Q4 2019 Earnings Call

call

Or by the gold investor relations team after the conference is finished before proceeding. Let me mention that forward-looking statements are based on the beliefs and assumptions off of goals management and on information currently available to the company, they involve risk and uncertainties because they relate to future events and therefore depend on circumstances that may or may not occur.

Investors and analysts should understand that events related to macroeconomic conditions industry and other factors could also cause results to differ materially from those expressed. It's just for looking statements.

At this time, I will hand you over to mr. Pollo. Kick It Off please begin, sir.

Good morning, ladies and gentlemen and welcome to Google lines conference call. I am follow cutting off chief executive officer. And I am joined by Richard want our Chief Financial Officer. Good morning. It's a pleasure to be with you all today this morning. We released our fourth quarter figures also be made available on both investors relations website previous with the results presentation financial review age and preliminary Q&A. We have once again delivered on our guide thanks to the dedication and engagement of our team of the Eagles despite several operational challenges 2019 such as the max delays and the unplanned maintenance on some Angie's goes net revenue who are three point eight billion realizing the quarter the highest ever recorded of the company an increase of 18.8% compared to the same period in 2018.

2019

That's Revenue Richard 13.9 billion reais an increase of 21.5% compared to 2018.

Goes natural Revenue guidance for Delaney is approximately 15.4 billion record revenues. This quarter rounds out what has been standing here in our system.

Disappear experience provided to customers combine. This goes low-cost operating model and sophisticated Fleet Management have driven our growth both in domestic and international markets in the Squadron recurring earnings per diluted share where 0.88 real and returning earnings per diluted a PS4 0.43 dog. Go straight many ups and Burning Spear DS guidance is 2.65 to 3.15 reais and 1.25 down to one point $50 respectively.

regarding

Smart he was 22.9% in the fourth quarter of 2019 increased 60.8 percentage points quarter-over-quarter.

Need a full year 2019 recurring pretax margin was 6.5% it Grove of a 3.4 percentage points year-over-year goes twenty twenty projects margin guidance is approximately 13% recurring ebitda. Margin was 38.5% an increase of 22.2% of the point quarter of require need to fold a nineteen recurring a bit. Margin was 31.5% it grow for eleven point five percentage points, year-over-year goes to fall off. The margin guidance is approximately 30% The company returned eight hundred million readers of cash with capital Partners in the fourth quarter mainly comprised a. 617 million that repayment of interested on on Capitol and 102 million of share repurchases.

Goa has a high level of

Housing protection place with around 90% protection in the first quarter of this year and 68% has in 2020.

Once again, we improved our operating indicators rpk increased 5.5% totaling 10.8 billion recorder driven by and 8% gross the number of of the passengers. Who are you AST growth was 6% strong passenger demand and dynamic Revenue management enabled go to manage the increase in here to Brady coughed achieving default indicators run average, you'd prefer passenger of 33.2 cents of real an increase of 13.8% compared to 4th, 18th to average load factor of 81.5% 3 average aircraft position of 12.2 hours a day and increase of 6.1% quarter-over-quarter and for flight completion of 99.2% It grows of 0.6 percentage Point compared to the same quadrant important.

18 according to him

In data from major airports. We continue to drive strong Revenue growth. The net was 3.8 billion the highest for a choir ever recorded by the company and an increase of 18.8% quarter-over-quarter Google Care at nine point seven million customers in the quarter with 9.2 within the mass Market wage increase of 9.5% over same. 2018 and 1/2 million International Market net revenue. Available 6 to order rust was with 28.7 sense of real an increase of 12.1% over fourth quarter last year.

That's that's his Revenue per available 6 Plus was in seventh sense of real an increase of 13.2% quarter-over-quarter. We have used the replacement facility to accommodate the increased demand for our passenger transportation services and to manage the max delays and the recent one planet maintenance requirement on some of our Energies.

we have

To use a dollar plan flexibility to accommodate the increased demand for our taxes or transportation services and to manage the max delays and the reason and plant maintenance requirements off on some of our energies the first choir we added 16 aircrafts to the free. We have the expectation of the max returns to service in our Network in the beginning of the second half of that. I'm going to hand you over to Richard who is going to take us through some additional highlights.

Thanks cookie. I would like to comment about our control cost environment plus the lowest unit costs in its markets in across based on quad-core available seats, Terr cast excluding non-recurring expenses decreased by 12.8% from 24% sense of real in the fourth quarter of 2018 to $21 off partially impacted by a 17% decrease in the average fuel price and a 2% reduction in fuel consumption per flight hour fuel costs for ASX decreased 15.6% mainly due to reduction of fuel taxes Cask X fuel excluding non-recurring expenses increased by 11.1% primarily due to increased productivity operating efficiency aircraft utilization and increase in this case.

and

In an aircraft maintenance expenses due to a decrease in aircraft returns in this quarter.

Partially offset by one a thirty 2.6% increase in depreciation due to the addition of Sixteen aircraft in the fleet and a reduction in the depreciable life of capitalize off and maintenance and large components and to a 23.8% growth in Personnel expenses mainly due to an increase in the federal payroll tax rate to 20% and the hiring and training of $819 a month due to the expansion of operations new routes and their bases.

Our margins remain healthy due to strong cost control.

Capacity and you management the company earned operating profits for the 14th consecutive quarter good demand enabled goal to achieve a recurring even margin of 26.5% the highest achieved by the company since 2004.

Recurring operating income was 1 billion rising in the quarter and 2.6 billion size in fiscal 2019. Such figures were 830 million and 1.6 billion higher than the same period last year and 2018 respectively.

recurring

Ebitda margin was 38.5% and increase of 22.2 percentage points quarter-over-quarter.

Last week we would like to share the continued success of our balance sheet and liquidity strengthening.

Go reported operating cash flow generation of approximately 1 billion reais in the quarter. Total liquidity was 4.3 billion realized 230 million higher in comparison to 6 or 30 or 2019 and one point three billion higher than December 31st 2018.

In the fourth quarter 2019 the company repaid $617 as of principle dead in Lisa's fifty million of interest on on Capitol and repurchase 102 million stock the net exchange of monetary action games and the quarter totaled $370 million realize that that excluding are Perpetual bonds and exchangeable bonds. The LTM was two point four times at December 31st, 2018. Now I would like to return to check it off. Thanks rich summarizing in 2019 blue accomplish phone number of speaking from my account. You need business strategy to be the first line for everyone and to grow its Network both International and domestic our commitment to The Continuous Improvement in terms of those has proven this strategy effectiveness of offering a differentiated and high-quality product y o relentlessly focusing on cost-efficiency.

Committed in offering the best experience in air transportation with exclusive the services to customers on new and modern aircraft that connect our main market with the most convenient schedules God. Yes, what is included management of our capital structure and liquidity 2018 E-class leadership and continuing as a preferred Airline for our customers while driving sustainable and returns for shareholders and to conclude we remain optimistic for the first quarter of the 40-20 with the scenario of increases are traveling in review page. It continues capacity discipline making our company. The first for everyone is what drives our best-in-class reservation.

No, I would like to initiate the Q&A session.

Hey, thank you, sir. The floor is now open for questions. If you have any question, please press * then 1 on your touchtone phone at this or any time. If at any point, your question is answered. You may remove yourself from the queue by pressing star two questions will be taken in the order. They are received. We ask that one you push your question that you pick up your life to provide Optimum sound quality again, it is star then one to ask you questions. Please hold while we pull for questions.

The first question would have will come from.

Michael Lunenburg up Toyota Bank, please. Go ahead. Oh, hey, good morning. Everybody. I have two questions first. I want to ask a question about your new agreement with American Airlines and how that ramps up at the same time that I believe you'll be winding down your Delta agreement. And so is there anything that will be noticeable in a whether it's the March or the June quarter where you know Revenue will either come under pressure or and then it will start to ramp back up. So can you talk about the timing of the mechanics about it? And then maybe even compare and contrast the two agreements, you know, which one, you know, maybe, you know from a big picture Revenue perspective, you know, where where you see the agreement with American getting you maybe a year or two out from now. Thank you.

I might go check out here in the morning and thank you very much for the question. Actually. We also we also the the new partnership agreement two weeks ago trying to give you a better guidance on how much is going to positively impact or accompany the seats availability to the United States to be two times as big as we we had before we switched out. So, I mean, we have a much larger seats availability availability page then we thought we had before we are looking up the revenues because as you know, we are selling seats in advance. So by replacing went down there by an audio with partners by another we are also Shifting the the network traffic generated by go from one company to to the order which is going dead.

Take some time what I can tell you for sure do to them.

To a larger number of seats available is that Revenue wise, uh the day after the the replacement we had already dead same amount of Revenue created or or sources by this partnership. It can only get better.

A great then my my my second question and it's just really too quick accounting questions. Maybe maybe to Rich, you know, when the guidance you do call out the minority interests lie for twenty twenty and twenty Twenty-One, but presumably you will in the not-too-distant future you will Own 100% of smiles and so that long mine goes away, and I'm not sure if that was there for illustrative purposes, and then the other question I have is just on the diluted share count. So maybe maybe the rich on that. Thank you.

A short. Oh, yeah, I might get we've been providing that line item for a while. Now. That's nothing new that's part of the architecture there in the guidance to help them be able to talk to the market about earnings. So we have to provide all the information. So everything we talked about with you guys is everybody has the same access to all the info and that that just kind of helps you understand how we're producing earnings. And so we're now focusing more on providing. Let's say recurring fully diluted earnings guidance. Yep, that's an important component. So in addition to that you also have the tax effects as well. But that line item there that just reflects, you know, what's in their name comes out of our accounting. It gets excluded out of the Consolidated results. That's where that piece comes out. And yes, you know, we have next month's a shareholders meeting where the smiles minorities were will yep.

I just say if they want to accept.

The Proposal that's out there if if that happens that would probably liquidate it in May and then the merger would would happen during the third quarter where that's uh that line item if you will would be zeroed out and so that's immediately earnings and treated immediately Ernie's like creative two-goal on a Consolidated basis and then there's the other effects which relate to better, you know, better tax efficiency, you know whose business processes and also some potential improved yield Management on a Consolidated basis, but overall, you know, overall improved competitivity. I mean, you've seen our our cash flow generation already and that's going to you know, get even stronger in that respect. But yeah, that's so that line item there is just it's just the help.

You know you and others understand and have visibility in an article only things we've been trying to do here at Google talk to you myself is dead is give the market better earnings visibility. And and so we've been you know, as you've seen over the years we've provided a significant amount of line-item detail may be more than any other company out there and and we're committed to that. I mean this is how we're thinking about managing the business is how we're managing the business but obviously guidance guidance is our guidance. You guys also have to come up with your own numbers, but in terms of the in terms of the earnings per share count, I'm not trying to set the question, but the fully diluted share count that's that we're using in our earnings reporting on a diluted basis is 391 million shares and 195.5 million bath.

That includes the converter.

First of all existing stock options and includes the the uh, and as if converted for the convertible bond that was issued and so that's fully loaded for all of the same potential solution effects based on what's currently issued its stock options or the converter, which is in our in our beliefs denominated wage. And I just my question on that was that you have you know, the $391 for the quarter for the full-year you have 392 and yet the deal was done June of the year. And so presumably you were including 392 on a full year basis pro forma for January 1st offering. I mean, that's kind of how I saw it and that was actually the question I was going to ask that you probably had it in a that's all that is for the 2020 and then the 21 guidance if you're talking about the for the full effect for the Q4 dead.

And if you were to go back.

You know for the full-year retroactively 2018, it would be there would be a slight reduction there. Correct? Yeah. Yeah, that's fine. Okay, and that makes sense. Okay, great know. I appreciate it. Thank you.

Yeah.

And that's weird and Mackenzie of Buckingham research. Oh, yeah. Hey thanks gud morning guys, a few questions here first, I guess, you know just the house clean question on the revised outlook for 20 28 did fall a here and that's despite the incremental Revenue upside from the the co-chair with American. So I'm just wondering you know what that factored, you know is a potentially factor in a slower GDP outlook for the country, or I'm just wondering if you can speak to that.

That you were you were saying with slight reduction in the revenue forecast for a 2020. Was that your question? Yeah, that's correct. That's a fact I need calibration there. It's it's nothing material. It it reflects what's going on with our capacity situation. Like we have been as you saw last year. We need our Revenue gained about three hundred million realize with about 3% less overall ask a growth. And so it's the same effect. You know, we've now gone back up to near 13 block of utilization. And so we're at record utilization record load factors, you know, you see getting on the right hand side. And so with that reflects is, you know, I'd say a little bit more conservative outlet outlet outlook on the return of the Max and what we can do on capacity, you know, we've birth

Power, you know.

Capacity guidance, but you've seen a shift. They're also between domestic International. So what that really affects is is the issues we've been dealing with on the on the police side of the equation in terms of being constrained in that regard don't read into it any any any any more than that understood and it does not reflect Revenue website from the co-chair with American.

Actually, when we hi second up here actually when we provide you the revenue for year you were already assuming the partnership with another one line. So if you consider that both either United and American Alliance, they are much bigger and busier than Delta. We did assume something in between both have our Revenue guidance being made public to use. So there is no additional impact on that. Yeah under said, okay good bigger picture of you know, he You Know Rich him or if he can talk a little bit about depreciation. You know, when you take a look at Southwest and other US Airlines, they are depreciating their craft in over twenty-five to thirty years. I'm just wondering if you can remember you know, what the average useful life is that goal is using and if you know goal were to use assumptions similar to what US Airlines use, you know, what impact that might potentially half.

On on your Casimir on your cost.

Around 18 years on aircraft which is obviously as you said, it's less than Southwest and Rain are the bigger Chunk in our you know larger effect in the office. You see what could be going on in the in the in the depreciation line has been more based on the depreciation of capitalized engine maintenance. Okay and the effects because of what we have to do to manage to the max situation and the pickle fork situation. And so what happened, you know in the you know, invest people sometimes forget that I bought a big chunk of the value on the aircraft is not the airframe. It's the engine and and so while we're at the appreciating the airframes over 18 years when we seen happen because of the money issue in the issue is if you know if you go back to two thousand and

And eighteen we had an average depreciable life on the engine portion of the assets of around seven years and last year because of the technician calculations and the discussions with Auditors in terms of how this has to work. If you're going to be faithful to what the accounting legislation dictates, you know, how long we have to do that. We subject ourselves to the rules of the game in terms of you know, making decisions on impairment and Provisions for returns for aircraft and Provisions for future maintenance package have to follow those rules. Right and that caused our those those issues caused our average life on engine maintenance the be reduced from seven years to 4 a.m. Okay. And so this year as we have the return to service on the Max and as we get that behind us and as we normalize our forward dead

I mean, we're we're are some.

engine maintenance schedule

That will go back to seven years. Okay, and that that's the big chunk of that affect their now. Yes, you're right in your first point is that we are following IFRS Ryanair in Southwest Georgia Southwest flight different accounting rules, and they have a longer depreciable life, even though we operate the exact same aircraft. And so this is something that we're discussing internally and eventually took us with our orders. And so you should also expect that to extend and that's to therefore reduce the average depreciation component in the in the same class component, but the big overwhelming effect here is when we got into the max issues in the second quarter of last year and they were confounded by the pickle fork issues in the in the third and fourth in the fourth quarter wage, um that you know based on following what's permissible by the accounting rules that dictate that you know, you basically have to calculate you know, what your maintenance costs are going to be until Thursday.

Going to be returning the aircraft and there's a lot of these aircraft that we've contracted. You know, this this capacity work.

We've done over the last year or so to to match with market demand many of these leases have been short term and long been forced to provision that and also with these unplanned and and temporary additional costs on the maintenance side to keep our faith. Angie's are worthy and flying we've had additional engine over all charges and things like that. It's all those are kind of gone into in the chasm line if you will have shown up in a relation and so I'll even give you some like kind of an additional kind of info there. There's you know, if you look at our run rate depreciation today or less couple quarters off and we have around three to five hundred million buys extra depreciation. It's being expensed in the last couple of quarters and will be expensed in the next couple of quarters. It is related to the Dead.

for effects and so somewhere between three when this gets normalized again, which

Yeah, we expect will start to happen in the second half of this year. There will be between 325 and a million rise of run rate depreciation annual which will then kind of you know, Facebook as we as we normalize the the first of all life of the engine the seven years which is the depreciable life of those of those engine maintenances, you know, you know, when we when we do the engine maintenance, we basically then have a maintenance holiday until the next maintenance event, which is roughly seven years the last year and this year we've been doing a lot of unscheduled and intermittent Nathan age that caused the the average depreciable life on that portion of the asset, which is the engine piece be reduced by three years, but seven two four years, so that's been a significant effect. But thanks for asking that question because it's a it's a technical question. It's something that you see because you're looking at how that's going into Southwest the Ryanair which are which are are dead.

Let's say that's benchmarks for.

Southwest Airlines they are brothers in terms of operating model the type of aspect. We operate highly similar and we also operate a very high levels of utilization. So meaning that month that should also be reflected in the amount of depreciation we have and so the difference is a very similar, but what I would say is as we kind of, you know, get Beyond these events of last year which is continuing to deal with through the first half of this year that will kind of phase out of the the business and the temporary effects, you know, we're following the accounting guidelines and the accounting rules and you know, we're not going to take a short cuts on that and we're going to be very transparent about that. But I appreciate that question very good now that's that's that's great clarification and and agreed of course if I can squeeze one last one in here. I am, you know compensation from Boyne. I'm wondering if you know you have had any preliminary thoughts about how you know, that might be used or you know how that might be reflected off.

You know in the financials as we as we move forward here.

And the moment and you understand that are you like to bring any kind of disturbed to this conversation by anticipating, uh, any any results or any of us to the frontage? So I hope you can understand that. I mean like to comment at the moment that we are discussing those wages terms and issues with white. Okay. Thanks for the time you guys

next web-savvy side of Raymond James

Hello, mr. Say on my side your line might be muted. Sorry about that. Thank you. Good afternoon. Good afternoon. Everyone. Just curious. I know there's a lot of uncertainty here around kind of Boeing and Max but I was kind of curious once the ground, you know, this it's recertified. You know, how much would there be from a trade. But more importantly, what do you think is going to realistically the number of aircraft that maybe you can get delivered from Boeing in like 20 20 and 20 21.

this is under

Good morning. We are assuming our planning official Target across from it by blank, which is to have the plane with journey by this year between July and August. That's the the forecast we are continually took me to that the project so we'll give you a clear understanding on where we are going to be the day after you should take into consideration. The following figures you have S7. My explain grounded here in 0 + 12 in Seattle already available to them to fly to the zoo and and let me do you service?

We do not know.

How much time it's going to say we're going to run round all those planes flying at the mall. So even you an idea might change but having more clarity as close as we're going to be a major service play. We are considering for this year to have the seventh grade year includes your back plus more or less aircraft coming from Seattle of the month already ones and those units be introduced it into the so I talked to Falls and Granny we believe that is all the max leads would be around twenty years. That's the the forecast we can share the money.

in terms of

Yeah, so we will have a small group of Pilots that will go through the additional time and we already have that taken care of. I mean we don't yet have maximum leaders in our own we have three similar in and it's a while but you know, we use the the maximum leaders that are located at the point of sodium Miami and you know, we'll have a wonderful week. We'll go through that training needs to be returned to service. So we've also got that in our in our planet.

That that's helpful color. Thank you. It just kind of curious with the with the 11 n g s with the sale-leaseback and and just dead maybe just how many can do you have on kind of short-term leases? And you know, what's the decision point on kind of if you kind of extend those leases or or kind of return return them and bought a 2021.

Yes, you have a good time if we have I mean, what was your question on the on the engines?

Kind of curious when those decisions need to be made and just it just how much flexibility you have in there. And I guess that maybe that's what was in that slide deck where what you can kind of flex up and flex Down based on those facts return.

Oh, I see. Well, obviously for example specifically those have you know, two year terms on those. And so those those are crafting phased out. So it's two separate decisions. We have the Fleet Landing decision. And then the we have the three playing decision and then we have the financing decision. Okay. So the sake of the aircraft relate to the financing decision and you know, you saw the results of that are the those aircraft are still with gold they're flying and you know, they will be no, uh, a phased out over a period of two to eight years and all the other inventory of injuries that we've sourced on a temporary basis. I said temporary short-term lease is generally kind of a 2-year you kind of a, you know, 18-month to a 24 month. It was also can be extended and maintained with

Does and so, you know if you want to include the Angie's in that?

Component right now these things that we've sold and are you still on Saturday? Sorry. Yes. I am. Sorry. I just got a message. I just got home and went out and that's why we were jumping around here. I wasn't sure if I was talking to myself, but the so if you can do want to take the keys that we've monetize plus wage the grouping of injuries that we Source from the market on a global basis, you know that right now is, you know close to one-third of the fleet. So, those are the aircraft's that I'm going to go out as the max.

It's normalized those immediately go out and we can actually you know, so we can accelerate the delivers on those but we can delay it so that's why we're going to get you know back on track, you know with the next four or five years what that means is that you know, we will get back on track in terms of our plan of having roughly half of the fleet operating with the in the max format the right now obviously, we're in a holding pattern. We've been sourcing, you know, our additional capacity on an incremental basis every month with Angie's that are available in the market and that's a lot of different choices. And and the the the the democratization decision that has happened in terms of the you know, what we're doing on monetizing the portfolio those aircraft that you saw go out to share those 11:00. We would have did that last year and our original plan were not for the max situation because the demand for that asset continues to be very good job.

and we've had some interesting opportunities on that for a while and so once we got a little

Better visibility on getting on the other side of a portion of the the max situation, you know, we decided to go ahead and and transform those from assets into leases if you will and then we realize the game on that and then we paid off all the liabilities on that and we have some cash left over on that which is which is also matched into life Management program, which is kind of basically be the the source of funds for for even further reduction of debt on the unsecured side of the balance sheet. So that's how that's how it's kind of like, you know package that whole deal there. But on the on the fleet plan side of the equation, it's important to remember that, you know, our Fleet plan is is a function of what we're doing in terms of growth demand home network magic capacities independent of the financing situation also independent of the asset disposition decision, you know, cuz we're already locked into what our you know, we're not dead.

Transforming from a old aircraft to a new aircraft or a different type of aircraft model to a new type of reference model.

Now we're just doing effectively, you know, a true updating within the fleet from you know, the energy to the Max and and so all this work we've been doing actually in the in the direct leasing Market has just been you know, basically bridged the Gap in this updation that we're doing and and so this this also won't pray for us another create a shortage of capacity and neither create an excess of capacity because we can match very easily can match the deliveries of Max's into the wage. It's perfectly matched with the weed delivery of an n g back out to our partners, which are these now we have a portfolio over twenty leasing partners that we deal with and so, you know, they're they're working with us very closely to match their availability and also their ability to replace birth

The energies out there as the max comes back to service. And so and we think as we've kind of highlighted.

This is kind of a competitive Advantage for all this ability kind of flex our our capacity. Not just throughout the cycle with the man but also enter year seasonally off and obviously the other half of the account reporting on that is the leasing company in our subleasing partners that do that and so we have a great partnership there that allows us to kind of almost make indigenous if you will any volatility will might have either one of the demand side on the supply side. It's not it's not necessarily perfect match, but we think you know goal has a the most mature of Fleet Management process which you know gives us kind of a leg up on all of this if we didn't have this process we wouldn't have been able to deliver the numbers we did last year. It would not have happened. And so I think the phone numbers in the putting the proof is in our numbers not just on the operating side, but also on the equity value that we've realized.

On our own aircraft assets, right? I mean we have that as a almost kind of like a side component that creates value for all of our shareholders.

And that's inconsistent. If you look at the aircraft modernization as we've gone since 2016 as we ended we came to the end of the financing cycle on the on the first order of 80 aircraft. We did with Boeing which wheel did not in 2005, you know, we've we've monetized one hundred percent of those forty aircraft that we had in in finance leads formats with the accent Bank guarantee at significant wage value creation for the company for all of our shareholders and that also puts us in a unique category along with the companies that were mentioned before along with Southwest along with Ryan are off because the sources that value is that type of aircraft and also our you know, our position is is one of the top five owners and operators of those aircraft on a global basis kind of like a hidden asset if you will that we've always had in the business and we think I think some of you now our kind of starting to give us credit for that.

No, it's definitely a kudos to the team for not only kind of monetizing it but also can introducing it operationally as well. It's pretty great. Thanks for the answer.

Next we have Victor level sake of Venice Kobe.

Hi, I have just just one question. I was like then you show a table with load detector Evolution and after several quarters of for bookings off basically showing a lot Factor expansion now, I mean that you should the slide basically we see flat load factor for fiber 2 to April. So, I'd like to understand here that if it is a kind of reserved for let's say the other airlines that in much more capacity in the system and if you can also comment a little bit about Thursday.

Yeah. Sure. Yeah. Thanks for the question. Yeah, I mean first comment is that yeah, we're guiding if you will are showing kind of that's based on what we can see we can see what we can find the today. All right, let me grab a good visibility for the next ninety days. You guys also, you know, for those of you who invested in the deal system you can you know, you can you can calculate this stuff. Also, we had you know, the facts for guiding, you know flat Louis is neither positive or negative and we're we're at record all-time highs for low factors in the industry structurally. It's very difficult loss of Revenue maximization, you know thousands if you will and load factor is much higher than just not structurally possible, you know, just based on how networks took it works how Brazilian networks work where we still have a large portion of flights, which are not point to point flights. They are connecting flights. That's point one beer second question because I mean those dead

factors as we see in the short-term are um,

Are are decent, you know flat. I mean, you know, I don't think that we would think that they if they went up a little bit or down a little bit it it doesn't change the second. I think I took your accent asking which is on the capacity side, which is something that obviously were were concerned about. I mean we're goal is growing is capacity at or below industry demand. That's what you have with them. That's how we manage this business. And that is it. A lot of people ask us about our hedging program, you know, but they had the value the hedging program is a compliment to what we do in capacity to management and revenue management. So we we took the capacity question, right we were to optimize Revenue management and then we traveling with hedging, you know are two competitors are growing at twice that rate dependent of what the industry is doing. You know, what time was putting seats into the market in the first quarter here at a rate of 2 times what goal is putting in. I mean if you look at and and and part of the interesting thing now dead

And part of what we can talk about as well as you have, you know, this will be the last Corridor with a year-over-year comparisons include Avianca Brazil in the denominator, you know, as of April the 2nd quarter that will be out of the situation and the first quarter of last year Avianca Brazil had was offering about 3.3 million seats in the market in the queue one of this year, you know, this is publicly publicly information publicly available information if you guys have if you guys invested in the deal system this year if you go into the deal system you have about four point six million seats. They're okay. So that's an increase of about 1.3 million seeds. We are adding about 1 million seats here over here, but Sam is adding about 2.1 million seats over here over here. And as always adding one point five million your rear

No.

You know, you're an analyst. I mean, you know, you can you can calculate things about supply and demand and how that might impact unit revenues. You saw our guidance, you know for the money on unit revenues, you know, we're expecting it to increase at a rate of 46% That's based on our management. Right? And so the overall Market I think is going to have a tough time with that because there is a significant increase in capacity. Remember this effect that you're looking at which still includes the Avianca Brazil in the queue one that's going to disappear in in April. Okay, and the same reality is is going to be you're going to look at a much higher industry demand. I'm sorry industry Supply growth rate in the year-over-year comparisons and so forth. That's what I would say if you want to compliment that yeah Victor actually reach that gave you the wrong answer if you like also to offer the short run and in that one month.

It's me.

Repeating over and over that we will always purifies use instead of fighting for for a capacity. You see our law section considers that we will do whatever it takes to protect our healthy deals and our health class protection.

Thank you.

Next we have Marcos baretto, I'm City.

Hi everyone, and thank you for taking my question. Just if you could correct me on this regarding it's pouring carrier launching domestic service in Brazil. Don't consumer laws need to check perfect for that to happen. And why are your views on that? Thank you.

All right. Actually the market is open and we have no I mean concrete info on on newcomers. I mean the company is already for nine thousand years defending the idea that the market should be open and the foreign Capital restriction, uh should believe what happened. We are dead you got afraid of any kind of competition and I need to they'll do that knowing all of the information already is read through the threat to the news is is really confirm. So I wouldn't like to do add more speculation and something that is not presented to ourselves off the concrete action front a new new compressor.

Brazil is already a very highly competitive market. We have 58.

Domestic 50 58 5/8 domestic and international Airlines operating in Brazil Brazil is already a very highly competitive market and then Brazil just structural characteristics. That was a very high highly concentrated demand a passenger that has certain needs and characteristics and things like that. And you know the goal work here that we've been you know, I'm working over the last twenty years has been constantly adapting our product to you know, be the most attractive in the most competitive from a customer perspective in the market. Okay, and that's that's kind of the the you know, that one of the secrets our success is if the best part in the market and we don't you know, we don't we don't take for granted the cost side of the equation as you can see. I know one of our policies is to maintain a significant differential on the unit cost side of the equation. So that's how we manage that. I mean that that is you know, Brazil's that open market. It's competitive it will yep.

To be and you know, this shouldn't be news and you know.

What you're seeing is, you know, just the reflection of that and I think it also reflects the fact that you know, Brazil is back in terms of you know, demanded value creation and am attracted attracting investment, you know, domestically, you know, we're investing in a were the main, you know, we make the most investment in the Brazilian Aviation sector us, you know that there is something crazy like to share last year. We sold 37 million ticket 21 million of those were sold at the maximum fare around $35 a month if I would translate that into a newer line that the line I mean come into the market and selling twenty 1 million tickets at that lower for low-fare Waffle House, you do to transfer the passengers in a every stage length around Eleven Hundred kilometers that Airline who need to start off.

separation having

At least 42 blank $77 or $4,420 or even sixty two employers. Eject. So the company is dead. He's already offering by far the largest number of Israel, uh Lo pher bath availability and that power I mean stronger or the strongest possible protection we could get is really a low-cost company off the same time that we are also offering to the high-yield customers. Ugh leather seats additional legroom Wi-Fi organic snacks for free wage kind of stuff in go created a a very ugly strong Fortress. And and that's what this has been tested by our already strong competitors in the wage.

And if you will see, they're all performance last year. We have another proof of how strong that business model is. I mean, we cannot control the market. It's open anybody can cover. I think that the company is free there to complete that money.

Okay.

That was my only question. Thank you very much.

Thank you.

And next we have Bruno Amarin of Goldman Sachs, please. Go ahead.

Hi, good morning. I have two questions the first one on the outlook for the first quarter. You are you know guiding for for True to 6% off a much slower Pace versus probably has and as a reassured well pointed out, you know, this is the last quarter with let's say easy, So the question is, you know, the the five permafrost growth expectations for the first quarter mean you expect much less than 5% unit Revenue growth in the full year 2020, and if so, how comfortable are you with the margin guidance for the full year, so that's the first question. Thank you.

Come on, you're asking me what I think about the guidance. I just provided that's not a question, right or guidance. We provided to help you guys. Think about you know, this is how we're managing the business right not going to we're not going to be a qualitative evaluation of the guidance. That's not a not a fair question, but I think what you're what you're asking about again.