Q3 2021 Gol Linhas Aereas Inteligentes SA Earnings Call
Market recovery.
We are optimistic that the synergies from this corporate reorganization expected to be approximately 3 billion reais in net present value for the next five years and the subsequent benefits to our shareholders will be realized in a relatively short period of time.
With that have Johan the floor over to Richard <unk>, our CFO, who will present some financial highlights.
Thank you Kirk.
Our most recent notable that was the success of our liability management program in September we issued $150 million and a recap that 8% annual interest rate on our senior secured notes maturing in 2026 Moodys assigned the notes are rating of B to.
Proceeds from the offering will be used for general corporate purposes, including aircraft acquisitions and working capital.
In October we refinanced our short term bank debt and the amount of $1 2 billion Reais via the extension of the seven series of debentures and the issuance of our eight series of simple non convertible debentures. This refinancing enabled the company to return to its lowest level of short term debt since 2014.
At about half a billion reais.
Which will also improve goals credit metrics by better matching future assets and liabilities and reducing the company's average cost of debt.
Our next relevant maturity date for outstanding debt is not until July 2024.
<unk> balance sheet is now in a stronger position in terms of its outstanding debt versus our peers, which we view to be a competitive advantage in the current market environment. In addition, the company amortized around 518 million reais of debt in this quarter. The average maturity of goals long term debt, excluding aircraft leases and perpetual health.
He is approximately three four years with the main obligations already addressed in our cash flow.
The net debt ratio, excluding exchangeable notes and perpetual bonds to adjusted last 12 month's EBITDA was $9 seven times on September 32021, representing the lowest financial leverage among peers.
Considering the amounts fundable from deposits and unencumbered assets the company's potential sources of liquidity resulted in approximately $6 1 billion rise of accessible liquidity.
The recent capitalization of the balance sheet with a capital increase led by the majority shareholder represented the recognition of goals value as Brazil's largest airline with the best product.
The refinancing of our short term bank debt in October.
Added to long term capital of $2 7 billion Reais raised in the second and third quarters of this year totals.
Totals over three 9 billion Reais of capital raised in the last seven months.
As far as discussion of financial results for the quarter. It was shared this morning in the video presentation and we believe you all had a chance to access that.
In short our work to reestablish operating margins that can support the sustained growth of our operations is bearing fruit.
We ended the third quarter with an EBIT, reaching 338 million Reais and an operating margin totaling $17, 7% concurrently adjusted EBITDA reached 464 million Reais with a 24, 3% margin evidence of our successful efforts in matching supply and demand.
I will now return back over to kick it off.
Thanks, Richard we have seen a recovery in demand for air travel and we believe that now with greater population immunization and the significant expansion of vaccination, we have a strong fourth quarter coincident with the start of this summer season.
I would like to close by thanking our employees the team off vehicles, who are working with extreme professionalism and commitment.
All of these intimidation puts us in a solid position to expand operations and achieve profitable growth, we reiterate our confidence that goal, we would mercury's strong and even more resilient as markets normalize.
Now I would like to initiate the Q&A session.
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Please hold while we poll for questions.
Our first question is from Stephen Trent with Citi. Please go ahead.
Good morning, gentlemen.
Thanks, very much for taking my questions guys.
I just kind of wanted.
Your high level views on.
International demand to the U S Spooling up again.
Now that Youre partnering with American Airlines.
What sort of bigger opportunity are you seeing on the horizon.
And do you see any opportunity as well for American to possibly increase its stake in golar at some point in the future.
I assume youre kicking off here. Good morning. Thank you very much for your question let.
Let me give you an overview on the North American market specifically.
Firstly, you know we are.
Now gradually reintroduction our international routes so have.
<unk> already made available the ticket sales for <unk>.
I'm, calling to Mexico Dominican.
That kind of Dominican Republic.
Now resuming slides to Motiva, though and when does that so United States.
We will be likely the routes to be add.
International portfolio by the second quarter next year and this is because you are right. The borders are now open to the Brazilians but.
And there is.
A considerable but.
Yes.
Yes.
The exchange rate may.
Jay is the ticket to adjacent the whole fleet cost.
Including both those trained we've got expense.
Expensive front I visited with respective.
The real devaluated.
Devaluated quite significantly along the last quarter or so.
So the economic conditions.
Also.
Who was reflected during the last three months.
And the combination of a bit of excitement.
To resume international treaties.
<unk> has a great contract.
The important goal strength equals a by the exchange rate. So the passengers are willing to fly mainly to the United States.
But that that trip became quite quite expensive at the moment so.
I cannot say that there is a theme.
Weighted to North America in Q2.
With it to airline tickets.
To fly to the United States.
We are about to begin the Brazilian high season in December and January.
Okay.
Kelly.
If you are to where do you see more passengers willing to travel.
Travel or leisure peripherals. This is not going to be different this year.
Slightly better for the international markets.
And the second Gulfstream, which has also affected the demand is that there is a backlog to provide north American visitors to the Brazilians.
We will not be.
So.
The address it in the short term so if you have a.
<unk> members.
Suddenly a five member.
Pretty much likely to at least one of them has no value to visa.
At the moment, Nathan making us possible to.
Due to fly to the United States. So all those things combine it.
Affecting the potential.
Our flight.
The catch up.
We could get if not by this.
New constraints and finally in our case.
We have the partnership with American Airlines.
Who has already deployed.
The considerable.
<unk> increased four.
For the following three months, so we have decided.
To support.
That investment by selling North American Airlines tickets in our channels.
As we have done already.
<unk> speed through 2020.
And through that strategy.
Seamless tentatively.
<unk> customers and.
Supporting this additional capex increased deployed by American aligns our partner. So we believe that this is the.
The best is threadfish to cope with.
With current demand and then we will resume our on site from Brasilia to Florida.
Okay.
<unk> market, which has not been it by American Airlines at the moment.
Second part of next year. So this is.
In overview.
The North American market on the Brazilian perspective.
The Airlines segment.
Super Thank you really appreciate that and just.
Very quickly one last thing on business travel any sort of high level trends, you're seeing in the domestic market in and let me leave it at that thank you.
Yes.
We might.
Might be soup fly by.
The speech.
Rich.
Business segment is.
The recovery.
It's pre pandemic.
Level.
We are now.
Very fine that identify actually that some specific segments.
Brazil is.
It's catching up.
This business struggled behavior.
Even above the AAA that mid level those are the services.
Generally speaking.
Mainly those those companies pretty much.
Are benefited by the new customer behavior, so like food delivery just to say.
For example in e-commerce.
So those segments are booming in VR.
Probably more than we were.
Before the pandemic and also.
If I could say so some other traditional segments.
Those are pretty strong.
In Brazil.
Such as the agricultural business oil and gas.
Some specific industry. So we we foresee that by the beginning of the next year, we might be above our prior projection, which has considered that one third of the business travelers would be gone for good which might be the case.
So it's too early to be precise.
On that projection.
At this moment.
We see that some.
Segments.
Recovering faster than expected.
Great. Thank you very much Jackie.
Thank you.
The next question is from Michael Lindenberg with Deutsche Bank. Please go ahead.
Yeah, Hey, good morning, everybody I wanted to just kind of run through liquidity I don't want to make sure I'm sort of comparing apples to apples here. So <unk>. Your total liquidity it looks like it ended at $2 1 billion Reais and Youre guiding to three eight at year end.
Is that rich is that predominantly the American airlines investment and an improvement or an increase in your ATM or.
Is there other things we should be mindful of.
Yes.
Any any transaction does not close is not in those numbers. So that that is not in those numbers Michael Moore is new additional.
Capital raising.
The Q3 number.
I'll walk you through the Q3 number.
This was composed of 4 billion that you mentioned.
Which is about one.
$1 1 billion of cash and investments of about $300 million rise.
Restricted cash about 600 million rise of accounts receivable and $1 nine.
Billion Reais of.
Posits.
The way that would break down in the Q4 would be about.
902, 1 billion reais of cash and investments about.
Is down.
Round.
$200 million rise because as we ramp up.
The high season, and get our fleet back up above 100 operating aircraft for investing in working capital of spare parts. If you will.
Will too.
All of these aircraft up and flying so that's effectively going into.
Assets.
Obviously consuming some liquidity and to some extent its also increasing our spare parts inventory, which supports the collateral in our senior secured notes program.
Strictly cash.
B, a similar balance of around 300 million Reais, yes, yes accounts receivable accounts receivable increases about 200 million Reais to 800 million Reais. That's obviously associated with the ramp up in operations and we expect by Q1, we should be back to a more normalized level of accounts receivable.
Which should be somewhere between one to $1 2 billion reais.
Okay positive amount posit amount goes down from the Q3 to the Q4 by about 100 million Reais because as we.
As we return aircraft.
We use some of those security deposits as well as our deposits through cost out.
The returns of the MTS because as you know we're accelerating our transition from the <unk> to the masses.
So we are using.
Those deposits to cost out aircraft deliveries, which is why as we've said we do have access access to those deposits as it relates to the to the asset that theyre supporting and.
So that's why we include that number in our liquidity.
Basically there is no external capital raising in there it's all operational.
Different which is around that total number down from 4 billion to.
$3 8 billion. It basically represents an investment in working capital spare parts too.
And the year with.
A little over 100 operating aircraft.
Okay. That's helpful. It's flattish to slightly down before anything and we know that.
Hopefully.
Capital raising in there as you know.
In addition to that and kind of maybe taking advantage of your question because we have some questions on how we get to the $6 $1 billion of liquidity.
In addition to what I described.
Half.
Potential financing sources.
Based on this thing.
Unencumbered assets that we have of a little over 2 billion Reais and so how we get to the $6 million the additional $2 billion.
It comes out of unencumbered assets about half of that is the collateral we have through the loyalty program in the Q3, we finalized the take in of the loyalty program. So now we control 100% of those assets and the additional collateral.
In spare parts and intellectual property.
If we wanted to could be deposited into our senior secured notes program.
This additional capital we have no plans currently.
To do anything with this additional collateral, but it is important to highlight the unencumbered assets that we have represents potential.
Potential additional 2 billion reais.
Long term capital should we.
Choose to pursue that.
No that's super helpful and then just.
Youre always helpful and sort of calling out.
I'll call it the non operating expenses associated with fleet idleness in personnel related costs and in this quarter. This fourth quarter. It looks like it's just going to be under 1 billion Reais now over the year that number has actually moved up meaningfully. Despite the fact that you are putting more people in planes back into service. So I don't know is that is that in.
Sex related issue, what's driving that number or am I, just my logic and thinking that as you put more people on planes back to work and that that should go down.
<unk> that maybe there is something wrong, there and how it's being accounted for if you could just detail that thanks rich.
Yes, I think what I think.
Depreciation effect, Michael which is a non cash effect in there. Okay. Let me let me, let me get back to that because that's somewhat cyclical calculation, but obviously in that in.
In the unit cost.
Is the depreciation and so.
Part of it related to that also in.
Into Q3.
The number in the Q3, the number of flights and still reduce.
And so the substantial ramp up in the.
And the Q4 okay.
I will kind of revert back but in the end of Q3 also in the month of September as you know, we scale that to scale back a little bit given the transition of our PSS.
Which impacted our our scale and our our revenues and our ability to improve.
Improve fixed cost solution because of the migration to the.
So revenue system, which was done in August and.
In September one and into Q3, we had.
70, aircrafts operated and so we still have 60 aircraft.
And the Q3 and so what Youre seeing there is in the Q3 as the cycle goes 60 aircrafts.
Still idle.
That number at the end of the Q4 will be reduced to hopefully less than 30.
And so both those.
We're trying to separate that out I think we're one of the few companies that try to separate that out for you guys or separating the idle costs versus the total.
But we're probably only see a normalization on a unit cost basis for comparative purposes in the Q1, because we're still going to have.
I don't final costs into Q4.
When you say normal in Q1 or are you, saying that approaches zero in Q1 or I am just assuming it gets to zero by the back part of 2022, but maybe maybe it gets there sooner.
Q1, because again, we're we've returned aircrafts.
We are.
This Q4 is activation of a majority.
Of the grounded aircraft and as we get into the January February high season.
It might be a little bit in there in the Q4, but for the most part will be eliminated and that once you get into the normal seasonality for Q2 for us is kind of a down.
Seasonality normally want to see where.
As Scott said, we could have some positive surprises on the corporate demand.
In the Q2 next year, a little bit better than we might normally see.
For Q1, because again, we're 100% domestic focused.
We don't have wide bodies, we don't depend on the international piece.
The right sizing, we did on our capacity and our fleet if you will.
Should kind of triangulate to.
Goal being back to more or less normalized operating efficiency by the end of December beginning of January.
Great. Thanks for that rich thanks, everyone.
The next question is from Dan Mckenzie with Seaport Global Securities. Please go ahead.
Hey, good morning, guys. A couple questions here I guess first another question on the corporate recovery Big picture. What are you hearing from corporate customers today on their travel plans for next year.
And then just related to that.
Given the FX volatility I believe there is a certain percent of the revenue that actually benefits from a weaker Brazilian hail, so I'm thinking the oil and gas sectors I'm thinking agriculture. So it seems like there should be a component of the revenue there that you do a little better.
Brazilian how weekends, but maybe you could clarify or even correct me on that.
Yes.
<unk>.
Firstly the customers the large corporates.
Yes.
Basically the same day, we resumed flight.
We want it.
It is somehow there.
Home office.
Obviously, which is for the vast majority of that is into the end of this year.
Yes.
Why do we saw specifically to those statements they have just to get it.
They are already moving.
Samples are ahead, but this is not even close to the potential they have told us.
So the next year.
Side note.
We have we structured ourselves to address the specific market.
New passenger service system were favorable.
We will likely give us.
As you know.
Set of I'll say it because we can now.
Not much more flexible and fast way.
Addressed.
Specifically demand weighted by the corporate cycle. So I believe that we will have the combination of a better product with a redesigned network with mice.
Accelerates.
Yes.
Sure.
The speed.
We are now <unk> two.
So you have that thing to see that segment.
Segment catching up.
Yes.
Oh go ahead I'm sorry, Richard go ahead. Please.
But again well done.
Well I guess just tied to that point I guess, what I was trying to get at is it seems like there should be some pent up demand next year and so I guess it just.
We're thinking that there is potentially some more revenue upside here that folks might be under appreciating.
But going back to I guess, a question for redo R. R.
Is just with respect to that cutover of Sabre that you just referenced the ability to market products in a way digitally that you haven't been able to historically.
So as you think about the Grand vision, what is the timeframe for exploiting that full capability and how material could that be.
I think that it's going to be we're going to have 100% of the business.
<unk> had some deploy.
Deployed.
Until the end of this year and then gradually because those are marketing events.
OUP gradually ultimately we've got to move along to closing.
Thank you.
It is really difficult to do.
It gives you a flavor on how.
Material those improvements can be.
We are now.
Secondly, closing.
As a single gas that we could get a customer service point of view.
Two.
A full legacy company at the same stat. This study speaking I mean im talking about digital service.
At the same time that we are.
Now.
Resuming.
The cask as advantage.
We always had so I believe that the combination of the two things.
It's more of a promising function that can definitely.
Due to that fact.
Our AR reserve.
With that as well too.
Because at the moment.
Can you share any.
Sure.
Precise numbers on that expectation.
Okay. Thanks for the time you guys.
Thanks, Let me just before we go to the next question on the sell side analysts.
We have been.
Question, we have from one of our buy side investors ask questions on the platform.
Sure.
Do that soon.
So that we don't have to say.
People to center.
Let's just through the platform, we'll have to wait until the end of this but it will come back.
Next question from sell side analysts.
They go through this question from one of our.
Fixed income investors.
Okay.
Three components on the results.
Explain what was the write off of deposits for aircraft leases end.
Aircraft lease deposits and maintenance and term deposits.
So just explain that to you to answer your question and the cash flow in the quarter in the third quarter.
We recognized provisions for return of aircraft out of 106 176 million Reais.
And against that we.
We're able to use and reverted.
$166 million rise of maintenance reserves.
And then we.
Reduced.
We have a.
A reduction in deposits.
$264 million all of this relates to what I was speaking about previously but.
<unk> two.
Us maintaining current or maintenance provisions.
For the.
The transformation.
All of the fleet from Max's to Angie.
The provision for the refund of aircraft that's in that as you can see that in the.
In the tables in the back of the release and also on the footnote to the financial statement is about $176 million, which has to be a provision because from an accounting perspective, because we are.
Accelerating return of its use of axis.
And we are no longer.
Constituting anymore neatness reserves, because we are utilizing deposits maintenance reserve deposits to call that out as I mentioned on the previous question.
It is more or less 100% offset between you.
Use of maintenance reserves.
And what I just mentioned within that question as well.
What was the provision for legal proceedings in your cash flow and the cash flow we have payment for.
Yeah.
Legal proceedings.
There are about 150 million reais related to <unk>.
<unk> cheese on peace and coatings.
Taxes.
And then.
There is and that amount is well in that legal proceeding one item that youre looking at care from the person who asked the question there are.
Other credits that increased to $192 million.
Occupancy.
Almost compensate these values.
Of these legal proceedings and the same a map and then the final component of the question in that category what was the.
What was the reason for the increase in other expenses in the third quarter versus the second quarter of 2021, which is basically 296 million versus 167 million reais.
And that is a necessity we had to constitute an increased provision.
For contingencies on peace and co pays taxes for the importation of aircraft.
Because one of our peers.
Loss.
Process and the amount of loss.
Most of it in the amount of $150, so that forced us to change our perspective from a possible loss.
On that discussion if those taxes applied to the importation of aircrafts the probable.
And in the in the accounting policies process when it goes to <unk>.
Is it have to constitute.
Our provision, but that was based upon we have not yet.
The.
Discussion with the government, but as one of the our peers did lose the discussion.
Then.
Great.
Need to increase the amount of <unk>.
Provision on that so hopefully that answers.
Your questions on some of those details as Youre looking at.
Those items that are less focus on it. So operator, we can go back to the.
So the for the.
The call list on the sell side analysts.
And the next question will be from Savi <unk> with Raymond James. Please go ahead.
Hey, good morning, Matt on for Savi here.
Either rich or kaki.
Regarding the 2022.
<unk> outlook, the 8% reduction versus 2019.
Could you give us a little bit of color on what you're thinking in terms of capacity production and utilization there.
Also is there any change in.
And the.
<unk> deliveries or anything we should consider there.
Sorry.
You're asking about we didn't.
Could you repeat the question because I think you were asking about 'twenty two.
Good morning, guys.
Okay. So I think it was more so maybe on the you talked about an 8% reduction in cask from the fleet.
I wasn't sure if the slide I believe it was 23.
Market outlook into 2022.
Yes, the the Max has a lower operating cost in the <unk> and so as our aircraft portfolio and increases the amount of aircrafts that are Max.
That has a.
The effect of reducing our unit cost is the main source of that is the lower fuel consumption I know, we're getting the as advertised roughly.
Roughly it's about 16% less fuel consumption.
So I think thats, what youre asking about it.
Okay, certainly that makes that makes sense I'm, sorry, I thought I thought it was.
Maybe early look into 2022.
On the cost side is there anything that we should consider that in terms of how you plan to return to your fleet utilization or capacity early looking into 2022, what we should consider.
Beyond that.
As a result.
Yes, if I understood. The question I mean, we will be back.
Our ecosystem will be back to more normalized aircraft utilization numbers in the Q1.
Which for us is.
It should be a sweet spot for us is kind of 12 hours a day of utilization we expect to be.
Back above 11 hours of utilization in Q1.
Okay. Thanks rich.
And then I think on the revenue side.
Versus what you were thinking in Joe and late July last quarter. When you provided guidance to now what's in the four key revenue outlook.
What has changed I know you target looking out into <unk>, some corporate segments have come back faster, but for Q number has gone lower versus late July. So I was wondering what has changed since then.
That's right I think we revised down the revenue forecast for Q4.
It's mainly based on.
Lower overall yields in the market and which has a big effect just given the still situation of.
Low efficiency and then also in that overall market that's not just us.
Then the and we've been staying out of the way of that.
Scenario and how would you how do we stay out of the way that we keep capacity.
Lower and so when you combine those effects are staying out of the way of the low yield environment given the overcapacity.
Coming out of competitors.
Dusting are offered down our capacity down those.
Those two effects magnified.
Into the reduced revenue.
But the catalyst is obviously more on the yield side.
We have the ability to flex up capacity.
Given the amount of aircraft that we have but we have had a management. During this two months of the pandemic.
<unk> focused on two key metrics one is.
Preserving our unit cost advantage in the post pandemic environment and also matching our cash inflows with cash outflows.
It limits, what we can do.
You've seen how we've done that for those will be the default, but you've seen how we've done that through the pandemic.
In terms of minimizing any operating cash burn so how about we do that through the capacity.
<unk> Appeals are better we can we can flex that up that was quite a tech you mentioned, we're now in the process of reactivating.
Our core networks, which is mainly focused on the business traveler.
And as you saw on the slides as well.
Shifting our focus from a network perspective from that massive hub, we created what I always just to manage through the pandemic based on connecting flights, which is not that convenient.
<unk> passengers to going back to them.
More point to point network.
With.
Very attractive point to point flights out of our.
Other hubs and also from our channel markets.
Some Paulo, Rio and Brasilia, that's happening as we speak.
At the goal.
The goal.
Ecosystem.
<unk>.
I can have a significant impact on yields.
Yes, if we have some positive surprises on the court was coming back I think we'll see that more on the Q1.
Because we're still in a transition on that.
Still not back to normalized levels.
Market capacity.
As well as <unk>.
From the business traveler and also the fact that you mentioned on the revenue side obviously.
The effect on.
EBITDA because it means lower scale and so less less fixed cost dilution and so that's why our expectations for Q4 EBITDA was down a bit the other thing that is in there is.
As I was mentioning I think one of the previous questions is an increase in capex.
About 200 million real increase in Capex in Q4 that mainly relates to investments in.
Spare parts inventories.
And other assets related to reactivation of the operating and so when you kind of those are the factors one obviously on the yield.
After the Destocking and the other on the Capex side that account.
For him out.
4 million real reduction and our targeted liquidity.
For the end of the Q4, but about half of that number is investment in assets.
I said it also.
Side benefit of increasing the.
Collateral pool.
Our secured.
<unk> program and those same effects will get you to the <unk>.
Difference in deleverage those exact same attacks all kind of roll into that.
And.
And.
And so it's.
<unk>.
Transitional.
Quarter for us.
And.
There was some.
Exchange rate effects in there obviously.
They kind of run through those calculations and put pressure on it.
On the on the net debt.
Part of the equation also.
And those resulted in massive negative exchange rate effects, but those are not economic in don't affect the cash flow just to highlight that because we have gotten some questions on.
What our exchange and monetary variations for those that are.
You may be familiar with.
Investing in.
Developing countries with.
Functional proxies in our functional currency is real there.
Therefore, we.
We have to recognize the exchange rate variation on the balance sheet and that produces accounting effects.
Negative and positive.
The exchange and monetary variation, which continues to be quite large given the short term.
Negative devaluation of the Brazilian real and sort of attack for the most part we recommend kind of backing that out.
Which is what we tried to do in our in our.
Furnished disclosures.
Certainly thank you very much for all the color there Richard I appreciate it.
Okay.
The next question is from Duane <unk> with Evercore ISI. Please go ahead.
Hey, thanks, good to speak with you.
On fleet can you just maybe playback.
For us the fleet simplification opportunity here.
It's not just Max and you've outlined knows you did a number of fleet transactions pre.
Pre COVID-19 short term leases to solve for a gap.
Then COVID-19 hit can you just help bring us up to speed on where we are with respect to those shorter term leases.
<unk> off and what the fleet simplification opportunity is here.
Yes, yes.
We still have a fair amount of.
And Ge's on short term operating leases.
Where we had.
The optionality of either extending those or returning it.
But not there to crack is the availability of Max's.
Market right now is constrained in terms of the availability of mattresses given that Boeing is.
Still only producing below 20, Max as a day. So it's still quite low which is about a third of what they were producing pre.
Pandemic.
We have all of the financing sources lined up too.
AD.
Many mattresses, we want to.
In the short term in next year.
The bottleneck is the availability of.
New matches, there are still some white tails out there, but they have <unk>.
Configuration costs and other issues.
Net.
Make them less attractive now so we have the ability to accelerate the returns of interest based on the structure of our aircraft portfolio, which is which is still today, a 100% operating lease.
And I think another part of the simplification that you are mentioning.
That you're hinting at is that we will do also as we move into the acceleration of the transition from <unk> to the Mac. No addition to this the operating cost benefit based on the lower fuel consumption and higher seat count on those aircraft and so on.
Is the component of.
How were financing those acquisitions and so we will also be doing more finance lease transactions as we move forward.
Somewhere in the order of between four.
And maybe as much as 16 of those next year.
Depending on the availability of Max's and Theres, a significant equity value creation.
Comes with that as you saw on the previous cycle. When we did 40 finance leases on the first order with Boeing that we created in excess of $500 million of cash equity.
Gates through that process and it also gives us equity to borrow against some things like that.
So the I guess the other component I would say Duane of that is our ability to.
It's back in the <unk>.
The game of.
Owning.
A portion of our fleet.
The reason why we are 100% operating lease today as you know pre pandemic we had.
Finalize the monetization of our energy portfolio.
And we're in the midst of.
Still in the midst of the Max the Max grounding and so we.
In that dynamic capital that is kind of got pushed out so we have enormous flexibility to return.
And she is at a faster pace.
And the bottleneck is the availability of matches to do it operationally.
We're scaled up our operational capacity.
On a normalized basis is easily two aircrafts receipts and to re deliveries per month two into out poor total we can go as high as three per month.
Given our operational capability and so for us it's operational easily easily.
<unk> done operationally to bring in 'twenty form axes.
Transition out 24 entities make sure if we need to do so.
Our fleet plan is a little bit less than that and part of is that we're still in the sourcing of the right matches for that activity, but I think it's important to mention that none of that is going to consume.
Our liquidity because.
We already have the financing.
Sources wind up to.
Hey for those Max acquisitions that are in our plan plus some additional if we need it we already have the issue of the liability is lined up and we're still working on.
Additional sourcing of aircraft hopefully that answers your question.
Yes listen it does the the delivery rate came up on the Ryanair call as well so I guess the.
Question would be for the for the deliveries that you've outlined for the rest of this year and into 'twenty two.
How many of those are are already built.
And how does that forecast feel relative to kind of the delivery rate that youre that youre seeing.
Well in terms of what's coming out of the factory.
We would need somewhere between eight to 10 aircraft if the sources the factory at the sources the white tail market, we've got that covered.
And that's what we're working on as we speak.
The issue with the IPO market is we have some additional reconfiguration costs that we wouldn't have if it was coming out of the factory.
For us but.
But.
If you can help us convince Boeing to ramp up production to somewhere aircrafts.
Yeah.
I wouldn't I wouldn't I wouldn't be here.
B you guide for that but.
I'll sneak one more in here rich because I'm always interested in your thoughts here.
What FX rate kind of drives the long term plan and for what it's worth.
How do we get there how do you see the path to.
To that long term range. Thank you.
Well.
We're not in charge of that but.
The most.
Bank market forecast, so for an appreciating real something with a four handle on it at some point next year. If you take fair value calculations are fair value calculations are below four.
We're now 12 months inside of <unk>.
Residential elections in Brazil.
And so that.
That is.
Going to be a factor that will be paid volatility high.
We addressed in our presentation.
The videos on our website. This morning and also in our release.
Fiscal situation.
Is much better.
Improving it's much better than the U S fiscal situation for example.
And.
GDP in Q3 was.
Up 4%.
Around 3% for the Q4, which is down a little bit.
But I think my own personal opinion would be youre going to see weakness in the currency.
Cause of the political dynamic between now and October of next year.
But.
Sure.
Going back to that at this point and that is going to keep a relatively captive audience for us for domestic air travel.
Which is perhaps the silver lining on that which is why we're not.
Focused today on driving international travel.
Given the lower purchasing power of Brazilians in Reais.
But I have to point you to market projections on that because it does seem to be a disconnect between the fundamentals of Brazil, and the currency, which are related to other factors and oil prices are.
Sure.
Factor for Brazil.
Materials sector in Brazil, the extraction economy, which primarily drives the economy is doing very well during this pandemic.
And that will create a positive effect.
And what other people were asking about in terms of the.
Elasticity of the return of corporate travel.
And in terms of those sectors being consumers of air travel is on the volume side I think exchange rate is less of an issue.
But obviously it does affect cash flow because it pressures both the oil price that we have to pay which is now at $1 as well as the <unk>.
Aircraft cost, which is not ideal, but it doesn't look like we're going to be getting any let's say market relief on that anytime soon.
And just.
Just given the volatility.
And the relative perception.
The X the outside World long on Brazil, That's my two cents on that but we're not the path of that.
We're price takers on it.
Very fair thank you.
Again, if you have a question. Please press Star then one.
Next question is from Alejandro <unk> with credit Suisse. Please go ahead.
Thank you Hi, Paolo Hi, Richard Thank you for taking my questions.
Curious on what's your view on the potential recovery.
The international market to Brightcove at Blue.
What would be the wound back on yield.
International market reactivation.
Yes.
Okay.
We are not that bullish on the international markets recover.
For them to any.
Q there is too.
It's different.
Regulations in different sanitary.
Requirements.
Which make us.
Doubt, whether it is going to be possible to harmonize all of that in.
In the first half of the year.
So this is one thing.
Second is also that.
A potential overcapacity will be deployed because you can imagine the total amount of wide bodies are available either.
Post has not.
Those have not been.
Utilizing for many.
Many months.
And and also purely east.
If there is going to be where the specific segments.
<unk>.
Severely affected.
Bye.
So called.
A new normal behavior is going to be.
Long haul business trips.
I think that the.
This customer we've already.
<unk> before deciding to take the plane.
Sure.
Sure.
Business trip, mainly long haul so.
Honestly I think that.
<unk> speaking.
International markets will be.
Factset.
There are rate effective embedded effects.
Really.
Longer than expect so.
But on other hand, I believe that the.
Long haul leisure travelers.
We'll be there.
And mainly for the most important tourist destination.
So.
Hollywood, Florida.
Was the business traveler.
Pandemic for those airlines operating wide body business classes businesses and first breath.
I am not.
Polish.
About this specific market demand.
Okay. Thank you and then second.
Second question, if I may on the <unk>.
Maintained.
Saw a significant decrease in during this quarter and the maintenance expense.
So we were wondering what was behind this increase.
What can we expect going forward.
I assume that it's.
That got shipped from the deferred maintenance.
Okay.
Just curious I'm sure Europe ups. Thank you guys.
Yes, sure and then I guess you didn't hear the answer to the previous question, but I'll go through that again.
The you're asking about the increase in maintenance expenses from Q2 into Q3 from 88 million Reais to 246 million Reais.
That is from.
And maybe I'll give you I'll give you I'll answer it from a different perspective.
That is related to the acceleration of the transition of the fleet from Engie the Max's.
Where we are <unk>.
Accelerating.
The returns of aircrafts.
Now over the next couple of months over the next year.
What.
What you have to do on a quarterly basis Theres always be fully provisioned on your future re delivery estimates.
We're accelerating now.
<unk>.
The return of the Andes.
The top up we have to increase the amount of provisions.
For maintenance on aircraft.
So in that particular case.
There is a certain number of aircraft.
And to see the mid single digits.
Sure.
Those provisions increase that so within there always remember that that's that's you always have to be estimating if you're doing your accounting properly.
So always asked that question to make sure. The company is our provisioning properly their future.
The re delivery cost.
Have to always be adjusting your.
Provision for that and for US the main component of those delivery cost as engine overhauls.
And so in our particular case.
We increased.
The number of entities that were returning.
And number of matches that were bringing in.
Provisions in the Q3 increase from 88 million Reais to 246 million rise.
Okay.
Yes sure.
We have one more.
Personally in the queue.
To ask a question, but before that I'm going to take another question that we have from the.
Platform.
Which is asking about.
Yields.
<unk> and task.
Q2, Q3, Q4 and so.
I'll just walk through that.
<unk>.
We had a.
15% increase in yields in the Q3.
What's implicit in our Q4 guidance is.
Basically flat yields versus the Q3, we're being conservative on that.
Given the capacity.
Environment.
Given that we are forecasting load factor is up a little bit.
That will in the Q4.
Sure.
As implied.
The slight increase in RASK.
Over where we were in the Q3.
We did 26 cents in the Q3.
Do you think we could be around something around 28 cents in Q4.
Now on the cost side of the equation.
The recurring unit costs that we did.
In the.
In the Q3.
Just under 22 cents and real.
In those Q4 guidance numbers that we provided.
Is it similar.
Level, even though we are as I was mentioning increasing the operating fleet.
And diluting fixed costs.
We.
Return engie as an accelerated transition from the masses.
We have a combination of higher.
Expenses for maintenance for the re deliveries higher provisions and also higher.
Higher depreciation.
So that goes to just looking at basically addresses that.
Question, which is basically a conservative forecast for the Q4 guidance. We are providing it's mainly volume driven it's not being driven out of an increase in yields or a reduction in unit cost.
He was mentioning if we get a higher positive, especially on the business side thats going to have a positive impact on yields.
And.
Could translate into better revenue numbers for Q4 with that operator, we can go back to the last question in the queue.
Okay.
Okay.
Okay.
Alright, operator, you can go to the last question I think you again, if you have a question. Please press Star then one this will be the last opportunity for questions for golf management. The next question is from Matthew Breckenridge from DSC Meridian. Please go ahead.
Hi, My question has actually been answered thank you very much.
Okay. Thanks.
This concludes today's question and answer session I would like to invite Mr. <unk> to proceed with his closing remarks. Please go ahead Sir.
I'd just like to thank you all very much for the attention.
And then I'd say.
This concludes the goal Airlines conference call for today. Thank you very much for your participation and have a nice day.
Okay.
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Okay.
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