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GOL Reports Net Revenues of R$844mm and EPS of R$0.54 for 2Q06
Brazil’s Low-cost, Low-fare Airline Reports Quarterly Net Income of R$107mm
56% increase in Earnings per ADS

São Paulo, July 20, 2006 – GOL Linhas Aéreas Inteligentes S.A. (NYSE: GOL and Bovespa: GOLL4), Brazil’s low-cost, low-fare airline, today announced financial results for the second quarter of 2006 (2Q06). The following financial and operating information, unless otherwise indicated, is presented pursuant to US GAAP and in Brazilian Reais (R$), and comparisons refer to the second quarter of 2005 (2Q05). Additionally, financial statements in BR GAAP are made available at the end of this release.

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In the second quarter of 2006, GOL demonstrated its ability to significantly grow capacity while reducing costs and maintaining world-class profitability and high quality service, even during periods of intense price competition and extremely high fuel prices. “GOL remains committed to its virtuous cycle of maintaining low costs, allowing us to offer the lowest fares and achieve the highest load factors in the Brazilian market, thereby driving industry-leading profitability,” commented Constantino de Oliveira Junior, GOL’s CEO. Mr. Oliveira added, “Through the addition of aircraft and flight frequencies during the quarter, GOL significantly increased its domestic market share and further consolidated its position as the second-largest domestic airline in Brazil.”

GOL increased load factors and aircraft utilization rates, while maintaining market cost leadership. Demand for GOL’s passenger air transportation services grew at high rates during the quarter, with passengers transported increasing 36.8% over 2Q05. During the quarter, GOL’s load factor increased 3.3 percentage points to 75.9%; aircraft utilization was at 13.9 block hours per day (increasing 1.5% over 2Q05), while operating costs per ASK decreased approximately 1%. Through strict fuel management practices and fuel hedges, fuel costs per available seat kilometer (ASK) decreased 1.9% year-over-year and helped to lower GOL’s operating cost per seat kilometer (CASK) to 15.32 cents (R$). Cost reductions were also driven by increased scale, productivity and stage length; reductions in sales, marketing and aircraft leasing expenses; and an 11.7% appreciation of the Brazilian Real against the US dollar, offset by higher scheduled maintenance expenses. The 21% increase in employees over 1Q06, related to planned capacity expansion, was balanced by higher overall productivity.

Increased passenger volumes and a reduction in CASK, resulted in an operating income increase of 55.6% in the year-over-year comparison. The Company has hedged approximately 54% of its fuel price exposure as well as 33% of its U.S. dollar exposure for 3Q06, and 15% of its fuel exposure for 4Q06. “Our absolute market cost leadership is key to our virtuous cycle, and allows us to provide the lowest fares and the best customer value proposition in the market,” commented Richard Lark, GOL’s CFO.

In terms of future perspectives, besides maintaining high levels of productivity and profitability, short-term growth will be driven by the addition of new aircraft, new destinations and new frequencies. The addition of six Boeing 737 aircraft to the fleet in the third quarter of 2006 will increase seat capacity by approximately 45% year-over-year.

GOL remains committed to its strategy of profitable expansion through a low cost structure and high quality customer service. “We are very proud that more than 44 million passengers have chosen to fly GOL, and we continue to make every effort to offer them the best in air travel: new planes, frequent flights in the main markets, an ever-expanding integrated route system and lower prices; all of which is delivered by our dedicated team of employees who are key to our success," stated Mr. Oliveira. “By remaining focused on our business model, while continuing to grow, be innovative and provide the lowest fares, we will continue to create value for our customers, employees and shareholders.”

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Net operating revenues, principally revenues from passenger transportation, increased 50.1% to R$844.0mm, primarily due to higher revenue passenger kilometers (RPK), offset by a lower yield. RPK growth was driven by a 34.6% increase in departures, a 14.7% increase in stage length and an increase in load factor from 72.6% to 75.9% . RPKs grew 57.3% to 3,523mm, and revenue passengers grew 36.8% to 4.3mm.

Average fares increased 9.7% from R$173.39 to R$190.23. Yields declined 4.7% to 22.33 cents (R$) per passenger kilometer, principally due to a 14.7% increase in average stage length coupled with intense price price competition during the quarter.

Complementing net operating revenues, cargo transportation activities primarily contributed to the expansion of other operating revenues, which increased from R$37.7mm to R$57.2mm.

The 50.4% year-over-year capacity expansion, represented by ASKs, facilitated the addition of 62 new daily flight frequencies (including 22 night flights) and 1 new destination in 2Q06. The addition of 5.3 average operating aircraft during the quarter (from 43.0 to 48.3 aircraft) drove the ASK increase.

Operating revenue per available seat kilometer (RASK) remained stable at R$18.19 cents in 2Q06 (vs. R$18.22 cents in 2Q05).

The growth in RPKs resulted in a higher domestic market share for GOL, reaching 35% in the end of 2Q06, compared to 29% in the end of 2Q05. Through its regular international flights to Buenos Aires, Cordoba and Rosario (Argentina), Santa Cruz de la Sierra (Bolivia), Montevideo (Uruguay) and Asuncion (Paraguay), GOL achieved an international market share of 6% (share of Brazilian airline RPK) in the same period. Approximately 7% of GOL’s total RPKs were related to international passenger traffic.

Total CASK decreased 0.9%, to 15.32 cents (R$), due to higher productivity, a longer average stage length, a greater spreading of fixed costs over a higher number of ASKs, and also by a decrease in aircraft fuel expenses per ASK. Operating expenses per ASK decreased by 0.2%, excluding fuel, in the quarter. Total operating expenses increased 49%, reaching R$711.8mm, due to higher fuel prices, increased scheduled maintenance, and the expansion of our operations (fleet and employee expansion, a higher volume of fuel consumption, landing fees and marketing activities). Fuel price increases during 2Q06 accounted for more than 30% of the R$91mm increase in fuel expenses, with the remainder accounted for by increased fuel consumption. Breakeven load factor increased 2.4 percentage points to 64.0% versus 61.6% in 2Q05.

Results from GOL’s operating expense (jet fuel price and USD exchange rate) hedging programs are accounted for in accordance with SFAS 133 (Statement of Financial Accounting Standards No 133), “Accounting for Derivatives and Hedging Activities.”

The breakdown of our costs and operational expenses for 2Q06, 2Q05 and 1Q06 is as follows:

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Salaries, wages and benefits expenses per available seat kilometer (ASK) increased 6.0% to 1.94 cents (R$), mainly due to a 6.0% cost of living increase on salaries. The number of full-time equivalent employees increased 81% to 7,229, related to capacity expansion.

Aircraft fuel expenses per ASK decreased 1.9% over 2Q05 to 6.12 cents (R$), due to improved fuel economies and gains on fuel hedges, offset by a 10.8% increase in fuel price per liter. The increase in average fuel price per liter over 2Q05 was primarily due to the 32.6% increase in the international price for crude oil (WTI), and a 30% increase in Gulf Coast jet fuel prices, partially offset by the 11.7% Brazilian Real appreciation against the U.S. dollar. The Company has hedged approximately 54% and 15% of its fuel requirements for 3Q06 and 4Q06, respectively.

Aircraft rent per ASK decreased 21.8% to 1.58 cents (R$) in 2Q06, primarily due to a high aircraft utilization rate (14 block hours per day), and an 11.7% appreciation of the Brazilian Real against the U.S dollar vs. 2Q05.

Sales and marketing expenses per ASK decreased 12.5% to 2.23 cents (R$) primarily due to reductions in commissions, an increase in ticket sales on GOL’s website and higher aircraft utilization rates. GOL booked a majority of its ticket sales through a combination of its website (82.4% during 2Q06) and its call center (10.5% during 2Q06).

Landing fees per ASK decreased 1.4% to 0.68 cents (R$), due to increased average stage length and to a higher aircraft utilization rate.

Aircraft and traffic servicing expenses per ASK increased 35.9% to 0.87 cents (R$), as a result of an increase in ground services (landings increased 34.6%) and an increase in consulting and technology services, partially offset by increased average stage length.

Maintenance, materials and repairs per ASK increased 114.7% to 0.73 cents (R$), primarily due to a higher number of scheduled maintenance services during 2Q06, partially offset by a 11.7% appreciation of the Brazilian Real against the U.S. dollar. Main expenses during the quarter were related to the scheduled maintenance of five engines, in the amount of R$11.1mm, the use of spare parts inventory and repair of rotable materials, in the amount of R$10.6mm.

Depreciation per ASK increased 25.9% to 0.34 cents (R$), due to a higher amount of fixed assets, particularly spare parts inventory, and the increase of technology equipment, due to our expansion of operations.

Other operating expenses per ASK were 0.83 cents (R$), a 5.7% decrease when compared to the same period of the previous year, due to a decrease in insurance expenses, cancelled flights expenses, lodging of flight crews and direct passenger expenses. Insurance expenses, at 0.14 cents (R$) per ASK (R$6.5mm total) decreased 42.3%, due to a reduction in average premium rates, a 11.7% appreciation of the Brazilian Real against the U.S. dollar, and a higher aircraft utilization rate.

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The impact of a 0.03 cent (R$) RASK decrease was offset by a CASK decrease of 0.14 cents (R$), resulted in an increase of EBITDA per available seat kilometer to 3.21 cents (R$) in 2Q06. Compared to 1Q06, EBITDA per ASK decreased 41.0% . 2Q06 EBITDA was affected by the 4.7% decrease in yields, and totaled R$148.2mm in the period compared to R$93.3mm in 2Q05 (a 58.8% increase) and R$236.3mm in 1Q06 (a 37.3% decrease).

Aircraft rent represents a significant operating expense for GOL. As GOL leases all of its aircraft, we believe that EBITDAR, equivalent to EBITDA before aircraft rent expenses (which are USD-denominated) is a useful measure of relative operating performance. On a per available seat kilometer basis, EBITDAR was 4.79 cents (R$) in 2Q06, compared to 5.05 cents (R$) in 2Q05. EBITDAR amounted to R$221.6mm in 2Q06, compared to R$155.7mm in the same period last year and R$302.8mm in 1Q06.

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¹EBITDA (earnings before interest, taxes, depreciation and amortization) and EBITDAR (earnings before interest, taxes, depreciation, amortization and rent) are presented as supplemental information because we believe they are useful indicators of our operating performance. We usually present EBITDAR, in addition to EBITDA, because aircraft leasing represents a significant operating expense of our business, and we believe the impact of this expense should also be considered. However, neither figure should be considered in isolation, as a substitute for net income prepared in accordance with US GAAP, BR GAAP or as a measure of a company’s profitability. In addition, our calculations may not be comparable to other similarly titled measures of other companies.

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Net financial income increased R$3.5mm. Interest expense increased R$18.4mm primarily due to the increase in long-term debt and a higher amount of short-term working capital debt related to increased operations. Interest income decreased R$0.4mm primarily due to a 3.9 pp decrease in average Brazilian interest rates (as measured by the CDI rate). The increase in other gains was primarily due to R$16.5 mm in fuel hedge gains.

Net income in 2Q06 was R$106.7mm, representing a 12.6% net income margin, vs. R$73.4mm of net income in 2Q05.

Net earnings per share, basic, was R$0.54 in 2Q06 compared to R$0.38 in 2Q05. Basic weighted average shares outstanding were 196,039,449 in 2Q06 and 192,914,653 in 2Q05. Net earnings per share, diluted, was R$0.54 in 2Q06 compared to R$0.38 in 2Q05. Fully-diluted weighted average shares outstanding were 196,156,436 in 2Q06 and 193,759,282 in 2Q05.

Net earnings per ADS, basic, was US$0.25 in 2Q06 compared to US$0.16 in 2Q05. Basic weighted average ADS outstanding were 196,039,449 in 2Q06 and 192,914,653 in 2Q05. Net earnings per ADS, diluted, was US$0.25 in 2Q06 compared to US$0.16 in 2Q05. Fully-diluted weighted average ADS outstanding were 196,156,436 in 2Q06 and 193,759,282 in 2Q05.

Based on GOL’s quarterly dividend policy for fiscal 2006, Management recommended payment of quarterly intercalary dividends to shareholders in the form of interest on shareholders’ equity calculated in accordance with the statutory financial statements ended June 30, 2006. The total payout approved for 2Q06 is R$32.1mm (R$27.2mm net of withholding tax) to be paid as interest on shareholders’ equity on August 15, 2006 to shareholders of record on June 20, 2006. The net payment for the quarter is equivalent to R$0.13897 per share (approximately US$0.06434 per ADS).

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Cash, cash equivalents and short-term investments increased R$342.5mm during 2Q06. Cash provided by operating activities was R$2.1mm, mainly due to increased earnings from operations (R$106.7mm), partially offset by a decrease in accounts payable (R$54.3mm), a net increase in deposits for aircraft and engine maintenance (R$12.8mm) and a decrease in other liabilities (R$85.7mm) and. The amount deposited for future maintenance was US$194.8mm at June 30, 2006. Cash used in investing activities was R$152.1mm, consisting primarily of advances for aircraft acquisition (R$98.9mm) and acquisition of property and equipment (R$49.9mm) . Cash provided by financing activities during 2Q06 was R$492.5mm, mainly due to an increase in long-term borrowings (R$565.9mm), partially offset by dividends payable (R$73.6mm) .

The net cash position at June 30, 2006 was R$1,255.3mm, an increase of R$397.1mm vs. 1Q06. The Company’s total liquidity was R$1,811mm (cash, short-term investments and accounts receivable) at the end of 2Q06. On June 30, 2006, the Company had eleven revolving lines of credit secured by receivables and promissory notes. On June 30, 2006, the outstanding amount under these lines of credit was R$107.4mm.

Currently, GOL leases all of its aircraft, as well as airport terminal space, other airport facilities, office space and other equipment. On June 30, 2006, the Company leased 50 aircraft under operating leases, with initial lease term expiration dates ranging from 2006 to 2012. Future minimum lease payments under operating leases are denominated in US dollars. Such leases with initial or remaining terms at June 30, 2006, were as follows:

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As of June 30, 2006, the Company had 67 firm orders and 34 options to purchase new Boeing 737-800 Next Generation aircraft. The firm orders had an approximate value of US$4.7 billion (based on aircraft list price) and are scheduled to be delivered between 2006 and 2012. As of June 30, 2006, GOL has made deposits in the amount of US$240.1mm related to the orders described below:

GOL’s expected fleet growth from 2006 to 2012 is as follows:

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GOL will continue to invest in its successful low-cost, low-fare business model. We will continue to evaluate opportunities to expand our operations by adding new flights in Brazil, where sufficient market demand exists, and expanding into other high-traffic centers across South America. We expect to benefit from economies of scale and reduce our average non-fuel cost per available seat kilometer (CASK) as we add additional aircraft to a well-established and highly-efficient operating network, and as our Aircraft Maintenance Center becomes fully-operational. We anticipate a solid third quarter, thanks to the dedicated effort of our employees to improve productivity throughout the Company, and an improved revenue environment.

The scheduled addition of six new aircraft to our fleet in the third quarter of 2006 should allow a 45% increase in available seat capacity over 3Q05. For the third quarter, we expect a load factor in the range of 75-77%, with yields in the range of R$26-28 cents. We expect a stable foreign exchange rate environment for the near term, supported by good economic fundamentals in the Brazilian economy. We expect that high oil prices will continue to impact our fuel costs, but will be partially mitigated by our hedging program. For the third quarter, we expect non-fuel CASK to be in the range of R$9-10 cents.

Financial guidance for 2006 is based on GOL’s planned capacity expansion and the expected high demand for our passenger transportation services, driven by strong Brazilian economic fundamentals and GOL’s demand-stimulating low fares. We expect full-year load factors to be in the range of 75% (a one point increase over previous guidance). Our projections are for a 2006 full-year EPS in the range of R$3.90 to R$4.30, representing annual earnings growth of over 50%. For 2007, we expect to add at least 13 aircraft to the fleet and expand capacity by at least 30% to adequately serve expected demand and add new markets. We plan to continue to popularize air travel in South America through expansion, technological innovation, improved operating efficiency, strict cost management, the lowest fares and high quality passenger service.

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Revenue passengers represents the total number of paying passengers flown on all flight segments.

Revenue passenger kilometers (RPK) represents the numbers of kilometers flown by revenue passengers.

Available seat kilometers (ASK) represents the aircraft seating capacity multiplied by the number of kilometers the seats are flown.

Load factor represents the percentage of aircraft seating capacity that is actually utilized (calculated by dividing RPK by ASK).

Breakeven load factor is the passenger load factor that will result in passenger revenues being equal to operating expenses.

Aircraft utilization represents the average number of block hours operated per day per aircraft for the total aircraft fleet.

Block hours refers to the elapsed time between an aircraft leaving an airport gate and arriving at an airport gate.

Yield per passenger kilometer represents the average amount one passenger pays to fly one kilometer.

Passenger revenue per available seat kilometer represents passenger revenue divided by available seat kilometers.

Operating revenue per available seat kilometer (RASK) represents operating revenues divided by available seat kilometers.

Average stage length represents the average number of kilometers flown per flight.

Operating expense per available seat kilometer (CASK) represents operating expenses divided by available seat kilometers.

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About GOL Linhas Aéreas Inteligentes
GOL Linhas Aéreas Inteligentes, a low cost, low fare airline, is one of the most profitable and fastest growing airlines in the industry worldwide. GOL operates a simplified fleet with a single class of service. The Company has one of the youngest and most modern fleets in the industry resulting in low maintenance, fuel and training costs, with high aircraft utilization and efficiency ratios. In addition, safe and reliable services, which stimulate GOL’s brand recognition and customer satisfaction, allow GOL to have the best value proposition in the market. GOL currently offers over 500 daily flights to 50 major business and travel destinations in Brazil, Argentina, Bolivia, Uruguay and Paraguay with substantial expansion opportunities. GOL’s growth plans include increasing frequencies in existing markets and adding service to additional markets in both Brazil and other high-traffic South American travel destinations. GOL’s shares are listed on the NYSE and the Bovespa. GOL: here everyone can fly!

For more information, flight times and fares, please access our site at www.voegol.com.br or call: 0300-789-2121 in Brazil, 0810-266-3131 in Argentina, 800-1001-21 in Bolivia, 0004 055 127 in Uruguay, 009 800 55 1 0007 in Paraguay and 55 11 2125-3200 in other countries.

CONTACT: GOL Linhas Aéreas Inteligentes S.A.
Ph: (5511) 3169-6800
e-mail: ri@golnaweb.com.br
site: www.voegol.com.br/ir

Media:
MVL Comunicação (São Paulo)
Ph: (5511) 3049-0343 / 3049-0342
e-mail: roberta.corbioli@mvl.com.br/simone.luciano@mvl.com.br

This release contains forward-looking statements relating to the prospects of the business, estimates for operating and financial results, and those related to growth prospects of GOL. These are merely projections and, as such, are based exclusively on the expectations of GOL’s management concerning the future of the business and its continued access to capital to fund the Company’s business plan. Such forward-looking statements depend, substantially, on changes in market conditions, government regulations, competitive pressures, the performance of the Brazilian economy and the industry, among other factors and risks disclosed in GOL’s filed disclosure documents and are, therefore, subject to change without prior notice.

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This press release may contain forward-looking statements. These statements are statements that are not historical facts, and are based on management's current view and estimates offuture economic circumstances, industry conditions, company performance and financial results. The words "anticipates", "believes", "estimates", "expects", "plans" and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.