Q1 2022 Gol Linhas Aereas Inteligentes SA Earnings Call
The webcast may post their questions on the platform.
And their questions will either be answered by management during this call or by the KOL Investor Relations team. After the conference is finished.
Before proceeding let me mention that forward looking statements are based on the beliefs and assumptions of the company's management and on information currently available to go.
They involve risks and uncertainties because they are related to future events and therefore depend on circumstances that may or may not occur.
Investors and analysts should understand that events related to macroeconomic conditions industry and other factors could also cause results to differ materially from those expressed in such forward looking statements.
At this time I will hand, you over to Mr. Paolo <unk> CEO . Please begin.
Good morning, everyone I would like to start by writing flying our most important results for the period, which were made possible by the terrestrial be things from our customers and investors suppliers and specialty auto team of Eagles.
Employees were responsible for getting this through the challenges of the acquired Red Bell disruptions in our operations.
Net revenue from passenger transportation grew significantly due to the consistent recovery in sales.
Sales levels in January and February increase, Dan and 30%, respectively compared to the same periods in 2019, while in March the expected, 60% due to the increase in sales to the corporate segment.
In January we reached the 38, 5% domestic market share.
99, 7% flight completion above the industry average.
This position was attributed by the division's capacity management in the previous months.
Compared to fourth quarter of 2021, we increased the capacity by 15%, we say more a seasonal recovery at the country's main airports such as <unk>. So Paulo, a significant hub for corporate passengers essential for strengthening profitability.
It keeps us your rates and aircraft utilization continuing to improve and flight frequency has expanded by 48% when compared to the first quarter of 2021 the increase.
<unk> demand and the number of passengers transported was followed by in the important growth yes.
During the quarter. This service quality indicators increases by seven points and reached 45 goes highest score to date, reflecting the consistently for us towards the improvement of our customer experience in April we signed a landmark cargo and logistics service agreement between our logistics business unit Golar.
And recoveries at <unk>.
Partnership contemplates a dedicated Friday, a fleet of six <unk> 77, 800 Bcf.
Which is expected to begin operations in the second half of 2022 and it can be increased to up to 12 aircraft.
2025.
Out of these aircraft will be converted at grew out of OPEC and its a personalization is anticipated to generate fleet optimization savings of approximately 25 million Reais in 2022, and then another seven 5 million in 2023 as.
As such we plan to increase <unk> range of services and tonnage capacity by 80% during 2023 to generate additional incremental revenue of approximately 100 million reais into both <unk> and more than 1 billion over the next five years.
I will give the floor to Richard Lark, CFO , who you present some financial highlights.
Thank you correctly or.
Our results reflect the social capital we have accumulated over two decades of collaboration with our clients employees suppliers and investors.
I would like to start today, highlighting the important results we had in the quarter.
We registered an EBIT margin of five 6% and an EBITDA margin of 16, 8%.
Our detailed financial analysis for the quarter were shared in the press release and video presentation released this morning.
We believe that you all had a chance to access them.
Regarding our capital structure.
Our available liquidity remained stable at $3 3 billion Reais with short term debt of $721 million at the end of the quarter.
We have no significant debt amortization within the next 12 months.
And sufficient long term financing credit lines for the acquisition of New 737, Max aircraft are key part of the fleet transformation plan.
On April 13th the exclusive Codeshare agreement between goal in American Airlines was finalized, including an equity investment by American in the amount of $200 million.
American now has a five 3% participation in gold share capital.
Granted the right to appoint a member to the company's board of directors for the term of the exclusivity provided in the transaction.
This quarter, we received eight Boeing 737, Max eight aircraft.
The transformation of our fleet to a newer more efficient technology plays a key role in our strategy for the coming years based on increased productivity.
Lower unit costs.
<unk> carbon emissions.
Among the eight 737 Max received in the quarter three aircrafts are under finance leases.
We anticipate that in the coming years around 50% to 60% of new aircraft received will be under finance leases.
And despite the increase in our leverage partially as a result of the acceleration in the fleet transition.
We are optimistic that the improvement in EBITDA generated by this initiative will lead us to a net debt to EBITDA ratio of around eight times by the end of 2022.
I'll now return the floor to kick it off.
Thank you Richard I want to close by acknowledging the commitment and dedication of our collaborators Latino for us.
Are the ones, who put us in a solid position to continue to expand operations in a sustainable way.
Go is emerging is stronger and more resilient as demand normalizes.
Even more confident now with the semi recovery of the corporate segment in March.
Later, you may initiate the Q&A session.
Thank you.
The conference call is now open for questions.
If you have a question. Please press Star then one on your Touchtone phone.
This or any time.
If at any point. Your question is answered you may remove yourself from the queue by pressing star and then two.
We ask that when you ask your question speak closely to the receiver of the device. So that everyone can hear you clearly.
Participants can also send questions via the webcast platform.
You need to click the question Mark in the upper left corner and typing your question.
Please hold while we poll for questions.
The first question comes from Dan Mckenzie with Seaport Global Please go ahead.
Hey, good morning, guys. Thanks.
Focusing on cargo 1 billion over the next five years, so a couple of questions here.
How is the logistics team just following the win with Mercado Libre thinking about other growth opportunities from here.
And then given the growth how should we what do you want us to know about this business how do we model 2023.
Both margins versus the core airline anything you can share would be great.
Yes.
Hi, Good morning, Thank you very much for the question.
Actually this is this new business.
<unk> is different.
<unk> another set of the bridge edges in search.
That advance sales globally.
The crowd.
The transportation.
Now assuming.
Thank you.
Aircrafts.
In our fleet. So they are all 77.
800 Etfs.
Although equity bye bye bye.
<unk> Bye bye the lessors once when you bridge search type of aircraft exclusively.
Thanks Judy.
To expand this type of operation.
The worlds additional routes.
Dean so the operator is sales and <unk> market segments.
Jos.
To share with you.
Of the possibilities at the moment.
Totally dedicated in delivering the best first of all experience.
Two ratios.
Our model.
Our model.
This business alone.
What would change dramatically with few days of our <unk> units and have shared with you.
These will be done.
So additional revenue.
Along the next five years.
Also we mentioned that.
This operation only could add up to 80% of all right. Good.
Our revenue so we are pretty excited here.
Individually.
<unk>, but other mortgage.
Although we concentrated in the problem.
<unk> only.
Certainly.
You have another set of information being shared with you from the next.
Earnings results conference of because now we are unaudited.
Business segment, David vary quite a bit.
For the moment.
Information that we would like to share.
I see okay.
Second question here.
GDP has been revised upwards in Brazil.
And your outlook for this year remains unchanged I'm just wondering if you can speak to the pace of oil recapture throughout the quarter, where we're at today.
And how smiles is helping to drive improvement in helping too.
I guess just stabilize your yield versus 19.
The best answer to this question is given by the first quarter results itself.
<unk>.
Two police and further develop our market in Brazil, there are several uncertainties.
<unk>.
Those.
For the vehicle.
Instabilities in.
And from the efforts that even though.
Even so we are.
Producing superior results.
In comparison to everyone's expectation.
Our business is even though we sell.
Set of different drivers certainly robust.
There is modest growth levels.
The company is in.
Shape.
Breaking records.
Already offering to the whole restructuring and the go.
Corporation.
The benefits of these models 18.
Only those.
<unk> benefits I mean that.
Mainly the.
Our capability to drop the price the miles.
Volumes the market much more directly correlated to our resident management.
Scheme already in place.
So go so.
We are making the most out of these extremely extremely valuable.
Assets developing maybe group.
So this model is also responsible in this run off.
The drivers as I said for the results we have delivered and also causes both two of Newco, we are sharing with you.
In regards to the market overall.
Forward bookings.
Sure.
Is promising.
Yes.
By the same effects to the smallest customers too.
Yes, Thanks, Kaki and I guess, what I really meant to get out is just the pace of the corporate recovery since the larger corporations.
Yes.
Yeah, Yeah, it's a little bit, but I can hear you.
The other part of it.
Trouble with.
For somebody who is using.
You have some it's not it's not very clear, but let me just maybe couple of neuropathy, you said a couple of things.
<unk>.
Right now we've been able to adjust.
Jeff.
Yes.
Just that very structured deliberate.
The current level of oil prices are pretty much at the beginning of March rather than we have here in Brazil, a fortified delay.
Jet fuel is twice.
Examples of the jet fuel price, we're going to have in may.
It's based on the average price of a basket of international oil prices in April for the whole box at the average the average 40.
So we can.
We anticipate if we have the.
Demand ability to do it and that's kind of going to your question, but let me give some historical context.
Recovery from in license, whether they work, we always wanted to get a recovery of corporate demand relative to the August of last year.
Coming off of a very attribute base.
The covered maybe to kind of 60%.
And 60% of 2019 by the end of December .
January February VFR leisure high season.
But during that same period since November of last year, we will be dealing with the combination of higher oil prices and a weak Brazilian currency.
February 24 to be exact when a lot of the travel restrictions such as restrictions in general.
Came off.
COVID-19 restrictions.
That also stimulated.
Final pieces that we did not back yet on large corporate demand.
Come back pretty quickly right at the end of February which also coincided with the beginning of the war February 2012 to be more exact literally the same day almost.
And so what's the return of that.
Final piece of the very large corporate demand for our business the very large corporates, which our network is.
Organized to serve.
Since that moment of time end of February we were able to work through yield management.
Yes.
<unk>.
Sure.
To visit recapture on what was happening.
Yes.
Oil with a couple of nuances.
At the end of the.
Q1 was 32%.
Those are the behavior 75 box versus 100 Bucks a 76%.
For the.
Same period of 2000 1950, Thermodox is one of the books.
Exchange rates the Brazilian currency.
Appreciated 15%.
From the beginning of the year through the end of the Q1 to approximately 64%.
The effect on jet fuel.
For us from the beginning.
At the end of March was a 15% increase might be massive increases youre seeing effectively uhm.
40%.
Effective April and May 30% lots of 70 to 50% to 70% for EBIT.
In other countries that you that you look at a.
A much lower number two we have to deal with on the fuel side leather exchanger appreciated, 15%, which also payables other costs that we have denominated dollars maintenance lease.
Soon.
Revenue systems in dollars.
We have.
The decrease in the Q1.
130%.
And that's how we started the <unk> period, which is normally a down quarter.
So in a normal situation from a different perspective.
The return of the corporate demand at the end of February .
Coinciding with the efficiency of the Brazilian real was unattractive.
We were able to.
Not just.
Recaps.
Capture the.
The variations, but also have an increase in margins and then well. Thank you I was saying and this is important because this effects goal separately from what might be affecting the sector as a whole.
A year ago and at the end of June we Reincorporated smiles right around here in the third quarter of last year.
We integrated.
Managements.
In the center of the work together.
The teams have kept sorted that they're working together maximizing the profitability of our inventory, which is produced out of the factory, which is the seat inventory.
At the end of June .
At the end of Q1.
We're expecting to already have generated synergies, which would equal 100% payback.
What we paid for the small piece of it.
More than half of these synergies coming from.
Coming in operations and give them a small sites.
They don't seem to be past all comes out of revenues yields and so we've been able to.
Also increased substantially.
Quality of the property with yield through what we've been able to do in terms of eliminating a lot of the problems we have in inventory management with our customers will.
We will suffer and that also goes in there because smiles.
Important increase draws.
The driver in the increase of the yields into Q1, but as you saw the release.
The gross sales as small as 100% higher.
Q1 of this year versus Q1 of last year. That's that's yield that comes out of the <unk>.
Integration of yield management processes.
That also.
A decline in our slides that's a core focus of all of that is also in there.
Driving what youre seeing in terms of our.
Our yields are rising et.
Et cetera, so just to kind of look.
What he said.
So that will help as you got to do a follow up on your question about Pizza hut.
Oh, Thanks Rich that's that's.
Really helpful.
Oil prices manageable I guess, just one last housecleaning question housekeeping question.
The volatility in oil, what's the spot jet rate you're paying at the pump.
The fuel price.
Just to add to that.
It's a pump today, just a housecleaning question.
At the moment.
You have the number.
Yes.
These 560 at this moment remembering that there is a 45 day delay in comparison to the international prices so at the moment.
Feeling.
Our aircraft with the prices compare to international quotation or 45 days.
No.
Understood and I hear you loud and clear rich on the recapture here good job.
Yes.
We have you have the number.
Great.
Q1 press release, you also IPO in a very detailed guidance your other assumptions for.
For the full year and so.
That's really what matters in terms of Ruggedized.
Thanks, a lot okay.
Understood.
The next question comes from Mike Lindenberg with Deutsche Bank. Please go ahead.
Oh, Hey, good morning, everyone.
Thanks Scott.
Nice to see the recovery really starting to take hold.
The American Codeshare, which.
As you said kaki and rich I guess effective just about a week or two ago.
Couple of things right.
Whats the potential revenue pick up like what are you assuming maybe in year, one and as sort of part two to that question do you plan to seek.
Antitrust immunity.
With them with the regulators to offer maybe a more comprehensive type arrangement, maybe on par with some of the other agreements in the in the region.
So we do not have good morning, actually we do not have.
Any.
New requests.
Should be submitted to the antitrust authorities considering the network, we have designers, which is pretty much.
Comprehensive.
Mainly with regards to the.
If I may come back.
Okay.
As a whole.
Icon Alliance network, what's important to highlight.
Is the current market performance.
One of those routes producing maybe could share.
In comparison to the overall demand.
The international.
Routes and international markets didn't recovery.
First domestic and Brazil are closed.
<unk>.
And this is something that should be.
Changes in the near future.
Now also perceiving the higher demand and a higher forward bookings for the international routes and even considering these.
The market size.
It's more than we had weak dynamic.
For the international travelers the partnership between <unk> and American Airlines is already today, two times bigger than we had.
Our previous partner.
They demonstrate.
Strong growth there.
American Airlines network.
<unk>.
The customer willingness to fly.
It was American airlines in Brazil, and Indonesia. So.
At this moment, we are exploring many.
The higher than expected.
In comparison to the overall market in Brazil has been producing basically by the excess dizziness the players.
In this partnership.
<unk> and American airlines, but for the moment.
As do we.
Sure.
We have already.
The antitrust approval.
Approval for the network.
The players today and.
Which is supporting the forward bookings.
Through the end of this year cocky when you say.
Bigger than you are.
Next biggest partner are you referring to like say a current partner like air France, KLM are you talking about versus downtown.
Versus what you had router.
Is that incorporates what you've you're already north American partner, our prior enough Americans.
Delta so.
This is explained by the network size by the capacity deployed.
American Airlines in the region so.
What should be good company for the South American markets and mainly in Brazil.
Just to give you.
Roger.
Reference on that subject.
And our lines of credit card in.
In Brazil second largest customers platform right after the United States. So did the brands really powerful here.
The company's in.
Customers.
Top of mind share so therefore.
As.
I'd say before we can see.
<unk> in the beginning of this.
No.
Of capturing that.
High value of this partnership.
Leashing.
The huge potential.
Right now and.
More to come.
Got it.
That's great. Thank you. Thanks, and then just turning to the slides.
Page four where you break out your corporate <unk>.
Kudos to the team this is.
Haven't seen anything like this from from any other carrier you guys have been very transparent with corporate and to break it down into I don't know it looks like 10 different groups.
This is fantastic data and you can see that big kind of as if somebody turned on a light switch back in February with corporate so I see there is a minor for corporate.
And there is a line there for consolidated which is green, but there are three other lines there.
What are those lines are they are they leisure are they are they VFR car.
Cargo.
I'm just curious.
You are right, we have the orders sub segments, mainly leisure.
Those bondholders is just to show you. The contrast between.
The recovery speeds of those two different segments.
<unk>.
Positively surprised by that.
The large corporate demand.
Overcoming removes pessimistic.
<unk>, we have shared before I go.
Along with the pandemic gaps.
The reason is related to.
No.
Strong would be.
Corporate demand deposits.
Also in contrast, with some of the most with domestics processes.
Sure.
Especially saying that.
Deep companies woodlands, everything should the pandemic travel habits.
We know the.
Broadridge as it was presented.
Even considering that.
Structural changes.
We're done.
I mean, we do see less and less passengers they can get blamed for.
When the new one.
And.
Flying back overnight.
The same time they are much more companies willing to visit customers in person.
Combining.
Business groups.
With leisure so even.
Each guidance from our point of view, which was always value.
Domestic.
Fortunately being supervised by a much stronger demand.
Knowledge and this is what we have tried to demonstrate.
Inset chart.
So to drive.
By making the offering and the yield comparison.
<unk>.
Much faster has been the corporate demand recovery in comparison to the leisure which is by the way also pretty strong.
Okay and then just.
That's super helpful. If I can just squeeze in last one just on the slide page five shows you how closely I look at these.
You talk about markets that you've reopened and you highlight some of the international markets and you have Orlando, there, which I know you are going back into.
You have instead of Orlando City code, you have Miami City code and so I'm not sure if that's a slip up or not but I would think that with the American agreement when I think about secondary Brazil.
Helped out the American have goal would be with the right cost structure and the right airplane size flying 737, eight Max from say, a DRAM or his CFA are Salvador manav.
To Miami that would make sense that would make a lot of sense. So I don't know if that was.
Unintentional or not but.
Maybe.
Yes.
Giving us.
Looking to your future plans.
Hello, My question like this our packing business.
Miami was always part of the art.
Max operation.
Politically we're doing flights from northeast, Brazil, and Portugal to Miami.
Part of the strategy, even prior to our exclusive Codeshare with American and now with the switch a culture of American Americas dominant market share in Miami.
There is a significant narrow body operation.
We can develop in.
Partnership with American.
Miami with American and our focus on the long.
I got it for the longer distances and the southeast of Brazil in southern Brazil definitely because of it.
Yeah, Mike.
The maximum.
Information I can share the magnitude that we are taking careful notes.
Very interesting suggestions okay.
Okay.
You can imagine.
February reaches the Flexibilities finishes.
Coming out of.
They should do with American Airlines that Youre right, 70% of mix.
Fantastic machine.
Really not only excited.
We are more than satisfied with the.
The forward bookings.
The.
The Vida slides to Florida.
Although to be region.
These months.
I think that is.
Sure sure.
<unk>.
Routes and markets and supposedly about to come okay.
Very good response, gentlemen, and nice quarter again, thank you.
Thank you.
The next question comes from Savi <unk> with Raymond James. Please go ahead.
Hey, Thanks, good morning.
If I might ask the business recovery question slightly differently I was wondering if you can say.
Forward sales is super helpful. But I was kind of curious where your business revenue is today versus kind of this time in 2019 and generally in your 2022 revenue outlook, what are you expecting that to recover.
Sure.
Alright.
The comparison two years those could you better explain that.
Maggie situations that we are at the moment.
Comparing second quarter 2019 and 2022.
In sporting.
The smaller number of business travelers than we were.
But reducing the much higher revenue.
And this is related to those two effects I have previously mentioned.
The type or the reason for the business drivers.
Has changed it.
Is widening.
They are more just one day trips.
They have been replaced by longer journeys.
<unk>.
King.
Not materially higher.
A number of clients.
Those travelers are bringing their families along so expanding their business trips and.
Producing whether you have.
And so how we manage the leisure segment.
So that's.
Therefore, we have higher yields longer longer stays.
The originations.
Therefore, producing.
Higher revenues. So those are the main figures to compare.
At this company.
So it was just a covenant in terms of your estimated Q2 for us is going to be a transition.
Back to what you kind of more so.
Normal mix of travel.
Struggling passengers pre pandemic until the second half and what's reflected in our full.
Full year guidance would be.
Approaching kind of the mix that we had.
Yes.
Pre pandemic, which would be roughly 70% of our inventory for them, but for business purposes, 40% VFR and leisure.
In that within that mix.
Overall about 40% coming from the high yielding large corporates.
That will probably be.
At the end of June and July that we will achieve that pre pandemic makes Q2 is still a little bit of a transition.
That's super helpful. Thank you and if I might.
Yes.
Okay I'm sorry.
Just like to add another another.
Item two this business driver analysis that we have shared.
One thing, we're really we'd like to highlight.
There is.
Our.
FIFA ability to adapt.
Network.
Okay.
Slide together.
Two new business centers profile.
I mean, we have densify.
This trend by the end of last year.
We are now in the second quarter is already offering a totally redesigned.
Network.
In terms of.
As I said Cabo and routes in order to cope with the new customer profile. So that's one of the benefits went up.
Assets.
Due to those business models.
Yes.
The next step is really adapt ourselves to the new market demands and precise so but please go on I didn't do too.
That was a good point Im glad you interrupted.
And if I might just ask on the on the fleet plan.
Like the Max deliveries outline in this fleet pan out a little bit different than the kind of the Max.
I think the firm orders or the Max deliveries.
In the 20-F I was just kind of curious what the difference was this year.
If you have kind of reworked the the delivery schedules. Since then are you are there.
Building in some conservatism on the Max deliveries.
Actually not.
Okay.
Thanks, Rick.
Actually we are in.
Not deviating much from what you have.
Sure.
And demonstrated previously and it happened because piano.
As previously mentioned.
We have combined our all delivery schedules.
Things that can move around.
Whenever we find attractive offers in the market. So we have somewhat blended.
Our our.
Order.
On the other.
Are there opportunities that we can we can take by the end of the day.
So but at.
At the end of the year, a change whether you'd be pretty close to the final figure we have already arranged share but.
It's more related to how we are doing this year and.
Scenario to recruit them.
Dramatically changing the numbers that we have already shared with you, but Richard I think what we'd like to do.
February what youre preparing there yet the order book is less than the total box we're sourcing from the.
Secondary market the lifestyle market etcetera aircrafts that were produced for other.
Clients.
Were bringing in in addition to the Max Max Our Max Order book.
So.
And part of the objective on that is to do a catch up.
This is.
Now it's almost four years, we've had where we had the bad.
Running in the pandemic.
And so.
And then during the pandemic, we reduced our total order book.
Through these risks until we're trying to do a big catch up.
Outside of our order book.
Working in the market.
And so if you're referring to with your.
Primarily extra boxes out there let us know.
And I suppose I'm looking at just two.
22 matches up with the 20-F, but like 'twenty three 'twenty four 'twenty five it looks like the 20th had like 59 to $79 96, and that's why I was kind of curious.
Tony I seem to have a higher number.
And that wasn't quite the question came from.
Okay.
Follow up with you offline on that.
Does that sounds great and then just one last question on just the capacity restoration as you kind of exit the year, where do you expect kind of domestic and international to be understanding that things can change in either being kind of very responsive to demand.
Sorry, Savi I am not sure that a 30 in the studio question, but if you're not growing viewer.
Land, we will have the two different markets.
Delivering pre pandemic numbers with regards to the Capex right.
Yes.
How long do you expect to be at the end of the year versus 2019.
Okay. Thanks, Chris is international.
The domestic domestic will be definitely.
The same pre pandemic level.
Even in light of both.
And international ice to believe this is going to be below 2019 levels, we might be surprised.
The current volatility.
The exchange Rage, and also the macroeconomic things that combine it with a different piece.
COVID-19.
Restrictions relaxation.
In the different markets by my postpone the international markets recover.
As we would like to have the domestic definitely we will be by the end of the year at the same.
We were pre pandemic.
Okay. Thank you.
Right.
The next question comes from Duane <unk> with Evercore ISI. Please go ahead.
Hey, thanks.
Firstly nice job getting your results out more more quickly I wanted to commend you on that.
Just a couple of questions for me Im not going to.
Five or six to dazzle, everybody with Mike.
Brazilian knowledge, but just a couple out of respect for the other people on the phone.
Look yields looks great.
Now and I'm wondering if you could comment more broadly on supply demand.
<unk> has been very disciplined.
Not just in this crisis, but in past crises as well but.
You continue to be a share donor.
By our rough math.
Going to be down about 4% in domestic.
In the second quarter. The second calendar quarter is always up nine points relative to 2019. So can you just comment broadly on.
How you see supply demand.
And at what point is kind of no longer willing to be a share donor in Brazil domestic.
Thank you very much for your question that that gives me the very I mean, how.
<unk> per share in Q2.
Once more.
Emphasize how important capacity discipline in the nineties.
You have.
We also mentioned that we had.
Defended the concepts already for many many years and hopefully you have seen that.
Have students to that concept.
In a very disciplined way.
<unk> disease.
<unk> perspective.
Is more important than ever therefore.
Steven.
We led the market in the first quarter.
Uh huh.
Have you already seen.
Quite terrible manner.
The 2019.
Others.
We are clearly demonstrating to the market.
Fly.
Okay.
At the time the Redwood.
Slide just to produce market share.
There it's again.
<unk> in market share result.
You will be able to continue to be sustained and protect as much as.
As we can this huge recovery.
With that he has been able to do that either.
So that's a very very important message, we like to deliver here.
That's the basic.
Yeah.
The fundamental pillar.
Strepogenin do we have.
Delusion.
Our business the results are speaking for themselves.
The another aspect related to the message here is that we have seen.
Somewhat.
Yes.
Yeah.
Offering a higher inventory than we usually would fly so.
Have mentioned based on the first quality of experience, we do have ice to believe that the industry.
In a more rational way then.
Every player in the market as we have been able to observe so that.
Independently of the vintages availability better Youre seeing right now I can't tell you.
<unk>.
From this perspective.
We continue to protect and defend the proper balance between capacity and demand.
Great. Thank you for that extensive answer and then just for my one follow up.
A follow up to some of mikes earlier questioning.
Just very simply not not this quarter or next quarter, but can you just remind us what the international strategy is.
What are the milestones that you're you're waiting for maybe it's sort of the U S testing requirements to go away but.
How are you thinking about international how are you thinking about the U S and how has that changed with the American partnership here. Thank you for taking the questions.
My pleasure <unk>.
More broadly.
Our next week.
We've seen that.
On average.
Assuming no international destination.
Since August last year and.
Is gradually throughout the year.
To resume international flights.
It is also improving.
The newest effectively one because we are.
Facing.
You mean.
Meaningful volatility.
Those markets with regards to the regulatory.
Constraints.
There are some countries.
Ads on COVID-19 restrictions relaxation some others.
Issue more conservative but.
Producing.
Very attract huge risks.
On all of those routes already.
Analysis and integration. So the next revenue will be the north American market flights from visitor to Florida.
Iterations of both to be region.
No.
Okay.
<unk>.
Now considering this.
At the same pace.
Along with the next the next months, so theyre more international destinations to come there.
You keep our word.
<unk> conservative strategy of.
Only deploying new routes and fees that we sure do.
As we achieve for us.
Our attractive rock.
Otherwise we would rather.
The things that preparation.
Thank you.
Yeah.
Thank you very much.
The next question comes from Stephen Trent with Citi. Please go ahead.
Good morning, gentlemen, and thanks very much for taking my question.
Most of mine have been answered, but just a quick.
Question.
For you on the maintenance side.
I haven't heard you guys mentioned goal aerotech for awhile.
And could you just maybe give me a little bit of color with respect to.
How you see potential third party business developing with that.
And to what extent.
Youre running any of your engine maintenance.
<unk>. Thank you.
Thank you Dan and thank you very much for the question.
At this very moment.
Fishing and annualize it.
Rising exactly those alternatives, one fact I'd like to share is that the demand for.
The msos worldwide.
It is pretty high at the moment the best produce.
Sorry.
Sure.
An interesting set of opportunities to go attack itself.
In order to increase revenues serving.
The airlines are there companies that also does represent a challenge.
Considering all that.
Our.
Fleet maintenance schedule. So we are reviewing.
Our strategy is the alternative.
In order to design.
Best location.
We can at the same time.
Yeah.
The higher cost to deliver the highest possible.
Number of customers being serviced by CECO aerotech structure. So I think that we will be able to give you more precise.
Information on this.
The scrappage.
In a few weeks.
Thanks, so much kaki and.
Super quick.
Dumb question Slash follow up you're still doing some of your engine maintenance to Atlanta or is that kind of phased out.
Okay.
Sorry could you pick up.
We could see the.
As everyone says.
When you said we are yes.
Yes, yes, yes, yes, yes, we believe we still have we still have our diversified and engine overhaul.
<unk> portfolio of service providers, we still have.
Start with Delta Tech Ops correct, yes.
Okay, perfect, let me leave it there thanks again guys.
Thank you.
As a reminder, if you would like to ask a question. Please press Star then one on your phone to answering the question queue.
The next question comes from Alejandro Zama Kona from Credit Suisse. Please go ahead.
Hi, Kaki and rich on a couple of questions here.
I'm wondering if you can share any thoughts on Macau and also ability to pass through.
Higher fuel prices through to final customers.
And any expectations.
Expectations for yields for the remainder of the year also considering.
The potential recovery of the business segment.
Discussion discussing during the call. Thank you.
Yes.
Okay.
I apologize for the audio was not the best today.
Setup, where we haven't been able to collect it during the call but in one of the previous questions. We were kind of walking through.
<unk>.
What you call the pass through what we call the recapture.
Which has depended on the travel events and so when we.
Had the strong recovery in the large corporates at the end of February we've been able to recapture.
100% of the variation in.
Fuel prices on our cost structure.
We were we have been struggling to do that.
From November of last year until the end of February when the number last year was really when the fuel increase oil prices increased significantly for us because it was simultaneous with a very weak Brazilian real.
And the other.
Phenomenon. That's happened also this year, we saw the first quarter was an appreciation of the Brazilian real by about 15%. So that is compensated a large portion.
Just of the increase in oil prices.
Our jet fuel prices in Brazil.
Effectively priced in U S dollars, but also has helped us.
<unk> reduce the cost of other a dollar denominated expenses such as lease payments.
Maintenance costs and things like that and so yes, we are.
We entered the second quarter.
With significant.
Higher level of yields as you saw in our first quarter results. This morning, as we have been explaining on the.
On the call.
On the second part of your question could you just repeat that again please.
Yes.
If you expect.
How do your yield from it.
The business segment.
Yes, I think your question was kind of in general going forward I think Q2.
We are at this level.
We shared with you in the presentation today, we showed some interesting data on the.
Corporate recovery.
And I grabbed that Michael was referring to the intellectuals between week nine and week 11 of the year.
So we continue to operate at that level.
As you know the second half.
We expect to have normalization of demand in the second quarter was a transition.
And when I say normalization of demand.
The normalized mix, 70% business traveler with about 30% of the mix being a large corporates.
And.
Second half also represents the majority of our <unk>.
Revenues for the year July is always a good month and so we do expect to have.
Continued buoyancy continued improvement.
In the yield environment, we've been Super disciplined theres been a lot of the order.
Questions on capacity.
Thank you.
The discipline.
Ability to have high quality yields.
Historically correlated with discipline on capacity management.
We continue to do that as Kaki was saying we do have as a target is directly focused on market share that we focus on.
Other metrics.
Identical we're focused on.
Sure.
Cash.
Management not margin management and also emerging from the pandemic with a unit cost.
Lower than we came into the public and we were able to achieve both of those and so now we're pivoting back to March management, which will be focused on in the second half of the year.
Yield management will be an important component of that as we'll continue to be capacity management with respect to assume we'd all have it was a question on market share, which tends to be kind of a U S market.
Focused question.
But that's not a metric for us we're focused on.
Initial pivot back to it in the second half of the year profitability management.
Balance sheet management.
We've been the most disciplined on capacity in that respect and that tends to result in less flight cancellations.
Because our competitors there was a data mentioned in one of the previous questions about somebody's Ford.
Inputs into the system.
Those aren't necessarily what ends up being flown.
There has been much less volatility in our imported schedule and the actual schedule with slower versus our competitors, who have put a higher number of flights in the system.
Canceling a much higher number of flights.
But using those two.
Project results in the future in terms of yields obviously that is a big turn up capacity, but we continue to be a leader in.
In the most disciplined.
Most conservative our capacity there is what I'm, saying all these points as it goes all the factors that I mentioned will tend to support.
For us the goal.
It's solid.
We expect a solid yield environment for the next couple of quarters.
Okay, Richard Thank you.
Excuse me this concludes today.
His 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 very much.
So a very nice day. Thank you.
This concludes the goal Airlines conference call for today. Thank you very much for your participation and have a nice day.
[music].
Okay.
[music].
Okay.
[music].