Q4 2021 Gol Linhas Aereas Inteligentes SA Earnings Call

Good day and welcome to the Golar Airlines fourth quarter 2021 results conference call.

This morning, the company made its numbers available along with three videos what the results presentation financial review and preliminary question and answer gold hoops, everyone connected has watched them. After the company's brief remarks, we will initiate the Q&A session. When further instructions will be provided.

This event is also being broadcast live via webcast and may be accessed through the company website at Www Dot Vogel Dot com Dot B R. Slash I R and M. D. IQ platform at Www Dot M Z IQ dotcom.

Those following the presentation via the webcast may pose their questions on the platform and their questions will be either answered by the management during this call or by the gold Investor Relations team. After the conference is finished.

Before proceeding let me mention that forward looking statements are based on 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, the call over to Mr. Paolo kicking off C. E O. Please begin sir.

Good morning, everyone I'd like to start by ratifying, our most important results of the quiet.

Which were made possible by the interest we receive at the front of our customers employees suppliers and investors.

We had the best quarter since the outbreak of the pandemic due to our relentless focus on cost and the creation of a flexible and dynamic operation, reaching 36% adjusted EBITDA margins.

The Muslim cassava, if one of them off the Masco travel was 77% of the same now in 2019, and we are projecting even more relevant demand recovery within that first half 2022.

We are already flying to all the main markets in Brazil, including some new ones like Puneet went a lot. This in addition to the return often international routes such as multi Vidal won't that goodness gunkel windows values and Palo Verde.

We had also seen encouraging signs of improvement in corporate segment is a significant development given that business drive a root cause that cause that broke some at least 50% of the market in 2019.

Gross sales in the fourth quarter to 421.

The fourth quarter, and 19, and we established our market, leading shuttle service between corporate and the market.

Our disciplined capacity management has protected the liquidity and position go for a drink of study.

Load factors and aircraft utilization continuing to improve.

Flight frequency has increased by 22% and despite a disciplined approach to capacity management market share grew in the fourth quarter to follow so anyway.

We achieved the fourth consecutive quarter of going you know exceeding pre pandemic levels and with significant contribution from this series.

Our balance sheet was presented and the short term debt is the lowest in four years.

Our liquidity will be further enhance it with the recently finalized an investment plan back in their lives.

We are accelerating to adhesion to Boeing 770 next to afford to drive cost efficiencies.

<unk> equity value and we'd use carbon emission.

We expect a reduction of around 8% in our unit cost and the equity created with your pre transformation and its respective financing plan should be around 4 billion reais at incremental spread is today.

As a result of these exploration, we expect better predictability in meeting the aircraft returns as scheduled.

Our revised the forecast, but it costs associated with newly signed up east and we had to recognize an additional nowhere going to vision without cash effect of $1 6 billion reais in the quarter result.

It is related to contract or weekend obligations Disneyworld cooler into 2026, we also expect a gradual reduction you maintain it expenses for the upcoming year.

Such savings will increase as the greater number of new 770, Mexico.

India feet intensifies, the honeymoon effect.

<unk> continues to show increasing resorts and he has already observed some of these synergies that didn't know who provide it.

And this quarter, we achieved synergies of 241 as you know the ice with tax efficiencies.

Finally, I would like to mention Scott is approval of the acquisitions of mine as a result, we started to offer new destinations that route departing frankel, whereas airport expanding the number of seats per flight and achieving greater cost efficiency with that have you have the floor over to Richard Lark CFO , who.

We will present some financial highlights.

Thanks.

Richard.

Thanks Kaki.

Our results reflect the social capital, we've built up over two decades of collaboration with our customers employees suppliers and investors.

I'd like to make a couple of comments on goals liquidity and capital structure management.

As for our detailed financial analysis for the quarter. It was in the earnings release and the video presentation shared today. This morning.

And I hope that you've had a chance to access them.

Our available liquidity remained stable at 3.7 billion Reais at the end of the fourth quarter of 'twenty one.

Considering 1.2 billion reais of debt refinancing announced last October .

Our short term debt totaled approximately 635 million reais at the end of 2021.

The lowest level in four years.

Although we had another challenging year, we fully honored our commitments to the global capital markets and paid 525 million reais in leasing obligations in the fourth quarter of 'twenty one.

Our liability management program, which the achieved the lowest gross debt among industry peers is a competitive advantage in the current market environment.

The net debt ratio, including aircraft leasing time seven.

Two adjusted last 12 month's EBITDA was nine times at December 31, 2021 stable in relation to September 30th 2021.

This ratio represents the lowest financial leverage among our peers.

Our initiatives to obtain additional sources of liquidity ensure the availability of funds for optimizing cost of capital, which will be sufficient for our growth during 2022.

I'll now return the floor to kick it off.

Thanks, Richard I'd like to close by thanking again that'll be employees. It team of Eagles, who are working with extreme professional audience and compete with all of this the stimulation puts us in a solid position to expand operations, we reiterate our conviction that goofy emerge even stronger and more resilient.

We've got a normalization of the market.

Now move on to the question and answer 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 at this time or at any time if at any point. Your question has been answered and you remove yourself from the queue by pressing the starkey.

Followed by two.

We ask that when you ask your questions speak closely to the receiver of the device. So that everyone can hear you clearly.

Participants can also take questions via the webcast platform you need to click on the question Mark in the upper left corner and typing your question.

And please hold while we poll for questions.

Yeah.

And the first question will come from Alejandro <unk> with Credit Suisse. Please go ahead.

Okay.

Thank you for taking my questions just a quick question.

So how can we think about the normalized should you after.

After the smiles integration considering that for.

This quarter, we show a few weeks.

Improvement.

Yeah, I'll I'll I'll take.

Take that question. Thanks.

Thanks.

A couple of things a couple of things one.

As we highlighted.

<unk>.

From the smiles reincorporation in the unified yield management.

Already in the third quarter of last year.

We worked on unified yield management, creating better inventory management in the system, there and roughly by September we had affected on an apples to apples comparison.

Around a 15% to 20% increase in yields because of that.

Yes.

I can't really say you know.

What that means on a normalized basis, because theres a lot going on with yields right now in.

In general and so that is already.

Incorporated.

That number into our inventory management, obviously, we're still recovering demand and we're also now dealing with.

The oil price.

Increases.

What's going on now in the very short term environment.

I'll take advantage of your question to make a couple of other comments.

We've been getting related to yields in general.

Where we are kind of right now which is the down seasonally.

It seems a little months of March April and May in the Brazilian domestic market.

We're tracking at about 30% above.

Our 2019.

In terms of yields in that comparison that many of you like to do.

And the yield on.

What's been sold or we've been able to.

Work hard and.

And just taking prices to deal with the current environment and.

Our sold yields are up about 25% versus two weeks ago that correlates to a yields are today run rate yield of about 45 cents in real.

Which probably should normalize in the short term at about 50 sites.

But obviously, it's hard to.

To speak to a normalized yield because we have dynamic yield management.

Which.

Is made possible by the market that the characteristics of the market that we operate in.

And also it's highly influenced by capacity and so you've seen what we've done on capacity also the market.

The competitors.

So adjusting capacity down to adjust for the oil price.

<unk> has reduced their capacity by about 15%.

Latam has reduced about 10%, but those are all factors that will affect what.

What happens with yields the issue ends up being the velocity of a variation on costs and.

And gradual adjustments that can be made as opposed to.

Quick adjustments, but but anyway going back to your principal question.

It was it was about a 15% to 20% increase in.

Yields as a result of the.

Of the smiles.

Transaction.

So our reincorporation.

Okay. Thank you and then my second question, if I may just some.

Okay.

The capacity we saw then.

New guidance.

Yeah.

I have a small reduction in terms of capacity.

Well I mean.

We look at the teach out looking at.

A meaningful.

Sure.

<unk>.

So what what are we missing.

No factories.

It's roughly stable so I just want to make sure what we're missing here.

Well, what you would be missing because I understand them better what we're doing about fleet transformation.

Accelerating our transformation from the engie to the Max.

Which has a larger a S K production per aircraft.

And also how we're doing in terms of network.

So it's an aircraft utilization and so all of those factors or in the.

The guidance that you were referring to in particular in the second half.

We're still not back to.

Our high operating efficiency.

That will only be the case.

When we're back with the.

Full fleet operating at between 11, and 12 hours of aircraft utilization per day.

That's what creates the SK production and then at the same time, we're accelerating transition from the AG to the Max.

Which has a slightly higher a S K production.

Per aircraft and so if you want to think about it is that for our stores. If you will our aircrafts will be.

On a same store sales basis.

Producing more on a capacity basis and thats seats right.

That seats.

So the there's a slightly larger seat.

Seat count in there and then the other factor is aircraft utilization.

But if you need any more details on that we could we can help you with the modeling.

Offline just reach out and contact.

My cellphone Mario after the call.

Okay.

Thank you Richard.

Okay.

Andrew I would like to I would like to compliment by saying that the.

The name of the game now he's got pest management I mean.

You have observed the longer last year that go.

As lab that the marketing that SaaS I mean towards rationality now that's more important than ever considering the current jets you not the coinsurance fuel prices at current oil prices because in Brazil.

There is a kind of delay.

Around 45 days between the international parity.

And the jet fuel price retail to the to the airlines, but we Oh.

Those are additional cost pressures coming from the oil market and therefore, the industry has demonstrated an even higher level of progression that is in comparison to what you have seen.

And so far so I believe that we could expect even.

Florida reductions in case that the oil prices we will.

Big gaps at the level that we would have forecast to the following 45 60 days okay.

Okay. Okay. Thank you Pablo.

Thank you.

The next question will come from Dan Mckenzie with Seaport Global. Please go ahead.

I think some rich I'm looking at the fourth quarter yields that was without the contribution of business. So you know your comment of normalized yields being closer to 50 cents does that include a full restoration of business or is that just simply a run rate based on the mix and and pricing actions that we've seen year to date and you know I'm I'm think.

The business where back that's about another $2 billion in and he is there another 2 billion of revenue in the quarter here.

Hello.

Perhaps our speakers are muted.

Sorry microbes.

Microphone disconnected can you hear me now.

Oh, there you go okay. Yeah. Thanks, Yeah, sorry, sorry, it's all just repeat because most of US think is normalized yields Dan. The question I got was what are your normalized yields.

I didn't say, what the normalized yields but as I said, what's going on in the short term.

Which is what matters.

You're asking you're asking about the Q4.

But the.

The yields will react to what's going on with.

Industrial capacity as well as what's.

What's going on on the cost side as Kaki mentioned.

There's a high correlation between the.

Brazilian real and oil prices there was an offset there a lot of you guys internationally in the U S and to focus only on the oil side of the equation. We also have the currency side of the equation the correlation hasn't been as strong recently, it's only about <unk> five negative it's usually closer to 0.9 negative.

But it does it has offset some of the.

The quick run up in oil prices.

And how does that you will put a little bit of a break on the immediate impact and as kaki was saying, there's a roughly a 45 day lag between when the.

Producer of jet fuel.

Passes those cost increases on to us, which does give us time to adjust.

Ticket prices you know we can have some visibility on that but just let me let me because I was answering the question and I realize that the.

The platform here automatically put me on mute just if you could just go back to the first part of your question. There. So I can make sure I answer it.

Yeah, just the record fourth quarter yields that was without the contribution of business and I'm, just trying to get a sense of what that they have today.

She is going to be in 2022 here potentially yeah, well it is.

Not that it's without the contribution of business. We started in the Brazilian market overall right around the end of August last year, we started to.

Get the recovery of the corporate traffic the large corporate traffic and it's still not fully recovered.

The specific sectors that are not.

There are specific sectors that are above 2019 consumption such as food.

<unk> beverages in education, and the specific sectors that are below the main ones that are below today.

The blue chips in oil and gas metals and mining and financial services.

There's some clients massive global clients in there that are only 20% recover that represents upside, especially for global because our network is most oriented towards.

The point to point.

A direct flights with a travel so yes that is that is something that continues to evolve positively to Lee.

As the travel restrictions that many of these.

Large corporates have posed on their employees and yes that was less present in the Q4. The Q4 yields were more driven by VFR and leisure.

You know kind of like a 60 40 mix of VFR leisure.

Slash business.

And we expect that by June July we'd be back to the more normalized mix of.

70% of our customers traveling on the gold network for business activity.

And then the.

And then the rest being VFR leisure. So there will also be there also be you know with the capacity restrictions that are required by the increase in in the cost of providing the service. There is going to be you know to some extent a crowding out.

All of the lower yielding passenger to.

To the benefit of the higher yielding passengers. So that is correct, what you're saying you know on a relative basis. If you take Q4 versus Q1 and Q2, and then very much the second half and.

In our case.

Can speak to that will definitely have an alteration of the mix in favor of a higher yielding.

Traffic.

In general as if you will depend downtick rolls off and at the same time.

As we were mentioning.

There is capacity reductions happening in the industry.

And what you guys have all the data on that and then then there is.

There are adjustments that are happening.

So on a on a forward basis right now worried about.

And average ticket of over 500, Reais, which hasnt fully necessarily compensated.

The full brunt of the oil price increases remember the currency the Brazilian real currency appreciation has.

That has helped.

But.

There is room.

The demand side overall and also because of what you mentioned.

The large corporate traveler coming back where.

We we can be looking at an average ticket somewhere between 550 and 600 Reais and the in the near term.

That would kind of correlate to that yield number that I was mentioning of kind of 45 to 50 cents.

Which is not a normalized yield it doesn't mean, it's not normalized or well. It is it's just what what.

We would be.

Achieving.

In the <unk>.

Short term through a variety of things and it's not just increase in ticket prices as also eliminating a private discounts in certain segments like otas and significantly reducing <unk>.

Promotional tariffs that were used as well to kind of more stimuli.

Activity in the end the deal foreign leaves are so it's a variety of things that we're doing there too.

Compensate for the.

The increase in the in the in the unit and the fuel component of the unit cost.

Okay. Thanks for that rich.

I guess, you know with respect to the really the video you know thanks for that as well you guys touched on M&A and and highlighted map and you know outside looking in you know they disappeared that Latam just simply hasn't been interested in M&A, but I'm wondering if fuel price volatility has had an impact on the urgency of any of your your.

Conversations.

Hi, Dan.

Up here.

Just want to add another information related to the large corporates before I ask you to answer a question.

But kind of what we saw for the first time some slip pandemic started.

<unk> strong.

Yeah.

Get chop on the big corporate demand.

Not yet close to the pre pandemic levels that's accelerating.

Yes.

It's coming along side with the protocols relaxation that we have seen coming from deal charges.

And I believe that from that moment on we view.

Have these <unk> curve.

Affecting in a good way that they use.

Mainly towards the second and the third quarter of this year.

Regarding the let me say South American environment.

I think that disease. There is no reason to believe that a global trend for the airlines.

Not happened here I mean everybody's looking for.

All of the synergies cooperations and there might be some.

M&A opportunities, we have prepared ourselves to play a major role.

<unk> data.

That range if it happens.

But also in parallel I believe that there are there seems to be down a bit.

To me the plain vanilla Codeshare, we usually get.

A full merger.

The market is.

Plenty of.

Senior Gs and corporations being developed it.

And they are now.

I mean, there's possibilities that we can envision nothing concrete.

I believe it does.

The market is moving.

Towards this direction it might.

Go or other competitors, but I believe that this is a kind of strange.

Which is about to happen worldwide.

Okay. Thanks for the time guys.

Thank you and see you next.

The next question will come from Duane <unk> with Evercore. Please go ahead.

Hi, This is Jake on for Duane. Thank you for taking my question.

As far as on the bulk.

Jake Gunning Duane to associate.

Oh, Hi, Jay.

Hi.

Historically, Brazil has seen a high inflationary periods, where fares are typically risen with inflation.

Also seem to be seen and now really.

And to your comments on yield.

Do you think this relationship is specific to Brazil, or South America or would you expect recent inflation in the U S to result in a similar increase in ticket prices.

Which relationship.

The relationship between inflation and ticket prices with broader marketing pleasure.

Yeah.

Well, Yeah, I guess the U S market is very different right.

You have much worse.

Leisure market.

Much more price sensitive market in Brazil is much more price elastic.

Inflation.

Our main fixed cost SAR aircrafts and.

Labor. So the aircrafts are most more impacted by what's going on until the global supply and demand of aircrafts and exchange rates.

And then.

The fixed cost of labor is what we have there in.

And the contracts and so we don't we have an annual cost of living adjustment on labor, which was already negotiated in December and so inflation does not really impacts our fixed cost structure like you might see in the U S. On the variable cost it would vary.

But our main variable cost as the.

As the fuel component that we've talked about.

So the issue with inflation is more is it.

Is it impacting the overall Brazilian economy.

Not necessarily go directly and so it would be.

Well that would be impacting your overall present economy, but.

It was Brazil, as the raw materials driven economy.

The main effect that is impacting the overall Brazilian economy is what's going on with commodities prices oil iron or things like that and so the current environment.

As bullish for the.

For the present economy. The issue then becomes.

Is the inflation at a point, where the government in Brazil, and then this is very Brazil specific as interest rate increases and the impact that that can have on consumption.

As well as on on Us in particular, and so the impact of inflation ended up being more muted.

On demand.

<unk>.

Based on what I just told you you can see that it's if it's related to the factors that you mentioned, it's a positive on demand.

Pretty much neutral on cost for us and then.

It can have impacts on.

On the on the balance sheet, we don't have a very high component of <unk>.

Variable rate.

Real denominated.

Facilities. So it has a more muted impact on us in terms of how we manage our balance sheet and I guess, the only final comment I would make in Brazil.

The price sensitive customers are more insensitive to their ability.

To purchase retail goods in air travel on installment payments and so we have that tool as well.

To manage.

To manage that.

Before before we go to the next question operator, I just wanted to address this in the Q is not.

I've seen the people in the queue and.

I understand the pressure on sell side analysts to rapid fire out.

Reports.

Sometimes without consulting with us and our buy side, you know asks us to.

Spend time to make sure that correcting misinformation that has put out by some sell side analysts itself.

This is an important point because it's a it's a big mistake about the JP Morgan analyst and I'll just mention it.

As many of you probably have not yet.

At that time to look at it and it's complicated because it relates to how we manage the fleet and its accounting.

We've proven we explained it in our release and as you have the time to go through it you understand it.

But in our 2021 results in the fourth quarter.

We increased the provisions.

For the return of aircrafts. So early re deliveries if you will.

Based on the specific contractual lease return conditions.

That was provisioned in the 2021 results.

It does not impact 2022 results and it reflects the estimated.

Costs expenses.

Of those aircraft returns.

Through 2026 over the next couple of years.

And the trigger on that was in the fourth quarter.

Management made a decision to accelerate the transition from the energy to the Max and so those are future expenses.

To return N G aircrafts over the next four to five years.

Sorry, I, probably did you can you hear me, okay, operator, so I'm not sure because my computer screen it keeps slipping off where.

They are not what Fernando Abdalla from JP Morgan said, our cost this year to put idle aircraft back into operations.

That is that is incorrect in that that needs to be.

That needs to be said here because.

That is very misleading that's not what we disclose and that's not.

What the purpose of those provisions are but those provisions already made in 2021, they do not affect.

They won't impact 2022 are in their year.

Going forward and then there was another component.

Component in the exact same research support.

That said, we had $2 7 million Reais billion Reais of short term debt that is not correct.

600 around 600 million RASM short term debt.

And that's a significant material difference and so the car.

Caveat and tour on that so operator, we can go to the next person in the queue. Please ethane exports into the queue, but I'd like to do is give some space for some of the questions that we received on the on the webcast platform.

Some folks are.

Communicating list that way in this new.

Hi.

Hybrid environment.

Yes, Sir our next question will come from Savi <unk> with Raymond James. Please go ahead.

Hey, good morning.

Afternoon, actually add if I might follow up on Dan's question on the business demand recovery.

I was wondering if you could provide a little bit more color on like maybe versus 2019, where it is today like are there in terms of volume or revenue and you know.

Generally what are you kind of assuming in the 2022 died.

Hi, Savi, it's got cut off here.

Two five and seven 2% than we had in 2019 I mean.

The percentage of of corporate customers flying today.

And what we are forecasting considering the crew and sales forward bookings is that that number might achieve 80, 80% to 85%.

Along the second quarter, that's our focus at the moment eight 5% in comparison to what we got.

2019.

That's helpful and then if I can sorry, I missed that.

As he apart and you say, it's 65 to 70 currently.

There.

Yeah. So currently because you need to differentiate what we are getting on board.

<unk> at the moment and.

What are we are selling.

Forward bookings, okay. So that did you guys. This issue decade snapshot.

What's the present day of corporate customers getting onboard today in comparison.

Pre pandemic levels that would be 65% to 70% dependent zero and the forward bookings are telling us that.

During the second quarter.

Might achieve.

<unk> hundred 85%.

And along those lines are you and then I don't know if he has great visibility that are you hearing from corporate clients.

Is going to be any you know is there kind of a resumption assumption that we get back to you know 2019 levels and beyond just because you know that there'll be growth beyond that as GDP grows or is there any kind of reason to think that maybe some kind of permanent impairment in the demand, but what I'm, saying.

Certainly there is an additional element now which is somehow.

Disguising the real the real reasons behind the capacity Andy's. Additionally, the mentor.

Those are business travelers not due for mine during the performer during the pandemic.

Now they are somehow unleashed I mean, we are combining the natural demand we've those travels.

Travels postponed during.

During the pandemic period, therefore, it's really hard to do.

Besides.

What exactly is the demand today, but it's catching up pretty fast.

I believe that this phenomenon we will last.

All over the 2022 years.

Yeah. That's a good point. Thank you and then if I might just a quick clarification question on that 2020, EBIT Guide I think.

It says it excludes fleet transformation maintenance cost is that related to the engie return costs and I'm just wondering what's the cash outlay might be in 2022, as we kind of forecast the cash component.

Yeah all of those all of those are.

Fully provisioned, so theres no expense impact.

Going forward relates related to is that as we work with companies who are supposed to have constantly provisions.

Your full cost to return.

Based on the contract clauses and so you'll have to have that constantly.

Updated.

And the other point you were saying is that it won't be in 2020 to what we're doing.

Is.

Matching the.

Returns with the intake of the matches.

And what we're doing there is as you saw we did with the transaction, we announced $600 million.

<unk> had some transaction we announced in January .

There are specific conditions, which allows us to.

Almost fully financed.

The lease return conditions related to.

Dan Giese, when we tie in those operations. So this year in 2022, there won't be any significant cash outlay related to the.

Re deliveries on a net basis.

On a net basis.

You know on a gross basis each re delivery you know can cost between $5 million to $7 million, mainly related to the engine overhaul expenses that are required to affect affect those.

Returns I remember specifically in the case of gold.

We've been hit negatively.

Over the last four years.

Because of what was going on with the Max.

And.

Two years of Max grounding two years of pandemic.

Our average fleet age.

Aged up to about 11 years.

Which is not our plan and so what you'll see.

And this acceleration has us getting back to our sweet spot of seven years or lower and so all of those components I mentioned are tied up in abnormally high.

Engine costs, because we've been keeping these older <unk> operating for longer periods of time and also <unk>.

Conserving cash and all the issues related to what's been going on to pandemic and so this year for us as a catch up.

On that but we're going to reset the dial on that by the end of this year.

When we will be finishing this year with above 40 matches in the fleet.

But it's important to Michelle.

On a net basis.

The.

The the Max is coming in are linked.

Not just on a replacement basis, but also on a generation of financing basis to help US return the energies and how do we do that well we were able to borrow against.

The equity value that.

We create when we buy them acts and so all of that.

David that I, just gave you can't help you.

Help you figure out which or whatever it is you're looking for them.

That's helpful. Thank you.

Mr. <unk> would you like to take the webcast questions now yeah. Good question, Yeah, I'll just start with so many I don't always wanted to check I was just.

The maybe this is one that probably some folks are going to ask and I think it's a person who's far down in the queue anyway. So.

Kill two birds with one stone can you provide additional color on hedges currently paid how are you thinking about your hedging.

Isn't your fuel need in the current environment.

Yeah.

About you know we've got.

Couple of things the short answer is.

Got you.

Well the exposure, we've got around 10% hedged for this year and next year.

<unk> $70.

But that's not significant enough given what's going on with all right now.

At this company that goal, we generally have a program that works on a.

24 months forward basis.

We're generally as you know for those who've been following us.

We'll be around 50% hedged 12 months forward and then once 13 24 will be around 20% hedged.

Given that we were 24 months independent make environment.

We are.

And given what's been going on with oil prices and given that our main focus has been cash and liquidity conservation.

We have not hit.

Many of our triggers that would have caused us to be hedged 50% of the next 12 months.

Now a couple of comments on that one is that.

Literally almost 12 24 months ago, we had zero or negative oil prices.

And for those of you that follow US know that we were always fully mark to market and fully deposited with.

Counterparties, we are the only.

Company, among our peers that did so everyone else defaulted.

And we rode out the zero oral place scenario and then the situation in Q2 of 2020.

We had about $1 5 billion reais.

Al.

Assets in our hedging program and then when oil went back into the mid sixties around September .

We started monetizing our hedge position and we extracted from our hedge positions.

End of 'twenty and then at the beginning of 'twenty, one about 1 billion reais of cash.

And that's one that just as an example of one of the points, we say, how we manage our liquidity using noncash current assets.

Having said that you know the pandemic lasting around 24 months.

We ran down all of those those cash gains on the existing hedges they were used to pay.

For pandemic needs, but we still kept in the market with triggers and that's why I said were just these positions we have roughly 10%.

This year next year in the low seventies were put on you know prior to the run up which started in November of last year.

Number of them number one having said that the industry right now is relatively unhedged or not hedged at all and so then that puts the pressure echoing <unk> comments on the capacity side as a way to manage.

Manage the.

The cash flow.

Situation and then the final point I would make.

Is that.

Well, we've been doing this for almost 20 years I mean this is the exact time when you should not be doing hedging.

It was around it was probably.

The uncertainty that's present in the market now dictates that and it has affected the entire curve.

And there's at least a 30%.

Premium across the entire curve at least in the time horizon that we would look at which would go out 24 months and so while we do have triggers.

But below where the the.

The market is right now and so don't expect to see anything.

From us on that and so.

That's a long answer to that question, but there was a couple of other questions related to what we're doing on.

One is of course all of this data is in our financial statements as well.

Just to make it easier to get through operating and go to the next person in the queue.

The next question will come from Pablo <unk> with Barclays. Please go ahead.

Hi, good morning, and thanks for taking my question I have just a simple one I'm looking at the Jetblue price that is increasing but the FX is moving in the right direction. What are your plans to deploy more capacity for international markets.

Are you married to the U S. Thank you.

So to do it's in the U S. We are about to resume however.

Our operations are in.

In May we have been pretty cautious deploy additional capacity for that specific route as you probably know that is a unique offer to.

You offered.

Just if I go to apply directly from Brasilia to Florida.

And that.

Makers capable of operating such a route on Etsy.

He dropped the ball level.

Regarding the Capex capacity overall.

Have good indicators that the industry is behaving accordingly the strategy.

You mentioned in the beginning of this.

Presentation.

It was.

<unk> highlighted by right Richard.

In his last answer.

We do see a higher level of rationality.

And that in combination with the current indicators.

We.

We have.

Foreseeing the forward bookings.

Such as those factors in March April and May pretty much in line with 2019.

Basically talking about the leisure travelers, we have exactly the same level.

Pre pandemic demands budge.

Those tickets have been sold at a much higher yield level.

Precisely 30% above 2019.

I mean disease.

The outcome.

A disciplined.

Capacity deployed by by the industry and I think that it has been.

That phenomenon has been strong enough to cope with the additional operating costs imposed by the judge of higher jet fuel prices.

The market has absorbed those additional views and it wouldn't be possible to make so if not through a hired.

Disciplined industry as we have seen.

So far.

Very clear thank you very much.

Thank you.

The next question will come from Valencia May Rocco with Metlife. Please go ahead.

Hi, rich.

Thanks for taking my question.

Thanks, Doug.

Okay.

Pricing policy, but I think that's it.

Yeah.

Absolutely.

Okay.

Thank you.

Operator, we'll go with one other question in the queue and then I'll come back to a question on the.

From the platform.

Yes, Sir.

Next question will come from Rodrigo <unk> with UBS. Please go ahead.

Yeah, Hi, reassured hi, guys. Thanks for the opportunity I had one single question regarding the end of your aircraft fleet.

There was a slight reduction in these guidance I'd like to trust them first.

The costs to return.

Those aircrafts were included in the provision already.

And secondly, could we see remain to capacity reduction beyond this level during the year and can be create extra costs that we're still not to provisions.

That's it thank you very much.

So that's a good question.

There was also some.

This information out there and one of the other reports I think it was the mortgage style airport not sure.

We haven't really changed the.

The fleet guidance for this year.

We finished.

We've made some.

Adjustments on if you will.

Well, let me kind of walk through it I mean, we finished 2021 with 135 total aircraft to the fleet and you've seen the guidance is between 130 and one for it. So it's roughly the same fleet size of them within that.

We're working on accelerating.

The fleet transition and we have.

We have three levers we can match maxon with an earn out.

Can have Max as we can.

Are they just going out SaaS of them access coming in or going out slower and so we can adjust our capacity.

Pretty well to match.

To match demand and so the first.

Driver for Us is really what's going on with.

Matt matching our networks with demand in the aircraft, we need to do it and then the other level we have in there.

Is the level of efficiency.

And as it is expensive to us.

Uh huh.

Return aircraft and then be short aircraft if demand picks up the way we can regulate that as just by having a slightly lower operating efficiency through lower aircraft utilization. So those factors when you see that.

Level of operating aircrafts go up or down with.

With the total fleet size remain the same it's really related to how Fisher.

We're going to be and as I was saying before we'd want to get back to roughly 12 hours a.

Dave utilization goes one of the few airlines on the planet that can achieve that and that's kind of our sweet spot in terms of cost <unk>.

Competitiveness.

Our competitors can't match that.

And we will need to get back to that having said that.

That's always been pushing as well.

A majority of the return costs are financeable.

To some extent that.

It's tied into Max's coming in which has also been very.

Very tight.

And so what youre seeing there in the in the guidance any adjustments there on capacity, it's a combination of those factors.

Number one a lower level of potential lower level operating aircraft, while keeping the.

The size of the fleet number two.

A adjustments on.

Utilization.

Number three.

You know how we're calibrating.

<unk>.

The Max is coming in and Andrew is going out and how that can be.

More or less capacity.

Pending on how we do that Jackie.

Jackie if you want to complement that.

So this is basically the same come from is it that you have raised before.

I think that you have already.

Sure.

It's completely.

Okay.

Just a.

I think we might have run out of the queue, but maybe I don't have the updated Q, but I'll just go to one other additional question on the.

From the webcast is basically.

What's the timing for us to close our exclusive Codeshare with American Airlines.

That is imminent.

And I Trust.

Oh.

Process, which is expected to occur.

In the short term after which we would.

Effect.

The 1 billion real capital increase and then on top of that.

Due to a preemptive rights offering and that's why actually I mean, it's just in the.

And the final.

Days or weeks of.

But obviously with the antitrust the pool.

So it's that.

<unk>.

The message I'm getting here is.

So operator, maybe you can do the last call to see if anyone else.

Wants to come into queue.

Yes, Sir.

If you would like to ask a question. Please press Star then one.

The next question will come from Mike Lindenberg with Deutsche Bank. Please go ahead.

Oh, Hey, Hey, guys. Thanks for squeezing me in I'm, just going to ask one quick one here rich on the forecast for 2022 now the revised revenue forecast.

<unk> seven versus 14.

We're down only were only down 2% and yet it looks like you know when I think about your capacity shave five points, but I think more importantly, the seats are down 15%. So there is obviously an elasticity here than you've mentioned it earlier that you know historically.

Demand in Brazil tends to be a lot less elastic than what we see in the U S and I'm curious you know sort of what you baked in with respect to your ability to recapture the higher fuel and it it may be that we have to go back to like 2011 and look at the Arab spring when energy prices were up 40%.

Wind back the clock a decade.

How what Paul was able to manage through that period, and maybe you were able to offset 100% of the ryzen feel but with a lag so anything that gets kind of color on that maybe past experience would be great. Thanks.

Yes.

Yes.

Okay.

Joe glad face, we'll leave it up to the last question on the call.

The short one rich.

Last but not least huh.

That is the question of everything.

No just the.

Maybe I'll start off and get cocky can complement a couple of factors.

The part of it will depend on how long we stay at this altitude.

Because as you know it could be over in two weeks right. It could be over two yes, it could be over in two years right. So part of that.

And nobody knows right and.

And I'll come back to that number two is that very different you know we're coming out of.

24 months of a pandemic.

And.

And then there's that lever.

So the main driver for us.

For goal again remember goal, it's not you know.

And so you'd have to if you want to compare goal to 2011 you'd have to compare networks you'd have to compare.

Fleet per outlet per I don't know, if it's relevant but because we did some major re formulations of the coal network.

Post 2015 16 recession.

When gold emerged as the number one market share number one business airline and once everything normalizes go we'll go back to that.

Network today, which is based much more on four or five central hubs around Brazil.

A higher much higher percentage than point to point flights and a much higher shuttle business and so it's a much more business weighted.

Network and revenue base, it's a much more higher yielding.

Then we had back in 2011 it number one.

Then.

Coming out of the pandemic.

We're still waiting for the final the major large corpus to come back Petrobras volley bradesco.

Which you know the blue chips coming back with consumption and so they're most likely coming back.

<unk> with this current scenario.

Both of those are factors that.

Give us substantial.

Leverage with respect to yields.

I would argue might that the yield numbers that I'm mentioning to you I don't know I don't keep the database in my head and I might be wrong, but you might have to go all the way back to like 2006 to see those levels of yields.

Yeah No. That's the first thing I said when you heard said 45 to 50, yeah that was like Wow I I haven't I don't think I've ever seen that before so I don't know we had that in and I would say like.

And obviously, it's a different environment, but as well, but and so and so.

Just kind of wrapping all of that together.

The key the key measure to have that happen is this overall capacity and we can go tends to outperform in these very high fuel price scenarios because of the cost advantage.

Obviously, we're always right now.

It could have the potential for demand destruction, but not yet we havent reached that limit yet.

And as Kaki was mentioning as well remember that we have the lag between an oil price increase and when it hits, our P&L structure, which was around 45 days and then it is also a partial offset.

With the.

With the currency, which is bad yep, appreciating so thats roughly call it 30% increase in oil prices has been offset by at least 10%.

Increased appreciation of the Brazilian real which cannot nullifies about half of the impact on oil prices on jet fuel.

And so it's like you know all the numbers that you guys are thinking that's impacting U S Airlines divided by two that's the impact that's hitting us.

Yeah.

And then.

Going back to your other question, we're just being prudent on capacity I mean, we.

During this entire pandemic, we've been the airline that's most kept capacity at the low end of the range given that the slot.

The slack requirements are suspended and as you know they've been suspended again for the next season, all the way until September .

So there's no reason to focus on market share there's no there's no reason.

That's why I called out the seats. The seat number is a sizeable decline people fixate on S case, but your 15% on the seats is a lot.

I mean, you guys are definitely making a move on capacity.

A message at least to the market that youre going to do what it should.

But that's just that's just how we see it and and.

We have the ability to go up if we need to.

But.

But I would say, what we say on the competitive side as rationality I mean, we we didn't need to cut.

Because of Omicron.

Because we were already playing it.

At the low end and the attainment as all had to cut they have cut.

And so a large part of it will depend on that and.

And and so so.

The short answer to your question and I'll kick it over talking office, yes, meaning I think we do have we will have increasing pricing power, especially as the large parts of the course its comeback.

Also because of our network and we you know we spent a lot of money in November December January reactivating. The the traditional network based on our four or five strategic hubs around Brazil, and the point to point flights in the shuttle markets. Those are all reactivated they're not operating at peak volumes, we still do have inefficiency in aircrafts on the.

<unk>.

That.

We will have when the when when normalized.

Demand comes up but Oh Crikey I'll, let you I'll, let you finish. This question. This will be the last question, we do on the call operator.

Yeah, Richard actually adjust who would like to add one comment to the already very comprehensive answer provided by you is that in comparison to 2011, our revenue management and Skus in Toulouse.

Much better much more enhanced it I would say.

Therefore, we can now not only.

I believe these are the right message as you said Mike.

Regarding capacity.

Discipline, but also how much you have been.

Able to correctly price or our affairs and through those that have in juice.

Compensate.

<unk>.

Through <unk> improvement that would be my additional comment.

Yes, good question, Mike and it will appreciate this we've its something we take for granted because we have this investment done pre pandemic, we made a big investment and big data and digital analytics.

And it may be lost on most people, but for those been following so closely even though we didn't have we don't have a crystal ball our magic wands goal has been the first company to.

Identify the shifts in demand.

We've always been about two to four weeks ahead of the competition in either bringing capacity down or bringing capacity up that might not sound like a lot, but at the margin it's allowed us to conserve cash.

And our work at this company, which is on behalf of all stakeholders and all shareholders.

In particular are very large controlling shareholder.

We just haven't had the leeway to take a month to figure stuff out and so the digital analytics that we have in revenue management.

It allowed us to.

Had allowed us to.

No.

It has allowed us to.

Let's say.

Do much even though our part the airline business model bags stability.

I would argue that we bet we are the most agile within that quadrant of stability.

So good question, but it just kind of highlights that the issues that you're talking about might relate to our business model and our operating yeah and.

So we're managing on that strength, obviously, where an airline in the pandemic and now with oil prices. So we can't mitigate that but it does give us and I don't think we get a lot of it we don't get credit for it from the majority they might just lump us in with generic airline.

But you know equity what kaki said the the agility, we have on the on the on the technology side.

And the system side and yield management.

It gives us a bit of an advantage on that to kind of now we've been using that during the pandemic taken serve cash but it will also allow us to take advantage of upticks that you're you're hinting to.

Tend to view this more as upside at this point and that's why you see that gap between total fleet and operating fleet yeah.

Which is a which costs, but at the same time, we're trying to get back to be a seven year old company with the Max and so there's a lot going on are.

The only final thing I would say on that is that you know this year, even though we'd gone back I think we are probably the most courageous out there we've gone back and put 22 guidance back on.

Which is a big commitment, but people need to take it in the following manner.

It's really three phases Q1 is the end of the pandemic Q2 as this transition and then.

Second half of this year will really be the first block of time that permits true comparison versus whatever was going on in any pre pandemic period, which I think probably most people are going to compared to the second half of 2019, and I think the characteristics of the second half of this year, we'll be in a lot of ways similar.

There are two characteristics.

Characteristics of the second half of.

But 2019, but it's really difficult to talk about 2022 is kind of one body of work because it was really kind of three three entirely different.

Environments in there and we'll try we'll try but.

Hopefully, we get a little bit of credit for having the guts to put 22 guidance back one well.

Well, we appreciate it and then.

Discipline it speaks to your seriously it speaks when you read it you see the discipline, especially like you said between the operating fleet and the total fleet. So great. Thanks Kaki. Thanks, So we'll finish I'll turn it back over to the operator, but I just wanted to say is this as you know obviously this is this call for us.

We have our Portuguese call that starts in about 20 minutes, and we need to switch over to that but.

The cocky will give his closing remarks after me, but I just wanted to say.

Thank you everybody.

So we're basically putting the.

As you can tell we're putting the pandemic management behind US, which has mainly been focused on two directors, one making sure that we emerge from the pandemic, which will be the second half of this year with a unit cost equal to or lower than our unit cost. When he came in and we've already done all of the structural things we need to do to make that happen and that's locked in.

And then the other the other directed we had was to make sure that cash inflows and cash outflows match, if you will assets and liabilities and we did that and everybody who is paying attention to what we did we were doing.

So all that we did that but it could not have been done with the.

With the support of everybody in our value chain and of course, everybody here on the call here I mean.

We've learned a lot.

From what both the sell side and the buy side focused on we've been able to raise over $1 billion. During this pandemic from the buy side and I think it was because of our relationship and it was one of the things that I don't know if people picked up on it but we put in our release and in our videos.

We recognized that this was possible because of the social capital that Golar had built up over two decades, and so it's really important to us us as a management team.

The relationship we have with everybody in the ecosystem that I just wanted to <unk>.

So recognize that as we pivot back to hopefully what will be margin management as opposed to class a cash flow management or would that all cocky all shifted over to you to do.

The true closing remarks.

It was just to say thank you very much.

Aye.

I think that you have all of your questions properly answered, but if not.

Does it take to reach all of our team.

We are all available to you. Thank you all very much.

Great.

Okay.

This concludes the Golar Airlines conference call for today. Thank you very much for your participation and have a great day.

Okay.

Yeah.

Yes.

[music].

Yes.

Sure.

[music].

Yes.

[music].