GOL Linhas Aereas Inteligentes SA (GOLLQ) Risk Factors

It is impossible to predict with certainty the amount of time that we could spend in our Chapter 11 cases or to assure parties in interest that a plan of reorganization will be confirmed. Our Chapter 11 cases may involve additional expense and our management will be required to spend a significant amount of time and effort focusing on the cases. This diversion of attention may adversely affect us, particularly if the Chapter 11 cases are protracted. During the pendency of the Chapter 11 cases, our employees will face considerable distraction and uncertainty, and we may experience increased levels of employee attrition. Loss of key personnel or material erosion of employee morale could impair our ability to execute our strategy and implement operational initiatives, thereby adversely affecting us.

One of the key elements of our business strategy and a key element of the low-cost carrier business model is to reduce costs by operating a standardized aircraft fleet. After extensive research and analysis, we chose the 737-700/800 Next Generation aircraft manufactured by The Boeing Company, or Boeing, which we are now, on an accelerated basis, replacing with Boeing 737 MAX aircraft, and Leap-1B engines manufactured by CFM International, or CFM. We expect to continue to rely on Boeing and CFM for the foreseeable future and delivery and operation of the Boeing 737 MAX aircraft are crucial to our strategy and fleet modernization initiatives. We derive benefits from a fleet comprised of a standardized type of aircraft while still having the flexibility to match the capacity and range of the aircraft to the demands of each route. If we had to lease or purchase aircraft of another manufacturer, we could lose these benefits. We cannot assure you that any such replacement aircraft would have the same operating advantages as the Boeing aircraft or that we could lease or purchase engines that would be as reliable and efficient as the CFM engines. In addition, replacement aircraft may require additional training of our pilots and crew, as well as our maintenance staff, and could materially affect our operations and require us to make significant unexpected expenditures. Our operations could also be disrupted by the failure or inability of Boeing or CFM to provide sufficient parts or related support services on a timely basis. Following two accidents involving Boeing 737 MAX aircraft, regulators grounded the aircraft in March 2019, and we resumed our operations of the 737 MAX in November 2020. In 2023, we were obliged to reduce the cycle limiters of our engines due to CFM's high pressure turbine bulletin which resulted in the removal of 10 of our aircraft from circulation. Because our aircraft have been designed on engines manufactured by CFM, any mechanical failures of CFM engines may increase our maintenance costs, impact our business operations, materially adversely affecting us. As our operations have been designed around the single fleet model, if there is any future grounding of the MAX aircraft or if there are additional delays in delivery of our ordered aircraft, we may face increased maintenance costs, experience operational disruptions and decreases in customer ratings, be unable to realize our expected fuel cost efficiencies, incur increased aircraft lease costs and risk facing a shortage of available aircraft, which may limit our growth plans and the execution of our long-term strategy. In early 2024, several incidents involving Boeing's aircraft occurred globally. Our reliance on single suppliers for our aircraft and engines means that any of these developments relating to Boeing 737 MAX aircraft or CFM engines would materially and adversely affect us.

Accidents or incidents involving our aircraft could result in significant claims by injured passengers and others, as well as significant costs related to the repair or replacement of damaged aircraft and temporary or permanent loss from service. We are required by ANAC and lessors of our aircraft under our operating lease agreements to carry liability insurance. Although we believe we maintain liability insurance in amounts and of the type generally consistent with industry practice, the amount of such coverage may not be adequate, and we may be forced to bear substantial losses in the event of an accident. Substantial claims resulting from an accident in excess of our related insurance coverage would harm us. Any accidents or incidents involving our or any other Boeing 737 Next Generation or Boeing 737-8 MAX aircraft or the aircraft of any major airline have and may again cause negative public perceptions about us, and, consequently, adversely affect us.

The Brazilian currency has, during the last decades, experienced frequent and substantial variations in relation to the U.S. dollar and other foreign currencies. In 2021, the real appreciated against the U.S. dollar and the U.S. dollar selling rate was R$5.581 per US$1.00 as of December 31, 2021, as reported by the Central Bank. In 2022 and 2023, the real gained value against the U.S. dollar and, as of December 31, 2022 and 2023, the U.S. dollar selling rate was R$5.218 per US$1.00 and R$4.841 per US$1.00, respectively. There can be no assurance that the real will not depreciate further against the U.S. dollar. In 2023, 87.2% of our passenger revenue and other revenue were denominated in reais while 48.6% of our total operating costs and expenses were either denominated in or linked to U.S. dollars, such as fuel, aircraft and engine maintenance services and aircraft insurance. The market and resale value of the majority of our operating assets, our aircraft, is denominated in U.S. dollars. As of December 31, 2023, R$18,876.7 million, or 94.3%, of our indebtedness was denominated in U.S. dollars and we had a total of R$6,400.7 million in present value non-cancelable U.S. dollar denominated future lease payments. Brent oil prices decreased from about US$85.91 per barrel at the end of 2022 to US$79.77 per barrel in March 2023. On December 31, 2023, Brent oil was priced at US$77.04 per barrel. We are also required to maintain U.S. dollar denominated deposits and maintenance reserve deposits under the terms of some of our aircraft operating leases. We may incur substantial additional amounts of U.S. dollar denominated leases or financial obligations and U.S. dollar denominated indebtedness and we will be subject to fuel cost increases linked to the U.S. dollar. While in the past we have generally adjusted our fares in response to, and to alleviate the effect of, depreciation of the real against the U.S. dollar and increases in the price of jet fuel (which is priced in U.S. dollars) and have entered into hedging arrangements to protect us against the short-term effects of such developments, there can be no assurance that we will be able to continue to do so. However, unlike certain other expenses, we may not be able to defer significant amounts of our fuel costs and we will likely not be able to adjust fuel costs in our ticket prices. Depreciation of the real against the U.S. dollar creates inflationary pressures in Brazil and causes increases in interest rates, which adversely affects the growth of the Brazilian economy as a whole, curtails access to foreign financial markets and may prompt government intervention, including recessionary governmental policies. Depreciation of the real against the U.S. dollar has also, as in the context of an economic slowdown, led to decreased consumer spending, deflationary pressures and reduced growth of the economy as a whole. Depreciation of the real also reduces the U.S. dollar value of distributions and dividends on the ADSs and the U.S. dollar equivalent of the market price of our preferred shares and, as a result, the ADSs. On the other hand, appreciation of the real against the U.S. dollar and other foreign currencies could lead to a deterioration of the Brazilian foreign exchange current accounts, as well as dampen export-driven growth. Depending on the circumstances, either depreciation or appreciation of the real could materially and adversely affect us.

The Brazilian government regularly proposes changes to the tax regime applicable to different sectors of the economy, including changes that represent an increase in our tax burden and the tax burden of our customers and suppliers, which can negatively impact our business. These changes include changes in tax rates, tax base, tax deductibility and, occasionally, the creation of taxes (temporary or non-temporary). If these changes directly or indirectly increase our tax burden, we may have our gross margin reduced, adversely affecting our business, financial condition and results of operations. As of the date of this annual report, the Brazilian congress approved the final wording of the proposal No. 45/2019 to amend the Constitution, or the PEC 45". The PEC 45 is a material bill in the context of the tax reform and it was enacted as Constitutional Amendment (EC) No. 132/2023, or the Tax Reform. The Tax Reform intends to simplify Brazil's taxation of consumption by substituting certain indirect taxes – ICMS, IPI, ISS and PIS/Cofins – for three new taxes: (i) the tax on goods and services, or IBS, (ii) the contribution on goods and services, or CBS" and (iii) the selective tax, or IS. As of the date of this annual report, the Tax Reform was approved and is subject to further regulation and a transition period. The effects of the Tax Reform, its application and interpretation by Brazilian authorities are uncertain, and we cannot foresee the impact that it will have on our financial condition and results of operations.

We are subject to a broad range of cyber threats, including attacks, with varying levels of sophistication. These cyber threats are related to the confidentiality, availability and integrity of our systems and data, including our customers' and business partners' confidential, classified or personal information. In addition, because we have access to certain information technology systems of certain of our business partners, our systems may be subject to attacks aimed at accessing, tampering with or exposing our business partners' systems and their data. In addition, certain of our business partners, including our suppliers, have broad access to certain of our confidential and strategic information. Many of these business partners face similar security threats and any attacks on their systems could result in unauthorized access to our systems or data. Any unauthorized access to, or release or violation of our systems and data, whether directly or through cyberattacks or similar breaches affecting our business partners, could materially and adversely affect us, including subjecting us to regulatory scrutiny and fines.

In the ordinary course of our business, our systems and technology require ongoing modification and refinements, which can be expensive to implement and may divert management's attention from other matters. In addition, our operations could be adversely affected, or we could face regulatory penalties, if we were unable to timely or effectively modify our systems as necessary. We have occasionally experienced system interruptions and delays that make our websites and services unavailable or slow to respond, which could prevent us from efficiently processing customer transactions or providing services. This could reduce our net revenue and the attractiveness of our services. Our computer and communications systems and operations could be damaged or interrupted by catastrophic events such as fires, floods, earthquakes, power loss, computer and telecommunications failures, acts of war or terrorism, computer viruses, cybersecurity breaches and similar events or disruptions. Any of these events could cause system interruptions, delays and loss of critical data, and could prevent us from processing customer transactions or providing services, which could make our business and services less attractive and subject us to liability. Any of these events could damage our reputation and be expensive to remedy. In August 2021, we switched our passenger service system to Sabre, which is one of the most used by airlines. The transition during the second half of 2021 resulted in issues with our website useability and customers' ability to book flights. We cannot assure you we will not face additional issues deriving from our passenger service system or other technology.

We face intense competition on all routes we operate from existing scheduled airlines, charter airlines and potential new entrants in our market. Competition from other airlines has a relatively greater impact on us when compared to our competitors because we have a greater proportion of flights connecting Brazil's busiest airports, where competition is more intense. In contrast, some of our competitors have a greater proportion of flights connecting less busy airports, where there is little or no competition. In addition, we cannot foresee how the recent financial distress of our main competitors will affect the competitive landscape. The Brazilian airline industry also faces competition from ground transportation alternatives, such as interstate buses. In addition, the Brazilian government and regulators could give preference to new entrants and existing competitors when granting new and current slots in Brazilian airports in order to promote competition. Existing and potential competitors have in the past and may again undercut our fares or increase capacity on their routes in an effort to increase their market share of business traffic (high value-added customers). In any such event, we cannot assure you that our level of fares or passenger traffic would not be adversely affected.