Q2 2021 Azul SA Earnings Call
Okay.
Okay.
Hello, everyone and welcome to <unk> second quarter 2021 results Conference call. My name is <unk> and there will be your operator for today.
This event is being recorded and no participants are in a listen only mode until we conduct a question and answer session. Following the company's presentation.
Should any parts Upended assistance during this call. Please press star zero to reach the operator, I would like to turn the presentation over to Taser barely Investor Relations manager. Please proceed.
Thank you for the money will come out towards the second part of the army.
The results that we announced this morning the job of this call.
Right.
W. Reference are available on our IR website, presenting today will be deemed didn't even as its founder and chairman and John Rodgerson CEO.
It makes an awful 30, our CFO and <unk> Shah our Chief revenue Officer are also here for the Q&A session.
I turn the call over to David I'd like to caution you regarding our forward looking statements.
Any matters discussed today that are not historical facts, particularly comments regarding the companys future plans objectives and expected performance constitute.
Forward looking statements. These statements are David from a range of assumptions that the company believes are reasonable, but as objected to incent, Turkey anyway. They are discussing E. C U E.
C P M and SEC filings.
Also during the course of the call you know just kind of small I have her expert imagine me, which should be considered in isolation with that I will turn it over to David David.
Thanks Chase.
Hi, everyone and thank you for joining us for our second quarter 2021 earnings call.
First of all I have to start as always by thanking our amazing team members, our strong culture, and Pat and the passion of our people.
Halfway there.
So just kind of you have been expense essentially as we successfully navigated the challenges of the pandemic. Thanks to their efforts we are in the position to emerge from this crisis stronger as you can see on slide three our competitive advantages are stronger than ever we're already flying to a 130 cities and we have many more to open this year are.
Team has done an incredible job in rebuilding our network focused on our strength, which is connectivity our unique fleet flexibility gives us the ability to access demand that no. One else can this has allowed us to recover our capacity to more than 2019 levels, which is.
While we are still.
While we are still the only carrier in 80% of the routes we serve.
Our business model is unsurpassed in the terms of the network effect.
And as demand recovers, we can add destinations to our map this improved revenue and profitability and the entire network, it's very synergistic.
Our focus on the network and its future leads us to slide four where I'm. Once again excited to talk about the recently announced partnership with lithium we know Brazil.
We have doubled the aviation market since our founding and now with Lilly and we see huge opportunities to create new markets and expand our business. The lithium jet is ideally suited.
For the types of regional and sub regional flying that has all created in Brazil.
Also this innovative partnership helps us to accelerate our ESG commitments by leveraging in an unprecedented way economic and social developments in Brazil through the 100% electric airplane model.
Speaking of Brazil, I know the external news flow is not always positive. That's why on slide five is important to share the amazing progress the country has made.
At this moment there are more than 155 million doses have been applied out of an adult.
The vaccine <unk>.
<unk>.
Out of a population of $160 million in total 600 million doses of the vaccine are available this year that.
That is three doses for every single Brazilian in addition in the upcoming weeks all adults in Brazil will have received at least one dose of the vaccine Thankfully daily case counts and deaths are coming down rapidly.
The economy is reopening safely restrictions on businesses restaurants, and other public places have been removed schools are back in person and our corporate customers are thankful I returned to the office move.
Moving to slide six what gives us further confidence is the high level the high intent to vaccinate amongst Brazilians one of the highest levels in the world I personally don't know anyone in Brazil, who doesn't want to get the vaccine. This intent to vaccinate is so critically important, especially as we see the impact of <unk>.
Guidance, the combination of efficient vaccine application more than sufficient availability together with this intent gives that gives the confidence that the country has the tools to deal with the different variants. Brazil. Currently has the Pfizer Astrazeneca Johnson <unk> Johnson and cornerback all approved.
And are being applied throughout the country vaccines or the solution in Brazil now has plenty of them everyone has seen the boom in demand in the U S travel as the economy opened up and we are now seeing the same phenomenon in Brazil as John will show you revenue trends are very encouraging yes, the second wave.
<unk>, the second quarter, but thanks to the vaccines and our competitive advantage. We are emerging stronger and are excited about the coming months with that I'll turn the time over to John.
Thank you David I also want to thank our crew members for all their hard work during the quarter. Thanks to them, we exited the second quarter stronger.
As you can see on slide seven our second quarter results show our.
Our business is resilient and we're confident that we've put ourselves in a great position to continue being the best airline in the world operating revenues totaled an impressive $1.7 billion reais with RASK impressed increasing nine 5% and 4% respectively compared to the first quarter of 2021, perhaps also increased 14 six person.
Compared to the second quarter 2020, further evidence of a rational capacity recovery and a sustainable competitive advantage of our network to access demand that nobody else can.
It was all cargo had another record quarter, we're really excited about the opportunities ahead for our logistics business I will share more details in upcoming slides at the end of June our cash position was the highest in our history at $5.5 billion Reais.
Long with our total liquidity of $8.2 billion Reais, we are now more than prepared to turn our attention to the future.
As you can see on slide eight operating cash flows surpassed operating outflows by over 400 million Reais. This shows how we responsibly put capacity in the market to rebuild our network. Our network advantage directly drives. These result in June is always the first and only airline in Latin America to issue unsecured debt since the start of the Covid.
Pandemic.
We have already made significant progress in reducing our covid deaths and have started investing in our future again.
Turning to slide nine you can see how the capital markets are open to a dual and that it was prudent to raise debt. When we did our offer was seven seven times oversubscribed, enabling us to raise 3 billion reais at seven and three eights yield the debt markets recognize our efforts over the last year to put us in a position to exit the crisis on a solid footing.
Capital raised together with the cash inflows from operations will support us to continue preparing as well for the future.
On Slide 10, you can see it has no significant debt repayments over the next two years, allowing us to focus on the recovery.
Slide 11 work, we are carefully timing our capacity recovery with the advances in vaccinations here in Brazil, as David explained, adding destinations to our network is a key part of our recovery strategy. It will continue to do so strategically and profitably as we have always done.
As demonstrated on slide 12, our <unk> increased roughly 15% compared to second quarter of 2020, clearly demonstrating that our Swift network recovery with compatible with our high unit revenues.
The sequential increase is our key focus as we continue through the rest of the year.
Slide 13 gives the most confidence yet that this trend will continue we spotted the vaccine trends early and made deliberate decision to focus on average fare recovery. We adjusted our short term capacity plan to focus on yielding up and lead the industry in fare increases the decision is now paying off our domestic book.
<unk> and corporate fares are currently higher than the same period. In 2019. This is the first time, we can say that in the last 18 months. This is a significant milestone as we prepare the revenue environment for the seasonally strong second half of this year and the strong rebound in travel post vaccination.
Also gives us the ability to recover profitably under essentially any scenario for fuel and FX I cannot overestimate how important this is.
Moving to the next slide is all cargo had another record quarter in terms of net revenue our logistics business grew 137% compared to the second quarter of 2019.
Just as impressive as that.
As all cargo today can deliver to 1000 cities all over Brazil in under 48 hours the compensation of the largest domestic passenger network together with the most flexible fleet is able to provide unmatched fast and reliable service to more than 4500 cities in Brazil, we are making the pivot from a cargo.
Company to a logistics company.
On slide 15, we wanted to update you on our loyalty program customer engagement. The program has continued to be very high with more than 1 million new members added since the start of the pandemic to Brazil was strong during the quarter with redemptions and gross billings ex is already higher than 2019 levels are recurring revenue program that took those old club in.
<unk> has performed very well in addition, the best airline co branded card and the market has been supporting us to drive further customer loyalty with more members joining each quarter.
Now I would like to focus on our commitment to make sure. We remain the best airline in the World. We led the industry in customer service metrics as measured by consumer door Dot Gov disclose buying back in July as you can see on slide 16, we are now offering the fastest Wi Fi in the region already installed on 23 of our aircraft we have corporate customers sponsoring.
The product, which allows us to offer it to our customers for free even better Wi Fi is being installed at our hangar in Campinas, our clear vision a clear example of how we're making a little more efficient we welcome all of you to fly and tried this amazing product.
Moving to slide 17, I could not be more proud to have them to fly the most magical fleet in the world. The magic of the multiple of the Walt Disney World will soon expand into the Brazilian skies with the arrival of our first themed aircraft to celebrate Walt Disneyworld 50th anniversary in total four aircraft will be customized to complete this magical fleet we're.
To have this unique relationship with an amazing brands like Disney.
Moving on to slide 18, I would like to remind you that in 2020 Tripadvisor rated as all the best airline in the World. We have internally expanded our mission now we also want to be the best airline for the World Aviation is a key driver of sustainable development, bringing people businesses and communities closer together safe reliable efficient and cost effective.
Air Transportation is an important component of a broader mobility strategy to foster development in an emerging market is all serves 130 destinations in Brazil, and as a sole airline and 80% of our routes providing an essential air service to these communities each time, a xul connects our new previously isolated destination with.
The other regions of the country it contributes to the local development, providing employment opportunities and stimulating trade tourism among many other benefits.
In the second quarter as all supported more than 100 different actions, helping millions of people, we distributed more than 80 tons of food over 500, Oregon's were transported onboard our aircraft saving lives and we delivered more than 20 million vaccines all throughout Brazil.
Wrapping up on slide 19, it is important to remind you that the zone is emerging in a stronger position and we remain with our 2022 expectation that EBITDA will surpass our best year of 2019, we have a unique and powerful levers to make that happen. We are now one of the only airlines in the world forecasting 2022, EBITDA above 2019, yes, we will have some bumps in there.
Road ahead as fuel prices and currency remain a challenge, but as we look forward. We will focus again on fleet transformation. It continues to be a strategic target for us to transform our fleet as quickly as possible with discipline and responsibility.
We are confident that our vaccine continues to progress as vaccinations continue to progress the economy Reopens Incorporations returned to office, we will see a strong revenue environment. During the second half of the year. We've worked hard to put ourselves in a position. So we can take full advantage of it with that David Alex Avi and I are here to answer any of your questions.
Ladies and gentlemen, thank Kim we will now begin the question and answer session.
If you have a question. Please press the Cherokee followed by the one key on your cell phone now.
Any time, you would like to remove yourself from the questioning queue, perhaps to start soon.
For those following the call via webcast, you'll meet both your questions don't get practice for them and they will be either answered doing during this call or by Dr. Julie Investor Relations team. After the conference is finished.
Okay.
Our first question comes from Hillary <unk> with Deutsche Bank.
Hi, thank but I'm, calling in for Mike. So I think when I spoke with my question.
Really impressive is that by end of September and kept Mcdonald's. We never won without so you don't have at least one dose of Covid vaccines. So I guess are you seeing corporations and Brookdale mandating dying to get back to the office. This fall in and just so you know what is your view of the.
The.
Corporate segment of your business.
Do you expect a full recovery by you know maybe all of them yeah.
I wanted to get your views on that.
Yeah.
Yes.
Seeing.
Our office is now filling up I think all throughout Sao Paulo, the rodeo in in for traffic and somehow was back on restaurants are open companies are coming back online I think most companies will be in the office by the end of September and we're hearing that from all of our corporate customers and so I'll, let <unk> talk to how that's trending in terms of revenue demand.
Yeah, Hi, Hilary so yes, we're definitely hearing from our corporate customers that as the second.
Second dose.
It comes into play for the months of August and September that they are coming back to the office, which obviously is a very good sign so our corporate revenue recovery right now the latest data is around 60% six zero.
<unk>, which has been a nice recovery, especially in the last couple of weeks and this month, especially a lot of people who get second doses. So I think we are already leading Brazil as a country is leading.
Many countries in terms of recovery and as soon as leading that as well because of our diversified network and how we're exposed to different parts of the corporate business.
Around the country. So it's not just finance, it's agro it's infrastructure it's energy.
Pharma, all those kinds of things and so.
We're seeing some segment of corporate already over 100%, which for example of construction and engineering is already over 100%.
But then we have finance at 36% for example, so.
But where we are exposed to.
But the country, our recoveries already at 60% and even went back we're still booking higher ferrous than 2019, so as that recovery progresses, it's actually going to want to push the fares even higher.
Okay two income.
So that's that that's great, but I guess in terms of you know getting Oh.
Do you like when when do you expect any profit.
I guess to be relative to 2019.
Yes, so right now we're at 60% I am expecting steady improvement over the next couple of months.
We'll have to see where we end up at the year, but but I think we're gonna be well ahead, you know I could easily see us being at 75 to 80, 85% by the end of the year I think I also want to highlight one thing that David had mentioned there'll be 600 million doses for a population of 200 million people and so yes. There are several individuals.
<unk> got the Pfizer vaccine and others, they've got the Johnson and Johnson vaccine Astrazeneca and the krona that well, but Brazil has the ability to mix vaccines.
Apply booster shots.
They have the availability to do that where many other countries in the world did not.
Okay got it.
And then as a follow up do you think average lease or if there is also going to need going into the third quarter and how far out on the booking quite well customized looking now.
Yes, so actually average leisure fares and corporate are both up leisure fares are more as leisure has led the recovery in <unk>.
Brazil like elsewhere in the world.
Leisure fares are actually up over 20% compared to 2019, while corporate fares are up around 10% compared to 2019. So leisure is leading but again has bee as corporate comes back further.
Tend to book closer in and they tend to fly more local as we call it or more nonstop, which also pushes the fare higher the booking curve is moving out slowly which is good.
Cause it shows.
More confidence that the customer has and as the corporate traveler comes in that will.
Rebalancing come a little bit more closer into you kind of have two movements. One is the increased confidence customers feeling better about planning ahead spring and summer, but as a corporate comes back the curve will move in as well. So I would say on average it's still further out compared to where it was in 2019 and.
As the corporate comes back it will start shifting again.
Got it great. Thank you so much.
Thank you.
Our next question comes from Tobey fifth with Raymond James.
Hey, Ed.
Good afternoon.
Just on the and recovery is in theory kind of outline in thinking about 2022.
I was curious what you are assuming in terms of capacity both at a zoo and the industry and in general the demand expectations and maybe some of the macro expectations I realize this is just kind of a high level plan, but wondering what the what whats underscoring that 2022 EBITDA outlook.
Yeah, Hey, Savi in terms of capacity the fleet is going to be largely unchanged.
So it's gonna be increasing utilization and a lot of it also is just coming full year of the ramp up in capacity. This year right. So we have set of reduction in the second quarter because of second wave now we're in the process of recovering it we have.
You know as.
As John talked about average fares, we've actually held we actually go to fly more if we wanted to today.
But we've actually helped our recovery at about 110% for.
For the next few months. So we can give average fares are time to catch up.
Coinciding with the vaccines and it's actually worked out better than I could have expected.
In terms of the average fares that were seeing and that gives us a lot of confidence going forward. So.
It's just going to be our current fleet.
And the capacity that we have in November December just coming year round.
So that's gonna be the that's where the growth comes from there is no other incremental growth. So you can think of it as our fleet that we have today that a normal utilization just coming for a full year as opposed to having a ramp up period.
That's helpful and then on the industry side.
You've seen one of your competitors and do an aircraft order in accelerating their fleet transformation.
And then just another competitor is still working through bankruptcy just curious what you think the industry capacity would look like in 2022.
Yeah, I mean, they're obviously listening so I don't know.
And then what to do but what.
What I will say is I think that I've been very encouraged with how the industry.
Has it recovered average fares at least we've been very very aggressive and we again like I said, we could fly more if we wanted to today.
And we're not doing it and we're giving.
The market and we're giving demand time to catch up with average fares and unit and.
Unit revenue right and we made that decision in July in late June as we saw the vaccination numbers pick up we said look we need higher average fares and we want to prepare ourselves for the funded returning demand and so that's the decision that we made.
And it's working out really well for us and the industry has followed and I think that I hope that they're seeing something similar to what we're seeing because I think it's good for everybody. So I think overall, there's going to be disciplined I think that they also want to have a good year like everybody else I don't see you know.
Anybody attacking anybody or things like that I think within their plans, they're going to want to be disciplined and as are we so our focus now is sequential revenue improvement.
We're already seeing a nice recovery in August.
In September and I think the decision that we made to really forced the average fares has worked out well for us and I think for everybody overall and Savi.
I just wanted to add where Avi has put this capacity has been in campinas and his CV and inconvenience or were actually significantly down in places like <unk> and then what you've also seen us deals you've added more cities to the map. So you actually have those accessing pockets of demand that werent, even online pre pandemic and so the network.
A little different than it was because theres more cities being served and much more focused on our hubs, where we have strength.
But that's all helpful. Thank you.
Our next question comes from Dan Mckenzie with Seaport Global.
Oh, hi, Thanks, guys, Yeah, a couple of questions here.
I guess first off one housecleaning a S case today are very different story than departure, so I'm seen departures down versus a S case relative to his case and are the current trends you know a reasonable proxy for 2022 or can you, perhaps just flush out.
That part of the story that up gauging story next year.
Yeah, Dan I mean, whats happening is exactly what we wanted to happen airlines, becoming more efficient you have less departure related cost and you are generating more of sks.
It's a combination of aircraft side.
We have 90 dues, we didn't have those before we have <unk> hundred 20 ones, we didn't have those before.
Average stage length as well so you'll see if you notice our stage length overall is actually up even though we don't have 4000 miles trips to the U S. Central Europe right like we used to so our domestic stage length is actually up quite significantly and even then we are recovering a unit RASK unit revenue.
So I think that speaks for the strength of what we're seeing on.
On the domestic side, but yes. It is a proxy of what you see in Duane what you have seen Duane 'twenty two.
<unk> is down and more S cogeneration.
Oh I see okay.
The cash position today, how are you thinking about that use going forward and you know I guess, what can you share about your conversations with Lat am at this point and you know.
If you get to a position where you know the two airlines can can reach an agreement.
Now is the cash that you have today is sufficient to execute on a potential merger or how are you thinking about the kind of the capital profile today.
Relative to growth plans relative to potential consolidation.
Hey, Dan I'll, let Alex kind of talk about our current cash and then I'll answer the consolidation question.
So I don't know on current cash.
It's consistent with what we've been saying we were proud of the support that we got from our partners.
To get through the tough times that we had last year and we committed to bring everybody back over time and that's what we're going to do it right. We have multiple years to pay everyone. This year, it's mainly a year, where we're paying back suppliers next year, we will start paying back the banks you know the the principal on the debt.
That was going to mature.
2020 and 21.
We renegotiated the start paying in 2022, and then in 2023, we start paying back to the stores and we have multiple years to pay all of them back, but we can pay for that credit for that support a lot of it with our own internal cash flow generation, but when.
We'll need to roll some of.
Got forward right, we're not going to just pay a 100% of our debt down all the time, we're going to look at our cost of capital we're going to look at the instruments that we have and we're going to strategically decide you know what should that we should pay down which does we should roll forward, which new sources of capital we can access right, but we are still.
<unk> targeting to be above 3 billion reais at the end of the year like we guided.
A quarter or two ago.
So some of the cash position that we have is intentional rod we raised that capital. So that we can use it to pay for deleveraging and to pay to invest in the future. So that we have the fleet ready to fly 100% of its capacity whenever we decide to do so.
Yes, Dan we're not going to talk to specific about our negotiation strategy, but I will say that we believe strongly that consolidation is healthy whether it's commercial or full integration consolidation in the market with him has their own process going on where they do have an exclusivity period as we speak but I am very confident that it's in the best inch.
First of all of their stakeholders and especially their creditors because the synergies of domestic consolidation in Brazil are very.
Large and that will benefit everybody will benefit pilots of benefits suppliers of benefits airports it benefits the entire industry, including Oems and so yeah, we haven't given up on it we're still looking at it we're excited about the opportunities that exist and we think it's a very favorable regulatory environment to do so and as John said there is so much synergies.
So much market value creation in any kind of a transaction be it commercial or strategic that it's easily financeable, but you know so the cash if it is required for any one of these transactions to materialize, we will not be a problem. We've had several inbound calls from some of the largest one.
In the world.
Wanting to finance the transaction so.
We'll we'll kind of update the market at the appropriate time, but theres nothing to update at this time.
Understood. Thanks for the time you guys.
Thank you Beth.
Ladies and gentlemen, as a reminder, if you'd like to pose a question. Please press. Please turn key follow up like the one key on your Georgetown So now.
Our next question comes from Savi <unk>.
James.
Hey, Thanks for the follow up here.
Just a little bit more on the <unk> suites angle that you mentioned before it is the kind of net flat fleet, just a matter of kind of deliveries and retirements and therefore, we'll see.
More as kind of up gauging into next year and tied to that I was curious given the kind of the improvement in utilization and the cost restructuring that you've done. So far is it fair to assume that you can kind of get to.
Non fuel unit costs in 2022 that are better than 2019.
Yeah.
I'll, let Alex kind of kind of address the unit cost. So that's why we're still here right I mean, a lot of people say what the heck are you still doing in Brazil. Your video 13 years I'm here, because we're just gonna be 50, 70 E twos coming on that burned 20% less fuel.
Then that you want and they have 18 more seat every time, we take an <unk> hundred 20 meal, It's got 56 incremental seats and burns as much fuels R&D ones do and so as you kind of fast forward. What are the zoo will look like what we've seen with having nine of the E twos flying around and having 43 of the <unk> hundred 20 meals, it's very promising so certainly.
Unit cost improves certainly we can actually increase our escape production with lower level of departures in the airline is a much more efficient organization because of the re fleeting that's taking place and so we are several years in front of our competition on that front and I think that that is.
That's what gets us so excited about this business.
Exactly yes for next year.
It's going to stay essentially flat if we choose to do so but we have the optionality to advance aircraft deliveries forward right and so we will make that decision at the appropriate time I think.
Worst case, we stay flat to slightly.
<unk> down as leases reached their exploration date, but we have the ability to advance.
Delivery of next generation aircraft.
If we choose to do so on the unit cost side I think everybody knows that the unit cost is going to come down dramatically from where they are today, you're right first there's the operational leverage that we can generate a lot more E. S case, essentially with the structure that we already have in place a lot of the fixed costs that are already in our P&L.
It will not go up as we bring the but not working.
<unk> background, so that operational leverage is going to reduce GAAP significantly and then we also committed to you right and we reaffirmed our commitment that we will be a more efficient airline post covid than we where we already are you know just to give you an idea.
At the airport level, we already processed 50% more customers per airport crew member today compared to 2019, and we're pushing that number up right, where you have an internal goal to push it even further up and so we will be even more efficient some of it is up gauging, but a lot of it is technology a lot of it is processes.
And in every area of the company, we're committed to being a more efficient airline.
The bottom line is that when you get to 2022.
Control for fuel and FX, because everybody I think has a different assumption for where fuel and FX will be but if you control for fuel and FX. Our unit costs will be down from 2019 somewhere in the mid single digits. Right. Then you have to layer on euro assumption for fuel and FX, if that assumption for fuel and FX push.
<unk> costs up there and the fact that we today have affairs above 2019 levels should give everybody confidence that we will be able to recapture.
Got through cost increases to fares wherever they ended up right because everybody in the industry is facing FX and fuel pressures until the capacity discipline in the rationality will allow us to continue pushing fares up if they're required but in terms of unit cost. Yeah, you can count on us being certainly a more efficient airline post covid.
As we committed to you.
What are the two on the fleet what are the big things was what are you going to do what he wants and so Avi has already found homes for 60 one's flying cargo and by the end of the year, we will have as many as eight flying dedicated cargo aircraft on the <unk> and as you know as those get to end of lease our ability to renegotiate at a much lower average lease rate.
<unk> significantly so we've even found a home.
They're going to be good tension inside the airline has to go to what happens with those assets and so we feel very good about our fleet position right now.
Okay.
That's helpful and just.
Just I realize this is several years out.
Which feels like a lifetime right now, but with the lithium Chad.
Did they sit within the network and does it is it is it serving areas that used to have today or is it kind of making it easier for people to get too until flights how did those aircrafts fit within the network.
Hey, Savi.
But we've made it a notional network for the lithium jet and how to think about it as a.
It is not really the airport run it's more large metroplexes like Sao Paulo, you're connecting different suburbs you're connecting.
Uh huh.
Some of them.
It would take two and a half our driver a two hour drive it's now 20 minute flight right. So it's not really an Uber Uber Black type service.
Something that's about 100 kilometers between suburbs between.
Downtown and beach destinations between residential areas and you know.
Connecting different points within a large metroplex that normally because of traffic because of distance would take you over two hours now gets you about 20 minutes. So it is much more aligned with.
Intercity inter suburban travel rather than urban mobility, which is your classic 10 mile trip, but savi I want to remind you we fly care events today, right and we fly to destinations like Andre and boozy arose in part of G and we get great average fares on those 19 aircraft right and so the lithium that is.
60 of the aircrafts with much lower cost and so when we looked at it was it was a no brainer for us.
Got it alright, thank you very much.
Okay.
Our next question comes from Dan Mckenzie with Seaport Global.
Well, hey, whereas everybody today, thanks for the time again here.
Alex on slide 10, I see the maturity profile, but just sort of following up on my prior question what could leverage ultimately looked like end of next year and say three years down the road.
And you know what leverage profile you know do you really want to see for us little longer term.
Sure Yeah. So.
We went into high threes prior to the pandemic one thing you need to adjust for that part of that number was because we have a young fleet and now with Ifr 16, a young fleet.
<unk> generates more quote unquote debt on the balance sheet that an airline with an older fleet right.
So you have to adjust for that but even without adjusting you know you're kind of saying high threes will just kind of where we started the pandemic we were shooting to get to the low threes and that's what we're going to do it right as we project out our.
Financials, you should see that we're going to get to a five handle you know fairly soon.
Especially next year and that quickly converges to four and then it quickly converges to three so we have a couple two or three years until we get to that target.
But it's something that's very manageable right now, especially because we don't have a lot of debt maturities in the <unk>.
Short term as you are as you pointed out so that's why we were going to focus on until we get to something that starts with a three.
We're going to keep all of our cash we're going to reinvest it into business, we're going to use it to delever.
Once we get to three is maybe we can start having the conversations but a lot of investors were pushing us on you know before the pandemic a lot of investors are saying, Hey, you got too much cash when he goes what are you going to start paying dividends or buying back shares until we get to those leverage levels that I've talked about we're going to keep all of that cash and then we'll see.
Very good okay.
And then I guess just the second question here on the cargo you know part of the operation.
I'm just wondering if you can just help elaborate a little bit more on you know where you are today, where you want it to be end of next year and how we should think about that growth trajectory.
<unk> as we head into next year and also head into kind of over your three year plan.
Yeah, Hey, Dan.
<unk> business is going to double from 2019 to 2021 were well on track to do that and I think we've talked about this a lot on the last earnings call is we're really seeing.
Great strength in customers migrating from road.
Two are and so that's driving you know we aren't really stealing share from our competitors.
Helping.
Go to market and so I think that that's sustainable growth going forward I mean next year you know that.
Is gonna be strong growth as well.
We have the ones that John talked about.
Which would significantly help and and and we're looking at our our dedicated fleet.
Fleet as well so.
We should have you know.
I don't know, 25%, 30% growth again next year.
As as this momentum continues into next year.
To put that in perspective than we had $500 million of revenue from cargo in 2019, that's 1 billion. This year, obviously, there's another 25% to 30%. So let's just say, it's $1.3 billion, that's 800 million more topline revenue that we get out of cargo and we had in 2019 right. So that's the investment we made in the business over the long.
Last two years, that's clearly helping us get to a more profitable 2022 than we had in 2019. The investment is the dedication that we made as a team and it's paying off now and certainly the growth doesn't stop in 2022. The growth will continue into 'twenty three 'twenty four as we further invest in our logistics business.
Mhm, Yeah, very good and then you know I'll be while I have you if I can just sneak one final one in here.
Idea of a vaccine passport is that a conversation that you know Brazil is beginning to have with Europe and in other countries and if you could just talk a little bit about how you see the international side of the business potentially waking up here.
Yeah I mean.
It's still a little bit slow down I mean, we know about the forecast forces in the U S.
You know with the UK U S.
Europe, Canada, and Mexico, I think that the pressure is high to open those borders.
And I think Brazil is on that list as well, especially with.
The number is coming down here significantly in terms of hospitalizations in terms of cases in terms of that so I do think that.
Some countries like Spain, like France has started to open up with.
With the vaccine requirement, we know about Greece, we know about.
Like that even the UK now with the U S. Travelers. So I think I think momentum is building.
Do I think it's weeks away probably not.
But I think the momentum is building.
And I think that it's important for a set of these rules to be aligned as much as possible so that customers on dealing with different regulations for different countries. So I think momentum is building.
And I think it's going to continue to build towards the end of the year, we will take it as it comes for international we're not going to force anything.
There is significant pent up demand, there's no doubt about it.
When does regulations opened up and it kind of makes sense.
We'll add back the service so I wouldn't say momentum is building, but I would say it's still probably.
And maybe one or two months away and not one or two weeks away.
Thanks for the time again guys.
Thanks, Dan.
As a reminder, if you really like Chico's a question. Please press the star key followed by the one key on your total count now.
Ladies and gentlemen. This concludes today's question and answer session I would like to invite Jim.
John to proceed with his closing statements. Please go ahead Sir.
Alright, thank everybody for their time and especially thank you absorbed team for all the work that they put in and we look forward to talking to all of you feel free to reach out to myself, Bobby Alex are tightening.
Have a great day everybody.
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