Q3 2022 Gol Linhas Aereas Inteligentes SA Earnings Call
Over the first nine months of 2022 and will be added in a balanced way in fourth quarter.
Our highest season.
These figures here demonstrates how growth is resuming its productivity and efficient and further reduce the already lowest unit cost in history.
Main competitive advantage to generate a faster recover of its operating margin and adapt the company to the best efficiency indicators by the beginning of 2023.
Our load factors and aircraft utilization continues to improve and flight frequency increased by 40% when compared to the fourth quarter last year.
We expanded our presence in regional markets, notably for the implementation of our five distributions tinkering by year, which should reach 50 daily domestic flights by 2023.
We will have connections abroad through our international partners and the launching of routes connecting Salvador to the mainstream Brewers and destinations in the states.
In the international markets, we are strengthening our operations from Brazil to Florida. We also launched two new routes to market that will be operated as of December from <unk> and Fortaleza.
We also inaugurated our regular cargo networks, which is operated with Boeing 737 800 created in partnership with other reason, we started with a growth between <unk> and Fortaleza.
And we will expand the network to seek new series that arena, some lease ronca solar has ctrip brasilia and portal leg.
Partnership between <unk>, and <unk> provide an increasing unit revenue and lower cost associated with aircraft return since the aircraft operated by go and regular passengers transport.
Working to freighters and will generate approximately 100 million of pension remains a revenue per golar. We maintained the pace of our program to accelerate the transformation of the fleet to a new more efficient equipment aligned with the company Carlo.
Miss traveling goals.
This quarter's growth took delivery of three new 737, Max aircraft and we returned $2 730, <unk> by the end of the year. We expect to have 44 737, Max aircraft, representing about 30% of the total fleet.
And our goal is to have 50% of the total fleet fleet component by 737, Max by <unk> 25.
Turning to our loyalty program, the <unk> customer base, surpassing the 20 million Mark in revenues reached $1 2 billion higher this quarter, 26% higher than the previous product and practically doubled when compared to third quarter to 19.
Customer base that <unk> records consecutively increased demonstrating its potential while go expand its operations synergies were generated from tax management and seat inventory important levers that optimize gross working capital and liquidity.
We also recorded.
On year over year, an improvement of five.
Percentage points in our NPS net promoter score alongside important advances to improve the customer experience and strengthening our presence in the high added value corporate segment and now turn the floor over Richard who will present some financial highlights.
Yeah.
Perhaps you're muted Mr Lark.
You are correct.
Thanks for that.
The.
Good morning, everyone. Thanks also our detailed financial analysis for the quarter was shared in the earnings release and in the presentation made available on the webcast platform as well as on the global IR Web site.
I'll go through some of the highlights here.
Which will turn it over for Q&A session. Our liquidity remained relatively stable at $3 7 billion Reais.
With 869 million Reais.
Short term debt.
Yes.
At the end of the quarter the management of our working capital together with the increase in accounts receivable and the advanced sales.
Of miles and advanced sales of tickets has enabled us to maintain.
Our pace of growth necessary to operate our high season.
With a greater dilution of unit costs at the same time with the maintenance.
Very healthy share levels.
Also mentioned the transformation of the golf suite to the Boeing Max has a fundamental role in our operating strategy.
Which is in part guided by increased and enhanced productivity and reduce unit costs.
We estimate that in the next few years about 50% to 6% of 50% to 60% of the new aircraft delivered.
The goal will be financed under finance lease format.
Our S K NR PK.
In the quarter increased.
Compared to the third quarter of 2021.
And reached around 77% of 2019 pre pandemic year levels.
Yield in RASK showed increases of 51% and 48% respectively over the same period reached.
Reaching 45 cents in 39, respectively.
Our recurring EBIT and EBITDA margins reached six 5% and 17, 3%.
Respectively, and our EBITDA totaled $1 7 billion Reais.
In the first nine months of the year we.
We obtained an increase in the average fare sold demonstrating our ability and experience in managing variations in fuel prices and the foreign exchange rates, we achieved approximately 6% growth in our recurring cost measured in dollars compared to the third quarter of 2021.
We continued to be impacted by higher oil prices.
Which increase in the range of 30% compared to the third quarter of 2021, and which drove consequently, an increase of 91, 3% and the.
<unk>.
Brazilian price of jet fuel over the same growth over the same period.
Our cash flow in the quarter, we had $4 8 billion reais of operational inflows, which although impacted by the fuel price increase generated an operating cash flow of $1 1 billion reais excluding interest expense.
The company's successful liability management during the pandemic as we've highlighted to you.
Throughout the pandemic has put us in a leading.
Our position with the lowest short term debt ratios among our peers.
We've updated our financial outlook for the year 2022 to take you through the end of the year taking into account the increases industrial and also the results of the first nine months of the year.
Cell so back over to you.
I would like to conclude by again, thank you our team of vehicles as well as our customers investors and suppliers, who will continuously show confidence in the company's business model and management.
For Eurosport, we are calm and we said that we not only have the champion business model, but also that we are prepared to overcome the market challenge and continue to play a leading role in the recovery of the airline industry in the next phase of growth operator, you may initiate the Q&A session.
Thank you.
Conference is now open for questions.
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The first question will come from Dan Mckenzie with Seaport Global. Please go ahead.
Oh, Hey, good morning, guys. Thanks, Congrats on the the revenue generation this morning.
So I'd like to put on the slide this morning, I thought there were some interesting slides in there I just would like to put a finer point on them.
Slides 11, and 12 profitability resumption.
And underpinning that is better utilization so it looks like 11 hours today versus 12 six in the third quarter of 19 can you get back to 19 utilization levels say in the fourth quarter, the first quarter and does that imply profitability.
Or maybe what does the path back to full profitability look like.
And if I'm reading the guide correctly. This morning, it looks like you might be expecting a small profit here in the in the fourth quarter.
Hi, Dan Good morning, and thank you for your question.
What we we have been managing Capex very carefully.
By adding more aircraft into our network as we also increased aircraft utilization by the end of the fourth quarter, we will be flying at the levels, we used to fly pre pandemic in the utilization of the aircrafts. We are operating we still have some things on the ground.
And consider this Idaho, correct and we want to address this.
Over the next months next year, but what we call. The operating fleet will be flying at 12 plus hours per day as we always did and the growth history, we are bringing back the fleet and breathe Brexit utilization as we.
Our confidence that we are going to be continued to improve also the unit revenue, we don't want to dilute the unit revenue so.
We own.
Our growth to the fourth quarter, when we see demand strong demand from all those segments not only VFR leisure, but also corporate demand for fourth quarter and first quarter next year also on the international markets, where we buy longest standing land with the Max fragrance.
For example to Florida and other cities hearing in South America, So with that we are going to achieve even further.
Cask ex fuel reductions and will benefit by increased dollars margins.
Yes, very good sell so.
Yes. The second question here slides 15, and 16, you know rich it looks to me like liquidity roadmap as we think about 2023.
And is the message this morning that there's enough cash coming in from say advanced ticket sales smiles to bridge the working capital needs through through next year and I guess I'm. Just wondering if you can elaborate a little bit more than that.
Are there any operating outputs or that worry you about that worry over the coming six months and.
Whether it be I don't know Capex maintenance returns purchase deposits anything like that I'm, just wondering which you can elaborate a little bit more on that.
Sure Yes.
The working capital management and the Capex management is going to continue to be the same.
As you have been seeing not just throughout the pandemic, but frequently.
Well the way we describe it here is matching assets and liabilities matching inflows and.
Outflows and that that will continue.
The.
A couple of points of difference and complementing a little bit with social response to your first question one of the key differences.
A lot of you guys kind of look at the comparisons of pre pandemic 2019, but in our company.
No.
Significant structural differences that during the pandemic, we completed the taking of the minority interest of.
The loyalty program smiles.
And that makes us. So there is a significant increase in the retention of earnings and cash flow that's generated.
Buybacks business, if you were to kind of compare it on a 2019 basis.
Down at the bottom line.
It's around.
Fiber in Reais of additional cash flow or if you have kind of.
Back that into EBIT margin equivalent is about four to 500 basis points.
On that and so when you are comparing.
Margins cash flow generation or EBITDA margins.
Profitability and cash flow.
Today, we're goal is going forward to 2019, we need to account for that.
It's a much more robust.
EBITDA the other the other component that I that I want to highlight there that I think is often missed.
Especially we are looking at a company like <unk>, which is very low fixed costs as the operating leverage component and so as we recover.
Two.
Hi, productivity, which for US is you know is 12 hours of aircraft utilization a day across the entire fleet, which.
Which we expect to Jack.
Gradually evolve back to in the coming quarters.
The benefit of the operating leverage really kicks in.
And when you combine that with the work that we've done on the.
On the yield management side of the equation to deal with the variations in oil prices.
So it puts us in a good position to.
Yeah.
To generate incremental.
As you were saying earnings, but more importantly incremental cash flow.
And then as gradual.
We've taken a very conservative posture with respect to capacity management as you know.
He began at the low end of.
Of the possible.
To conserve cash and so we continue to be in that mode, meaning.
For more conservative capacity as opposed to as opposed to more for more cash conservation as opposed to more when you translate into liquidity.
Liquidity, which is part of your question.
You've seen where the structural liquidity pool is kind of settled in.
So this number of about $3 six $3 7 billion Reais, which is how we're going to be continued to be managing of the business growing.
Four and if there's any adjustments we need to make it's going to be on the capacity side.
In terms of how things are.
Our balancing out and sell to the next couple of quarters, I think youre going to see more of the same in terms of working capital management.
We do need to reduce our days payable to something more sustainable we got.
A very large amount of support during the pandemic across our entire value chain. If you sum it all together over the course of the roughly 30 months of the pandemic.
We.
We generated about $3 billion of additional cash resources that came.
Came in from everything from the very top of part of the balance sheet with suppliers all the way down to the very bottom part with shareholders across the board.
All of them and we didn't get any significant government support likely you saw in the U S.
And so that $3 billion.
Helped us get to where we've got now in the pandemic and over the next couple of quarters.
Need to reduce days payable to something more sustainable that will be matched when I say something more sustainable our normal if you will get a pre pandemic working capital management, we were roughly 50 to 60 days receivable payable.
Payable.
So the on the payables side that needs to come down on the receivable side as we continued recovery in the corporate demand as well as overall recovery to pre pandemic levels that accounts receivable level will come up.
Those those will match out I don't know.
On the investment side on the Capex side.
As you know.
We've been able to do a pretty good job of.
Pretty much 100% financing all of our.
Capex needs the most important of which is.
Max aircraft, we have.
The appropriate mechanisms are lined up.
Two 100% finance any needs that we have on the new aircraft side of the equation.
And then on the on the maintenance side of the equation, which continues to be a challenge we caliber calibrating the returns of the <unk>.
With our ability to get financing for such and so for example, the the deal you saw you guys saw recently.
On the spare engines that we were acquiring that was a way of effectively of.
Financing.
Keeping the angi is flying longer.
Such that we can also.
Preserve cash as it relates to.
Future returns of <unk> of which the main.
Cash outflow relates to the engine overhauls and so we're going to continue to match that definition.
Has to be pretty close to 100% LTV.
All the new assets.
Coming in which is going to create long term equity value with the new Max is coming in but we have to avoid.
Short term cash outflows, but just to kind of finalize because it's kind of part of your question just given where the.
The markets are right now.
The company really doesn't have a currency.
Today for any new external capital raise and so we're going to have to continue levering heavily on our working capital management.
Our ability to <unk>.
Finance.
The transition of the fleet.
<unk>.
<unk>. So hopefully that gives you a little bit broader context of how we're going to be managing the business going forward.
That's perfect. Thanks for the time you guys.
The next question will come from Savi <unk> with Raymond James. Please go ahead.
Hey, good morning, this is actually Matt on for Savi.
Rich I have a question about about Abra as we look forward to when that is approved or what are some of the key steps involved that goal needs to do to implement the partnership.
In order to drive the value. There is there anything that we should be mindful of in the next year the timing of that.
Okay.
Maybe you could I'm not sure if I understand your question.
Yesterday.
Is the focus on is the focus on Golar Golar earnings.
So ill rephrase. Your question, that's very strong basically I'm looking at it.
When the partnership has put in place are there any investments that go to make in house or costs related to that such as integrating systems, where that could entail.
Or are there things associated with aligning our loyalty programs et cetera, something along those line of sorry, I didn't catch.
Yesterday I got to work with.
Yes, Matt.
Matt Sorry, yes, if you want you can close up later on weekend I mean, we're not this call is not about that.
Thats what I. So appreciate if you could stick to rule.
Okay certainly.
Maybe I'll switch over.
On the aircraft deliveries if you could talk maybe about your comfort level there on your.
And just the timing with Boeing referred some industry commentary that there are concerns about the order book. So maybe your thoughts there and I think in the last question you said, 100% financing was in place for all of those deliveries are coming in the new year.
Misunderstand that.
Yes, I'll make a comment on itself. So you can complement on there obviously Boeing continues to have production, which is much below.
The pre pandemic levels.
We've been able to for the most part.
Well meet our targets on.
On the transition from <unk> some accesses.
As we've described we're still targeting to finish this year with.
44, <unk> in the fleet and of course all of this is within the context of what has happened over the last three or four years because.
The if you take the last three or four years from a capacity perspective, we have some pretty significant <unk>.
Impairment events on that plant one was the.
Grounding of the Max.
Globally.
As well as our actions taken in Brazil second was the Avianca, Brazil exit from the market, which put a lot of trends on capacity and then in our particular case and goal is to pick up our problem, we have with the <unk>.
Towards the end of above.
2019, and all that was pre pandemic sometimes.
Our focus tends to be on what's happening in the world.
This is the world began.
In March 2020, but when the pandemic hit and obviously, we had to pivot to a different type of management, where.
We became a little bit of an advantage.
The situation that we entered the pandemic, which was a fleet.
Primarily almost.
We only had <unk> on the fleet at the time, all operating leases because we have monetize all of our owned and Gs.
And that combined with the compensation agreement that we negotiated with Boeing and other things we were able to do.
Became a huge asset.
For us kind of managing.
Through the pandemic as we've been highlighting last couple of quarters, we've been accelerating and pivoting our transition to the.
To the Max obviously part of that will come off our order book with arm and then another part will come from aircrafts that are available in the.
And the white tail Mark.
And we're having success I mean, we're getting what we need.
And we're also able to 100% financed centers insiders, we'd wind up obviously, if a sale leaseback.
There is 100% financing there with the upfront cash generated.
Since the end of 2000.
'twenty, one we lined up some other mechanisms to be able to do finance leases with pretty much the same economics, meaning <unk>.
Generation of upfront cash.
Based on our purchase prices versus what we can finance if you look at the map. The mechanisms we have wind up to do finance leases than we did four in the first quarter of <unk>.
This year and we're going to do another six over the next two quarters.
With the six maxes that are coming in.
We have 100% Ltvs and a finance lease format, which also generates the upfront cash that we need to.
For the engine overhauls to return.
<unk>.
Having said that we have.
As you've seen if you compare our.
Consecutive revisions to the fleet plan over the last couple of years, we have consistently.
Consistently and gradually revised down.
The portion of the fleet for the next couple of years that will be <unk> and so we are keeping the <unk>.
If you roll back all the way back to say 2017, and 18 with our fleet plan with the Max.
We would have had.
A little over 60 matches in the fleet at the end of this year and we're targeting 44 and all of that roughly almost.
Right.
The 16% to 20 maxes.
Is the.
Is the difference in the effect of that happened because of those items that I mentioned over the last.
A couple of years, so having said that that has obviously been useful.
In the context of managing capacity to the low end.
In the context of the.
Of the pandemic.
The increase the massive increase in oil prices. This year on those others. So that turned out to be I think a hidden asset.
For us and so what you've seen on that as we have.
We've always been gradually revising down.
Afford delivery schedule of.
Of Max's.
All of these factors kind of.
Roll that having said that over the next couple of years, we do expect to catch up.
Obviously, we're going to do it on economics that it makes sense for us it's.
Important for maintaining the competitive cost advantaged, social and I don't know if you want to complement anything there.
Sure Rich.
It was completed just wanted to highlight that we.
We.
Hi.
Receiving.
The aircrafts at the lower pace than we were expecting but the white tails that means the aircrafts already produce it.
<unk> the main tool for us to have access to the capacity on the new technology, we need so that's why we're going to take another six until.
At the end of the year now.
This is for US was a way to accelerate really accelerates the fleet while.
Other manufacturers in the whole aviation industry is facing.
Hurdles and the deliveries of the planes, we we were successful of being reached.
We are successfully reaching mall, where regional fleet plan that we had even pre grounding on the Max.
Okay.
Rich.
Thank you both.
Operator, just before going to the next.
Sell side analysts on the call is we like to work in questions that we get.
From the platform in here, some of which come from the buy side.
So I'm just going to work in.
Two questions here now just to make sure we address those or have put in the questions on the platform and are waiting.
Cautionary some.
What do you think will be your indicators. After goal reached normalization by Q4 of 'twenty two could you give us some trend indicators on how you expect.
We will be the behavior on yields cask ex fuel in margins.
And run rates for 'twenty.
Well I think the main headline for this quarter is that gold converged its efficiency.
Almost back to pre pandemic levels at the 11 hours of utilization, we still need to squeeze another one hour a day out of the aircraft and we expect to start.
Or it should be in the first quarter towards the end of the first quarter 'twenty three.
With improved above its getting back to that full peak productivity.
Yields going forward are expected to have a more flat.
Behavior versus point too I think we've highlighted that they are at record levels and shares are very high.
Which have been necessary just to.
It almost breakeven operationally given the level of oil prices.
But we we plan to invest an incremental additional capacity at lower fares.
Stimulate.
<unk> and.
And Additionally, we still have around <unk>.
20% capacity lag.
Versus two.
2019, and so as you've seen the revenues, we've revised cynically revised up our revenues.
Run rate for this year with with 20% of our capacity and so when you combine both of those effects with the capacity coming up.
<unk>.
The expected yield behavior.
Yields.
We expect at this point would be flat next year.
Versus this year on cask ex fuel.
As you saw in U S dollars converted to U S dollars its already lower than in the third quarter of <unk> 19, and we expect to see further improvements.
As we get back to full productivity.
In Q1, and so expect to see that.
Better than the three six in dollars that it is now expect to see that.
And the three five range. So there should be some further improvements on that we also have implemented several fixed cost reduction initiatives.
As an example.
And with the natural turnover that's happened in the business during the pandemic.
Just the natural turnover in operations, mainly in things like airports and.
In other areas, we will end 2022.
With almost 2000 employees less than our preclinical models and so.
Our productivity has adjusted.
They are.
Now what I'm going to add there's another question here, which I think it's worth adding on to it because it's a little bit like the question we got from the.
The Raymond James person ourselves I'll flip to see what the question is.
Yeah.
Regarding.
Regarding the.
The Max.
<unk>.
Sorry, just slipped off my screen here, let me back to the question that just popped off here.
Pressed the wrong button.
One second.
Apologize for that.
And it's basically.
The.
Just talk about the.
<unk>.
Additional purchase order for the incremental 18.
Aircraft with Boeing.
What's the rationale behind that.
And.
And the financing of such and so I think I think subsidy because complement.
It's a little bit of a complement to the previous question.
Yeah, Yeah, Okay. Richard So this transaction was a continuation of.
Federation program with Brian that was already publicity discloses in January .
This year we're in.
Now we have completed the remaining six aircraft with borrowings to complete the 44 mattresses that we expect to have by the end of this year those right deals with attractive price conditions.
Those are all Max eight aircraft and we May finance those those claims.
And the same credit lines that we disclosed in January .
<unk>.
This year.
The additional 12 months then they have to be delivered between 2027% to 30.
And we want to support those position.
The Max spend will be.
Really really important for us to reduce even further our cat.
Expect to have the first and by 2025.
And those incrementals will be.
To have the right number of Max ban and the fleet mix, we designed for the company.
<unk>.
Five years from now so it will not change the short term plans of the company. We are not changing the fleet plan is just execution of the plan as we go.
This.
Phil.
Delivery schedule like I said, we don't have the same.
Availability of production that we use to help so we are.
Trying to find good deals being very pragmatic on those aircrafts were bringing into the fleet with the right.
Rice on REIT financing and this is what we're going to seek additional on Max eight.
Okay.
I'm just going to slide in one more question here from our platform and then we can go back to the analysts in the queue. This next question here is what is the plan to mitigate the volatility of oil prices are you planning to rebuild edge protection for oil what about half.
X.
Well, we go utilize this instrument today.
This is probably a question that other people have as well.
Today, the position that <unk> has with instruments.
We have protection for.
25%.
Over the next 12 months exposure at around $85 a barrel.
And if oil gets over $100 that the way we've designed the instrument that goes to <unk>.
50% protection, obviously, we've been doing our hedging we have been.
We came into the pandemic very well hedged.
And that created asset for us.
We had about $1 5 billion reais of a of an asset that we use to help pay for.
A lot of the needs in 2020.
We monetize most most of those hedge positions and our last couple of quarters, we have been gradually rebuilding and so today that we have in terms of.
But doing it in a way, where we use minimum amounts of cash but today.
We built basically gives us about 25% hedged for the next 12 months at around 85 Bucks and the way it's designed.
Cover us it will make us about 50% hedged if oil prices reach.
More than $100 now.
And about.
Anyway, so thats thats basically I think the.
The important.
Point.
And a big chunk of those positions are not exposed to mark to markets.
And then on the FX side, we continue to do.
Low levels of FX hedging, but just given the volatility a lot of those hedges get done and come off India monetize intra quarter.
Anytime we get some interesting gains.
There is the competition to take those gains and use those.
Four.
Paying expenses and so on and so with that operator, we'll turn it back over to the queue. Please.
Thank you. The next question will come from Holly on Joe.
Mokoena with credit Suisse. Please go ahead.
Okay.
Thank you Hi Central region. Thank you for taking my questions.
Just a quick question on capital allocation.
Any plans to improve the balance sheet.
I know this call is specifically for <unk>, but I think that.
Could be also in <unk>.
You have some information regarding our rollout.
<unk> capital increase and go you have any color on that.
We appreciate it Fernando on.
On that point I mean.
If and when Abra wants to announce anything there that would be made.
In the case and so.
We pride ourselves on not providing meti to investors and so on and so this will be not be the appropriate format to.
Do that Alejandro so please if you could just please keep your.
Questions on any questions you might have on helping you understand what we just disclosed in terms of the Q to Q to.
Q3 also as you know like we have a pretty detailed guidance.
Through the end of this year, we're not talking.
Specifically about guidance for 2020, we're not well.
We will provide that at the at the appropriate time, but if you could focus your questions on that I think that would be most productive yes sure sure.
My second question is on expectations.
Full recovery.
And if you can comment.
I know you mentioned some early expectations for 'twenty three.
And you can also mentioned in terms of capacity what are you expecting and also the latest trends on the corporate amendment.
Hi Highlands.
And I had to.
I will.
<unk> received all of the questions regarding the demand scenario as well so I'll try to answer your question also addressing other points that game along the call here.
<unk> scanning, but not every month, we are seeing demand improving quarter after quarter as domestic market is proving really to be resilient even in this high cost environment.
Go protected liquidity and design growth to happen in a way that cash and value would be maximized to the company.
Both both of our main competitors.
What happened is that the.
Really.
Capex in the beginning of the year, while we are waiting.
While we are waiting for the let's say more healthy.
<unk>.
Season of the year to bring back.
If you compare our growth for the fourth quarter will be around 11% via theyre going to be almost flat comparing to third quarter.
That is.
For the first time, where you're going to see more rationality right now.
We the pricing environment is.
More rational, but we see we still see some inconsistency if we go to them, let's say a group level.
The hub level, we can see that some competitors are adding a lot of capacity in <unk>. For example, just as an example net create.
Kind of a challenge for the pricing environment overall.
But we are really confident that all of the capacity we are deploying right now which is.
Even less.
What we had in 2019.
Very carefully we are going to be able to expand.
The.
The RASK.
Unit revenue.
While growing fourth quarter and what do we want we want to really start 2023 at the high level of unit revenue, but also at the high level of utilization and with the whole network and schedule already deployed of course, we're going to navigate through this.
Seasonality of next year, but we want to start 2023 by having the let's say the levels of productivity.
At least compared to.
What we had in 2019.
So with that we are going to offer an even lower task.
X deal and feel because of the fleet renewal program.
Thank you very much.
Thank you.
The next question will come from Hillary <unk> with Deutsche Bank. Please go ahead.
Hi.
Taking my question.
To have 25 last quarter and I was wondering if he has.
Okay.
Not that <unk> won't that.
Hong Kong that certified.
Well point out anything wonderful well thank you.
Jessica.
Yes.
And then I was just wondering if you have one we have the flexibility to switch.
Correct.
While youre principle, please don't have that.
Okay.
Hi, good morning Hillary.
Yes, we have the flexibility.
It's also speaking and we yes, we have flexibility to convert those Max and two other macs.
The aircraft.
Even if one day buying launch our new new middle market aircraft. We also have the rights.
We believe that the Max 10 will be certified.
With the assumption, we have on our plan, but where are we.
Of course, we are protected by.
I just wanted if we need to convert those to eight nine.
Whatever we need.
But the Max than.
Our first Max and will be <unk>.
Gathered to be delivering 20000 psi. So we don't see major risks that.
Could change.
Okay.
And then I just wanted to say.
With the global economy had a slow roll with high interest rates globally.
With that Ah, yes.
Being under pressure.
On the wet floor comparable club all in tons of corn.
<unk>.
What kind of environment.
Okay.
Yeah.
Christine.
Yes.
A high cost environment overall Hilary here.
Okay.
In Brazil.
Especially down in the second half of the year.
Inflation is getting older and we also had deflation.
The next in the last 12 months, which is good news.
Overall, we see for the industry challenges ahead.
Interest rates and also inflation.
Okay.
Thank you.
<unk> is going to continue to be high I mean, that's not only for.
To offset the fuel cost but also.
FX and U S.
Inflation.
And then I'll re queue, if you want to add something.
No.
Okay.
Okay, well thank you Paul.
So I was just going to say operator, we're going to I'm going to insert a.
A question from the platform and that we can go back to the go back to the queue.
The question here is.
And I think our centers want to yourselves to response.
Can you discuss the competitive landscape.
Are you seeing discipline capacity additions.
Additions from competitors.
How does your cash compared to.
Competition on similar routes and Legoland.
Okay rich.
Like what we're seeing from no one is more rationale more rationality in the market as compared to <unk> to discuss so flat their capacity.
While the.
Karen what they did before and we grew the capacity in second quarter and third quarter in our view more than needed and now I'm seeing that.
<unk> their capacity to address fourth quarter demand in the first quarter demand last year. So our view is that we're going to be.
Seen a healthy environment on yields.
At least the next six months.
And we are of course.
Expanding the network now on the most.
We're on the corner of our network. So what we did before.
At the beginning of the year, we brought back the whole.
The number of destinations we had we concentrated the frequencies on the on the hubs and from now one.
Any frequencies to the high frequencies and business market so in that sense.
<unk> should continue to improve also the yields we had sold for the next months are also.
Much higher than before.
We have our ECL model and $1 5 billion higher.
For the fourth quarter, so which means that we have.
Planning than the <unk>.
Revenue for the next quarter.
And by already knowing that we would be facing a more.
Even higher cost environment, but also our rationale.
Behavior from our competitors.
Our focus on the cask ex fuel cask advantage, we have today, we have 10% against one of the competitors and 30% advantage against the other competitors and we want to keep.
Improving these get.
Okay.
I'm going to slide and because we're getting some good questions on upfront we got two more questions and then we can flip back to the.
Back to the queue.
I think we have.
Got about another 10 minutes here, we can you can do.
Our next question is how is how is jet fuel trending in Q4.
The guidance implies your guidance compliance higher jet fuel expense in Q4 is that correct.
After the all time record peak in July and August .
Because again remember in Brazil that Theres, a lag between what you guys see with international oil prices and how that works its way into.
Our.
Costs in Brazil.
Upwards of almost a 45 day lag.
Now so there was a was a big piece.
Peak in July and August there was a 10% reduction in September October .
But those there's going to be a new increase in November .
What's going on but that obviously gives us a slight advantage if we need to take some actions.
And and hedging.
But the other the other.
The other phenomenon that's very different.
<unk>.
For example, pre pandemic.
<unk> is what's been going on with the crack spreads so our <unk> brand are more stable.
The crack spread is <unk>.
Significantly higher and also there is the FX component because we pay for our jet fuel in Brazilian Reais and so on this one as it comes through the.
Monopoly.
Provider.
It's basically the average of what happened in the previous months.
<unk> branches that before then there was a crack spread component of the FX component.
She has now gone back to slide three.
Five four.
So I already talked about.
What we've been able to do in terms of forward hedging.
Which gives us a moderate degree of protection.
And that's what's reflected in the <unk>.
In the guidance based on what we're seeing that's going on with international prices and we do expect.
There'll be another increase in in.
In November and so based on what's going on with <unk>.
The prices here.
Okay.
And then one other question.
Excuse me.
The.
But I wanted to.
To point here.
The question is the following I will just read it because we are heading into the travel season.
Liquidity sources or something.
It's something we're all watching in addition to bond maturities coming up I guess, he is referring to the <unk>.
Our next bond maturity, which is July of 2024.
Can you talk a little bit about the travel season.
How that will.
Impact to cash generation and liquidity to pay off.
Flip that to yourself.
Yes, I mean travel season is.
Starting right now and in the winter IATA season is our summer here.
Growing.
By 11% with the best in fourth quarter compared to the third quarter. So that represents of course.
An additional.
Additional seems to be sold so.
It tends to be a working capital positive this period for us and that will continue until February of next year, which we consider the high season in Brazil.
During these periods increased utilization <unk> welcomed the network to the main airports in Brazil also launching new point to point routes.
The most important leisure destinations here.
Opening up new destinations and international market like I said in Miami in Fortaleza to Miami and strengthening our partnership with American Miami, which is now a key.
A key advantage for us on the on the U S market.
And yes, I mean, we are entering into the best season for Us now.
Operator, we can go back to <unk>.
Later, we can go back to the year.
The next question will come from Pablo month's UBS. Please go ahead Sir.
Hi.
Thanks for taking my question.
I have just one simple question in your press release about.
Financial flexibility that you are saying with the new credit facility you got Brett.
We have guidance of besides.
On the cost that will be very helpful.
I guess that.
My previous question with Iridium answering about the competitive.
The environment for next year, but any.
Further color would be appreciated thank you.
Yes, I think what Youre talking about is the engine facility we announced.
The nice spare engines that were going to.
So you're acquiring direct from CFM.
The flexibility there is what I mentioned before is that that will allow us to keep.
Some of our Lng's flying longer.
Uh huh.
Voiding the cash outflows that are required.
To do engine overhauls, which are very expensive. So that's what we mean by the flexibility. So it's basically.
<unk> fully financed those new answers can be used in operations, which will allow us to also manage our capacity effectively.
Through the Ics.
<unk> been trying to obviously you have to look at how we're managing the company today reflects.
Yes, you could probably all the way back to 2016 with the 2015 16 17.
GDP contracted 7% over two years, but.
Pre pandemic, we had the Max grounding.
Brazil banker.
Bankruptcy, the pickup more problem all of which.
Yes.
Kept <unk>, the energy portfolio and the engines flying much longer than we expected and the company not able to start transitioning earlier to the Max's with the brand new very new engines on the maintenance holiday all of that and so what you see in that is and then the flexibility component is exactly that.
It is.
It gives us operational flexibility, especially now through the high season.
The key benches flying longer and.
And it's fully fully financed sell so maybe you want to complement that because I think it's an important point, which might not be obvious for maybe.
Yes.
Some of you guys havent been following goal.
Fully over the last cycle or maybe less familiar with with airlines that might be helpful to give a little bit more information on that.
Hi, Rich can you repeat the question please.
Sure.
Yes. His question was what do you mean by flexibility with the.
He is referring about the the new financing mechanism that we announced related to the spare engines.
Yes, they are coming in so that's correct yes.
We are really focused on.
Instruments to finance the Capex of the company so we.
We now have this facility is financing of the ancient also the financing of the Max and now the focus is to finance the Capex, especially engine overhauls.
<unk>.
It's going to be key for us to deliver the capacity of next year.
So we're feeling much brokers in.
Adjusted.
The right level of investment.
Investment and finance over the Capex.
Finances mechanism that is now available in the market with with.
We are a supplier.
And we are confident that we will be able to finance most of the capex for next year.
Alright, Thank you very much that was super useful.
This concludes our call.
Just one second number and we'll conclude the call, but there was one that was one additional question that came in that specifically asks us to answer the questions from Matt because I think it was the Raymond James Analyst.
And I'll just repeat.
Maura courtesy.
That does that.
The information Thats been provided on.
What <unk> is doing has already been provided there is no additional information I was just trying to be polite when I said to them.
Matt if he wants it gets sent US an email list out those questions or call us, but you would get the same answers as.
As im providing here there is no additional information.
Got it.
With respect to that all the information there.
Gold provides as a public company is provided.
Simultaneously to everyone. One of the reasons why we provide that super detailed guidance. So all you guys, which leaves about 20 different metrics because it allows us to basically.
Telling you how we're thinking and talk to you about numbers in theory, if we didn't provide that level of guidance wouldn't be able to.
Half.
Conversations with sell side and buy side about what.
<unk> is doing but all the information that's available and that can be provided.
With respect to.
What <unk> is doing.
It has already been provided there is no new information.
<unk> is.
He is available to provide so with that operator, you can you can conclude the call.
Yes, Sir.
This concludes today's question and answer session I would like to invite Mr. <unk> to proceed with any closing remarks.
Please go ahead Sir.
Thank you all and I hope, you're enjoying todays webcast, our investor relation and communication teams are available to speak with you as needed. Thank you very much.
Okay.
This concludes goal Airlines conference call for today. Thank you very much for your participation and have a great day.
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