Q1 2020 Earnings Call

Welcome to the door Airlines first quarter 2020 results conference call.

This call is being recorded an all participants will be in listen only about the company's presentation.

After goals remarks, there will be a question answer session.

At that time further instructions will be given.

So that a participant need assistance during this call. Please press star zero to Michigan.

This event is being broadcast why I'd be a webcast and maybe accessed the goal website at www dot the E. G O dot com dot deal or slashed IR.

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Those following the presentation via the webcast. Please post your questions on the platform.

Questions will ever be answered brother management during this call or by the goal Investor Relations soon after the conference in Spanish.

She did let me mention that forward looking statements are based on the beliefs and assumptions uncles management and on information currently available to the company.

These risks and uncertainties because it relates to future Burns and therefore depend on circumstances that may or may not occur.

Investors and analysts should understand that that's related to macroeconomic conditions industry and other factors could also cause results to differ materially from those expressed in such forward looking statements.

At this time I would hedge over to Mr. Paulo Kakinoff.

As we get.

Good morning, ladies and gentlemen, they'll come to grow their lives conference call and bulk I can all chief Executive Officer, and I'm trying to buy Richard like our Chief Financial Officer. Good morning, It's my pleasure to be with you today.

To the money, we released our first whether figures also made available on goals Investor Relations website previous wish the results presentation.

Natural review and preliminary Q. I mean.

We hope everyone has watched it down.

As we view it now only make a few brief considerations about the acquired to results and that we moved to your questions.

All comparisons with the first quarter two falls in 19.

Despite several operational challenges facing during this quarter such as the rise of coffee 19 bags are they company as well the macroeconomic scenario.

Well as depreciation of the real against the U.S. dollar go reach it recurring EBITDA of 1.4 billion Reais ice and the recurring operating income off 930 meter.

Our total liquidity remained at four point, you begin to be eyes of which three beat up cash and short term investments and one point should be enough receivables after amortization of 1.2 billion of principal interest at least.

We had 1.1 being offered for reading cash flow generation between 36% margin improvement off 28 percentage points quarter over quarter.

Net loss after minority interests was 2.3 be unrealized primarily do it you had 2.5 billion negative netting backed off exchange rate and monetary variation.

Once again, we reported robust operating indicators.

As possible and rational capacity management name in relation to passenger demand Elia this efficient you'd management allowed the company achieved the quality indicators.

Average use per passenger off 29.6 cents up real an increase of 2.6%.

All time departures of 92.6% an increase of 5.5 percentage points. According to any fratto and data from major airports.

Average gold spectra of 79.8% reduction 1.7 percentage points and average aircraft the physician off 12.1 hours per day 80 degrees of 5.5%.

We had a scenario of back to the revenues.

Go care is 8.3 million customers into Florida, we have 7.8 meet any of the domestic market minus 7.1% and.

0.5 million the international market minus 15.8%.

Net revenue fair available seats kilometer Rasco was 25.3 cents I think ways off 2.6%.

Net passenger revenue per available seats law. There PRASK was 23.6 that I think we is off 1.4%.

If that I'm going to hand, you over to Richard who is going to take us through some additional highlights. Thanks, Jackie I would like to comment about our controlled cost environment.

Well, that's the lowest unit costs in Latin America, which enables a better balance of fixed costs.

During this pandemic period.

The cost per available seat kilometer cask, excluding nonrecurring expenses decreased by 13.3%.

From 20.4 cents of rail in the first quarter of 19 to 17.7 cents in the first quarter of 2020.

This was a consequence of the game.

From aircraft sale operations offset by increases in depreciation costs due to the net addition of nine aircraft.

The fleet and by the increase in maintenance and repair and materials expenses due to the exchange rate impacts on important parts and labor.

Our margins remain healthy.

Due to the strong cost control and efficient capacity management and yield management the company achieved operating profits with the 15th consecutive quarter.

There are occurring even margin was 30% recurring operating income EBIT was 938 million rise, which was 392 million higher than in the first quarter of 19.

Recurring EBITDA margin was 46% recurring EBITDA was 1.4 billion rise, which was a 488 million increase quarter over quarter.

Well hedging was an exceptional item.

Due to the reduction in our capacity goal expects to consume a lower volume of fuel leaders than expected over the next two quarters. Thus goal recorded the index the expected ineffectiveness of its fuel price hedging for the second quarter of 2020 in the third quarter of 2020.

As an exceptional item of 292 million realize in its financial results for the first quarter of 2020.

Lastly.

We'd like to share the continued success of our liquidity strengthening.

Goal reported operating cash flow generation of approximately 1.1 billion rise in the quarter.

Total liquidity was 4.2 billion maintaining the same level registered on December 30, Onest 2018.

Due to prudent cash flow management and rapid cost containment from the decrease in sales.

A in the second half of March.

Also in March the company concluded sale and leaseback operations for 11 737 LNG aircraft.

Reducing its net debt by 619 million realize.

As a result of a 149 million rail decrease in debt and a 449 million real increase in cash liquidity.

Part of the proceeds was used to fund the early redemption of the senior notes due in 2022.

In the amount of 427 million realize had nominal rates of approximately 9%.

Maintaining our responsible discipline of de leveraging our balance sheet and our commitment to long term creditors.

In the first quarter of 2020, the company paid 1.2 billion realize in principal debt and leasing payments.

Net debt, excluding perpetual bonds and the convertible to LTM EBITDA was 2.4 times as of March 30, Onest 2020.

Now I'd like to return to Kakinoff.

Thanks Rich.

Yes, effectively managing our business should the crisis why are the credit financial situation as solid as the scale fits challenger became clear in early March.

We initiated a rigorous review off our budget to preserve working capital.

We aim cost containment across the company through the elimination of non essential items go estimates around 2.4 billion cost reductions.

Capex eliminations and payments postpone is for 2020 and those are VAT is in a real nice.

In any environment of economic uncertainty and lower demand go single fleet and flexible capacity management reduces its exposure and makes it more adaptable to face this crisis than other airline business models.

We sit is as a competitive advantage on their normal operating sucrose passes and even more so at that time, who had the industry is facing strong external pressures.

We are focused on caring for our customers and employees preserving the financial decrease of any company and beauty a plan to not only two we scaled the business over the recovery appeared but also to accelerate the progress of our long term strategy.

Was we are through this crisis.

I have no doubt that if you do have learned important lessons.

How as a company we can work more effectively together.

Although the biggest feature is uncertain.

Good to adapt to setting corporate santanders, it's important to remember that like all prices does one we've also best.

Okay.

At the end of it is hard process. We're confident that go we will be even stronger now I'd like to initiated Kenny Sasha.

Thank you.

Floor is now open for questions.

If you have a question. Please press star one on your Touchtone phone.

Oh.

Yes, let me point. Your question is answer you may remember herself from the Q by pressing star incentive.

Questions will be taken in the order they are perceived.

But when you Paul.

Quicker headset to provide optimum sound quality.

So while we pull for questions.

Today's first question comes from Mike Linenberg with Deutsche Bank. Please go ahead.

Yes, I have a few questions here good morning, everybody rich and cocky.

Rich you mentioned that in the March quarter that goal paid 1.2 billion realize.

Rental payments are very pricing rental payments and also principle.

On debt, how does that how does that change as we get into the second and third quarter I believe in their release. It indicated that you were getting lease rate deferrals.

From upwards of three to six months.

So how should we think about what that number it looks like in at least the June and September quarter.

Yes, good morning, Mike.

Well two levels one at the leasing level at the.

It's a lease level.

Depending on how many are what the sizable suite is going to be in the second half.

If we if we adjust or not on that.

Yes.

So.

I want to hear me, Okay, Yes, no I can't I can't.

Okay.

We're doing our we're doing our social dispensing here and the Roman overall spread out here and make sure. We're yeah I can do very well.

And so if if we just give an example.

For example, if we weren't to reduce.

The size of our fleet the match a lower demand.

On the order of.

Yes.

12.

20% ourselves.

And let the contracts.

Take course, meaning just what we have.

What im adequately in terms of the rollover in terms of the expiration of aircraft by short term leases and those aircraft go out.

That would be a reduction of about 3 billion rise of debt.

In the in the second half.

So the total debt would go down just just on the aircraft that basis. It would go down from the roughly 17 billion and we have right now to about.

14 billion.

But we don't have any specific amortization.

Let me say at the lease level, what we have is more the capital structure level and we have.

A term loan that matures and thermal, albeit it matures in autos.

And then I'll $3 million and then.

And then we had a 150 million.

Semi annual amortization at September on.

Yes.

A Brazilian real denominated.

Debenture.

Okay, and so I, so that's kind of one way to answer your question.

Okay. So that's that's the debt peaks. So that's the debt piece, but your lease price right should come down like presumably you were able to defer 90% of your license in the second quarter that number is going to come down a lot right.

That that number is it would be about 50 to 60 million realize okay.

Cash flow perspective, okay.

With that would be equal in accounting it Wouldnt show up there because your accounting for these.

All these leases under IRS 16, but from a cash flow perspective.

That will be a reduction of around 70% versus what the run rate was okay.

That would be a savings of around 50 to 69 realize.

Okay.

Okay. So that's helpful. Another question you called out one and a half billion of honored excuse me I wanted to half billion revised unencumbered assets. What what are those now where are those mostly spare parts notables.

Inventory are there any engines in there and presumably you're probably not including your slots.

Or even your smile stake just curious.

Yes, those thats correct. Those are a combination of spare parts wearables and there are some small amounts of.

Non credit card receivables like let's say cargo and travel agent.

We that does not include any add amount does not include any spare engines also in Brazil, we don't own.

Slots, we have the right to operate them mhm and.

Yes that does not include that does not include the smiles thing the large chunk of that is.

Airports, and Wearables, which as a market value in excess of $325 million and then as a small amount of receivables from which are non credit for which our cargo and and travel agent. In addition to that it's important to mention. This addition to that.

We have around 1.7 billion realize.

Hi, David.

For aircraft leases.

Maintenance reserves.

And legal proceedings.

Which.

If we needed to it's not in the plan.

Two.

We could use those to generate liquidity by exchanging them for letters of credit those are those are actually in our case their actual cash deposits.

And.

And those are.

Assets that are in our in our in our balance sheet that.

If we if we wanted to we could pay.

To exchange those for letters of credits or insurance policy, and we could you know that could probably generate upwards of 1.5 billion rise at the maximum that's not in the plan right now.

But that is in that seven over 7 billion, yielding 7 billion rail number that we're giving you includes.

What is executable.

On top of our our liquid assets, which includes what we can do with unencumbered assets.

Financeable portion of those as well as Ics transforming cash deposits into.

It's again, it's actual cash through the letter of credit and through the.

Through through insurance mechanisms and so thats. The some of those is what's inside that seven seven over seven doing rail number there.

Okay, Great and just my last one the.

Guide to a 6% EBITDAR margin in the June Q, which I think you're probably going to be one of the few airlines in the world that is actually going to have positive EBITDA, but you are talking about a 50% expense decline versus a 70% revenue decline. So the math is the math, but I sure to zoom in on the 80% load.

Factor and I realize you're not operating a lot. So it's probably easy to fill up the airplanes that maybe what it was two months ago. When you had a lot more flights that said how does that 80%.

Square with some of the social distancing mandates that that people are talking about and maybe it just doesn't it doesn't matter for you because you are flying from.

You know between Sao Paulo, and capitals, and you are carrying a lot of Moscow traveling a lot of its government officials and they have to fly it's the only way to get there is that.

Yes, that's that's a great question I, Thank you for asking because.

Im going to break that into two pieces. One is what we're doing on the.

On the customer side and the safety side, and then I'm going to like cocky answer that and I'm going to walk you through a little bit on what we're seeing in a super short term because obviously, we do have a visibility today.

Not much more than that.

I'll.

I hand over to calculate it kind of go through what we're doing in the.

In that category on in terms of.

Keeping our employees at our and our customers say, Mike Great. Good morning, and my Cocky aircraft.

Given the chance to share our actions and thoughts on on the safety and security measures. So.

Havent also the Steve any that.

However is that of our customers.

I'd now demanded to air Max at the same applied to.

On staff in every single Sands any I have enhanced so dramatically did sanitary conditions.

Our airplanes.

In order to make the falling demand and thats. The only one we have so far.

People, who really needs to two flight.

Finally, and an airplane, 100% sanitize, it and and safety for there for debts route. So we have basically absorbed every single available initiative to make it happen and does not is not only up liable to the aircraft itself, but also.

At the airport we have.

Redesign bump into that process. So did two variables here are we.

We need to support those persons who need for a the travel service I mean.

We are about the public agents the.

And.

The docs and.

Everybody really needs to fly the moment and offer Dan the safest possible experiences I believe that EMEA.

Doing so considering that we have.

You have been demanded the low set those are pretty high 80% and have also morning War.

Based on our own crew.

Did that.

Lets ability of.

Having a an increase in the indeed contamination square, which is not happening.

So far so at the moment cost hole.

Organization, we have only eight active cases in our company.

Considering 16000 people and you have.

Most of our crew member is still being exposed every single day, because they are scales and antibodies flying.

So I think that have been predicts effective in those metrics because.

We need to serve this just kind of service.

No the size of our contracts and how important is even to fight against depend damage to keep those those essential service did that that essentially a network operator, so I believe that.

Yeah.

[music].

Hi, good shape, I mean, promoting the highest possible level off safety and security to over to our best.

Mike Mike that that in our calculations, obviously those are procedures that are already being executed.

It's going to add around with all the whole process, which is including cleaning.

And these other components is going to add about 10 minutes to our turnaround time <unk>.

Which hurts a little bit on utilization, but we're also forecasting and keeping the utilization above 11 hours. So I think that's what you're going to see obviously, it's on a much more reduced operation.

But we arent within that the second part of the question, what I would say as well as that but can you. Just described answers. The procedures were also combining that with.

I mean, we'll have our traffic stats out.

This.

This week.

For the month of April, but I'll share with you now what are the things that we've been doing here at this company is trying to.

But in a lot of effort to make sure that all of our Counterparties they work with us.

Have as much information as we have visibility on and can provide too.

Probably beyond what we normally what we normally we do there.

And so the on the load factors for April we're expecting you know something in the low eightys. Other we closed out probably around 82% Wow, that's a similar type.

Similar for May kind of in the low eightys not around 80 81 ish.

And we are.

That we're looking at low elevens low 11 hours.

On the on the aircraft utilization and.

And so kind of combining that with.

What he was saying what weve tried to do with this essential network.

His habit operating.

At the absolute minimum operating cost to serve as the maximum demand and so as we.

As we evolve we'll adjust that obviously and also will adjust on the on the customer side in terms of.

Procedures and the direct feedback we get because as you know we also manage our company with using MTS.

And we have the direct feedback on that as well in terms of how the customers are feeling about it so it'll be an iterative process.

As we kind of.

Work along here over the next couple of months.

Hey, whatever the.

The recovery.

Phase phase would be and then on the cost side. So the only in fact, we see thus far this little bit on the.

On the turnaround time, and this is literally being rolled out as we speak.

It's been in the planning.

As we start rolling out these new procedures.

And so it will probably be a month or so before we have a combination of both the feedback on the efficiency side as well as the feedback on the customer site.

That was all very helpful. Thanks, gentlemen.

Okay.

Our next question cultural sobbing, Sir with Raymond James. Please go ahead.

Hey, good afternoon.

Just curious.

On the term loan.

Any thoughts on kind of given your revised outlook that things take longer to recover wondering what your plans are for the term loan in and if that is included in that 7 million a day cash burn that you think they can get to in second half is absolutely no improvement in demand.

Well number one capital structure is not included in that that is a that's at the operating level and so we're trying to give you you guys. Some visibility on how we said that's the outflows obviously.

As you know we've been managing.

For the month of.

April.

[music].

Based on the numbers we provided.

You know.

Previously managing.

The overall.

Cash inflows minus cash outflows.

Near breakeven.

And so those numbers, we provided there our cash outflows.

Cash burn and so those are operational they do not include capital structure as I mentioned, we have two.

We have to structural maturities in the second half one is the term loan in August the other is the.

The semi annual debenture amortization over 100 for the me right in September.

Our plan right now is to use cash to amortize those.

Both existing cash as well as future cash.

Those are still down the down the road on in terms of the forecast.

And so I think we would only.

Adjust that physician and that intention probably towards the end of June.

Based on whatever visibility we have on the.

On the recovery.

So that's the plan is to both amortize both of those but as you saw we were able to reschedule all the capital structure components that we had.

Coming due in the.

In the Q2.

Let's say March through the Q2.

No the debenture amortization.

Same semi annual dimension amortization rate down at the end of March.

We rescheduled for and put that into the March 22 amortization.

But on that I mean, we there's there's various alternatives that we can work through on both of those I think it's a little bit early to change the plan on that and so thats. Our plan currently currently I.

I think we'll see how things go on the revenue side, because obviously be.

Priorities Euro is to protect the company and to protect our liquidity.

To be able to preserve the company goal airlines to be able to provide service and also to be able to finance, what we need to do in terms of working capital turns into recovery, but those are plans right now I think thats thats. The best answer I can get to that question.

That's helpful and does the cash Brian.

Summation, providing us with Super helpful to just a clarification on is that.

I wasn't clear against a 9 million a day was for all left to Q or if it was by end of Q and just what's what changes to get from like 9 million today to 7 million today as you go into the second half.

Yes thats.

That is probably going to be pretty close to what the borrowing will be for all of Q2.

That's what we're targeting to be yet.

Let's say for the month of June kind of a run rate of June if you will but.

I think will be pretty close to that for all of for all of Q2.

And the Delta in terms of the small improvement in the second half is other things that we've been working on also.

We had an effect as we got into the.

Downsizing and the restructuring we had to use cash.

Two.

Negotiate and to reorganize.

Our.

Suppliers and credit facilities, and so that cash is already.

By the by mid April most of that cash is already spent and so that also just reflects the a more stable structural.

Situation in terms of.

In terms of the fixed costs and payables that we had as we had a transition from.

Company that was operating at an average up a little over 1 billion realize a month of revenues with the associated working capital law with that and a massive downsizing, 90% downsizing within a short period of time. So we had we had some catch up to do.

To kind of reorganized the company into the smaller operation. So it's really that effect and so there was a little bit of a hangover effect with the negotiations we started up in mid March and they really kind of finished in the first 15 days of April.

And and so.

When we go towards the end of this quarter and then into the second half.

We have a more lets say level situation in terms of working capital more stability won a number two the other effect is.

The and that's on a cash outflow side the other effect will be.

A combination of the variable costs side of equation.

That would relate to whatever we're doing on the on the revenue side and so if we do get a ramp up.

Yes, the variable costs will follow proportionally.

And won't change that cash burn.

For the second half and we've already got the fixed costs.

More or less where we want them and so.

But basically it was this the effect of them as we kind of got from let's say if as we go from Q1 to Q3, we had a transition there in the Q2 also into Q2 remember that it's generally are down quarter.

Where we also take advantage of that the down quarter with.

Aircraft.

Overhauls in our maintenance hangar.

And.

We generally have a massive pitstop being exercise and the Q2.

And and that's that's also in those Q2 numbers in terms of our hangar full time is rotating through roughly seven aircraft at the time to catch up on maintenance and get a little bit ahead of the game.

As we prepare the company for the second half so there's a little bit of that effect in our also in terms of problem in terms of as a cash effect and the.

In the in the Q2 versus.

The Q3, so thats, how I would.

Hello format, but it's all that's all operational it's important like that when I say operational its combination of.

Operating expenses plus working capital.

To run the airline.

And then also.

Financial expenses, if you will interest expense related to that also but not.

Not.

Josh a capital structure for long term assets, nor does it include anything related to asset sales or anything like that so anything related to structure assets liabilities not in there that's more of an operational number.

Got it.

Good for us.

Yes.

The.

Restricted cash that jumped up this quarter.

Well, it's a combination of factors we have.

Some of them, we have deposits that are required.

For operations legal deposits and then the majority of big chunk of that is out were.

Roughly 100 million dollar.

Investment in our hedging positions, which we have hedges that go out into 2022.

In our in our hedge portfolio the majority of it is.

His caps and calls which have premiums that are located in.

In previous years.

But a portion of that less than 50% or end.

Our in.

Costless collars, we have done our position the majority of those are done.

Done in Brentwood with a with the Brent.

We don't have any Wi Fi puts.

And most of those were immunized in the low twentys.

The the positions for this year and then I've been low Twentys, we came into the.

The situation with around $80 million deposit and we generally.

We treat those as restricted cash.

Because those are the positive with Counterparties and as we got into the at the bottom fell out.

On.

With the Saudi Russia oil price War, we probably went up as high as 120 $130 million on the deposits.

Thats come back down a bit.

But the but a big chunk of that is.

Is that there was what I emphasize that is that we're fully deposited with counterparties on on the working capital for our hedges were also immunizing the low twentys.

In terms of oil prices and we don't have any double check points.

And so we did have we already had we came into this we were already about 80, 70% to 80% invested in that and this company we have over the last couple years.

Actively manage the company.

With.

100 million dollar working capital budget to support our hedge positions.

Times, the volatility that exists with oil and as the volatility has been enormous in the short term, we've been up and down around that.

You know that's been a rollercoaster, but like I said were current on our margins were immunizing the low twentys.

We kept as we work through the last couple of months, we added gammage the portfolio.

In other words, keeping participation of the upside for the spent that that recovers. In addition to that we also have small amount of cash collateral in credit lines.

I would just standby letters of credit and those.

Those.

Deposits, we estimate in those credit lines increased because of the Brazilian real devaluation, but thats cash it's going to return on that in that number is about 150 million realized.

Cash collateral for a standby letter of credit.

Because of this we had that.

Massive devaluation on the Brazilian reality, but that's cash that's that's there whats arent similar with the.

With the deposits for.

To support our hedging positions those those are.

So the positions, which go out 24 months and so depending on what's your view example on oil you know a portion of those.

Deposits I mean for example, I just given the simulation off if oil gets back to 45 Bucks by the end of this year, 100% of those margin deposits would would come back to us overtime over the course of the year.

So that's basically what's in that number there we exclude that and call that restricted cash because we don't have immediate cash access to that.

Alright, thank you.

Okay.

Our next question.

Duane Pfennigwerth.

Core IR. Please go ahead.

Thanks.

Can you just high level talk about the industry aid that may be on the table in Brazil.

Sounds like it's all loans.

What are the amounts based on and what are you thinking about with respect to the cost of funding.

Hi, this is starting from our studying by the most.

Meaningful off those.

So for us.

About two com is that the so called began yes.

Credit line. They are the figures are to falling three beat and realize roughly.

Five.

Years two for payment.

Waving defers to ones.

In the amortization that refers to an interest rate.

And that would be 3 billion realized for airline.

And with the due to age analysis by the disease MDM, yes to have those lines being structured.

Would be and need to 15 so.

That's the major expectations some other initiatives were.

Already implemented.

Yes mouse so I can mention these lots flexibilisation they allow us to not.

Yes return.

The shares to that to the customers.

Or tour bus richer returns that.

Up to 12 maps in case that day summit with castle.

[music].

His or her ticket previously bought.

And.

Some are there.

Airport fees and navigation fees those were lifted either lifted our.

Deferred to the page.

After 90 days. So this is the these are the highlights of the government support given given so for.

The the.

Specifically on the on the loan package wheel, Brazil, we don't have anything close to what you're seeing in France. So the U.S.

With the different tiers grants for payroll and loans and then essentially equity I mean the instrument that's.

Being discussed is a.

Kind of a debt debt with warrants structure.

And like I said, we and we prices makes a little time and so if based on current market environment.

The pricing of that would be have about a 13% cost of capital within that it will be an interest rate in this country was saying in the low kind of sort of 5% range and then as a warranties.

They would come in there.

We've been approaching that very supportive we've been supporting.

What the government is doing in that respect. The government is also the BNS is also as this known has involved the private sector banks in that potentially.

It appears we want you know what they're looking for is a similar I think what youre seeing in the us on the industry side not on the.

On on the financial side, but kind of a public private partnership.

Between to be NDS, and the commercial banks.

Such that it would you also have a participation from the from the private credit markets not just the government.

And that's what they're working on at this point and.

We as you know we viewed that as something that.

We would like to.

Take advantage of as a.

You know as a facility.

Can use if we needed and also kind of help us to the extent that the recovery is.

Oh, let's say the the shutdown is extended.

One thing that we could use.

Down the road a bit.

We don't have the.

Specific terms on that yet it's still in.

Process of discussions and and due diligence also between to be the us and the private sector banks.

Well, we do expect much short term to have the.

I have have have the details.

On that so.

From a cost of capital perspective.

Good.

It is efficient.

We obviously our company we here have a.

Controlling shareholder that 60% of the business.

Yes, it's one of Brazil's largest transportation groups.

Well capitalized and so obviously.

We at this company are very sensitive to dilution.

Bye Bye definition and so obviously, we'll look at that very carefully from a dilution perspective, but what I would say from an overall cost of capital perspective from an executive.

Perspective.

It's.

Would be reasonable.

Cost of capital to the extent that it was.

Needed as khaki said the whole package that they're looking at for this for the airline sector is around 10 billion will be up the tend to rise and then roughly.

3 billion plus or minus four of the three large companies and then a billion.

For other parts of the.

Other other participants in the.

In the second we really don't have any any any more details.

At this point and we're also not going to get in front of the being the asks on providing details, but they have not provided talks and so I think we need to got it.

Wait wait a couple weeks on that.

Thanks. Thank you and then just for my follow up.

You know to the extent you can talk about it obviously, some moving parts with Boeing you deferred some aircraft typically there's a cost associated with that my guess is in a situation there's not.

You got some cash in the door here. So can you just talk high level. What did you give what did you get.

With respect to any Boeing settlement.

Well.

First you know we have obviously as you know we have company out of your with Boeing and so we were really limit on what we can say we provided as much information as we could both in the release that as well as into footnotes to the financial statements.

But that was that was something that we had negotiated.

For many months prior to this crisis and so I think coincidentally that deal was closed during a couple of weeks before the crisis.

And as you saw it was a combination of factors in there.

The one that has the biggest value is the reorganization of the firm commitments.

We reduce them at the front commitments substantially as you saw in the footnote.

And we also have the flexibility to do other adjustments.

In firm commitments as well as.

Conversion rights for other versions of aircrafts that could come in the future.

So that was a big component and I would say the other component as well was a compensation for damages that we suffered because of the delayed the non deliveries.

It's been over a year now and as you saw last year, we had significant additional expenses.

That we had to incur because of that.

Effectively we are being compensated with that in a variety of formats and in a portion.

Is cash.

You know.

Portion is cash in a portion of that cash already came in.

Literally in the first week of April.

That amount that we disclose their around.

Roughly $200 million came in.

In the first week of April and then there's other cash compensation that also.

We will be received as part of that agreement.

And.

And we try to also quantify that in that that roughly 2 billion net present value.

That obviously, it's spread out over very long period of time, but that effectively when will you can look at that effectively if you take where we wouldn't be going forward from now you could look at that as a reduction in tax effect will be over a period of time and so the equity value that's real equity value for us obviously, that's the NPV of that.

Over time, but obviously, it's complex each each each I think each airline has their own.

Complexities and.

Also within that it was reorganization of Pdps and things like that and so it's a combination of factors and so yes, you saw the cash that came in the 447 million rise of cash the came and which is very handy came in in the first week of April and then there is the 1.9 billion of our present value that would come in also the over.

Along over a period of time over several years based on what we do.

With our.

With our.

With our activities on the Max we are committed to the Max as the that was the spinal cord of our fleet plan.

But I think lot to see once we get on the other side of this crisis.

Specifically, we're going to be doing in terms of accelerating or not our conversion of our fleet from ngs them axis.

You know one way you might look at this is that companies like all are going to be very eager to.

Take advantage of any excess excess produce capacity, even accelerate the conversion of our fleet.

To the Max.

Faster than maybe what we previously.

Well, we previously discussed, but that's not something we're going to really.

Let's say talk much about now we have to get through this we do have flexibility to to downsize, if we need just through letting the contracts.

Expire on on temporary aircraft that we took in last year because of them actually but I think once we get on either side of this.

And we get a new vision of what the.

But before demand is looking like and.

You know what excess capacity of maxus, there is out there it's going to be great opportunity for companies like goal to even accelerate.

Our our shifts to the.

To the Max.

But the first step is going to be matching our just real quick.

Yes.

Yes. Thanks, Thanks, Rich just real quick last follow up I think it said in the release, you're looking for 560 million rebuy of Capex for the remainder of this year.

Early view on 2021, and thanks for taking the questions.

Yes, I mean, we have that's the number that we would have it's mainly engine overhauls that does not include any aircraft acquisition or pdps.

Assuming a normalization that number would be similar.

Roughly the 600 million rise range for next year, and then added on top of that would be whatever we're doing with aircraft acquisition, meaning pdps.

So it could be potentially another 100 million rise on top of that.

For PDP is all of that Capex in our case, it's 100% Financeable most of the engine overhauls refinanced with very low cost facilities with banks and a big portion of it has done with the U.S. Exim Bank guarantee which is still there for us which allows us to finance that.

Pretty much at 100% LTV in in mid single digit interest rates and even even more so on the PDP side. So none of that really is cash outflow.

It is we will continue to finance that and roll over.

The existing facilities that we have so even though that's a capex number of roughly 600 million for the rest of this year and at least 600 million for next year, that's not going to be a cash outflow.

So thats one an estimate.

Okay.

Sorry about that our next question.

Our next question comes from Stephen Chunk of Citi. Please go ahead.

Thank you very much for the for the time gentlemen, can you hear me okay.

Yes sure.

Okay, great just.

Two for me the first John.

Was wondering if you have any kind of broad view approximately what percentage of your domestic passenger flow.

Our government officials on on.

More or less on a normal cycle basis.

That's a high if that is correct.

Actually that figure it kept business.

It's really low I believe that between 5% to 10% of government officials and then laundry have more I mean, how.

Because obviously that's been a collapse yes.

And so they are much larger portion, but normally you know if you look at our top three clients within our top three clients.

He is usually.

Government like in the largest sense, yes, all of the Ministry is then government employees locations that along with Petrobras and valley and the kind of being the largest consumers of of corporate air travel in Brazil, but neither one of those is it's kind of in the 1% range you know one day.

2% Max overall.

A couple little bit more now just because the government is obviously a.

It's working more probably on a relative basis than your average.

Average.

Company in Brazil, which have implemented policies of travel restrictions or things like that.

But roughly in that in that range.

Okay very helpful.

And just one quick follow up.

When I think about.

You are engine maintenance I know in the past you'd done.

Roughly half of that perhaps through dealt that tech ops.

I know that you guys now have.

Goal Aerotech, which is even going to do some some third party work.

Yes, John maybe give us a view.

Going forward.

Thanks, Dan.

Goal Aerotech, it's going to be the main source.

Your engine maintenance.

But no we don't have any plans to have.

Engine maintenance today inside of goal Aerotech Thats.

Variable engine.

Engine as a business engine maintenance a significant capital investment.

Where.

We would have to have a different business plan on different revenue plan.

Sourced dose and so thats not in the plan currency. Currently so we'll continue to use third parties for our engine overhauls, which include you know there. There's also third parties in Brazil.

Gee.

Well as you know we have.

When you add some and air France, KLM in Europe, and we've worked with others as well, it's a very specific niche business.

Which which requires a very large capital investment and therefore, you have to have a need to have a global sourcing of clients.

You can't would make sense to do it for us today, given our size it would not make sense for us to have that investment.

For our size business, whereas when you get these mega Global Airlines.

At some point it makes sense for them to do it were far away from that aerotech for us both for goal as well as for third parties is focused on airframe maintenance.

And painting and.

We do have a small engine shop, there, we do a little bit of engine work, but nothing of the sophistication that you havent a large.

Engine overhaul providers, it's a really.

Specific business, where you really helped us some significant scale.

To justify the capital investment.

Okay very very helpful. Thanks, very much guys I will I will leave it there.

Well here.

As a reminder, ladies and gentlemen.

Asked a question. Please press Star then one katzenstein sorry. The next question comes from Mike Linenberg with Deutsche Bank. Please go ahead.

Yeah, Hey, just two quick follow ups cocky I may have Miss heard you. When you were describing the BFDS. The five year loan did you say that you would not have to pay interest and it would not amortize I don't know if you said two months or two years.

Yes, actually curious, Russia kind of amortization it would be years, three four and five and I guess specific asset on that it would have you have to be interest, but the amortization is would be.

There are no sorry, first you know interest and amortization is in your three four or five so yeah. It would be kind of an average life of sort of four years. If you will okay. Okay and then rich just one other question you talked about the Boeing agreement and you said you listed.

The whole slew of elements that were tied to it as well as a I guess a reorganization of the Pdps I'm just curious when I look at in your Noncurrent assets at your deposits. They are up 23% I'm not sure maybe maybe the PDP is aren't even in that although I think that they would be in that so why you set up sell much and and.

How does that reconcile with your view of that.

Sort of reorganizing the Pdps is there something in there that I'm, just not I must be nothing.

Specifically, we're going to predelivery deposits or deposits in general.

Predelivery deposits and both deposits I guess because our they are they both included in that line item or is that something else.

Well, it's there's also an exchange rate affecting their so look I don't have happened.

Yeah, one yeah, then he had a.

Q from December to Mark feels like a 30% evaluation pursuing right. Yeah. So it's down it's actually get I guess, if I were just apples to apples the numbers actually down okay.

And that that answers my question that's off Okay FX.

Thank you.

When in doubt [laughter].

And our next question, Jamie Nicholson with Credit Suisse. Please go ahead.

Hi, Thanks, so much for the call I just have a couple follow up on your liquidity.

You mentioned you received like 100 million of cash in the first we Chris Phillips April but that also you used cash for some of that it may negotiations and the payment deferrals. So I'm wondering if you could give us a cash balance as of April Thirtyth. That's my first question and then secondly.

You mentioned that.

If oil goes back to $45, a 100% of the cash margin deposits would be accessible. So I'm just wondering if if brent stays at 30, how much of that oil hedging margin.

It goes to that hedge and it's not accessible thanks.

Yes, okay. Thanks, a question and just on the second question if oil stays where it is we would have over the next.

Eight quarters.

Hey.

And expense.

Roughly $100 million that would roll through the income statement.

Net cash is already deposited in those margins and all of our calls and caps are out of the money and so if we stay where it is we would just on a quarterly basis.

Be recognizing the losses.

It already deposited in margin.

That is a little more front end loaded meaning most of that probably about.

70, 60% to 70% of that will be recognized inside of 2020, but there's no cash outflow because all that cash is already deposited and like I was saying what we immunized.

In the low twentys.

And now if and then at the other than what I would say is like if oil went.

Up to 45 Bucks by the end of year.

Based on the structure of our positions, we'd get back about half of that cash into our cash so roughly roughly $50 million would come back to us.

And then we'd still have the 2021.

Positions, but now on the on the first part of your question and we also kind of gave some information on where we expect to finish.

The second.

Fiscal second quarter, there's really no changes in the liquidity.

So we're managing inside of that the receivables are running down a bit we still have a.

Total liquidity of around 4 billion realize.

All of which the total cash component.

Right now is 3.3 billion rights and within that available cash as to building Riyadh. Some so.

Snapshot of yesterday, that's what it is 4 billion or as a total liquidity.

All of which 3.3 billion rise is is the cash component of which liquid available could write a check is 2 billion realized or managing within that when I. When I mentioned that we use a little bit of cash is that in exchange for longer payment terms. If you were more runway we invested some key.

Cash upfront.

In terms of each negotiation and different but in terms of reorganizing that and we expect to more or less be at that level by the end of.

By the end of this quarter also and obviously within that number for April is the compensation we receive.

Off of our agreement from Boeing.

Okay. Thanks, and then just one.

Other follow up on the trade receivables.

I know the government has given an extension on that but how much of the receivables.

[music].

<unk> is in your like cash versus like held it credit card.

That makes sense all would you mean is in the accounts receivable.

Government receiver Okay, no accountability.

Yes receivable about 70% to 80% credit card.

And then the remainder are a combination of.

Travel agents and cargo agents, where we have a specific relationship with them.

As they might be just dealing directly with their clients on a cash basis, but around 70% is credit cards in Brazil, we don't have.

Credit risk on credit cards, and we also don't have the withholding risks.

For a couple of reasons one is that.

You know, we the government change the.

The rules regarding reimbursements.

In the context of this crisis, where normally you can get a cash refund or change your ticket.

If you want to cash refund, we normally would charge you refine your 95% of the amount and that's based the 5% basically to pay for our costs.

Not role has changed in the context of the crisis such that if you want to get a cash reimbursement you have the legal right to that but 12 months from now and so we didnt get around on the bank.

From that sense, but also we had we had even before the rule was changed we had very very low refunds.

Quest most people were requesting to.

To exchange their native travel part of it is the habit and I think part of it is.

The repressed demand and part of it. All has also is that you how to 5% cost of getting and if you're going to generally going to travel anyway, you're much more rational to exchange of for our credit as opposed to get your you get your money back now we use.

We continue to use we have access to all of those receivables.

We had and obviously the balance that we came into the situation with is running down there's a small receivable balance that is being created because now we are selling albeit at a number that's.

10% of normal, but we continue to use of factoring.

Of those receivables, which we do through banks.

And we just have access to those receivables here's what I'd say that in Brazil, we have a structural difference with some other markets, where the average default purchase credit card purchases in Brazil is done on three monthly installments without interest.

So you run a receivable balance but at the bank has the credit risk of those receivables and.

Either the bank passes.

Those installments through to US every 30 days with no interest charge, but if you want to have access to that sooner they.

The we have an interest charge in there and we factor those.

Receivables and so the the receivables mechanism in Brazil, which is by far the large chunks of sales.

Continues for companies like Us and I guess I can only speak in our case, you may be seeing different things and other companies.

But we've had no.

No barriers or restrictions in the normal flow of.

Receivables and that also being cook combined with a very low amount of refunds I think the highest refund I saw on that week when the.

In the pack was starting I think the highest refund day was maybe 6%.

Of the total amount and that was even closing before the rules got change where if you want to cash refund you can have access to it a year from now.

Okay. Thanks, that's helpful clarification, and then just one final question if I may.

Do you have any access Q.

Credit line other than what you talked about.

Yes.

Well sure I mean, we don't have any undrawn credit lines as natural your question is is that your question yeah Yeah.

We don't have any it doesn't.

It doesn't really work that way in Brazil, meaning I'd say is that generally banks like in Brazil, We don't have a.

Standby.

Line of credit facility like you see with other airlines you look at I'm always very envious of now airlines like southwest to keep that you know standby letter of credit standby credit line generally in Brazil present banks have to provision.

A standby facility so they prefer that we borrowed against it so what we do as we work to occupy our credit that we have with banks.

In a more positive way so we have about 4 billion realities of credit.

If you take all of our Counterparties and some off everything that goes from let's say just normal working capital stop.

Including.

Credit with Counterparties for whatever activity, including hedging including.

Security deposits. So what we do it leasing companies and then all the way into kind of the more medium term area, which would be say a engine overhauls and things like that.

The other component that we have is the exchange rate effects because a portion of what we're using these credit wise for is us dollar denominated.

Spending so we did see around a 200 million real.

FX impact.

I'm, sorry to an immaterial impact in the in.

It's always going on with exchange rate and so we got that with the banks in other words the banks.

Followed.

Gave us additional credit, which wasn't additional cash necessarily to us kind of like free cash, but we went in reorganized all of these working capital lines, we were able to get additional credit effectively because of this.

Devaluation of the present route because as I was saying before we had no from December to March we had about 30% devaluation, the Brazilian real and so we were able to capture that.

So effectively we ended up getting about another said, we are going to $20 million effectively of credit.

To deal with the.

The exchange operation when we went to rollover these facilities and all of these facilities as I mentioned, we have roughly 4 billion rise of of credit lines with a large amount of counterparts, it's very spread out 20 different counterparties.

And in all of our different activities to support the business all of those have been rolled over to a minimum July.

And because some of those by definition or just short term facilities, where you could enroll a much longer anyway. So.

At that gave us significant.

Credit relief, if you will.

Through the end of July.

And you know were fairly comfortable with that.

In terms of what's in the system, we didnt lose any credit.

And we were able to.

Absorb.

The impact of the of the weekend, Brazil, Enron Ral on that but no we do not have any.

Undrawn.

Let's say working capital credit lines that are there for us to draw on the way we are dealing with that from our plan is the two things I mentioned the previous question one if we needed to transforming this roughly.

Over a billion a half realize of.

Deposits exchanging them for letters of credit or insurance mechanism other things to free up that cash, which will come back to US and then also roughly another billion and a half of unencumbered assets that we could.

Raise financing on through structured transaction, so those two categories there for us.

Are you know and at least 2 billion realized.

Potential additional cash credit.

To the extent that we wanted to work and unbundled that.

That is those are not.

I do not have high execution risk. If you wanted to do that I just have costs.

Unless of course, we would get a much worsening of the.

Of the credit markets like I said, we were able to you know in the.

In the in the worst part of the the storm we were able to.

Batten down the hatches and retain all of our credit so to the extent that.

The credit markets are still there and potentially improve once we get a visibility on the reopening of the economy.

We don't think we're going to see any negative effects on.

On that portion of our business the large amount of working capital that we have to.

Don't support our business.

Okay. Thanks, Thanks for all that color I appreciate the color. Thank you.

Yes.

Our next question comes from reserve.

Okay.

Right Okay.

Yes.

Yes, Hi, Hi, Richard Hyperacute. Thanks for the call a couple of follow ups here first one.

No.

I don't I was this is Charlie in.

Good.

Yeah, no more than of course, you had to but yes.

So a couple of questions here one is.

Well in bid on the are.

On the sale that I'm on the ticket sales that are making right now if you look at that your bookings you know.

In which month people already starting to buy peak it if they are.

Already doing that you know and that so I would like to have a sands.

On when traffic is likely going to start to recover.

And if there is any sign on the booking at this point in time and also.

On the Trask recovery when you state that the burn cash should be something around 7 billion.

Hi, guys, a day by second half and which would make her current cash position last by your and so do you expect any threats recovery during the spirit in those calculations. That's my first question. Thank you.

Well that's the billion familiar real question you just asked the billing rate.

Because aren't ready to talk on them out for you know that our revenue.

For the base is there all the month by month by to be thereby that's definitely there won't be done real real question.

Okay.

Depending the good news so I said by the bat is really hard to predict and to be precise and saying okay. The amount.

And the X.

Why are we going to.

See that demand recovery.

At the moment the very.

Okay and transparent we are.

No to see a meaningful.

Grow even relative terms copper copper us until last week.

Regarding demand quarter following four weeks, but you know the grants.

The Matt so depressing that any even if you find 15, 18% growth in comparison to last last week, we are talking about.

500, 600 fall then.

Realize that's that's really not going to move the needle so each too early to say in that that's the bad news. The good news is.

You know you check our.

Oh, there a commercial approach we are not Bernie fares.

In order to two Butte cash at the moment at a very low level off ROSC, we are not promoting a dramatically the future Europe basically.

Sally although essential network and we are keeping the healthy fares that usually a sell for the demands.

Okay.

Or beyond July.

Therefore, I believe that whenever you're going to see the pandemic somehow control not is not exactly or not necessarily sold let's call. It. So I mean after the peak period or having.

The how assistant being.

The through to two or capable.

Taking care.

Of the burn as far as case I believed that the future or the sales we resume.

And that has a very.

As opposed to be a very dramatic effect.

In our cash position because you imagine that he have 11 must say is in advance. So the inventory for the next 11 months is always available at the moment to we have only 10% of those seats being demanded and whenever you bring back to the market and meeting the level of cost net.

Then you you cannot.

See exactly the opposite effect that we are leaving today. So much earlier data view going to incur in the cost to operate those those travels or goal still slight wheelhouse the the.

The cash being boosted by is.

Ceos recovery so.

For the if you ask me I.

I believe that you're going to skew phase.

At least a more 30 days, maybe 60, I think crewing levels, but then.

By foreseen.

A more console endemic scenario.

The sales will you recovered pretty pretty fast and.

I think that I sat is related to the domestic market, which accounts for 90% of our revenues International is not only in good question market with personally I don't believe is going to recover.

Anytime soon there that fourth quarter, maybe only first part of next year.

I would like what we're seeing like right now right now like where we sit.

Assuming no more additional restrictions on travel or or.

Moving the opposite direction on Lockdowns or shutdowns I mean, we're seeing for example, if you just like you know our booking radar sales rate right now is for the month amaze like five to 6 million Riyadh today.

I think that's probably useful number for you to get your your head around.

That.

Where we sit right now.

So you know you do the math on that you can you know we would have higher revenues than that in the month of May just because you know we have.

Other bookings of people that.

Would be would be traveling but the run rate on if you will cash generation of cash coming in.

The new compared to those burn rate numbers that that we provided today, it's around five to six.

Million.

Realize what we're expecting right now assuming.

No additional.

Restrictions.

And so that's that's the equation that were that we're working with I mean, we were working to try to achieve a cash breakeven combination of cash inflows and outflows now in addition to that.

That sales rate, we do have receivables and so we are complementing.

That run rate on sales, which is new receivable by using if you will.

This thing receivables as they come in but obviously they are winding down and so as we said a couple of weeks ago, we're pretty much managing the company.

At a cash breakeven.

From an operational perspective, not including any capital structure issues and that's why I was saying in the previous question that we were.

You know were more or less maintaining the same level of liquidity.

That we that we have had.

So we had at the end of the at the end of the first quarter and that your second question I'm sorry. It was on it was on unit operating costs.

No actually that was my my only question I have a second wasn't actually which is related to that amortization.

So any news I think there's a large that to expire in August so any news on on that and.

What's you're expecting therapies off that amortization in the second half of the your.

Well, maybe didnt hear the the previous question I can also directed to that but but no I mean theres.

The plan is to conduct our amortization is when do we have an amortization of 300 million in August and we have another amortization on a Brazilian real adventure in September of 156 million rise we come into the plan today is to amortize those when do.

Obviously, you've seen what were you able to do.

With the capital structure during this crisis. The the the end of March semi annual amortization 150 million rise we reorganized.

Into it we put it into the March 2000.

22, amortization and what I said in the previous answer is that.

To the extent the plan would change on that that would be.

Something for us to look at towards the end of June.

Which is not the plan right now because our number one.

Priority as management of the airline is always to protect the company first.

And so I think what the C., we are in June vis-a-vis liquidity.

The forward booking curves.

As well as overall.

Conditions in the credit markets and the capital markets as it relates to any changes on those plants. Okay.

So that's that's that's basically the.

The plan and those are the only two capital structure or components that we have in our.

In our cash flows over the next 12 months than we have another maturity of 150 million rise on a debenture.

In March of 2020 next year 2021.

Very clear thanks, so much havent emigrated week. Thanks.

Thank you.

Our next question comes from outlets Telco with HSBC. Please go ahead.

[music].

Hi.

Good morning, or good afternoon, guys.

Quick question on my end it there on your talk I know, there's not a lot of details there, but if you comment on the help from being gas Theres a warrant component there.

Is there any trash holder of dilution that would make you not goal for this sort of help with that you can share with us. Thank you.

Yeah.

Well I mean number one we don't have the specifics on that and so we're just talking in general terms.

But I mean.

What do you mean like in same dilution or would it wouldn't be more specific what do you mean any level what do you mean by that.

Oh, no well, but are there controlling shareholders going to go.

Not your goal.

Hello.

Threshold or losing control or whatnot I'm just wondering if there's any yes I'm wondering that are probably the same deal. That's got offered because going to be offered she is going to be offered to the other companies specifically as EU.

Our because we'll be nice corporation.

I'm I'm guessing that there would be a difference in terms of.

You guys do have a controlling shareholder.

What is the structural that.

Those confirms your homes will be really should be dilutive, that's well I see what your questions. Yeah, you're right as all really doesn't have any shareholders with skin and again I mean, I think you're right. There I think in our case, it's a little bit different maybe in it for you and people that don't know.

Don't know as much of our structure I mean, we have a controlling shareholder that group that has 100% of the voting stock right.

And the shares that are traded in the market are not voting stock it is.

Non voting stock and so we have a dual dual share class. If you were to roll that on a consolidated basis. The controlling shareholder has a little over 60% of the total economics. So the substantial there's substantial amount of.

Economics on our side of equation. So if you are saying from the respective losing control of is Theres no scenario that I could sizably see.

Where are controlling shareholder that's got 100% of the voting stock would be diluted below 49, I just don't see how that could happen, but now on the on the economic side of equation. So the voting is not an issue with this company I think in the other company you're mentioning there is there is a very complex architecture, where.

The really tiny piece of the economics. There is one individual that's keeping control the company I think ill was at less than 5% of economics over there and is controlling 60% of the vote.

But again the market approve that so that's a structure that they got approved their shareholders. So I assume that works with them in our particular case, we have a very different situation right I think our shareholder are controlling shareholder as one of the largest transportation conglomerates in Brazil.

Enormous in terms of.

Operations I was in the airline is the most important.

Investment.

And focus for them.

If you look historically, a you know they've invested.

You know over 250 million in the business originally a startup and then.

They put in a 100 million in March of 2009, if you remember that the echo of the 2008 crisis.

The company needed some some primary equity capital.

In the company in March of a nine in the same thing happened again in October 15 about a 100 million of primary equity capital.

They went into the business then and so they have significant skin in the game obviously.

But we don't have any we don't have any indications of interest from them on.

Providing any primary capital to support of this comp a company at this time I think you'd have to have some visibility on the recovery and what the other options are as well I mean, we've worked at this company. So that the company would not have to call capital.

From the controlling shareholder because he has met significant capital calls twice in the past and we'll continue to do so as management.

As long as management, we have to protect the interest of the company and we're always going up.

Work in that regard and then obviously our board will decide but I think historically, if you look at historically.

The owners of our business have always been very responsible and flexible.

When it comes to doing what's best for the company and their decisions I've always been made with within the best interest at the company No. We don't do related party transactions.

It's very separate.

How we manage this but you're right the best anti dilution protection for our minority shareholders is the presence of of the of the Constantino group in terms of how they also would look at dilution I like side is this would like to add that.

Independently of of the terms Oh, we should not take for granted that the company overview utilize that credit line I mean, yeah, you know disease, even being very attractive we were the only taken engage it's going to be perceive it as as either needed are attractive enough.

In order to replace are there other sources you know we have been.

We have given emphases.

Sure on capabilities to.

To deal with the French addition, but you know.

Nobody knows I have.

Resuming my my prior answer and nobody knows how long. This this crisis is going to left I mean, how.

A warm and and large does.

Dessert crossing is so that might be very very helpful to have a these new credit line available, but there's nothing that we have.

Treat it like a.

The nery asset so.

Solution okayed by having that the credit line available is not in this not the Saudi is going to take it.

Our our if that's all I'm opt is pretty much related to the conditions that have you show up but it but I think I think from an equity perspective, you know I think we have complete alignment.

If you're speaking on behalf of.

Public market shareholders, a minority shareholders I think from an equity perspective, we have complete alignment in terms of how we look at dilution I think also from a credit perspective, as well I think obviously separate but it's got he was saying.

We we we've been very.

Supportive of the structures that have been.

Proposed by the government it to be NDS, because our objective would be to work.

With our own two feet, our own operations at our own private access to capital.

As far as we cat.

But if thats not there it will be.

Very valuable to have.

A support mechanism to help us if the private market mechanisms such as the commercial banks and the capital markets out there for us.

Because we think we can always get good deals and negotiate good deals with those counterparties, we have good relationships, but if that's not there.

Then it will be extremely valuable and of course.

As I said for our controlling shareholder a this is the most important business for him and so of course who's going to.

Look at it from the perspective.

Protecting the company if push comes to shove them, we got to that situation, but thats. What you have with our company actually I'm speaking I think we have an advantage or perhaps a different situation where.

We have all owner.

I've been is I've been working with airlines in my career.

For over 20 years I've been working with goal for 18 years and in my experience with airlines, especially from the perspective of.

Finance and they can the markets.

There's a very high correlation between long term success and a strong owner of that business. I think if you look out at the history of rail and you see that and that is so we do have that at that air at this airline here. This is not a.

This is not up passage for our controlling shareholder this is not a.

Private equity investment this is not a temporary situation.

It's a long term permanent situation. So of course, all that's going to go into their decision on how they because you asked me a question about the controlling shareholder and we don't represent the controlling shareholder we represent a company.

I'm, just telling you like from my experience.

They have like I said three times, they put equity primary equity capital in this business and the primary capital capital came in when the company needed. It most.

March April nine October 15.

Can't predict the future.

Nor do we have an indication. The this situation is a little bit different in the past some of the problems were related to dislocations in the market or overcapacity, which is not we have right now, but just pure lack of demand.

So I think until we will get to a visibility on what the new size of demand is going to be and therefore, the new sides of the company because we're going to match us as managers of the company, we're going to match the size of our company to whatever the demand is where Brazil, where Brazil domestic market one aircraft type all that so we have.

We have some advantage the key myself and our colleagues here have been matching.

Our operations to what the new the new demand is going to be but I think once we get on the other side of that when that is then I think it might be.

Those kind of things could be on the table.

As in the past once we have a visibility too.

The.

The revenue here.

You know what the revenue side. So that's what I would say to that they're telling me. We only have another couple of minutes on the call here. So I think we're going to we have another couple of people in the Qs I think we'll go to the next question.

Absolutely today's final question is from Maggie.

Summers wealth management. Please go ahead.

Hi, Thank you for taking my question.

Yes, Hi, Linda Thanks.

That's.

In conclusion as you well I think we'll go from one so.

Quota.

Oh My second question can you help so.

Little to no milestones.

Accordingly.

Interest cool nights or.

Yes, well it.

Okay.

Okay, I think we have a bad connection on this Maggie but I got the second question no we don't do well.

We don't do balance sheet hedges.

Because of the cash flows from the U.S. dollar assets with on the aircraft. We match those with the long term liabilities, we do a short amount of a small amount of short term hedging.

In currency.

Sometimes to cover a short term payments.

Or we will hedge and amortization.

From time to time, but most of the currency hedges that we put on in the recent periods have come off very quickly because we also said exit trigger. So we have realized some profits on that but no. Currently we do not have any.

Exchange rate hedges against future dollar liabilities and I apologize I Didnt get your first question.

Just first question when I when I look at job.

All right. Thanks.

I'll now financial debt amortization schedule.

So when I listen to me won't you have mentioned.

Just one more follow.

Correct.

Hi.

Well one wall.

So we call.

I'm really sorry, because I think we're just there is some really bad connection or maybe.

Try one more time please.

What's your question.

So.

Yes, yes, yes.

So by them.

Yes. This is about to learn.

Mobile.

Thank you the cash.

And then we'll look at.

Well I would call center culture.

Yes.

Cool Barbassa tell them, how will have a warm so.

Okay, all right good corporate what would be that Cheetah mobile will follow Glenn how long before yes.

Quite high.

To begin.

Oh that could be then calls.

I want to go there could be throughput.

Yes, again, the I. I think I understood. Your question as I mean, the prior to the company today is managing the working capital.

We're not going to use.

The 4 billion of liquidity, we have we're not going to use to apple debts and call. It a day, that's not going to happen, obviously and so in addition to that as I was describing when I was describing that 7 billion realities of liquidity, that's probably the number you should look at.

In other words imagine this scenario, we were where we were winding down operations in the next 12 months and going to hibernate the company and not do anything and go on vacation.

We would have to work to basically a.

Drain out you know 7 billion rise of liquidity put her on the table now and then consume all that and then we would then we would just amortize.

Those liabilities with that excess liquidity and so the right way you should look at the.

But you're saying on available cash that's we're working capital and that's for managing the airline part of the business Okay.

Then or other amounts that we havent under carbon assets and the other mechanisms that I mentioned.

That would have to be executed.

What I the way you should think about that is those would be for capital structure. Okay. A separate the two things because basically what we have in the cash today, the cash liquidity both available in receivables and other things that's to manage the working capital the business right working capital of the airline operating company.

And then the other elements if you want to think about it this way because it was also how we think about it the other elements we'd have to do be it raising money off of unencumbered assets or be it unlocking.

Cash deposits that we have that cash could be available for capital structure issues. So that's how I would suggest you think about that.

Separate the two issues.

Because we don't we don't mix the two things here working capital was working capital capital structure is capital structure. One is in the Treasury Department. The other is in the corporate Finance Department and those are separated and are not mixed.

Matt you feel pretty I mean, we can also.

You can shoot me an email we could we could set up a time the to go through that.

And just given the time because what we have to do now as we have to jump on our.

Portuguese our Brazil, our local call if you will and there.

So we spent a good our here on the call. So we're going out to cut it off now, but if any if anybody else has any other questions. Please shoot us an email so with that I'm going to handed off to a lucky to close out the call I just would like to thank you all for the attention. Hopefully is session was helpful to you. All we are here available. Thank you very much.

Having last week.

Thank you. This concludes today's conference call you May now disconnect your lines have a wonderful day.