Nov 12, 2014
Executives
Paulo Sérgio Kakinoff - Chief Executive Officer, President, Member of Human Resources & Corporate Governance Committee, Member of Financial Policies Committee and Member of Risk Committee Edmar Prado Lopes Neto - Chief Financial Officer, Vice President, Financial Director, Investor Relations Officer, Member of Accounting, Tax & Financial Statement Policy Subcommittee and Member of Financial Policies Committee
Analysts
Michael Linenberg - Deutsche Bank AG, Research Division Duane Pfennigwerth - Evercore ISI, Research Division James D. Parker - Raymond James & Associates, Inc., Research Division Stephen Trent - Citigroup Inc, Research Division Bob McAdoo - Imperial Capital, LLC, Research Division
Operator
Good morning, everyone, and welcome to GOL Airlines Third Quarter of 2014 Results Conference Call. With us here today, we have Mr.
Paulo Kakinoff, CEO; Mr. Edmar Lopes, Chief Financial and IR Officer; and Mr.
Eduardo Masson, Financial and Investor Relations Director. This event is being recorded.
[Operator Instructions] This event is also being broadcast live via webcast and may be accessed through GOL's website at www.voegol.com.br/ir where the presentation is also available. Participants may view the slides in any order they wish.
The replay will be available shortly after the event is concluded. Those following the presentation via the webcast may post their questions on our website.
They will be answered by the IR team after the conference is finished. Before proceeding, let me mention that forward-looking statements are based on the beliefs and assumptions of GOL management and on information currently available to the company.
They involve risks and uncertainties because they may relate to future events and, therefore, depend on circumstances that may or may not occur. Investors and analysts should understand that conditions related to the macroeconomic conditions, industry and other factors could also cause results to differ materially from those expressed in such forward-looking statements.
Now I will turn the conference over to Mr. Paulo Kakinoff.
Mr. Paulo, you may begin your presentation.
Paulo Sérgio Kakinoff
Thank you. Hello, everyone, and thank you for being with us in GOL Airlines Earnings Conference Call for the Third Quarter of 2014.
Let's begin our presentation on Slide #2, where we have the period highlights regarding the macroeconomic scenario, which showed a high exchange rate volatility and the dollar appreciation. This scenario indicated that reduction in the corporate passenger traffic reflecting a slowdown in economy activity.
We have also observed a decline in oil barrel prices, which was not yet reflected on these results. In light of this scenario, GOL reinforced its commitment to rationality in terms of seat supply.
The company has also maintained its focus on improving its products and services. With this in mind, we extended our GOL+ Conforto to our entire domestic route network, consolidating our position as the leading airline in ANAC category A seating, which means the most comfortable seats possible.
We also launched our exclusive express bag drop service to make check-in easier and faster. The measures taken by the company to improve its products and services have enabled it to reach the first place in number of transported passengers in the market.
Also for the first time, GOL was the airline company leader in tickets issued for the corporate segment year-to-date, according to ABRACORP, Brazilian Travelers Agents' Association. New international flights to Chile, Miami and Punta Cana are part of GOL's strategy of strengthening the share of revenue in other currencies.
The new domestic destinations are also the result of the efforts to identify market opportunities. As a result, the company has announced flights to regional destinations in the domestic market to Carajás and Altamira, in Pará state, cities that have been rapidly growing, creating demand for our services.
With these measures, GOL remains focused on improving its results. Moving now to Slide #3.
We can see our main numbers in the quarter and in the last 12 months. Net revenue grew by more than 10% to around BRL 2.5 billion, bringing the last 12-month figure to a record BRL 10 billion.
Operating income EBIT reached BRL 152 million in the third quarter 2014, BRL 150 million up on third quarter '13. The EBIT margin widened by 4.5 percentage points to 6.2%, increasing for the 7th consecutive quarter.
EBITDAR totaled BRL 463 million in the period and BRL 1.9 billion in the last 12 months. The constant increase in this indicator allowed the company to reach record levels.
On the operational side, as you can see on Slide 4, we reduced domestic supply by 3% year-to-date, while managing to capture 53% of the industry's 5.4 upturn in demand. The load factor increased by 8 percentage points to 77%, reducing our gap in relation to the industry's average of 79.4%.
As a result of these operational improvements, on Slide 5, we point out that GOL maintained its industry leadership in terms of number of passengers carried. According to ANAC, we reached the record mark of 26 million passengers transported in the first 9 months of the year, an increase of 11% over the previous year, which represents 2.6 million more passengers transported than our main competitor.
This advantage is equivalent to approximately the volume of passengers transported by GOL in 1 single month. Moving on to Slide 6.
We can see GOL's continuous focus on RASK growth and its strategy to reach these results. In the third quarter '14, we had a favorable quarter in terms of load factors and a bigger challenge in terms of use, which decreased by 2% year-over-year.
The 8 percentage points growth in the load factor more than offset this decline. Unit PRASK, which moved up by 9% in the period.
Passenger revenue, combined with the 47% increase in ancillary revenue, led to a 13% upturn in RASK. On Slide 7, we can see that efficiency and productivity indicators are improving every quarter.
Net revenue per employee improved by 68% over 2011. The same trend can be seen in seat demand per employee, which was 37 higher in the same comparison basis.
For the operation standpoint, GOL also showed continued progress, boosting revenue generation per flight and improving fuel consumption per RPK. Moving to the next slide, #8.
We can note the results of the strategy of international expansion, further strengthening our revenues in GOL, which creates an important natural protection for GOL. In this quarter, we implemented a 2-way codeshare partnership with Aerolíneas Argentinas, allowing us to sell their tickets on our website and we will shortly begin offering the same facility for Air France-KLM flights.
The increase in international flights with new routes to Chile, Miami and Punta Cana are boosting revenue in other currencies, which already surpassed the mark of BRL 1.1 billion in the last 12 months. The amount which is at 11% of total revenue, an increase of more than 4 percentage points in 2 years, in the quarter, this share came to an even higher level, 13%.
On Slide #9, we present an illustration of the client's entire experience from the ticket purchase to the flights and the final customer assessment. GOL closely followed the changes in passenger needs in order to improve its product and services and make the client experience even better.
A new site, with improved search queues helps clients to have an easy access to information, flights and make purchases. When arriving at GOL -- I'm sorry, when arriving at the airport, GOL's new visual identity helps clients notice it with clear and smooth [ph] language signs streamlining the entire process.
Count on Me is an important part of contact that they can use, it is a partially launched. In order to provide even more convenience to our customers, passengers can check in, use their computer and smartphones or our self services station.
This quarter, we began offering an exclusive express baggage service at Congonhas airport, through which customers can complete one more check-in stage at the self-service station, labeling their own baggage, as well as paying for any excess. It is one more simple and intelligent innovation to make our clients' airport experience fast and convenient.
Regarding the flying experience, in order to meet the client's needs for more comfort, GOL's fleet has GOL+ comfort seating, with an even greater angle of recline and even more distance between seats. We have also extended our GOL+ comfort seating to our entire domestic route network.
These seats are located in the 7 first rows of our aircraft and have more distance between the seats. By the end of the year, 100% of the fleet will be configured for GOL+ comfort, our inflight service has also been redesigned with improvements to buy on board service, with the new menu with lighter and more nutritious options for our guests.
In the shuttle service, the service is free and has options, especially developed for the different times of the day. Upon arrival, clients will receive a satisfaction survey by SMS in which we kindly ask them to rate their experience from 0 to 10.
This new facility have strengthened our capacity to ensure an even better client experience for leisure passengers and attracting more corporate flyers. Moving on to the next slide, #10, where we can see the highlights for Smiles, which closed the third quarter '14 with an operating income of BRL 69 million and an operating margin 6 percentage points higher than in the third quarter '13.
The result of Smiles operations reflect the 20% increase in the number of accrued ex-GOL miles and healthy direct redemption margins. The company launched an innovative campaign in which it undertook to offer 365 new reasons in addition to establishing new accrual partnerships with FastShop and Clube Magazine Luiza, one of the largest retailers in Brazil.
I now turn the presentations to Edmar, who will present the Q3 results.
Edmar Prado Lopes Neto
Thank you, Kakinoff, and good morning, everyone. I would like to invite you to Page 12.
And before going over to numbers, I would like to highlight that from our point of view here, we are executing the plan, and we also say that it is a moving year plan, it doesn't finish at the end of 2014. We still have a lot to improve, and that's how we see, we face the future.
Going back to the numbers. Kakinoff has mentioned revenues are up 10% on a quarter basis and 20% up on the last 12 months comparison.
It shows that all the efforts, all the improvements that we have done in the service of the company are -- over the restructuring time are indeed showing the results. EBIT came at BRL 152 million.
This is a 4.5 percentage points above last year, and it shows that we have been able to maneuver even in a very challenging scenario. As for the scenario, we highlight that the FX has moved 10% against us.
All of us, we know that we have a mismatched year. And even with that, we have been able to increase and to improve the company's results.
Yields came down by 2%, but we understand that our strategy was flexible enough in order to accommodate that and to have higher load factors so working more on the leisure side and show PRASK increase close to 13%, while costs were -- grew by just over 7% and I'm including fuel here. Moving on to the next page.
We can see our -- the numbers for the last quarters, and we have come from an EBIT of minus 3% over the last 12 months, the third quarter last year, to almost BRL 500 million for this year, meaning a 4.9%, almost 5% EBIT margin for the last 12 months. On the EBITDAR side, it is the right part of the chart, 19% of margin and BRL 1.9 billion for EBITDAR.
This is a record for the company. And I would like to remind you that just 9 months ago, by the end of 2013, we were at BRL 1.5 billion.
That is we are not only improving margin, but we are also growing the company in terms of revenue in spite of ASKs being down. On the next page, this is Page 14, please.
We show a chart with the highlights over CASK. So the first one is the growth over last year has come down to 10%.
And on a quarterly basis, CASK is down by almost 9%. The highlights are: first, pressure on wages side labor, and this is primarily related to the law.
We have an annual adjustment here in Brazil. And also for union agreement, we have a charge of BRL 5 million in the quarter related to risk premium.
Also, different from last year, we have been provisioning a profit sharing from the first quarter, it was BRL 15 million this quarter. Aircraft rents did not suffer from the FX, all of it, it seems like -- I remember that the FX moved by 10%.
Sales and marketing, this is an issue for 2014, and we recognize another BRL 23 million in losses. The trend here is down, and we do expect to go back to the previous levels by 2015 as a result of all the efforts that we have made in the last few months.
So the numbers would be -- to keep, we should keep the trend of the losses going down. On the Other, the comparison here doesn't favor us because at the end of quarter last year, we had a gain related to 6 aircraft exchanged of BRL 49 million.
We didn't have any this quarter, so this -- it does explain the change in this line alone. Moving on to the next slide.
Although we haven't got all the data from the other companies here, there's still some companies to show the results. We would like to emphasize that although the number of total ASKs are down, and although we have seen inflation in Brazil, and although we have seen the FX moving a lot, the company remains very, very competitive in terms of ex-fuel CASK.
Just compare us with airlines that have the same aircraft as we have, like Southwest, and have more like the same mission, Alaska, which is not so different than the model that we have been developing recently, meaning that we understand that we have been able to improve the margin, not only with the growth on the revenue side, but also with the cost being tackled and being managed on a quarterly basis. This is exactly what we show on the next page, turn to Page 16.
We're talking about the spread, RASK and CASK and although we recognize because of the many reasons I have mentioned, the CASK is up, more important is that the RASK is growing faster. That is we have come from a negative margin of BRL 1.54 to a positive number of BRL 1.26.
It is a 200% improvement in this spread. Moving on to the next page.
This is a common, a usual slide for us. It talks about liquidity, 27%.
We have a target of 25%, meaning that we could use some of the excess cash to repay some of the debt. It depends on conditions.
And also, EBITDAR is helping to deleverage the company. And in this quarter, because of the volatility, because of the devaluation of real, we were not able to improve as expected, but we showed indeed that the trend is under control.
Moving to the next page, and this is Page 18, please. We show you the amortization schedules, and this is the result of all the measures that the company took in the last quarter.
That is we tapped the market, we buy back some of the bonds that we have and we issued a new bond with maturity in 2022. The main message here is that the company paid, in terms of amortization from 2011 to 2013, just over BRL 1.2 billion in terms of debt.
And we did it at a very, let's say, challenging time when the margins were shrinking, and we have a turnaround being built. If you look at what we have from 2015 until 2020, you can see that for the next 5 years, the average amortization that we have, in nominal terms, is even more than the one that we have previously.
Meaning that, yes, we have, let's say, prepared the company to continue its recovery, and if there is a downturn, we would still have room to maneuver and, again, to improve. By saying that, I pass the floor back to Kakinoff for his final remarks, as well as comments over the guidelines.
Paulo Sérgio Kakinoff
Thanks, Ed. The results make us confident that we are on the right track to deliver the margin projected in our guidance for 2014.
We are, therefore, reiterating our projections for this year. I would like to close this conference call with the final message [indiscernible] reinforcing the company's consistency in delivering results and executing its strategy, always seeking the best value proposition for the stakeholders.
Thank you for participating in our conference call. Now I will begin the question-and-answer session.
Operator
[Operator Instructions] Question is Mike Linenberg, Deutsche Bank.
Michael Linenberg - Deutsche Bank AG, Research Division
I guess, 2 questions here. One, in regards to the new regional aviation plan, I know what's been proposed, I know it's still in the bill, it has to go to Congress.
Based on this, the opportunities to fly on these regional flights with up to 60 seats, I believe, 100% of up to 60 seats will be subsidized. Is that -- how does that drive your thinking as it relates to future fleet decisions?
Would you be considering, maybe, smaller jets like the Embraer? Or would you be looking at maybe some of the smaller Boeing 737s?
How should we think about those opportunities for GOL?
Paulo Sérgio Kakinoff
Michael, that, actually, what was approved yesterday and is still to be submitted to the Congress is basically what was presented to us at the beginning of this year related to the problem. There were no news despite of the new possibility to have foreign investors, having a higher stake in the airlines, that was I'd say, the only news.
Therefore, we have developed all these strategies already considering this scenario since the beginning of this year, and we are improving our regional routes operated with our current fleet, the 737-700 and 800. These subsidies can also boost our results once -- GOL is today the largest airlines carrying people to these so-called regional airports, basically due to our bigger airplanes.
That said, I think this new plan seems to be an opportunity to even expand or extend even more our regional routes and we can do that with our current planes being very, very competitive. So there is no reason to, at the moment, to consider additional jets or to change our standard fleet.
It is very, very important to say that we need to replace from 2018 on our 737-700s. We have just purchased 60 MAX 8, so the bigger plane, bigger than 737 family, which is supposed to replace the current 737-800.
Therefore, there is a need in the market, our request for purchase involving Embraer and Boeing. Those companies are competing to have -- to win actually this opportunity to serve -- to supply GOL with the 737-700 replacement from 2018 on.
That is not in relation to the regional plan in this competition. So it's just to keep our fleet as young as it is today.
Michael Linenberg - Deutsche Bank AG, Research Division
That's helpful. And then just -- you mentioned the changes in foreign ownership.
Is that -- I know this had been kicked around in the past, but that would be to change the voting of foreigner -- the restrictions that would lift the cap from, I believe, 20%. Is that lifted from 20% to 49%?
Or is it something different?
Paulo Sérgio Kakinoff
As it was presented, there is no barrier anymore. I mean, it could be virtually 100% foreign ownership, as it is presented.
As it is presented. So the issue under assessment and validation process.
It could be 100%.
Michael Linenberg - Deutsche Bank AG, Research Division
Okay, well. And then my second question and this is completely a separate topic.
But I saw recently that what I call your scissor's hub in the Dominican Republic, you were, the planes were basically connecting in Santo Domingo, and I saw that it looked like it was going to get moved to Punta Cana. And when I think about the Dominican Republic, one market is much more business-oriented, the other is much more leisure-oriented.
Is that what's going on? You're switching airports?
Was there an airport issue? Or was it just that many of the passengers would rather go to the vacation city rather than the business city?
Paulo Sérgio Kakinoff
You have already answered the question. This basically following the leisure high season, therefore, it makes more sense to move it to Punta Cana.
Operator
Our next question is Duane Pfennigwerth, Evercore ISI.
Duane Pfennigwerth - Evercore ISI, Research Division
Just wanted to follow-up on your comment about a slowdown in corporate travel or corporate bookings. Can you talk a little bit more about what specifically you're referring to?
When did that start? And are you seeing any recovery in that trend?
Paulo Sérgio Kakinoff
Duane, you know that I cannot give any guidance to the next year. But I can tell you that this movement or this effect started just right after the Brazilian World Cup, the soccer games, when the low -- the purchase before prior to departure up to -- from 0 -- up to 3 days prior to departure went down by 20%.
As far as we learned, the same effect happened in South Africa and in Germany, the last 2 prior soccer games. And month-after-month, this flux is supposed to recover, and it's exactly what has happened.
So while we show the quarter results, we cannot see the month-after-month evolution, but it's happening and I think that until the end of this year, when we will meet the leisure high season, we will have the corporate sales back on track. So there is nothing which would make us believe that in the next year the corporate sales will not be back at the same level that it was in the beginning of this year.
Duane Pfennigwerth - Evercore ISI, Research Division
Okay. So the recovery following the slowdown during the period of the World Cup, has that been consistent with what you expected?
Or has the recovery post World Cup been slower from a corporate perspective?
Paulo Sérgio Kakinoff
It's slightly lower than we expected. But fortunately, we were fast enough to compensate it, improving the other load factors as you can see.
So it was the final output, I mean, the EBIT margin is even higher than it was expected in our plans because we were able to compensate this huge reduction with higher load factor.
Duane Pfennigwerth - Evercore ISI, Research Division
Okay, that's great. And then I wonder if you could give us any thoughts maybe preliminarily on capacity growth next year.
It looks like the schedules, you're indicating maybe mid-single digits or 5% to 7% growth over the next couple of quarters. And typically, when we look at the scheduling data, it's higher than what you actually end up flying.
So is 5% to 7% kind of the right way we should be thinking about it or something less than that?
Edmar Prado Lopes Neto
Duane this is Edmar here. It's very preliminary.
But I would like to remind you that one of the main drivers here is being flexible within the year. Meaning that this is -- you are talking about the high season, so we do expect to have a higher number of ASKs here.
But at the same time, during those season, we have been very, very conservative. So it's too early to give a guidance, but the main concept here is, yes, we will still be very, very rational in terms of capacity in Brazil.
The strategy has been working for us. And we have no reason to change that at this moment.
Operator
Our next question is Jim Parker, Raymond James.
James D. Parker - Raymond James & Associates, Inc., Research Division
I have a couple of questions here. One, following up on Mike Linenberg's questions regarding the regional airline package.
As currently proposed, what would be the annual revenue benefit for GOL?
Paulo Sérgio Kakinoff
We have -- our previous calculations show that just in case it would be implemented exactly as presented yesterday on the current GOL network, it might represent something around $20 million in subsidies.
James D. Parker - Raymond James & Associates, Inc., Research Division
$20 million dollars not reis? USD 20 million?
Paulo Sérgio Kakinoff
USD, yes. Let me give really a context here, Jim.
What has been voted and it's about to be validated by the Congress is the allowance to the government to invest in regional aviation. The formula behind that has been unofficially shown to the airlines.
So what I have -- to everyone at the same time so it can be considered now, but the formula will be explicit only after the Congress approval. And only after that, we can say, okay, these are the real figures.
What I am telling you in advance is based on the previous discussion hold by the government with the airlines, showing their intention, how to build this subsidies formula, okay. So based on that, which is not wrote down, it is not officially announced, we can calculate USD 20 million as additional disbursement to GOL only.
James D. Parker - Raymond James & Associates, Inc., Research Division
Okay. And what proportion of your revenue is currently either in USD or tied to USD?
So when you sell international tickets connecting flight on Delta to, say, the U.S, what percentage of your total revenue is in USD or tied to USD?
Edmar Prado Lopes Neto
Jim, this is Edmar here. We have a sharp business last 12 months, it's 11%.
And last quarter, it's 13% and it's moving up, okay. It's either USD or related to USD.
I'd say from the revenue perspective, it means USD because it's tied to US dollar, okay.
James D. Parker - Raymond James & Associates, Inc., Research Division
Right. Edmar, did you answer Duane's question specifically about capacity growth next year?
You said you could vary it, what is your best guess currently regarding capacity growth in 2015?
Edmar Prado Lopes Neto
Jim, look, even if I knew, I wouldn't be able to tell you because we normally deliver that with the guidance, okay. This is how CVM has been.
This is how we have been dealing with CVM. But the main message here is that we don't know, haven't approved the budget at this point.
This is very, very true, trying to avoid that you not have the answer as close as possible to what you need to be -- to know and the colleagues, too. Personally, we do not see any environment to additional capacity.
It is, I'd say, the closest that we can get to what you would like to know. Rational supply might be in 2015, too, okay.
Operator
Our next question is Stephen Trent, Citigroup.
Stephen Trent - Citigroup Inc, Research Division
I guess, the first question would be how much of your all-in debt, and that's including operating leases, is dollar denominated?
Edmar Prado Lopes Neto
The operational leases are 100% in USD, Steve.
Stephen Trent - Citigroup Inc, Research Division
Okay. Yes, that's a quick answer.
And secondly, I guess, how is your rollout with Air France going? Are you seeing an acceleration there or...
Edmar Prado Lopes Neto
Look, Kakinoff has mentioned, we will fully implement the codeshare 2 way by the end of this year, and this is where -- this is exactly when the results pick up. So far, the trend is up but we understand that there is still a lot of room to improve here.
But overall, going over what has been done from the execution of the agreements until today, we are very, very satisfied with the outcome. The annual effects of having Air France and Aerolíneas Argentinas both in the 2 way codeshare situation, we will be only affected or only be felt next year because we have just implemented it.
So just those 2 actions enabling us to tell that the uptrend is in and must continue to next year.
Stephen Trent - Citigroup Inc, Research Division
Okay. Great.
And then, I guess, just circling back to the regional aviation plan and the new news about the foreign ownership. Would that require like an amendment to the constitution to allow for ownership like to say up to 100% over the current 49% limit?
Or would that be more a regulatory issue?
Edmar Prado Lopes Neto
This is Edmar here. If the bill is voted and approved, we understand that it's done.
There's no constitutional amendment here being required. This is the understanding that we have at this point.
Stephen Trent - Citigroup Inc, Research Division
Okay. So there wouldn't be an additional vote needed, if this is approved then foreign ownership can go up beyond the 49%?
Edmar Prado Lopes Neto
Yes. That's correct.
Stephen Trent - Citigroup Inc, Research Division
And then I guess finally then just to kind of follow up on that. What extent are you seeing potential from other airlines buying GOL's stakes?
I mean, I know Delta has a small stake, Air France does, could you see like maybe Latam coming in and buying stakes and the others?
Edmar Prado Lopes Neto
Well, there is nothing of this kind being discussed or any plan or any whatever over foreign ownership at GOL. If, of course, if the law is approved, it does open new opportunities and possibilities for us, but at this point, there is absolutely nothing here to be said.
Operator
[Operator Instructions] Our next question is Bob McAdoo, Imperial Capital.
Bob McAdoo - Imperial Capital, LLC, Research Division
A couple of things. First thing, a few years ago, when the currency weakened pretty severely, it seems like you made an announcement in June of a schedule change, it had a schedule change, rescheduled -- reduced supply that was effective like in August, relatively short noticed.
Are we anywhere near with the currency in what's happened to the currency since the election? Are we anywhere near a situation where you would take a similar action?
Or like maybe you wouldn't do that during the holiday period, it's coming up, but like shortly after the holiday period? Are we anywhere near feeling a need to do a relatively short notice pull down of capacity?
Paulo Sérgio Kakinoff
No, it's a completely different situation environment. The company had a negative operating margin at that time.
At the moment, we are expanding our EBIT margin. So we do not foresee any major changes related to scale or something like that.
Bob McAdoo - Imperial Capital, LLC, Research Division
Okay. And then secondly, on this issue of the Dominican Republic and when -- 2 things there, when did the shift take place out of Santo Domingo or the Punta Cana?
And I remember when you started that whole process, you always described it, you seem to always describe it as a way to get Brazilian citizens to the United States and really never talked about the fact that, that maybe some of the people might actually get off and stay in the Dominican Republic. In today's world or thinking forward, what do you envision or what is the actual situation in terms of percent of the travelers who were on those flights who actually stay in the Dominican Republic and don't go on to the United States?
Paulo Sérgio Kakinoff
Since the beginning of these flights, we have improved the load factor and also the capacity to United States via Dominican Republic. We have just launched additional flights from Campinas, we have got this through the same routes.
And now we found out an additional opportunity after noticing that Punta Cana might be a leisure destination to, not only to the Brazilians, but actually to Americans. Therefore, over the leisure high season, we could improve even more our load factors and use by offering Punta Cana as a foreign destination, exactly due to the fact that you properly mentioned that Punta Cana is also a final destination, not only a stop over to United States.
We are taking this opportunity to test Punta Cana as an additional route, which could play in combination with Santo Domingo. [indiscernible] So this is something that makes sense to be delivered at the moment.
Bob McAdoo - Imperial Capital, LLC, Research Division
So you would actually go to both cities. When does the Punta Cana thing anticipated to start?
Paulo Sérgio Kakinoff
Punta Cana will start now in December for the high season. I mentioned that we can have both operations, but not for the leisure high season.
The leisure high seasons we are moving operations to Punta Cana, where the demand is much higher there than in Santo Domingo. But later on, we can come back to Santo Domingo with those flights and keep an additional one in Punta Cana in case that decision makes sense.
Bob McAdoo - Imperial Capital, LLC, Research Division
Okay. But historically -- over the last several quarters, the Dominican Republic, has there been any meaningful amount of traffic that really saw Dominican Republic as their ultimate destination or is it virtually all going through?
Paulo Sérgio Kakinoff
In every flight we have around 5 to 10 seats of Dominican -- occupied by Dominicans in both directions. And it's growing, it's improving.
When we implemented the project, we considered up to 5 seats paid by Dominican. So it's not part -- fundamental part of the charter, but it helps to improve our RASK and our yields moving these flights to Punta Cana give us the opportunity to improve even more the yields basically due to the higher demand in this period.
Bob McAdoo - Imperial Capital, LLC, Research Division
Okay. And 1 final thing.
Did I understand you to say that the treaties do allow you to have a local traffic rights between the U.S. and Punta Cana, that you could carry U.S.
citizens down if you wanted to, during the high season there?
Paulo Sérgio Kakinoff
Yes.
Operator
[Operator Instructions] Having no questions, this concludes today's question-and-answer session. I would like to invite Mr.
Paulo Kakinoff to proceed with his closing remarks. Please go ahead, sir.
Paulo Sérgio Kakinoff
I just would like to thank you for your attention, and wish a very good day to everyone. Thank you very much.
Operator
This concludes GOL Airlines' conference call for today. Thank you very much for your participation, and have a nice day.