HOME Company History and Corporate Profile
Smiles was created through a corporate restructuring of Gol to independently and exclusively manage and operate the Smiles Program. The Smiles Program was originally launched by Varig in 1994 as a frequent flyer program and was acquired by Gol in 2007 together with other assets of the Varig business. Starting in 1997, Varig co-branded credit cards were issued to allow members to accelerate their accumulation of miles, which were sold to commercial partners and rewarded to Smiles members. In addition to earning miles through flights and spending on co-branded credit cards, members also earned miles through purchases from select travel industry partners, such as large hotel chains, international car rental agencies and high-end restaurants. Because of its established brand recognition, Gol maintained the Smiles Program as a tool to generate customer loyalty.
Beginning in 2008, the Smiles Program, which had been essentially inactive for years, underwent a total restructuring and revitalization. Since then, the program has gained market share, which Company believes was approximately 26% of the loyalty program market in Brazil in 2012. Currently, the Smiles Program has over 9 million members, a number that has grown at an average rate of approximately 67,000 new members per month since 2010. Additionally, Smiles has an extensive and diversified network of more than 150 commercial partners in Brazil.
The Company began the activities as a stand-alone loyalty program but gradually evolved toward the current model, becoming a coalition loyalty program with certain unique characteristics that permit the accumulation and redemption of miles for flights operated by Gol and its international airline partners, as well as through the main Brazilian commercial banks, including through Smiles’ co-branded cards issued by Bradesco and Banco do Brasil, and Company’s broad network of retail partners, including Petrobras Distribuidora. Under the current model, (1) Smiles sells miles to commercial and financial partners, including Gol, (2) members accumulate miles by flying with Gol or other partner airlines, which include Gol, Air France, Delta Airlines, KLM, Qatar Airways and, soon, Iberia or by purchasing products and services from one of 120 commercial partners that award miles and (3) members redeem miles in exchange for rewards in the form of airline tickets from Gol or other partner airlines or in the form of products and services from Smiles’ commercial partners.
On January 1, 2013, Company took over operations of the Smiles Program after entering into an Operating Agreement, a Miles and Tickets Purchase Agreement and a Back Office Services Agreement with VRG and Gol in December 2012. The Operating Agreement establishes the rules under which management of the Smiles Program was transferred to the Company, including the allocation of costs of reward redemptions, exclusivity rights and the management of client relationships, as well as VRG’s payment of a fee for managing its loyalty program. The Miles and Tickets Purchase Agreement establishes the terms and conditions of VRG’s miles purchases from Smiles and Company purchases of VRG tickets. The Back Office Services Agreement contains the terms, conditions and levels of services provided by VRG to Smiles, which are intended to develop the administrative activities needed to pursue Company’s corporate goals, such as controllership, accounting, internal controls and auditing, finance, information technology, call center, human resources, inventory and legal matters. The Brands Assignment Agreement assigns all brands of the Smiles Program to the Company.
Currently, Smiles’ partners include Brazilian and South American commercial banks, credit card companies, large retail chains, hotels, restaurants, car rental companies, gas stations, drugstores and publishing houses, among others, to guarantee members a wide range of ways to earn miles, not just through travel, but also through daily activities. The Company is continuously expanding reward options in order to provide more options to members. Smiles offer reward tickets to more than 560 destinations in Brazil and abroad and also offer over 100,000 non-ticket reward products and services, including electronic devices, appliances, furniture, sporting goods, toys, books, shows, movie tickets and gift cards through the Smiles Shopping platform.
Smiles is the exclusive manager of one of the largest coalition loyalty programs in Brazil, with 9,7 million members as of December 31, 2013. Between 2011 and 2013, Company’s miles issued increased at a CAGR of 15% and reward tickets increased at a CAGR of 24.2%. The Company is the exclusive manager of the Smiles Program, a loyalty program serving a variety of companies. Company’s business model is based on developing a coalition loyalty program consisting of a single platform for accumulating and redeeming miles through a broad network of commercial and financial partners. Smiles’ main commercial partner is Gol, an airline with an operating fleet of 140 B737-700/800 planes that provides 910 daily flights to 65 destinations in 10 countries. Gol flies more flights from Brazil’s busiest airports than any other airline, according to information from ANAC, and has a broad network of international airline partners.
Company’s main source of revenue is redemption of miles issued to members, which is done at the request of Smiles’ commercial partners, including Gol and the main Brazilian commercial banks. Members may redeem miles for rewards through a broad network of partners.
Smiles’ was created through a corporate restructuring of Gol to independently and exclusively manage and operate the Smiles Program. On January 1, 2013, the Company took over the Smiles Program’s extensive and diversified network of more than 215 commercial partners. Smiles has added approximately 62,000 new members per month since 2011.
The Company seeks to create a coalition loyalty program that provides a single platform for accumulating miles through a network of commercial and financial partners. The Company has a single cost structure and centralized administration, generating operational efficiency for partners. Accordingly, Smiles has encouraged commercial partners to participate directly in the Smiles Program, while maintaining the flexibility to link the Smiles Program to the loyalty programs of commercial partners. Smiles believes that a coalition loyalty program is attractive to members, since it facilitates mile accumulation and redemption of rewards by concentrating miles in a single account and eliminating the complexity and losses involved in participating in a variety of programs.
Currently, the Smiles Program allows members to accumulate miles through: (1) flights with Gol and its international partners, which are currently Delta Airlines, Air France, KLM and Qatar Airways, (2) the main Brazilian commercial banks, including through Smiles’ co-branded credit cards issued by Bradesco and Banco do Brasil and (3) a broad network of more than 150 retail partners, including Petrobras Distribuidora, the largest fuel distributor in Brazil, among others. Company’s primary redemption partners are Gol and its international partners, which, with the upcoming addition of Iberia as Smiles’ fifth international partner, will cover over 560 destinations worldwide. Members may also redeem miles to purchase products and services from Smiles’ commercial partners.
The agreements that govern Company’s commercial relationship with Gol provide one of the main pillars of Company’s business model, as they allow Smiles unrestricted access to seats on Gol flights at extremely competitive prices and afford significant flexibility to react to changes that may impact Smiles’ business, such as changes in supply and demand, economic conditions and the prices offered by commercial partners and competitors.