets balances | |
Intangible assets and goodwill at beginning of period | 82.2 |
Intangible assets and goodwill at end of period | 82.2 |
Gross carrying amount | Software | |
Changes in intangible assets balances | |
Intangible assets and goodwill at beginning of period | 201.6 |
Acquisitions | 56.1 |
Disposals/Written-off | (0.5) |
Intangible assets and goodwill at end of period | 257.2 |
Accumulated amortization | |
Changes in intangible assets balances | |
Intangible assets and goodwill at beginning of period | (94.7) |
Amortization for the year | (37.2) |
Intangible assets and goodwill at end of period | (131.9) |
Accumulated amortization | Software | |
Changes in intangible assets balances | |
Intangible assets and goodwill at beginning of period | (94.7) |
Amortization for the year | (37.2) |
Intangible assets and goodwill at end of period | R$ 131.9 |
Intangible assets - Impairment
Intangible assets - Impairment of goodwill and Airport operating licenses (Details) - BRL (R$) R$ in Millions | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Impairment of goodwill and Airport operating licenses | ||
Book value | R$ 961.0 | R$ 942.6 |
Projection period used in impairment tests of goodwill and other intangible assets | 5 years | |
Impairment loss | R$ 0.0 | |
Goodwill | ||
Impairment of goodwill and Airport operating licenses | ||
Book value | 753.5 | 753.5 |
Book value - CGU | 3,330.1 | 3,440 |
Value in use | R$ 6784.9 | R$ 4623.8 |
Discount rate before taxes | 11.50% | 19.20% |
Perpetuity growth rate | 3.00% | 3.40% |
Airport operating licenses | ||
Impairment of goodwill and Airport operating licenses | ||
Book value | R$ 82.2 | R$ 82.2 |
Value in use | R$ 538.9 | R$ 244.7 |
Discount rate before taxes | 12.50% | 20.50% |
Perpetuity growth rate | 4.00% | 4.40% |
Income tax and social contrib98
Income tax and social contribution - Schedule of income tax and social contribution (Details) - BRL (R$) R$ in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Income tax and social contribution | |||
Income/(loss) before income tax and social contribution | R$ 597.8 | R$ 17.7 | |
Combined tax rate | 34.00% | 34.00% | |
Income tax and social contribution statutory rate | R$ 203.3 | R$ 6.0 | |
Adjustments to calculate the effective tax rate: | |||
Taxable profit on foreign subsidiaries | (13.5) | (14.1) | |
Exchange differences on foreign subsidiaries | 27.1 | 91 | |
Unrecorded deferred tax on tax loss and on temporary differences | 39.9 | (213) | |
Permanent differences | (8) | (2.5) | |
Deferred Income Tax on Tax Losses utilized in the PERT | 83.1 | ||
Reversal of provisions for uncertain tax provisions | 3.6 | ||
Other | 2.3 | 0.6 | |
Total income tax and social contribution expenses | (68.8) | (144) | |
Current income tax and social contribution | 2.9 | 8.7 | R$ 1.4 |
Deferred income tax and social contribution | R$ 71.7 | R$ 152.7 | R$ 3.9 |
Income tax and social contrib99
Income tax and social contribution - Schedule of breakdown of deferred income tax and social contribution (Details) - BRL (R$) R$ in Millions | Dec. 31, 2017 | Dec. 31, 2016 |
Breakdown of deferred income tax and social contribution | ||
Net deferred tax (liabilities) | R$ 453.0 | R$ 253.7 |
Net deferred tax (liabilities) | (326.9) | (181.5) |
Provision for tax, civil and labor risks | ||
Breakdown of deferred income tax and social contribution | ||
Net deferred tax (liabilities) | 17.7 | 20.6 |
Deferred revenue of TudoAzul program | ||
Breakdown of deferred income tax and social contribution | ||
Net deferred tax (liabilities) | (109.7) | (67.6) |
Aircraft lease expense | ||
Breakdown of deferred income tax and social contribution | ||
Net deferred tax (liabilities) | (233.1) | (201.1) |
Depreciation of aircraft and engines | ||
Breakdown of deferred income tax and social contribution | ||
Net deferred tax (liabilities) | (55.3) | 79.4 |
Exchange rate | ||
Breakdown of deferred income tax and social contribution | ||
Net deferred tax (liabilities) | (11.3) | (105.4) |
Deferred gain related to aircraft sold | ||
Breakdown of deferred income tax and social contribution | ||
Net deferred tax (liabilities) | 49.3 | 59.3 |
Cash flow hedge reserve | ||
Breakdown of deferred income tax and social contribution | ||
Net deferred tax (liabilities) | 5 | 17.4 |
Fair value of TAP convertible bonds | ||
Breakdown of deferred income tax and social contribution | ||
Net deferred tax (liabilities) | (147.4) | (92.7) |
Provision for onerous contract | ||
Breakdown of deferred income tax and social contribution | ||
Net deferred tax (liabilities) | 23.4 | 39.3 |
Financial instruments | ||
Breakdown of deferred income tax and social contribution | ||
Net deferred tax (liabilities) | (0.7) | 1.2 |
Fair value of aircraft | ||
Breakdown of deferred income tax and social contribution | ||
Net deferred tax (liabilities) | (0.4) | (0.5) |
Fair value of slots | ||
Breakdown of deferred income tax and social contribution | ||
Net deferred tax (liabilities) | (27.9) | (27.9) |
Other on business combination fair value adjustment | ||
Breakdown of deferred income tax and social contribution | ||
Net deferred tax (liabilities) | (4.3) | (5.8) |
Others | ||
Breakdown of deferred income tax and social contribution | ||
Net deferred tax (liabilities) | 41.7 | 30.1 |
Deferred tax assets on net operating losses | ||
Breakdown of deferred income tax and social contribution | ||
Deferred tax assets on net operating losses | R$ 126.1 | R$ 72.2 |
Income tax and social contri100
Income tax and social contribution - Schedule of income tax losses offsetting against future taxable profits (Details) - BRL (R$) R$ in Millions | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Disclosure of temporary difference, unused tax losses and unused tax credits [line items] | ||
Net tax losses | R$ 1940.1 | R$ 2254.4 |
Percentage of income tax loss carryforwards | 25.00% | |
Percentage of social contribution negative base tax carryforwards | 9.00% | |
Percentage of unused tax losses that are recognized relating to deferred tax liability | 30.00% | |
Tax losses utilized in the PERT | R$ 244.5 | |
Net operating losses | ||
Disclosure of temporary difference, unused tax losses and unused tax credits [line items] | ||
Deferred tax asset | 485 | 563.6 |
Social contribution negative base tax | ||
Disclosure of temporary difference, unused tax losses and unused tax credits [line items] | ||
Deferred social contribution asset | R$ 174.6 | R$ 202.9 |
Income tax and social contri101
Income tax and social contribution - Schedule of balance of debts included in Federal Installment Payment Programs (REFIS and PERT) (Details) - BRL (R$) R$ in Millions | Dec. 31, 2017 | Dec. 31, 2016 |
Income tax and social contribution | ||
Air navigation fees (REFIS) | R$ 75.6 | R$ 82.1 |
Air navigation fees (PERT) | 39.6 | |
Total | 115.2 | 82.1 |
Current | 9.8 | 6.5 |
Non-current | R$ 105.4 | R$ 75.6 |
Loans and financing (Details)
Loans and financing (Details) - BRL (R$) R$ in Millions | Dec. 31, 2017 | Dec. 31, 2016 |
Loans and financing | ||
Loans | R$ 3287.4 | R$ 2848.3 |
Debentures | 202.5 | 1,186.2 |
Total loans and financing | 3,489.9 | 4,034.5 |
Non-current | 2,921.7 | 3,049.3 |
Current | R$ 568.2 | R$ 985.2 |
Loans and financing - Loans (De
Loans and financing - Loans (Details) - BRL (R$) R$ in Millions | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Loans and financing | ||
Loans | R$ 3287.4 | R$ 2848.3 |
Current position | 405.6 | 740.7 |
Non-current position | 2,881.8 | 2,107.6 |
Purchase of aircraft | U.S.dollar | ||
Loans and financing | ||
Loans | 124.4 | 518.8 |
Purchase of aircraft | Denominated in local currency - Brazilian reais | ||
Loans and financing | ||
Loans | R$ 258.4 | R$ 372.5 |
Purchase of aircraft | Minimum | LIBOR | U.S.dollar | ||
Loans and financing | ||
Variable spread on interest rate (as a percent) | 2.55% | 2.55% |
Purchase of aircraft | Minimum | Fixed interest rate | Denominated in local currency - Brazilian reais | ||
Loans and financing | ||
Interest rate (as a percent) | 3.50% | 3.50% |
Purchase of aircraft | Maximum | LIBOR | U.S.dollar | ||
Loans and financing | ||
Variable spread on interest rate (as a percent) | 4.00% | 4.00% |
Purchase of aircraft | Maximum | Fixed interest rate | Denominated in local currency - Brazilian reais | ||
Loans and financing | ||
Interest rate (as a percent) | 6.50% | 6.50% |
Finance lease | U.S.dollar | ||
Loans and financing | ||
Loans | R$ 1108.3 | R$ 1250.7 |
Finance lease | Denominated in local currency - Brazilian reais | ||
Loans and financing | ||
Loans | R$ 7.1 | R$ 12.1 |
Finance lease | CDI | Denominated in local currency - Brazilian reais | ||
Loans and financing | ||
Variable spread on interest rate (as a percent) | 3.87% | 3.87% |
Finance lease | Minimum | LIBOR | U.S.dollar | ||
Loans and financing | ||
Variable spread on interest rate (as a percent) | 2.05% | 2.05% |
Finance lease | Maximum | LIBOR | U.S.dollar | ||
Loans and financing | ||
Variable spread on interest rate (as a percent) | 5.50% | 5.50% |
Working capital | Currency swaps | ||
Loans and financing | ||
Loans | R$ 1383.7 | |
Working capital | U.S.dollar | ||
Loans and financing | ||
Loans | 1,377.1 | R$ 351.2 |
Working capital | U.S.dollar | Currency swaps | ||
Loans and financing | ||
Loans | R$ 1226.1 | |
Loans (as a percent) | 35.10% | |
Working capital | Denominated in local currency - Brazilian reais | ||
Loans and financing | ||
Loans | R$ 412.1 | R$ 320.0 |
Working capital | Denominated in local currency - Brazilian reais | Currency swaps | ||
Loans and financing | ||
Loans | R$ 2263.8 | |
Loans (as a percent) | 64.90% | |
Working capital | Minimum | LIBOR | U.S.dollar | ||
Loans and financing | ||
Variable spread on interest rate (as a percent) | 2.39% | 2.39% |
Working capital | Minimum | Fixed interest rate | Denominated in local currency - Brazilian reais | ||
Loans and financing | ||
Interest rate (as a percent) | 5.00% | 5.00% |
Working capital | Maximum | LIBOR | U.S.dollar | ||
Loans and financing | ||
Variable spread on interest rate (as a percent) | 5.86% | 5.86% |
Working capital | Maximum | Fixed interest rate | U.S.dollar | ||
Loans and financing | ||
Interest rate (as a percent) | 5.90% | 5.90% |
Working capital | Maximum | CDI | Denominated in local currency - Brazilian reais | ||
Loans and financing | ||
Interest rate (as a percent) | 126.00% | 126.00% |
FINIMP | U.S.dollar | ||
Loans and financing | ||
Loans | R$ 23.0 | |
FINIMP | Fixed interest rate | U.S.dollar | ||
Loans and financing | ||
Interest rate (as a percent) | 5.40% | 5.40% |
Purchase of aircraft and working capital | ||
Loans and financing | ||
Gain (loss) due to the effect of fair value hedge | R$ 4.7 | R$ 13.2 |
Loans and financing - Senior no
Loans and financing - Senior notes (Details) R$ in Millions, $ in Millions | Dec. 31, 2017USD ($) | Dec. 14, 2017USD ($) | Dec. 14, 2017BRL (R$) |
Senior unsecured notes due 2024 | |||
Details of derivative transactions with banks counterparties to swap the senior notes | |||
Credit derivative amount | $ 400 | ||
Interest rate (as a percent) | 5.875% | ||
Fixed interest rate | Senior unsecured notes due 2024 | |||
Details of derivative transactions with banks counterparties to swap the senior notes | |||
Credit derivative amount | $ 400 | ||
Interest rate (as a percent) | 5.875% | 5.875% | |
Floating interest rate | Swap | |||
Details of derivative transactions with banks counterparties to swap the senior notes | |||
Credit derivative amount | R$ | R$ 1314.6 | ||
Floating interest rate (as a percent) | 99.10% | 99.10% |
Loans and financing - Long term
Loans and financing - Long term loans maturity (Details) - BRL (R$) R$ in Millions | Dec. 31, 2017 | Dec. 31, 2016 |
Long term loans maturity | ||
Total long term loans | R$ 2881.8 | R$ 2107.6 |
Property and equipment (carrying value) used as collateral (Note 14) | 2,357 | 2,626.4 |
Later than one year and not later than two years | ||
Long term loans maturity | ||
Total long term loans | 629.6 | |
Later than two years and not later than three years | ||
Long term loans maturity | ||
Total long term loans | 292.7 | 337.7 |
Later than three years and not later than four years | ||
Long term loans maturity | ||
Total long term loans | 434.7 | 330.9 |
Later than four years and not later than five years | ||
Long term loans maturity | ||
Total long term loans | 367.2 | 263.8 |
Later than five years | ||
Long term loans maturity | ||
Total long term loans | R$ 1787.2 | R$ 545.6 |
Loans and financing - Debenture
Loans and financing - Debentures (Details) - BRL (R$) R$ in Millions | 3 Months Ended | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Loans and financing | ||||
Debentures | R$ 202.5 | R$ 202.5 | R$ 1186.2 | |
Current position | 162.6 | 162.6 | 244.5 | |
Non-current position | 39.9 | 39.9 | 941.7 | |
Redemption of debentures | R$ 1153.2 | 150 | R$ 50.0 | |
Fifth and seventh issue | ||||
Loans and financing | ||||
Redemption of debentures | R$ 973.5 | |||
Fifth issue | ||||
Loans and financing | ||||
Debentures | R$ 1038.3 | |||
Fifth issue | CDI | ||||
Loans and financing | ||||
Interest rate (as a percent) | 127.00% | 127.00% | 127.00% | |
Seventh issue | ||||
Loans and financing | ||||
Debentures | R$ 147.9 | |||
Seventh issue | CDI | ||||
Loans and financing | ||||
Variable spread on interest rate (as a percent) | 2.85% | 2.85% | 2.85% | |
Eight issue | ||||
Loans and financing | ||||
Debentures | R$ 202.5 | R$ 202.5 | ||
Eight issue | CDI | ||||
Loans and financing | ||||
Variable spread on interest rate (as a percent) | 1.50% | 1.50% | 1.50% |
Loans and financing - Long t107
Loans and financing - Long term debentures maturity (Details) - BRL (R$) R$ in Millions | Dec. 31, 2017 | Dec. 31, 2016 |
Long term loans maturity | ||
Total long term debentures | R$ 39.9 | R$ 941.7 |
Later than one year and not later than two years | ||
Long term loans maturity | ||
Total long term debentures | 470.4 | |
Later than two years and not later than three years | ||
Long term loans maturity | ||
Total long term debentures | R$ 39.9 | R$ 471.3 |
Loans and financing - Finance l
Loans and financing - Finance leases (Details) - BRL (R$) R$ in Millions | Dec. 31, 2017 | Dec. 31, 2016 |
Finance leases | ||
Total minimum lease payments | R$ 1157.8 | R$ 1310.7 |
Less finance charges | (42.4) | (47.9) |
Present value of minimum lease payments | 1,115.4 | 1,262.8 |
Less short-term portion | 211.9 | 214.2 |
Long-term portion | 903.5 | 1,048.6 |
Not later than one year | ||
Finance leases | ||
Total minimum lease payments | 222.3 | |
Later than one year and not later than two years | ||
Finance leases | ||
Total minimum lease payments | 219.9 | 199.9 |
Later than two years and not later than three years | ||
Finance leases | ||
Total minimum lease payments | 206.1 | 198.8 |
Later than three years and not later than four years | ||
Finance leases | ||
Total minimum lease payments | 212.6 | 205.3 |
Later than four years and not later than five years | ||
Finance leases | ||
Total minimum lease payments | 159 | 152.6 |
Later than four years | ||
Finance leases | ||
Total minimum lease payments | R$ 360.2 | R$ 331.8 |
Loans and financing - Covenants
Loans and financing - Covenants (Details) R$ in Millions | Dec. 31, 2017BRL (R$) |
Loans and financing | |
Loans and financing subject to financial covenants | R$ 4974.0 |
Eighth issuance of debentures, sixth issuance of promissory notes and aircraft financing | Maximum | |
Loans and financing | |
Debt coverage ratio | 1.2 |
Leverage ratio | 5.5 |
Air traffic liability (Details)
Air traffic liability (Details) - BRL (R$) R$ in Millions | Dec. 31, 2017 | Dec. 31, 2016 |
Air traffic liability | ||
Advance ticket sales | R$ 887.0 | R$ 640.5 |
TudoAzul program | 400.4 | 308.9 |
Total | R$ 1287.4 | R$ 949.4 |
Equity (Details)
Equity (Details) R$ / shares in Units, R$ in Millions | Apr. 19, 2017R$ / sharesshares | Feb. 23, 2017 | Feb. 03, 2017Voteitemshares | Dec. 31, 2017BRL (R$)shares | Sep. 20, 2017shares | Apr. 19, 2017$ / sharesshares | Apr. 10, 2017BRL (R$)shares | Dec. 31, 2016BRL (R$)shares |
Disclosure of classes of share capital | ||||||||
Issued capital | R$ | R$ 2163.4 | R$ 1488.6 | ||||||
Stock conversion ratio | 2 | 1 | ||||||
Number of votes per common share | Vote | 1 | |||||||
Number of preferred shares represented by each ADS | 3 | |||||||
Proceeds from exercise of options | R$ | R$ 13.3 | |||||||
Number of shares issued related to the exercise of stock options | 4,182,454 | |||||||
Common shares | ||||||||
Disclosure of classes of share capital | ||||||||
Shares issued (in shares) | 928,965,058 | 928,965,058 | ||||||
Stock conversion ratio | 75 | |||||||
Preferred shares | ||||||||
Disclosure of classes of share capital | ||||||||
Shares issued (in shares) | 321,753,720 | |||||||
Multiplier to price per share paid to the controlling shareholder used to determine the purchase price per share of preferred shares in a public offering | item | 75 | |||||||
Multiplier to the price per common share that preferred shares have the right to receive in the case of liquidation upon splitting of remaining assets among shareholders | item | 75 | |||||||
Multiplier to the price per common share used to determine the amount of dividends that may be received | item | 75 | |||||||
Class A preferred share | ||||||||
Disclosure of classes of share capital | ||||||||
Shares issued (in shares) | 180,485,574 | |||||||
Class C preferred share | ||||||||
Disclosure of classes of share capital | ||||||||
Shares issued (in shares) | 10,843,792 | |||||||
Number of shares converted to Class A Preferred | 10,843,792 | |||||||
Class D preferred share | ||||||||
Disclosure of classes of share capital | ||||||||
Shares issued (in shares) | 63,241,900 | |||||||
Number of shares converted to Class A Preferred | 63,241,900 | |||||||
IPO | ||||||||
Disclosure of classes of share capital | ||||||||
Number of preferred shares represented by each ADS | 3 | 3 | ||||||
IPO | Preferred shares | ||||||||
Disclosure of classes of share capital | ||||||||
Shares issued (in shares) | 96,239,837 | 96,239,837 | ||||||
Number of shares offered in IPO by entity | 63,000,000 | |||||||
Number of shares offered in IPO by selling shareholders | 33,239,837 | |||||||
Initial public offering price per share | R$ / shares | R$ 21.00 | |||||||
Initial public offering price per ADS | $ / shares | $ 20.06 | |||||||
Number of preferred shares represented by each ADS | 3 | 3 | ||||||
IPO | Preferred shares | ||||||||
Disclosure of classes of share capital | ||||||||
Issued capital | R$ | R$ 1323.0 | |||||||
Shares issued (in shares) | 63,000,000 |
Equity - Share issuance costs (
Equity - Share issuance costs (Details) - BRL (R$) R$ in Millions | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Disclosure of classes of share capital | ||
Shared issued costs | R$ 71.3 | R$ 21.5 |
IPO | ||
Disclosure of classes of share capital | ||
Shared issued costs | 68.6 | |
Tax credits from income tax and social contribution | (23.3) | |
Shared issued costs, net | 45.3 | |
HNA | ||
Disclosure of classes of share capital | ||
Additional share issuance costs | R$ 26.0 |
Equity - Capital reserve (Detai
Equity - Capital reserve (Details) - BRL (R$) R$ in Millions | Apr. 10, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Disclosure of classes of share capital | ||||
Foreign exchange loss | R$ 57.9 | R$ 179.7 | R$ 184.3 | |
Capital Reserve | ||||
Disclosure of classes of share capital | ||||
Recognized compensation expense | 29.9 | 9.9 | ||
Amount in excess of par value of the shares issued | 10.2 | |||
Capital Reserve | Key management personnel | ||||
Disclosure of classes of share capital | ||||
Recognized compensation expense | R$ 5.6 | |||
Number of shares issued but not fully paid | 781,225 | |||
Capital Reserve | IPO | ||||
Disclosure of classes of share capital | ||||
Amount in excess of par value of the shares issued | R$ 646.5 | |||
Foreign exchange loss | R$ 15.0 | |||
Capital Reserve | HNA | ||||
Disclosure of classes of share capital | ||||
Amount in excess of par value of the shares issued | R$ 487.9 |
Equity - Dividends, Other compr
Equity - Dividends, Other comprehensive loss and Treasury shares (Details) - BRL (R$) R$ in Millions | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Minimum mandatory dividend rate as a percent of net income | 0.10% | |
Change in fair value of cash flow hedges recognized in comprehensive income, net of tax | R$ 11.2 | R$ 33.8 |
Deferred tax effect | R$ 3.5 | R$ 17.4 |
Treasury shares | ||
Number of treasury shares acquired | 103,000 | |
Treasury shares acquired | R$ 2.7 |
Income (loss) per share (Detail
Income (loss) per share (Details) R$ / shares in Units, R$ in Millions | Feb. 23, 2017 | Feb. 03, 2017 | Dec. 31, 2017BRL (R$)R$ / sharesshares | Dec. 31, 2016BRL (R$)R$ / sharesshares | Dec. 31, 2015BRL (R$)R$ / shares |
Numerator | |||||
Net income (loss) | R$ | R$ 529.0 | R$ 126.3 | R$ 1074.9 | ||
Denominator | |||||
75 preferred shares | 75,000,000 | 75,000,000 | |||
Weighted average number of shares issued at average market price | 9,253,991 | 7,641,753 | |||
Stock conversion ratio | 2 | 1 | |||
Stock Compensation Plan | |||||
Denominator | |||||
Antidilutive securities effects from diluted net loss per share amount | 7,641,753 | ||||
Common shares | |||||
Denominator | |||||
Weighted average number of shares | 928,965,058 | 928,965,058 | |||
Weighted average number of equivalent shares | 23,669,013,177 | 17,176,250,308 | |||
Basic net income (loss) per share | R$ / shares | R$ 0.02 | R$ 0.01 | R$ 0.07 | ||
Diluted net income (loss) per share | R$ / shares | R$ 0.02 | R$ 0.01 | (0.07) | ||
Shares outstanding | 928,965,058 | ||||
Stock conversion ratio | 75 | ||||
Preferred shares | |||||
Denominator | |||||
Weighted average number of shares | 303,200,642 | 216,630,470 | |||
Weighted average number of equivalent shares | 315,586,842 | 229,016,671 | |||
Basic net income (loss) per share | R$ / shares | R$ 1.68 | R$ 0.55 | (5.42) | ||
Diluted net income (loss) per share | R$ / shares | R$ 1.64 | R$ 0.55 | R$ 5.42 | ||
Shares outstanding | 12,386,200 |
Financial instruments (Details)
Financial instruments (Details) R$ in Millions, $ in Millions | 12 Months Ended | ||||
Dec. 31, 2017USD ($)R$ / $ | Dec. 31, 2017BRL (R$)R$ / $ | Dec. 31, 2016BRL (R$) | Dec. 31, 2015BRL (R$) | Dec. 31, 2017BRL (R$) | |
Financial instruments | |||||
Recognition of loss | R$ 90.4 | R$ 10.8 | R$ 82.8 | ||
Maximum | Call option sold | |||||
Financial instruments | |||||
Exchange rate | R$ / $ | 4.7500 | 4.7500 | |||
Maximum | Put and call options bought | |||||
Financial instruments | |||||
Exchange rate | R$ / $ | 3.2865 | 3.2865 | |||
Cash flow hedge | |||||
Financial instruments | |||||
Principal amount | 273.3 | R$ 87.4 | |||
Senior Notes | Call option bought | |||||
Financial instruments | |||||
Exchange rate | R$ / $ | 3.2865 | 3.2865 | |||
Senior Notes | Call option sold | |||||
Financial instruments | |||||
Exchange rate | R$ / $ | 4.7500 | 4.7500 | |||
Short-term investments | |||||
Financial instruments | |||||
Financial assets at book value | 331.2 | 1,036.1 | |||
Financial assets at fair value | 331.2 | 1,036.1 | |||
Long-term investments | |||||
Financial instruments | |||||
Financial assets at book value | 753.2 | 836 | |||
Financial assets at fair value | 753.2 | 836 | |||
Trade and other receivables | |||||
Financial instruments | |||||
Financial assets at book value | 673.3 | 914.4 | |||
Financial assets at fair value | 673.3 | 914.4 | |||
Restricted investments | |||||
Financial instruments | |||||
Financial assets at book value | 162 | 8.8 | |||
Financial assets at fair value | 162 | 8.8 | |||
Derivative financial instruments. | |||||
Financial instruments | |||||
Financial assets at book value | 21.7 | 420.8 | |||
Financial assets at fair value | 21.7 | 420.8 | |||
Loans and financing | |||||
Financial instruments | |||||
Financial liabilities at book value | 4,034.5 | 3,489.9 | |||
Financial liabilities at fair value | 4,065.8 | 3,461 | |||
Working capital loans denominated in US dollars that had swaps to local currency | 103.7 | ||||
Recognition of loss | R$ 2.4 | ||||
Accounts payable | |||||
Financial instruments | |||||
Financial liabilities at book value | 1,034.3 | 953.5 | |||
Financial liabilities at fair value | 1,034.3 | 953.5 | |||
Interest rate and Currency swap agreement | Senior Notes | |||||
Financial instruments | |||||
Principal amount | $ | $ 400 | ||||
Interest rate and Currency swap agreement for period April 2018 to April 2019 | Senior Notes | |||||
Financial instruments | |||||
Coupon payments | $ | 12 | ||||
Interest rate and Currency swap agreement for period October 2019 to October 2024 | Senior Notes | |||||
Financial instruments | |||||
Coupon payments | $ | $ 12 | ||||
Interest rate and Currency swap agreement for period October 2019 to October 2024 | Senior Notes | Put option bought | |||||
Financial instruments | |||||
Exchange rate | R$ / $ | 3.2865 | 3.2865 | |||
Interest rate and Currency swap agreement for period October 2019 to October 2024 | Senior Notes | Call option sold | |||||
Financial instruments | |||||
Exchange rate | R$ / $ | 4.7500 | 4.7500 | |||
Interest rate swap contract | Cash flow hedge | |||||
Financial instruments | |||||
Financial liabilities at fair value | 21.7 | 14.7 | |||
Recognition of loss | R$ 14.7 | ||||
Total notional of the finance leases | 87.4 | ||||
Financial liabilities at fair value through profit and loss. | |||||
Financial instruments | |||||
Financial liabilities at book value | 44.7 | ||||
Financial liabilities at fair value | 44.7 | ||||
Derivative financial instruments. | |||||
Financial instruments | |||||
Financial liabilities at book value | 231.3 | 426.9 | |||
Financial liabilities at fair value | R$ 231.3 | R$ 426.9 | |||
CDI | Interest rate and Currency swap agreement | Senior Notes | |||||
Financial instruments | |||||
Interest rate (as a percent) | 99.10% | 99.10% |
Financial instruments - Derivat
Financial instruments - Derivative financial instruments (Details) € in Millions, R$ in Millions, $ in Millions | 12 Months Ended | ||||
Dec. 31, 2017EUR (€) | Dec. 31, 2017USD ($) | Dec. 31, 2017BRL (R$) | Dec. 31, 2016USD ($) | Dec. 31, 2016BRL (R$) | |
Derivative financial instruments | |||||
Assets from derivative transactions | R$ 420.8 | R$ 21.7 | |||
Liabilities from derivative transactions | (426.9) | (231.3) | |||
Cash flow hedge | |||||
Derivative financial instruments | |||||
Liabilities from derivative transactions | (14.7) | (51.3) | |||
Notional amount | 87.4 | 273.3 | |||
Interest rate swap contract and heating oil forward contract | Cash flow hedge | |||||
Derivative financial instruments | |||||
Liabilities from derivative transactions | (14.7) | (51.3) | |||
Interest rate swap contract | Fair value hedge | |||||
Derivative financial instruments | |||||
Assets from derivative transactions | 4.7 | 4.5 | |||
Liabilities from derivative transactions | (17.7) | ||||
Notional amount | 103.7 | 599.9 | |||
Heating oil forward contracts | Cash flow hedge | |||||
Derivative financial instruments | |||||
Liabilities from derivative transactions | (29.6) | ||||
Notional amount | 183.2 | ||||
Senior Notes | Interest rate swap contract | |||||
Derivative financial instruments | |||||
Liabilities from derivative transactions | R$ 6.1 | ||||
Interest rate (as a percent) | 5.875% | 5.875% | 5.875% | ||
CDI | Senior Notes | Interest rate swap contract | |||||
Derivative financial instruments | |||||
Variable spread on interest rate (as a percent) | 99.10% | 99.10% | 99.10% | ||
Derivatives not designated as hedge | Interest rate swap contract | |||||
Derivative financial instruments | |||||
Assets from derivative transactions | R$ 4.2 | 17.2 | |||
Liabilities from derivative transactions | (385.2) | ||||
Derivatives not designated as hedge | Purchase of TAP Convertible Bonds option issued | |||||
Derivative financial instruments | |||||
Liabilities from derivative transactions | (154.4) | ||||
Notional amount | € | € 30 | ||||
Derivatives not designated as hedge | Forward foreign currency contract | |||||
Derivative financial instruments | |||||
Assets from derivative transactions | 219.9 | ||||
Liabilities from derivative transactions | (5.8) | ||||
Notional amount | $ | $ 370 | $ 80 | |||
Derivatives not designated as hedge | Heating oil forward contracts | |||||
Derivative financial instruments | |||||
Assets from derivative transactions | 4.5 | ||||
Liabilities from derivative transactions | (2.1) | ||||
Notional amount | 15.5 | R$ 183.2 | |||
Derivatives not designated as hedge | Foreign currency options | |||||
Derivative financial instruments | |||||
Assets from derivative transactions | 187.5 | ||||
Liabilities from derivative transactions | (27) | ||||
Notional amount | $ | $ 544 | ||||
Derivatives not designated as hedge | Foreign currency call spread option | |||||
Derivative financial instruments | |||||
Liabilities from derivative transactions | R$ 1.3 | ||||
Notional amount | $ | $ 15 | ||||
Derivatives not designated as hedge | LIBOR | Foreign currency call spread option | |||||
Derivative financial instruments | |||||
Variable spread on interest rate (as a percent) | 2.388% | 2.388% | 2.388% | ||
Basis point spread period | 3 months | ||||
Derivatives not designated as hedge | CDI | Foreign currency call spread option | |||||
Derivative financial instruments | |||||
Interest rate basis ( as percent ) | 124% |
Financial instruments - Maturit
Financial instruments - Maturity of derivative financial instruments (Details) - BRL (R$) R$ in Millions | Dec. 31, 2017 | Dec. 31, 2016 |
Maturity of derivative financial instruments | ||
Assets from derivative transactions | R$ 420.8 | R$ 21.7 |
Liabilities from derivative transactions | (426.9) | R$ 231.3 |
Total derivative financial instruments | (6.1) | |
Not yet due | ||
Maturity of derivative financial instruments | ||
Assets from derivative transactions | 0.8 | |
Liabilities from derivative transactions | (21.6) | |
Total derivative financial instruments | (20.8) | |
Until 6 months | ||
Maturity of derivative financial instruments | ||
Assets from derivative transactions | 6.7 | |
Liabilities from derivative transactions | (0.1) | |
Total derivative financial instruments | 6.6 | |
7 to 12 months | ||
Maturity of derivative financial instruments | ||
Assets from derivative transactions | 2.8 | |
Liabilities from derivative transactions | (26.8) | |
Total derivative financial instruments | (24) | |
1 to 5 years | ||
Maturity of derivative financial instruments | ||
Assets from derivative transactions | 410.8 | |
Liabilities from derivative transactions | (378.4) | |
Total derivative financial instruments | 32.4 | |
Up to 5 years | ||
Maturity of derivative financial instruments | ||
Assets from derivative transactions | (0.3) | |
Total derivative financial instruments | R$ 0.3 |
Financial instruments - Deri119
Financial instruments - Derivatives designated as hedge accounting (Details) R$ in Millions | 12 Months Ended | |
Dec. 31, 2017BRL (R$)item | Dec. 31, 2016BRL (R$) | |
Designated as hedges | ||
Fair value | R$ 426.9 | R$ 231.3 |
Balance at the beginning of the year | (33.8) | |
Deferred tax effect | (3.5) | (17.4) |
Balance at the end of the year | (11.2) | (33.8) |
Cash flow hedge reserve | ||
Designated as hedges | ||
Balance at the beginning of the year | (33.8) | (92.8) |
Transactions settled during the year | 6.4 | 60.6 |
Realization of deferral discontinued hedge | 23 | |
Fair value adjustment | 12.7 | (42.1) |
Deferred tax effect | 3.5 | 17.5 |
Balance at the end of the year | (11.2) | (33.8) |
Cash flow hedge | ||
Designated as hedges | ||
Notional amount | 87.4 | 273.3 |
Fair value | (14.7) | (51.3) |
Fair value hedge | ||
Designated as hedges | ||
Gain (loss) on ineffectiveness | 0 | 0 |
Loans and financing | Cash flow hedge | ||
Designated as hedges | ||
Notional amount | 87.4 | 90.1 |
Fair value | R$ 14.7 | (21.7) |
Heating oil forward contracts | Cash flow hedge | ||
Designated as hedges | ||
Number of Counterparts on Local Market | item | 2 | |
Amount of loss reclassified from equity to profit and loss | R$ 29.6 | |
Notional amount | 183.2 | |
Fair value | (29.6) | |
Interest rate swap contract | Cash flow hedge | ||
Designated as hedges | ||
Total notional of the finance leases and loan | 87.4 | 273.3 |
Unrealized gain (loss) on fair value hedge | (14.7) | (51.3) |
Interest rate swap contract | Fair value hedge | ||
Designated as hedges | ||
Notional amount | 103.7 | 599.9 |
Fair value | (17.7) | |
Unrealized gain (loss) on fair value hedge | R$ 4.7 | R$ 13.2 |
Financial instruments - Deri120
Financial instruments - Derivatives not designated as hedge accounting (Details) € in Millions, R$ in Millions, $ in Millions | 12 Months Ended | |||||||
Dec. 31, 2017BRL (R$) | Dec. 31, 2016BRL (R$) | Dec. 31, 2015BRL (R$) | Dec. 31, 2017EUR (€)item | Dec. 31, 2017USD ($)item | Dec. 31, 2017BRL (R$)item | Dec. 31, 2016USD ($) | Dec. 31, 2016BRL (R$) | |
Designated as hedges | ||||||||
Recognition of an gain (loss) | R$ 90.4 | R$ 10.8 | R$ 82.8 | |||||
Forward foreign currency contract | Derivatives not designated as hedge | ||||||||
Designated as hedges | ||||||||
Notional amount | $ | $ 370 | $ 80 | ||||||
Recognition of an gain (loss) | 219.9 | |||||||
Foreign currency options | Derivatives not designated as hedge | ||||||||
Designated as hedges | ||||||||
Notional amount | $ | $ 544 | |||||||
Recognition of an gain (loss) | 160.5 | |||||||
Foreign currency options | Senior Notes hedge | Derivatives not designated as hedge | ||||||||
Designated as hedges | ||||||||
Notional amount | $ | 529 | |||||||
Foreign currency options | Loan maturing In April, 2018 hedge | Derivatives not designated as hedge | ||||||||
Designated as hedges | ||||||||
Notional amount | $ | $ 15 | |||||||
Purchase of TAP Convertible Bonds option issued | Derivatives not designated as hedge | ||||||||
Designated as hedges | ||||||||
Notional amount | € | € 30 | |||||||
Recognition of an gain (loss) | R$ 154.4 | |||||||
Maximum percentage of option to purchase economic benefits of TAP convertible bonds | 33.00% | |||||||
Interest rate swap contract | Derivatives not designated as hedge | ||||||||
Designated as hedges | ||||||||
Recognition of an gain (loss) | R$ 381.0 | (17.2) | ||||||
Heating oil forward contracts | Derivatives not designated as hedge | ||||||||
Designated as hedges | ||||||||
Notional amount | R$ 15.5 | R$ 183.2 | ||||||
Recognition of an gain (loss) | R$ 4.5 | R$ 2.1 | ||||||
Number of counterparts on local market | item | 3 | 3 | 3 |
Financial instruments - Fair va
Financial instruments - Fair value of financial instruments (Details) - BRL (R$) R$ in Millions | Dec. 31, 2017 | Dec. 31, 2016 |
Short-term investments | ||
Financial instruments | ||
Financial assets at fair value | R$ 1036.1 | R$ 331.2 |
Restricted investments | ||
Financial instruments | ||
Financial assets at fair value | 8.8 | 162 |
Long-term investments | ||
Financial instruments | ||
Financial assets at fair value | 836 | 753.2 |
Forward foreign currency contract | ||
Financial instruments | ||
Financial assets at fair value | 219.9 | |
Foreign currency options | ||
Financial instruments | ||
Financial assets at fair value | 187.5 | |
Financial liabilities at fair value | (27) | |
Heating oil forward contracts | ||
Financial instruments | ||
Financial assets at fair value | 4.5 | |
Derivatives not designated as hedge | Interest rate swap contract | ||
Financial instruments | ||
Financial assets at fair value | 17.2 | |
Fair value hedge | Interest rate swap contract | ||
Financial instruments | ||
Financial assets at fair value | 4.7 | 4.5 |
Level 1 | Short-term investments | ||
Financial instruments | ||
Financial assets at fair value | 331.2 | |
Level 1 | Restricted investments | ||
Financial instruments | ||
Financial assets at fair value | 162 | |
Level 1 | Long-term investments | ||
Financial instruments | ||
Financial assets at fair value | 1.1 | |
Level 2 | Short-term investments | ||
Financial instruments | ||
Financial assets at fair value | 1,036.1 | |
Level 2 | Restricted investments | ||
Financial instruments | ||
Financial assets at fair value | 8.8 | |
Level 2 | Forward foreign currency contract | ||
Financial instruments | ||
Financial assets at fair value | 219.9 | |
Level 2 | Foreign currency options | ||
Financial instruments | ||
Financial assets at fair value | 187.5 | |
Financial liabilities at fair value | (27) | |
Level 2 | Heating oil forward contracts | ||
Financial instruments | ||
Financial assets at fair value | 4.5 | |
Level 2 | Derivatives not designated as hedge | Interest rate swap contract | ||
Financial instruments | ||
Financial assets at fair value | 17.2 | |
Level 2 | Fair value hedge | Interest rate swap contract | ||
Financial instruments | ||
Financial assets at fair value | 4.7 | 4.5 |
Level 3 | Long-term investments | ||
Financial instruments | ||
Financial assets at fair value | 836 | 752.1 |
Financial liabilities at fair value through profit and loss. | ||
Financial instruments | ||
Financial liabilities at fair value | (44.7) | |
Financial liabilities at fair value through profit and loss. | Level 2 | ||
Financial instruments | ||
Financial liabilities at fair value | (44.7) | |
Interest rate swap contract | Derivatives not designated as hedge | ||
Financial instruments | ||
Financial assets at fair value | 4.2 | |
Financial liabilities at fair value | (385.2) | (5.8) |
Interest rate swap contract | Cash flow hedge | ||
Financial instruments | ||
Financial liabilities at fair value | (14.7) | (21.7) |
Interest rate swap contract | Fair value hedge | ||
Financial instruments | ||
Financial liabilities at fair value | (17.7) | |
Interest rate swap contract | Level 2 | Derivatives not designated as hedge | ||
Financial instruments | ||
Financial assets at fair value | 4.2 | |
Financial liabilities at fair value | (385.2) | (5.8) |
Interest rate swap contract | Level 2 | Cash flow hedge | ||
Financial instruments | ||
Financial liabilities at fair value | R$ 14.7 | (21.7) |
Interest rate swap contract | Level 2 | Fair value hedge | ||
Financial instruments | ||
Financial liabilities at fair value | (17.7) | |
Purchase of TAP Convertible Bonds option issued | ||
Financial instruments | ||
Financial liabilities at fair value | (154.4) | |
Purchase of TAP Convertible Bonds option issued | Level 3 | ||
Financial instruments | ||
Financial liabilities at fair value | (154.4) | |
Heating oil forward contracts | ||
Financial instruments | ||
Financial liabilities at fair value | (31.7) | |
Heating oil forward contracts | Level 2 | ||
Financial instruments | ||
Financial liabilities at fair value | R$ 31.7 |
Financial instruments - Level 3
Financial instruments - Level 3 financial instruments reconciliation (Details) € in Millions, R$ in Millions | 12 Months Ended | |||
Dec. 31, 2017BRL (R$) | Dec. 31, 2016EUR (€) | Dec. 31, 2016BRL (R$) | Dec. 31, 2015BRL (R$) | |
Level 3 financial assets reconciliation | ||||
Balance at the beginning of period | R$ 8400.6 | |||
Balance at the end of period | 10,316.4 | R$ 8400.6 | ||
Level 3 financial liability reconciliation | ||||
Recognition of an gain (loss) | (90.4) | 10.8 | R$ 82.8 | |
Level 3 | Purchase of TAP Convertible Bonds option issued | ||||
Level 3 financial assets reconciliation | ||||
Acquisition cost (90 million) | € | € 90 | |||
Level 3 financial liability reconciliation | ||||
Balance at the beginning of period | (154.4) | |||
Fair value of call-option | (154.4) | |||
Recognition of an gain (loss) | 154.4 | |||
Balance at the end of period | (154.4) | |||
Level 3 | Long-term investments | ||||
Level 3 financial assets reconciliation | ||||
Balance at the beginning of period | 752.1 | |||
Acquisition cost (90 million) | 360.8 | |||
Foreign currency exchange gain (loss) | 47.8 | (51.3) | ||
Interest accrual | 29.6 | 15.6 | ||
Net present value adjustment | (11.8) | (41.3) | ||
Fair value of call-option | 18.3 | 468.3 | ||
Balance at the end of period | R$ 836.0 | R$ 752.1 |
Financial liabilities at fai123
Financial liabilities at fair value through profit and loss (Details) R$ in Millions, $ in Millions | Dec. 23, 2013USD ($) | Jan. 31, 2017USD ($) | Dec. 31, 2017BRL (R$) | Dec. 31, 2016USD ($) | Dec. 31, 2016BRL (R$) | Dec. 31, 2015BRL (R$) | Dec. 31, 2016BRL (R$) |
Financial liabilities at fair value through profit and loss | |||||||
Equity issued in private placement | R$ | R$ 1308.0 | R$ 1473.1 | R$ 313.0 | ||||
Financial liabilities at fair value through profit and loss | R$ | R$ 44.7 | ||||||
Private placement | Class B Redeemable Preferred Shares | |||||||
Financial liabilities at fair value through profit and loss | |||||||
Equity issued in private placement | $ 239.4 | ||||||
Percentage of interest payable at the time of redemption | 72.50% | ||||||
Redemption of preferred shares | $ 44.7 | $ 346.4 | |||||
Principal amount | 214.2 | ||||||
Interest portion of the amount redemption | 132.2 | ||||||
Financial liabilities at fair value through profit and loss | $ 44.7 |
Operating revenue (Details)
Operating revenue (Details) - BRL (R$) R$ in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Revenue | |||
Passenger revenue | R$ 6985.1 | R$ 6062.9 | |
Other revenue | 1,139.4 | 958 | |
Gross revenue | 8,124.5 | 7,020.9 | |
Taxes levied on | |||
Passenger revenue | (289.8) | (276.1) | |
Other revenue | (45.2) | (74.9) | |
Total taxes | (335) | (351) | |
Net revenue | R$ 7789.5 | R$ 6669.9 | R$ 6257.8 |
Financial result (Details)
Financial result (Details) - BRL (R$) R$ in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Financial income | |||
Interest on short-term investments | R$ 50.6 | R$ 37.6 | |
Federal tax installment payment program | 28.8 | ||
Other | 15.4 | 13.5 | |
Total Financial income | 94.8 | 51.1 | R$ 43.2 |
Financial expenses | |||
Interest on loans | (278.8) | (399.9) | |
Interest on factoring credit card and travel agencies receivables | (36.2) | (97.7) | |
Interest on other operations | (110.4) | (115.6) | |
Guarantee commission | (24.9) | (31) | |
Loan costs amortization | (36.6) | (33.8) | |
Other | (37.1) | (53.2) | |
Total financial expenses | (524) | (731.2) | R$ 685.9 |
Derivative financial instruments, net | (90.4) | 10.8 | |
Foreign exchange result, net | 57.9 | 179.7 | |
Net financial expenses | R$ 461.7 | R$ 489.6 |
Other operating expenses, ne126
Other operating expenses, net (Details) - BRL (R$) R$ in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Other operating expenses, net | |||
Accommodation and meals | R$ 184.0 | R$ 164.6 | |
IT services | 132.6 | 145.7 | |
Professional services | 52.9 | 45.6 | |
Taxes, civil and labor risks | 67 | 42.5 | |
Aircraft insurance | 21.6 | 25.4 | |
Flights interrupted | 41.3 | 35.8 | |
Others | 73.1 | ||
Others | (3.1) | ||
Total other operating expenses, net | R$ 572.5 | R$ 456.5 | R$ 483.8 |
Commitments (Details)
Commitments (Details) R$ in Millions | 12 Months Ended | |
Dec. 31, 2017BRL (R$)engineaircraft | Dec. 31, 2016BRL (R$)engineaircraft | |
Leases | ||
Number of aircrafts held in operating lease | aircraft | 114 | 106 |
Number of engines held in operating lease | engine | 17 | 16 |
Periodic lease payments for operating lease agreements | R$ 8394.6 | R$ 8021.5 |
Lease expense | 1,114.4 | 1,144.4 |
Cash impact of operating lease rentals | R$ 1092.5 | 1,117.9 |
Minimum | ||
Leases | ||
Lease term | 60 months | |
Maximum | ||
Leases | ||
Lease term | 144 months | |
Not later than one year | ||
Leases | ||
Periodic lease payments for operating lease agreements | R$ 1256.7 | 1,139.5 |
1 to 5 years | ||
Leases | ||
Periodic lease payments for operating lease agreements | 4,577.6 | 4,235.1 |
Later than five years | ||
Leases | ||
Periodic lease payments for operating lease agreements | R$ 2560.3 | R$ 2646.9 |
Commitments - Future acquisitio
Commitments - Future acquisition of aircraft (Details) R$ in Millions | Dec. 31, 2017BRL (R$)aircraft | Dec. 31, 2016BRL (R$)aircraft |
Commitments | ||
Purchase commitments for acquisition of aircraft, number | aircraft | 73 | 73 |
Commitments for the acquisition of aircraft on future payments | R$ 15473.8 | R$ 15245.0 |
1 to 5 years | ||
Commitments | ||
Commitments for the acquisition of aircraft on future payments | 11,769.2 | 8,937.3 |
Later than five years | ||
Commitments | ||
Commitments for the acquisition of aircraft on future payments | R$ 3704.6 | R$ 6307.7 |
Commitments - Letters of credit
Commitments - Letters of credit and guarantees (Details) R$ in Millions, $ in Millions | Dec. 31, 2017USD ($)aircraft | Dec. 31, 2017BRL (R$)aircraft |
Commitments | ||
Letters of credit issued | $ 161 | R$ 533.2 |
Related parties guarantees on aircraft held under operating lease agreements, number | 3 | 3 |
Share-based option plan (Detail
Share-based option plan (Details) | Apr. 19, 2017 | Mar. 10, 2017 | Jun. 30, 2014 | Dec. 11, 2009 |
First share option plan | ||||
Disclosure of terms and conditions of share-based payment arrangement | ||||
Term of the plan | 10 years | |||
Vesting period (in years) | 4 years | |||
Second share option plan, prior to IPO | ||||
Disclosure of terms and conditions of share-based payment arrangement | ||||
Term of the plan | 8 years | |||
Vesting period (in years) | 4 years | |||
Second share option plan, after IPO | ||||
Disclosure of terms and conditions of share-based payment arrangement | ||||
Term of the plan | 10 years | |||
Vesting period (in years) | 4 years | |||
Number of trading sessions in stock market for determination of exercise price | 30 days | |||
Third share option plan | ||||
Disclosure of terms and conditions of share-based payment arrangement | ||||
Term of the plan | 5 years | |||
Vesting period (in years) | 5 years | |||
Maximum period available for exercise of options after vesting | 15 days |
Share-based option plan - Fair
Share-based option plan - Fair value of share options and expense (Details) | Jul. 06, 2017BRL (R$)YOptions | Mar. 14, 2017BRL (R$)YOptions | Mar. 10, 2017 | Jul. 01, 2016BRL (R$)YOptions | Jul. 01, 2015BRL (R$)YOptions | Jun. 30, 2014BRL (R$)YOptions | Apr. 05, 2011BRL (R$)Options | Mar. 24, 2011BRL (R$)Options | Dec. 11, 2009BRL (R$)Options | Dec. 31, 2017Options | Dec. 31, 2016Options | Dec. 31, 2015Options |
Stock options | ||||||||||||
Disclosure of terms and conditions of share-based payment arrangement | ||||||||||||
Total options granted (in shares) | 10,023,977 | 820,250 | ||||||||||
Total options outstanding (in shares) | 16,250,687 | 10,877,982 | 10,057,732 | |||||||||
First share option plan | ||||||||||||
Disclosure of terms and conditions of share-based payment arrangement | ||||||||||||
Maximum life of the option | 10 years | |||||||||||
1st program | ||||||||||||
Disclosure of terms and conditions of share-based payment arrangement | ||||||||||||
Total options granted (in shares) | 5,032,800 | |||||||||||
Total options outstanding (in shares) | 2,213,675 | |||||||||||
Option exercise price (in reais) | R$ | R$ 3.42 | |||||||||||
Option fair value as of grant date (in reais) | R$ | R$ 1.93 | |||||||||||
Estimated volatility of the share price (as a percent) | 47.67% | |||||||||||
Expected dividend (as a percent) | 1.10% | |||||||||||
Risk-free rate of return (as a percent) | 8.75% | |||||||||||
Maximum life of the option | 10 years | |||||||||||
Expected term considered for valuation | 7 years | |||||||||||
2nd program | ||||||||||||
Disclosure of terms and conditions of share-based payment arrangement | ||||||||||||
Total options granted (in shares) | 1,572,000 | |||||||||||
Total options outstanding (in shares) | 695,600 | |||||||||||
Option exercise price (in reais) | R$ | R$ 6.44 | |||||||||||
Option fair value as of grant date (in reais) | R$ | R$ 4.16 | |||||||||||
Estimated volatility of the share price (as a percent) | 54.77% | |||||||||||
Expected dividend (as a percent) | 1.10% | |||||||||||
Risk-free rate of return (as a percent) | 12.00% | |||||||||||
Maximum life of the option | 10 years | |||||||||||
Expected term considered for valuation | 7 years | |||||||||||
3rd program | ||||||||||||
Disclosure of terms and conditions of share-based payment arrangement | ||||||||||||
Total options granted (in shares) | 656,000 | |||||||||||
Total options outstanding (in shares) | 326,660 | |||||||||||
Option exercise price (in reais) | R$ | R$ 6.44 | |||||||||||
Option fair value as of grant date (in reais) | R$ | R$ 4.16 | |||||||||||
Estimated volatility of the share price (as a percent) | 54.77% | |||||||||||
Expected dividend (as a percent) | 1.10% | |||||||||||
Risk-free rate of return (as a percent) | 12.00% | |||||||||||
Maximum life of the option | 10 years | |||||||||||
Expected term considered for valuation | 7 years | |||||||||||
1st program | ||||||||||||
Disclosure of terms and conditions of share-based payment arrangement | ||||||||||||
Total options granted (in shares) | 2,169,122 | |||||||||||
Total options outstanding (in shares) | 1,680,229 | |||||||||||
Option exercise price (in reais) | R$ | R$ 19.15 | |||||||||||
Option fair value as of grant date (in reais) | R$ | R$ 11.01 | |||||||||||
Estimated volatility of the share price (as a percent) | 40.59% | |||||||||||
Expected dividend (as a percent) | 1.10% | |||||||||||
Risk-free rate of return (as a percent) | 12.46% | |||||||||||
Average remaining maturity (in years) | Y | 0.4 | |||||||||||
Maximum life of the option | 8 years | |||||||||||
Expected term considered for valuation | 4 years 6 months | |||||||||||
2nd program | ||||||||||||
Disclosure of terms and conditions of share-based payment arrangement | ||||||||||||
Total options granted (in shares) | 627,810 | |||||||||||
Total options outstanding (in shares) | 542,276 | |||||||||||
Option exercise price (in reais) | R$ | R$ 14.51 | |||||||||||
Option fair value as of grant date (in reais) | R$ | R$ 10.82 | |||||||||||
Estimated volatility of the share price (as a percent) | 40.59% | |||||||||||
Expected dividend (as a percent) | 1.10% | |||||||||||
Risk-free rate of return (as a percent) | 15.69% | |||||||||||
Average remaining maturity (in years) | Y | 1.5 | |||||||||||
Maximum life of the option | 8 years | |||||||||||
Expected term considered for valuation | 4 years 6 months | |||||||||||
3rd program | ||||||||||||
Disclosure of terms and conditions of share-based payment arrangement | ||||||||||||
Total options granted (in shares) | 820,250 | |||||||||||
Total options outstanding (in shares) | 768,270 | |||||||||||
Option exercise price (in reais) | R$ | R$ 14.50 | |||||||||||
Option fair value as of grant date (in reais) | R$ | R$ 10.14 | |||||||||||
Estimated volatility of the share price (as a percent) | 43.07% | |||||||||||
Expected dividend (as a percent) | 1.10% | |||||||||||
Risk-free rate of return (as a percent) | 12.21% | |||||||||||
Average remaining maturity (in years) | Y | 2.5 | |||||||||||
Maximum life of the option | 8 years | |||||||||||
Expected term considered for valuation | 4 years 6 months | |||||||||||
4th program | ||||||||||||
Disclosure of terms and conditions of share-based payment arrangement | ||||||||||||
Total options granted (in shares) | 680,467 | |||||||||||
Total options outstanding (in shares) | 680,467 | |||||||||||
Option exercise price (in reais) | R$ | R$ 22.57 | |||||||||||
Option fair value as of grant date (in reais) | R$ | R$ 12.82 | |||||||||||
Estimated volatility of the share price (as a percent) | 43.35% | |||||||||||
Expected dividend (as a percent) | 1.10% | |||||||||||
Risk-free rate of return (as a percent) | 10.26% | |||||||||||
Average remaining maturity (in years) | Y | 3.5 | |||||||||||
Maximum life of the option | 10 years | |||||||||||
Expected term considered for valuation | 5 years 6 months | |||||||||||
Third share option plan | ||||||||||||
Disclosure of terms and conditions of share-based payment arrangement | ||||||||||||
Maximum life of the option | 5 years | |||||||||||
1st program | ||||||||||||
Disclosure of terms and conditions of share-based payment arrangement | ||||||||||||
Total options granted (in shares) | 9,343,510 | |||||||||||
Total options outstanding (in shares) | 9,343,510 | |||||||||||
Option exercise price (in reais) | R$ | R$ 11.85 | |||||||||||
Option fair value as of grant date (in reais) | R$ | R$ 4.82 | |||||||||||
Estimated volatility of the share price (as a percent) | 50.64% | |||||||||||
Expected dividend (as a percent) | 1.10% | |||||||||||
Risk-free rate of return (as a percent) | 11.32% | |||||||||||
Average remaining maturity (in years) | Y | 4.2 | |||||||||||
Maximum life of the option | 5 years | |||||||||||
Expected term considered for valuation | 5 years |
Share-based option plan - Stock
Share-based option plan - Stock option activity (Details) - Stock options | 12 Months Ended | |
Dec. 31, 2017BRL (R$)Options | Dec. 31, 2016BRL (R$)Options | |
Number and weighted average exercise prices of share options | ||
Balance at the beginning of the year (in shares) | Options | 10,877,982 | 10,057,732 |
Granted (in shares) | Options | 10,023,977 | 820,250 |
Cancelled (in shares) | Options | (468,818) | |
Exercised (in shares) | Options | (4,182,454) | |
Balance at the end of the year (in shares) | Options | 16,250,687 | 10,877,982 |
Number of options exercisable (in shares) | Options | 4,788,718 | 7,566,621 |
Balance at the beginning of the year (in reais) | R$ 8.38 | R$ 7.49 |
Granted (in reais) | 12.58 | 19.37 |
Cancelled (in reais) | 8.19 | |
Exercised (in reais) | 5.61 | |
Balance at the end of the year (in reais) | 11.69 | 8.38 |
Number of options exercisable (in reais) | 8.11 | 5.26 |
Share-based compensation expense (in reais) | R$ 19900000 | R$ 9900000 |
Share-based option plan - Fa133
Share-based option plan - Fair value of RSUs (Details) | Jul. 06, 2017BRL (R$)Options | Jul. 01, 2016BRL (R$)Options | Jul. 01, 2015BRL (R$)Options | Jun. 30, 2014BRL (R$)Options | Dec. 31, 2017Options | Dec. 31, 2016Options | Dec. 31, 2017Options | Dec. 31, 2015Options |
RSU | ||||||||
Disclosure of terms and conditions of share-based payment arrangement | ||||||||
Vesting period (in years) | 4 years | |||||||
Total shares granted (in shares) | 285,064 | 367,184 | 1,434,204 | |||||
Shares outstanding | 809,946 | 859,940 | 809,946 | 672,715 | ||||
1st program | ||||||||
Disclosure of terms and conditions of share-based payment arrangement | ||||||||
Total shares granted (in shares) | 487,670 | |||||||
Shares outstanding | 109,210 | |||||||
Fair value as of grant date (in reais) | R$ | R$ 21.00 | |||||||
2nd program | ||||||||
Disclosure of terms and conditions of share-based payment arrangement | ||||||||
Total shares granted (in shares) | 294,286 | |||||||
Shares outstanding | 141,405 | |||||||
Fair value as of grant date (in reais) | R$ | R$ 21.00 | |||||||
3rd program | ||||||||
Disclosure of terms and conditions of share-based payment arrangement | ||||||||
Total shares granted (in shares) | 367,184 | |||||||
Shares outstanding | 274,267 | |||||||
Fair value as of grant date (in reais) | R$ | R$ 21.00 | |||||||
4th program | ||||||||
Disclosure of terms and conditions of share-based payment arrangement | ||||||||
Total shares granted (in shares) | 285,064 | |||||||
Shares outstanding | 285,064 | |||||||
Fair value as of grant date (in reais) | R$ | R$ 24.17 |
Share-based option plan - RSU a
Share-based option plan - RSU activity (Details) - RSU R$ in Millions | 12 Months Ended | 42 Months Ended | |
Dec. 31, 2017BRL (R$)Options | Dec. 31, 2016BRL (R$)Options | Dec. 31, 2017Options | |
Number of other equity instruments | |||
Balance of the beginning of the year (in shares) | 859,940 | 672,715 | |
Granted (in shares) | 285,064 | 367,184 | 1,434,204 |
Cancelled (in shares) | (63,676) | ||
Paid (in shares) | (271,382) | (179,959) | |
Balance of the end of the year (in shares) | 809,946 | 859,940 | 809,946 |
Share-based compensation expense (in reais) | R$ | R$ 10.0 | R$ 5.3 |
Provision for taxes, civil a135
Provision for taxes, civil and labor risks (Details) - BRL (R$) R$ in Millions | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Provision for taxes, civil and labor risks | |||
Other provisions | R$ 73.2 | R$ 76.4 | R$ 81.8 |
Taxes | |||
Provision for taxes, civil and labor risks | |||
Other provisions | 1.9 | 5.2 | |
Civil | |||
Provision for taxes, civil and labor risks | |||
Other provisions | 48.7 | 48.8 | |
Labor | |||
Provision for taxes, civil and labor risks | |||
Other provisions | R$ 22.6 | R$ 22.4 |
Provision for taxes, civil a136
Provision for taxes, civil and labor risks - Changes in provisions (Details) - BRL (R$) R$ in Millions | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Provision for taxes, civil and labor risks | ||
Balance at the beginning of the year | R$ 76.4 | R$ 81.8 |
Provisions recognized | 78.4 | 53.7 |
Utilized provisions | (81.6) | (59.1) |
Balance at the ending of the year | R$ 73.2 | R$ 76.4 |
Provision for taxes, civil a137
Provision for taxes, civil and labor risks - Total amount of claims (Details) - BRL (R$) R$ in Millions | Jul. 18, 2017 | Jul. 31, 2017 | Dec. 31, 2017 | Dec. 31, 2016 |
Provision for Taxes, Claims | ||||
Proceedings for which no provision was recorded | R$ 237.2 | R$ 95.8 | ||
Taxes | ||||
Provision for Taxes, Claims | ||||
Proceedings for which no provision was recorded | R$ 80.6 | 41.8 | ||
Rate of additional charge on COFINS | 1.00% | |||
Rate on imports of aircrafts and parts | 0.00% | |||
Civil | ||||
Provision for Taxes, Claims | ||||
Proceedings for which no provision was recorded | R$ 23.3 | 8.5 | ||
Provisions relating to COFINS | R$ 0.0 | |||
Civil | Aeroportos do Brasil Viracopos S.A. ("ABV") | ||||
Provision for Taxes, Claims | ||||
Percentage of fine and discount on payments | 40.00% | 40.00% | ||
Direct discount rate | 20.00% | |||
Percentage of remaining fine and discount payable through judicial deposit | 20.00% | |||
Claims relating to civil lawsuits | R$ 26.2 | |||
Labor | ||||
Provision for Taxes, Claims | ||||
Proceedings for which no provision was recorded | 133.3 | R$ 45.5 | ||
Claims relating to labor lawsuits | R$ 66.0 |
Insurance (Details)
Insurance (Details) R$ in Millions | Dec. 31, 2017BRL (R$) |
Insurance | |
Fire - property and equipment | R$ 43.6 |
Civil liabilities | R$ 5055.5 |