São Paulo, May 14, 2014 - GOL Linhas Aéreas Inteligentes S.A. (BM&FBOVESPA: GOLL4 e NYSE: GOL), (S&P: B, Fitch: B-, Moody’s: B3), the largest low-cost and low-fare airline in Latin America, announces today its results for the first quarter of 2014. All the information herein is presented in accordance with International Financial Reporting Standards (IFRS) and in Brazilian reais (R$), and all comparisons are with the first quarter of 2013, unless otherwise stated.

Highlights

Operating income (EBIT) totaled R$144 millionin 1Q14, 43% increase versus 1Q13, with an operating margin of 5.8%. In the last 12 months (LTM), GOL achieved an EBIT of R$309 million anda margin of 3.3%.     Net revenuesreached R$2.5 billion, 20% or R$411 million, up year over year and the Company’s highest ever first-quarter figure. LTM net revenue stood atR$9.4 billion.    Total load factorof 76.1% on the 1Q14 representedan 8.9 percentage point improvement over 1Q13 and also a first-quarter record, while yield maintained its upward trajectory, increasing by 4% in the period. These factors helped push RASK and PRASK by 18%to R$19.90 cents and R$18.23 cents, respectively.    Given the average 18% devaluation of the Real against the Dollar and fuel prices reaching record levels for a quarter, R$2.62/liter, total CASK moved up 17% over 1Q13, while CASK ex-fuelincreased by 22%. LTM total CASK increased 3%.    EBITDAR totaled R$493 million, 34% more than in 1Q13. LTM EBITDARof R$1,652 million, a Company record, reducing leverage (adjusted gross debt/LTM EBITDAR) from 27.9x, in 1Q13, to 6.5x in 1Q14.

      GOL closed 1Q14 with a total cash position of R$2.8 billion, equivalent to 30% of LTM net revenue. The Company remains committed to maintaining ample liquidity, which is essential at times of high volatility in the economic scenario.

      Given the devaluation of the Venezuelan Bolivar against the Dollar, the Company recognized an exchange variation adjustment of R$75.9 million in its 1Q14 financial result. As a result, the realizable value of its cash in Venezuela was R$274.6 million on March 31, 2014.

      Smiles S.A. reported first-quarter net income of R$78.3 million in 1Q14, 162% up on 1Q13, with a net margin of 41.6%, driven by the 61% period increase in net revenue to R$188 million.  

      SMILES S.A. approved a capital reduction of R$1.0 billion, or R$8.19 per share, the trading ex-reduction date to be defined after the legal period of 60 days. The amount of the reduction will be paid to Smiles shareholders proportionally to their respective interest in the company. Also in

1Q14, the company approved the distribution of additional dividends totaling R$160.3 million related to fiscal year 2013.

                      1 – Gross debt + LTM operational leasing expenses x 7;  

                      2- Adjusted gross debt less cash and cash equivalents, short-term financial investments and restricted cash. Certain variation calculations in this  report may not match due to rounding

           Message from Management

On the first quarter, operating income (EBIT) reached R$144 million, a 43% year-over-year improvement, with an operating margin of 5.8%.

This result was fueled by a new level of load factor, which reached a record 76%, which together with the continuing increase in yield, resulted in GOL’s highest ever net revenue for the first-quarter of R$2.5 billion, and R$9.4 billion for the last twelve months.

In regard to the industry as a whole, demand for seats moved up 6.5% over 1Q13, while supply decreased by 0.8%. On the eve of Easter Holiday, GOL transported 140,990 passengers, a record for a single day.

With the objective to offer our passengers even more comfort, the Company announced the expansion of GOL+ to the domestic fleet, resulting in an even more pleasant flying experience of more space with extra leg room, as well as the special GOL+ Conforto seats, with an even greater 34 inches between seats. By the end of May, 80% of GOL’s fleet will be equipped with the new configuration. The change is part of a process of standardization, operating efficiency gains and revenue generation.

In order to increase connectivity and become even more appealing, GOL announced new agreements with three leading international airlines that fly to Brazil: Air France-KLM, TAP and Aerolíneas Argentinas. In the first quarter, it entered into a strategic commercial cooperation partnership with Air France-KLM along the lines of the highly successful agreement with Delta Airlines, including expanded codeshare, improved joint sales procedures, and more benefits for Customers through both Companies’ frequent flyer programs. As part of this agreement, recently approved without restrictions by Brazil’s antitrust authority (CADE), Air France-KLM will invest US$100 million in GOL, including the acquisition of around 1.5% of the Company’s preferred capital stock for US$52 million.

The Company also signed codeshare and frequent flyer program agreements with TAP, which are awaiting approval by the regulators and CADE. ANAC (the Civil Aviation Authority) and CADE also approved the codeshare agreement with Aerolíneas Argentinas.

In line with its 2014 guidance, the Company is maintaining its strategy of gradually increasing its international market presence and its foreign-currency denominated revenue. With this in mind, it has announced a series of initiatives, including the re-start of flights between Santiago and São Paulo (Guarulhos airport), scheduled to begin in July, as well as new flights between Brazil and the United States from Campinas (Viracopos Airport) to Miami via Santo Domingo, in the Dominican Republic, where passengers will be able to connect to a flight to Orlando.

In April, GOL announced a new direct flight, once a week, between Fortaleza and Buenos Aires in association with the Ceará state government, which approved a 13 percentage point reduction in the ICMS tax (state VAT) on jet fuel for all domestic flights from Ceará for airlines operating regular international flights to the same destination. Fortaleza has now joined Brasilia, which reduced its own ICMS in 2013, in offering better conditions for the development of the airline industry and the local economy.

As for costs, the Company maintained its focus on controlling manageable expenses: LTM CASK moved up by 3% and quarterly CASK by 17% over 1Q13, primarily due to the average 18% period devaluation of the Real against Dollar, the all time high fuel price of R$2.62/liter, and the upturn in Brazilian inflation. The workforce remained stable, closing at 16,157 positions, 1% down compared to 4Q13.

The Company ended the quarter with a cash position of R$2.8 billion, or 30% of annual net revenue, while leverage closed at 6.5x, versus 27.9x at the end of 1Q13, due to the R$1.3 billion increase in LTM EBITDAR to R$1.7 billion, its highest ever figure, in line with continuous deleverage strategy.

In 2014, after 64 years, the World Cup returns to Brazil, the country of football. As a truly Brazilian company, GOL takes great pride in being the Brazilian team’s official carrier. Throughout the last few months, the Company has been preparing to offer even better services. Our route network for the event has 974 extra flights or flight-time changes to  serve the 12 host cities. Since the end of last year, we have been investing in a new visual identity in all the country’s airports and adding three new languages to our electronic kiosks: English, Spanish and French.

We have also reformulated our website and mobile platform, which are now available in Portuguese, English and Spanish. Our employees have also undergone specific training for the event, including in foreign languages, in order to ensure better service for visitors. We will also be hiring additional staff and reallocating personnel among the bases in order to prioritize service in the host cities. In addition, four of our aircraft have received special paint work, once again symbolizing our commitment to the event. All these initiatives are designed to offer GOL’s passengers the best World Cup while flying in Brazil.

Once again, GOL would like to thank its customers for their loyalty, its Team of Eagles for their commitment, and its investors for their confidence, all of which increasingly reinforces GOL's vision of being the best company to fly with, work for and invest in.

Paulo Sérgio Kakinoff 

CEO of GOL Linhas Aéreas Inteligentes S.A.

SMILES

Smiles S.A. reported 1Q14 net income of R$78.3 million, 162% up on the previous quarter, with a net margin of 41.6%. On April 30, 2014, the Annual Shareholders’ Meeting approved a R$1.0 billion capital reduction, or R$8.19 per share, with no reduction in the number of shares, with the trading ex-reduction date to be defined after the legal 60-day period. The Meeting also approved the distribution of additional dividends totaling R$160.3 million related to fiscal year 2013.

In January, CADE approved the company’s R$25.0 million investment in Netpoints Fidelidade without restrictions. On April 15, the company announced the beginning of the conversion of Netpoints points into Smiles miles, expanding its Customer base by more than 5.2 million potential members.

Smiles S.A. also entered into a partnership with Aerolíneas Argentinas and TAP, allowing their passengers to accumulate miles and use them to redeem air tickets. In the first quarter, the company also launched online ticket reservations for GOL flight award tickets. The program is the first to offer this product, once again underlining the company’s commitment to innovation and differentiation. It is also becoming increasingly recognized by the market – in April, Smiles was elected the best frequent flyer program in Brazil by readers of Melhores Destinos, a Brazilian travel blog.

In regard to participant numbers, Smiles closed 1Q14 with 9.9 million Customers, growth of 7.4% and 1.7% over 1Q13 and 4Q13, respectively. The number of commercial partners also increased, climbing by 7.4% over 1Q13 to 218.  

SMILES represents a solid sales channel for GOL, which regards the loyalty program as a competitive advantage to increase the attractiveness of its products and services.

    Smiles – 1Q14 Financial Highlights

Aviation Market: Industry  ­

                                                                            National Civil Aviation Agency (ANAC) figures                                                           

In 1Q14, aviation industry demand increased by 6.5% over 1Q13, fueled by domestic demand growth of 8.9%. In the same period, total supply declined by 0.8%. As a result, the load factor moved up by 5.4 percentage points  to 79.5%.  

Aviation Market: GOL 

                                                                         National Civil Aviation Agency (ANAC) figures

                             Domestic Market

      Domestic supply increased by 1.6% over 1Q13, demand increased by 14.7% and the load factor climbed by 8.7 percentage points to 76.8%, GOL’s highest ever quarterly figure,  lifting the Company to a new load factor level. On April 17, eve of Easter Friday, the number of passengers transported in a single day reached record levels. Of this total, GOL carried 140,990.

International Market

First-quarter supply grew by 1.4%, while demand increased by 18.3% and the load factor rose by 10.2 percentage points, reaching 71.4%.

              PRASK, RASK and Yield

      PRASK increased by 18% in the 12-month comparison and yield  expanded by 4%, due to the Company’s new load factor level (76.1% in 1Q14) and the improved appeal of the Company’s services. This evolution can be seen in the graph below:

Annual Variation in Domestic PRASK and ASK*

               Key Operating Indicators

      1. Source: Brazilian Central Bank; 2. Source: Bloomberg; 3. Fuel expenses/liters consumed.

            Income Statement in IFRS (R$ thousand)

                                 ¹ Interest income comprises income from short-term investments and investment funds

In accordance with CVM Instruction 527, the reconciliation of EBIT and EBITDA is shown in the Operating Result section. We also show the reconciliation of EBITDAR, given its importance as a specific aviation industry indicator.

1Q14 Result - Operating Segment (R$ thousand)

For more information on the breakdown by business segment, see Note 29 to the standardized financial statements (DFPs).  

Net Revenue (R$ million)

Net revenue of R$2,493.4 million in 1Q14, 20%, or R$411 million, up on 1Q13 and GOL’s highest-ever first-quarter figure, fueled by the 18% increase in RASK and PRASK due to the upturn in period demand, the 9 percentage point increase in the load factor, and the continuing yield improvement.

Operating Expenses (R$ million)

Operating expenses totaled R$2,348.5million in the quarter, 18% up on 1Q13. Excluding fuel expenses, operating expenses came to R$1,337.2 million, versus R$1,074.1 million in 1Q13.

Cost per ASK stood at R$18.74 cents, 17% higher than the R$16.07 cents recorded in 1Q13. Excluding fuel expenses, CASK moved up by 22% year-over-year to R$10.67 cents. LTM CASK increased by 3%.  

Fuel costs per ASK of R$8.07 cents in 1Q14, 10% up on the same period last year, due to the 8% increase in the average fuel price, which reached an all time high level for the quarter, and the 3% growth in consumption .   Salaries, wages and benefits per ASK of R$2.77 cents in the quarter, 19% more than in 1Q13, as a result of: (i) the write-down, in 1Q13, of the provision for INSS, due to the inclusion of the air transport sector in the Brasil Maior incentive program which exempts employers’ social security contributions on payroll, which had an impact of R$20 million; (ii) the collective pay rise as of December 2013, which impacted by R$18 million; and (iii) an increase of R$22 million in the provision for the payment of variable compensation for crew and for the employees profit sharing program (PPR). The increase was partially offset by the 2% reduction in the workforce in the same period.

Aircraft leasing costs per ASK of R$1.70 cents, 36% up on 1Q13, mainly due to the 18% average depreciation of the Real against the Dollar and the entry of new aircraft, which impacted the average leasing price. The number of aircraft under operational leasing increased from 88, in 1Q13, to 102.

Sales and marketing expenses per ASK of R$1.29 cents, 76% higher than in 1Q13, due to higher commissions resulting from increased sales (R$33 million). These costs were also impacted by the period upturn of around R$37 million in losses from sales in direct sales channels.  

Landing costs per ASK of R$1.21 cents, 11% higher than in 1Q13, chiefly due to the charging of a passenger connection fee which began at the end of 2012 and was fully implemented in all airports used by GOL in Brazil in July 2013. The increase was also impacted by the 1.2% period upturn in the number of aircraft arrivals.

Aircraft and traffic servicing per ASK of R$1.32 cents, 20% up on 1Q13, primarily due to the increase in contractual adjustments (R$20 million) and  the modernization of IT structures and services focused on the passenger (R$9 million).

      Maintenance, materials and repairs per ASK of R$0.60 cents, 20% less than in 1Q13 due to the reduced number of engine removals (8, versus 10 in 1Q13), partially offset by the 18% period appreciation of the average Dollar against the Real.

      Depreciation and amortization per ASK of R$1.08 cents, 20% up on 1Q13, chiefly due to the accelerated depreciation of improvements associated with major engine maintenance work on aircraft in the process of being returned.

      Other expenses per ASK of R$0.70 cents, 24% more than in 1Q13, mainly due to the increase in provisions for legal indemnification and higher expenses from the improvement in international on- board service. The increase in other expenses was partially offset by gains from the sale lease-back of aircraft (6 aircraft in 1Q14, versus  5 in 1Q13).

      Operating Result

GOL recorded operating income (EBIT) of R$144 million in 1Q14, 43% up on 1Q13, with an operating margin of 5.8%, up by 0.9 percentage points.  

In accordance with CVM Instruction 527, the Company presents the reconciliation of EBIT and EBITDA, whereby: EBIT = net income (loss) plus income and social contribution taxes and the net financial result; and EBITDA = net income (loss) plus income and social contribution taxes, the net financial result, and depreciation and amortization.

We also show the reconciliation of EBITDAR, given its importance as a specific aviation industry indicator, whereby: EBITDAR = net income (loss) plus income and social contribution taxes, the net financial result, depreciation and amortization, and aircraft operating lease expenses.

Hedge Result

The Company makes use of hedge accounting to recognize some of its derivative instruments. In 1Q14 it recorded a book loss of R$121.8 million from hedge operations

*OCI (Other Comprehensive Income) or Statement of Comprehensive Income is a transitional account where positive and negative fair value adjustments of future operations are booked, designated as effective for hedging cash flow. The purpose is to state income as close to the Company’s reality as possible. As the results from operations occur in their respective accrual periods, they are incorporated into the Company's income. GOL records the fair value of hedges due in future periods whose aim is to protect cash flow.

Part of the entire amount related to hedge operations was recognized under the financial result. For more details, see the Financial Result section

Fuel: fuel consumption hedge transactions, which are effected through derivative contracts involving crude oil and its by-products (WTI, Brent and heating oil) generated losses of R$1.7 million in 1Q14. The Company’s fuel hedge position increased over 4Q13, and on March 31, 30% of its exposure in the next three months was protected.

Foreign Exchange: foreign exchange hedge transactions designed to protect the Company’s cash flow generated losses of R$61.0 million. GOL increased its FX hedge protection, with 100% of exposure in the next three months being protected, versus 43% in 1Q13.

Interest: swap transactions to protect cash flow from aircraft leasing against an increase in interest rates generated total losses of R$59.1million. The Company reduced its hedged position from US$1,319 million in 4Q13 to US$1,269 million at the close of 1Q14.

The table below shows the nominal value of derivatives contracted as a hedge against future expenses, the derivatives’ average contracted rate and the percentages of hedged exposure on an accrual basis on March 31, 2014:  

 Weighted average of derivative strike prices.

** On 03/31/2014, the exchange rate was R$2.263 / US$1.00.

             Financial Result

GOL recorded a net financial expense of R$194 million in 1Q14,  81% higher than in 1Q13. 

¹ Interest income comprises income from short-term investments and investment funds.

Interest expenses totaled R$143 million in the quarter, 18% up on 1Q13, mostly due to: (i) the average 18% devaluation of the Real against the Dollar, with a resulting adverse impact on the Company’s Dollar-denominated debt, which accounted for 77% of the total, versus 73% in 1Q13; (ii) the approximate 2.7 percentage point period upturn in the CDI interbank rate, which increased interest payments on CDI-indexed debt, notably the 4th and 5th debenture issues; and (iii) the Bond 2023 issue, whose impact on 1Q13 was only partial, given that it took place in February 2013.

The exchange variation was positive by R$57.5 million in 1Q14, up by 6% in the 12-month comparison, due to the appreciation of the Real against the Dollar in 4Q13. This variation was partially offset by the recognition of R$75.9 million in losses from the devaluation of the Venezuelan Bolivar against the Dollar (see Note 28 to the financial statements).

Interest income totaled R$42 million in the quarter, 70% more than in 1Q13, mainly due to the 74% period increase in the cash position and the upturn in the benchmark interest rate (SELIC).  The

increase in interest income was partially offset by the larger portion of cash denominated in foreign currency.

Other financial expenses came to R$32 million, 18% down on 1Q13, primarily due to the recognition, in 1Q13, of expenses related to the waiver obtained with holders of the 4th and 5th issue debentures.

Income Taxes

Income tax totaled a negative R$47 million in 1Q14, versus an expense of R$69 million in 1Q13, largely due to the higher income recorded by Smiles S.A. and the temporary difference in 1Q13 (deferred income tax).

            Net Loss

GOL posted a net loss of R$96 million in 1Q14,  due to the increase in the net financial expense to R$194 million. The net margin was a negative 3.9%.

Balance Sheet: Liquidity

GOL closed 1Q14 with total cash, financial investments and short and long-term restricted cash of R$2,822.4 million, 74% up on 1Q13 and 7% down on 4Q13. The quarter-over-quarter downturn was due to: (i) the 3% appreciation of the Real against the end-of-period Dollar, which impacted Dollar-denominated debt; (ii) the devaluation of the Venezuelan Bolivar against the Dollar. On March 31, 2014, the Venezuelan cash position stood at R$350.6 million, whose provisioned amount of R$75.9 million refers to the loss from the devaluation of the Bolivar against the Dollar. In any event, given the Company’s intention of remitting the amounts involved, the realizable value of the cash in Venezuela on March 31, 2014 was R$274.6 million.

Total cash represented 30% of LTM net revenueand 5.9x obligations due in the next 12 months(versus6.9x in 4Q13 and 3.3x in 1Q13). Short-term receivables totaled R$464 million in 1Q14, 29% and 43% up on 1Q13 and 4Q13, respectively. These consist mostly of ticket sales via credit card and accounts receivable from travel agencies and cargo transportation.

Balance Sheet: Indebtedness

On March 31, 2014, the Company’s total loans and financings came to R$5,468.8 million (including financial leasing), 2% up on 1Q13, primarily due to the 12% devaluation of the Real against the end-of-period Dollar, increasing the Dollar-denominated portion of the Company’s total debt, which moved up from 73%, in 1Q13, to 77%. The increase in total debt was partially offset by the amortization of R$22 million in short-term debt in the quarter. In the last 12 months, the Company has amortized a total of R$308 million.

 *See Note 30 to the financial statements

The current liquidity ratio (total cash plus receivables divided by current liabilities) stood at 1.0x in 1Q14, stable over the previous quarter. In 1Q13, this ratio stood at 0.6x.

On March 31, 2014, the average maturity of the Company’s long-term debt, excluding financial leasing and non-maturing debt, was 5.0 years, with an average rate of 10.9% for local-currency debt and 9.2% for Dollar-denominated debt.

Due to the period recovery of LTM EBITDAR, which totaled R$1.7 billion at the end of 1Q14, versus R$357 million at the close of 1Q13, the Company closed the quarter with a leverage ratio (adjusted gross debt/LTM EBITDAR) of 6.5x, versus 27.9x in 1Q13

In April 2014, Smiles S.A. informed its shareholders and the market in general that its Annual and Extraordinary Shareholders’ Meeting had approved a R$1.0 billion capital reduction with no reduction in the number of shares. The amount in question will be paid to Smiles shareholders proportionally to their respective interest in the company through: (a) the delivery of own funds from Smiles’ cash position; and (b) the contracting, by the Smiles Executive Board, of a loan up to R$700 million from a financial institution. As a result, consolidated leverage is not expected to be strongly impacted, given that 54.5% of the amount paid via the capital reduction will go to GOL. 

Financial Debt Amortization Schedule (R$ million)

GOL’s loans and financing amortization profile, excluding interest and financial leasing, shows that the Company remains committed to reducing its short-term financial obligations.   

Main Financial Ratios

1- Financial commitments (gross debt + operational leasing contracts, in accordance with note 27 to the interim financial statements) less cash and cash equivalents and short-term financial investments; 2 - Gross debt + LTM operational leasing expenses x 7;

3- Adjusted gross debt less cash and cash equivalents, short-term financial investments and restricted cash. Certain variation calculations in this  report may not match due to rounding.

            Operational Fleet

The Company closed the quarter with an operational fleet of 141 Boeing 737-700 and 800 NG aircraft  (another six of these aircraft were in the process of being returned to their lessors), with an average age of 7.2 years. The total 1Q14 fleet comprised 155 aircraft (including B737-300s and B767s).