Q2 2024 Azul SA Earnings Call

Zach: Welcome everyone to Azul's second quarter earnings call. My name is Zach, and I will be your operator for today. This event is being recorded, and all participants will be in listen-only mode until we conduct a Q&A session following the company's presentation. If you have a question, click on the Q&A icon at the bottom of your screen and write your name and company. When your name is announced, please turn your microphone on and proceed.

Zach: For those who are listening to the conference on the phone, press nine to join the queue and six to accept the audio when requested. I would like to turn the presentation over to Thais Haberli, Head of Investment Relations. Please, Thais, proceed.

Quarter four earnings call. My name is egg <unk> Burrito friction day disadvantage being recorded and all participants will be Nathan only mode until we conduct a Q&A session. Following the Companys presentation. If you have a question because you're gonna kill the icon at the bottom of your screen and write your name and company. When your name is announced please join your microphone.

And proceed for those who are listening to the conference on the phone crestline to join the queue and seeks to accept the AGA when requested.

I would like to turn the presentation over to Dave heavily head of Investor Relations. Please phase proceeding.

Thais Haberli: Thank you, Zach, and welcome all to Azul's second quarter. The results that we announced this morning, the audio of this column, and the slides that we referenced are available on our IR website. Presenting today will be John Rodgerson, CEO, David Neeleman, Azul's founder and chairman, Abhi Shah, the president of Azul, and Alex Malfitani, our CFO.

Dave: Thank you Zack.

Speaker Change: <unk> second quarter earnings call.

Dominic: We don't see any announcement this morning, Dominic column ended like negative reference are available on our IR website.

John Rogers: Thank you today will be John Rogers GE April blended even at those holiday.

John Rogers: Mike <unk>, the president of Adobe and Alex Lafitte, Jordan our CFO.

Speaker Change: Before I turn the call over to John I'd like to caution you regarding our forward looking statements.

Thais Haberli: Before I turn the call over to John, I'd like to caution you regarding our forward-looking statements. Any matters discussed today that are not historical facts, particularly comments regarding the company's future plans, objectives, and expected performance constitute forward-looking statements. These statements are based on a range of assumptions that the company believes are reasonable but are subject to uncertainties and risks that are discussed in detail in our CVM and SEC files. Also, during the course of the call, we will discuss NOAA IFRS performance measures, which should not be considered in isolation. With that, I will turn the call over to John.

Speaker Change: Any matters discussed today that are not historical facts, particularly comments regarding the company's future plans objectives and expected performance constitute forward looking statement.

Statements I made it on a range of assumptions that the company believes are reasonable.

John Rogers: JAKKS to uncertainties and risks that are discussed there's more detail in our CPM and SSG side.

Josh: During the course of the call we will discuss non <unk> for pharmacy measures, which should not be considered in isolation. So with that I will turn the call over to Josh.

John Rodgerson: Thanks, Thais. Welcome everyone, and thanks for joining us for our second quarter earnings call. First, I would like to express solidarity with the families, loved ones, and the crew members affected by the aviation tragedy that occurred in Brazil on Friday. Aviation safety is number one in everything that we do.

Josh: Bank pays welcome everyone and thanks for joining us for our second quarter earnings call.

Speaker Change: First I would like to express our solidarity with the families loved ones and the crew members affected by the aviation tragedy that occurred in Brazil on Friday.

Speaker Change: Aviation safety is number one in everything that we do and as an industry, we always come together in times of need.

John Rodgerson: And as an industry, we always come together in times of need. We offer them our condolences and support and our prayers during this very difficult time. I would also like to thank our crew members for all their hard work during the second quarter.

Zach: Al-Komol to Azul's second quarter earnings call. My name is Zach, and I will be your parader for today. This event is being recorded, and all participants will be in this and only mode until we conduct a Q&A session following the company's presentation. If you have a question, click on the Q&A icon at the bottom of your screen and write your name and company. When your name is announced, please turn your microphone on and proceed. For those who are listening to the conference on the phone, press 9 to join the queue and 6 to accept the audio when requested.

Speaker Change: Offer them, our condolences and support and our prayers during this very difficult time.

Speaker Change: I'd also like to thank our crew members for all their hard work during the second quarter. Our strong culture was essentially stalled as we successfully navigated a challenging combination of seasonality fleet I fuel and currency devaluation combined with the devastating floods in the south of Brazil, all of which made this an especially difficult quarter Amit.

John Rodgerson: Our strong culture was essential as we successfully navigated a challenging combination of seasonality, fleet, high fuel and currency devaluation, combined with the devastating floods in the south of Brazil, all of which made this an especially difficult quarter. I'm incredibly proud of our entire team for how quickly we adapted to the changing conditions, implemented initiatives, and delivered what I think is an industry-leading result. On slide 3, we summarized the results for the quarter.

John Rodgerson: Our revenue was R$4.2 billion, with a RASC of $0.3822. Unit costs reduced 1.8% even with fuel prices up compared to last year and the devaluation of the Brazilian real against the dollar. Most importantly, our EBITDA was $1.1 billion, and our EBIT was $441 million, representing a margin of 25.2% and 10.6%, respectively.

Speaker Change: I'm incredibly proud of our entire team for how quickly we adapted to the changing conditions implemented initiatives and delivered what I think is an industry leading results.

Thais Haberli: I would like you to turn the presentation over to Thais Haberli, head of investor relations. Please, Thais, proceed. Thank you, Zach, and welcome out to Azul's second quarter earnings call.

Speaker Change: On slide three we summarize the results for the quarter. Our revenue was $4 2 billion Reais with a RASK of 38 to two sets unit cost reduced one 8%, even with fuel prices up compared to last year and the devaluation of the Brazilian real against the dollar.

Thais Haberli: The results that we announced this morning, the audio of this call and the slides that we referenced are available on our IR website.

Thais Haberli: I present it today will be John Rodgers, so C.E.O., Dave DeNidman, Azul's founder and chairman, Adi Sham, the president of Azul, and Alex Mofi turns our CFO. Before I turn the call over to John, I'd like to caution you regarding our forward-looking statement. Any matters discussed today that are not historical facts, particularly comments regarding the company's future plans, objectives, and acceptance performance constitute forward-looking statements. These statements are based on a range of assumptions that company beliefs are reasonable, but are subject to uncertainties and risks that are discussed in detail in our CVM and SEC fight. Also, during the course of the call, we will discuss not IFRS performance measures, which should not be considered in isolation.

Speaker Change: Most importantly, our EBITDA was $1 1 billion and our EBIT was $441 million, representing a margin of 25, 2% and 10, 6% respectively.

Speaker Change: As I look around the world even with all the challenges we face. This is a strong result.

John Rodgerson: As I look around the world, even with all the challenges we face, this is a strong result. The key was our ability to adapt. And this is something we will talk a lot more about in this presentation. Moving to slide four, I wanted to provide an update and context on what happened in Rio Grande do Sul and how it impacted our results. As we mentioned on our last call, the state of Rio Grande do Sul was impacted in early May by severe flooding.

Speaker Change: He was our ability to adapt and this is something we will talk a lot more about in this presentation.

Speaker Change: Moving to slide four I wanted to provide an update and context on what happened and he arranged a school and how it impacted our results as we mentioned on our last call. The state of hearings to saw was impacted in early may by severe flooding. We were deeply saddened by the loss of lives displacement of people and widespread destruction in the region once.

John Rodgerson: We were deeply saddened by the loss of lives, displacement of people, and widespread destruction in the region. Once again, our crew members and our clients stepped up, contributing over three thousand tons of donations, which we delivered quickly to those who needed them most. The main airport in Porto Alegre remains closed.

Speaker Change: Again, our crew members and our clients stepped up contributing over 3000 tons in donations, which we delivered quickly to those who meet the demos. The main airport in Portree Library remains close the good news. However is that it will now partially reopen on October 21 last Friday, we opened sales to that.

John Rodgerson: With that, I would turn the call over to John. Thanks, Thais. Welcome, everyone, and thanks for joining us for our second quarter earnings call.

John Rodgerson: First, I would like to express the solidarity that the families loved ones and the crew members affected by the aviation tragedy that occurred in Brazil on Friday. Aviation safety is number one in everything that we do, and as an industry, we always come together in times of need. We offer them our condolences and support and our prayers during this very difficult time. I would also like to thank our crew members for all their hard work during the second quarter.

John Rodgerson: The good news, however, is that it will now partially reopen on October 21st. Last Friday, we opened sales to that airport, and we will be the largest airline again with 60 daily operations, almost 80 percent of our capacity pre-flood. For those who don't know, Rio Grande do Sul is the fourth largest state in Brazil in terms of economic activity and represents over 10% of our total capacity. The relevance of Rio Grande do Sul to us is equivalent to the relevance of Los Angeles to a major U.S. airline.

Speaker Change: Airport it will be the largest airline again with 60 daily operations, almost 80% of our capacity pre floods.

Speaker Change: For those who don't know who granted you saw the fourth largest state in Brazil in terms of economic activity and represented over 10% of our total capacity.

John Rodgerson: Our strong culture was essential as we successfully navigated a challenging combination of seasonality, sleep, high fuel, and currency evaluation, combined with the devastating floods in the south of Brazil, all of which made this an especially difficult quarter. I am incredibly proud of our entire team for how quickly we adapted to the changing conditions, implemented initiatives, and delivered what I think is an industry-leading result.

Speaker Change: The relevance to us is equivalent to irrelevance of Los Angeles for a major U S Airlines as a result, we estimate that the reduction in our capacity in that region negatively impacted our second quarter results by at least 200 million and had an even bigger impact of cash when including the impact to a T L and the loss of forward bookings.

John Rodgerson: As a result, we estimate that the reduction in our capacity in that region negatively impacted our second quarter results by at least $200 million and had an even bigger impact on cash when including the impact to ATL in the loss of forward booking. On slide 5, you can see the rapid devaluation of the Brazilian real in 2024. The end of period exchange rate in the second quarter devalued 12% versus the first quarter, while at the same time, fuel prices increased 2.4%.

John Rodgerson: On slide three, we summarized the results for the quarter. Our revenue was 4.2 billion reais with a ask of 38.22 cents. Unit costs reduced 1.8% even with fuel prices up compared to last year and the devaluation of the Brazilian Rial against the dollar. Most importantly, our EBITDA was 1.1 billion, and our EBIT was 441 million, representing a margin of 25.2% and 10.6% respectively. As I look around the world, even with all the challenges we face, this is a strong result. The key was our ability to adapt, and this is something we will talk a lot more about in this presentation.

Speaker Change: On slide five you can see the rapid devaluation of the Brazilian real in 2024 end of period exchange rate in the second quarter devalued, 12% versus the first quarter, while at the same time fuel prices increased two 4%. The combination of these negative effects required us to rapidly adapt during the quarter.

John Rodgerson: The combination of these negative effects required us to rapidly adapt during the quarter. For example, we quickly redeployed the capacity from Porto Alegre to other cities in our network. However, we were forced to sell this capacity quickly at a lower quality than we would have liked.

Speaker Change: For example, we quickly redeployed the capacity for from Port The library to other cities in our network. While we were forced to sell these this capacity quickly at a lower quality than we would have liked we still were able to mitigate part of the EBITDA impact.

John Rodgerson: We were still able to mitigate part of the EBITDA impact. Turning to slide six, our business units were very instrumental in our ability to adapt. We are extremely proud of the performance of our business units, which accounted for more than 20% of our RASC and over 30% of our EBITDA. Azul Fidelity Dodge, our loyalty program, delivered strong results with all-time records in members, gross billings, and active credit card sales, highlighting our customers' preference for Azul.

Speaker Change: Turning to slide six our business units were very instrumental in our ability to adapt we are extremely proud of the performance of our business units, which accounted for more than 20% of our RASK and over 30% of our EBITDA.

John Rodgerson: Moving to slide four, I wanted to provide an update and context on what happened in Rio Grande do the soil and how it impacted our results. As we mentioned on our last call, the state of Rio Grande do the soil was impacted in early May by severe flooding. We were deeply saddened by the loss of lives, displacement of people, and widespread destruction in the region. Once again, our crew members and our clients stepped up, contributing over 3,000 tons in donations, which we delivered quickly to those who needed them most.

Speaker Change: Xul Fidelity Dodge our loyalty program delivered strong results with all time records in members gross billings and active credit card sales highlighting our customers' preference in a xul adobe.

John Rodgerson: Azul Viagens, our vacations packaging business, grew 63% in gross bookings in the second quarter versus second quarter 2023. Additionally, our logistics business grew 12% quarter over quarter. In total, Azul's revenue was 60% above 2019 levels on an airline that is roughly 35% larger. Looking ahead to the rest of the year, we are very encouraged by the normalization of demand and capacity and the favorable seasonality with positive bookings and average fares, plus additional revenue initiatives we are putting in place. To give you further details, I will now turn it over to Audrey.

Speaker Change: <unk>, our vacations packaging business grew 63% and gross bookings in the second quarter versus second quarter 2023, our logistics business grew 12% quarter over quarter in total <unk> revenue was 60% above 2019 levels on an airline that is roughly 35% larger.

John Rodgerson: The main airport and portrait recovery remains closed. The good news, however, is that it will now partially reopen on October 21st. Last Friday, we opened sales to that airport and we will be the largest airline again with 60 daily operations, almost 80% of our capacity pre-flood. For those who don't know, Rio Grande du Soleil is the fourth largest state in Brazil in terms of economic activity and represented over 10% of our total capacity.

August: Looking ahead to the rest of the year, we are very encouraged by the normalization of demand and capacity and the favorable seasonality with positive bookings and average fares plus additional revenue initiatives, we're putting in place to give you further details I will now turn it over to August.

Audrey: Thanks, John. Let me start by talking about recent trends in bookings, because, as we all know, good bookings will always lead to good revenue. As you can see on slide 7, we are seeing significantly improved average fares since the beginning of the quarter and even better since the bottom in mid-May. The closure of Porto Alegre had three major impacts on our revenue. First, a demand shock where 10% was immediately lost, not just on the routes to and from Porto Alegre but also the network contribution from the largest city in the fourth largest state in Brazil. We also believe that the damage caused by the flood affected demand throughout the system, further deepening the weak seasonality in Tuque.

August: Thanks, John.

August: Let me start by talking about our recent trends in bookings because as we all know good bookings will always lead to good flow in revenue.

John Rodgerson: The relevance to us is equivalent to the relevance of Los Angeles for a major U.S, airline. As a result, we estimate that the reduction in our capacity in that region negatively impacted our second quarter results by at least 200 million and had an even bigger impact to cash when including the impact to ATL in the loss of forward booking.

August: As you can see on slide seven we are seeing significantly improved average fares since the beginning of the quarter and even better since the bottom in mid may.

August: The closure of poker Legwork had three major impacts to our revenue.

August: First a demand shock, where 10% with immediately lost.

John Rodgerson: On slide five, you can see the rapid devaluation of the Brazilian Rial in 2024 and the period exchange rate in the second quarter devalued 12% versus the first quarter while at the same time fuel prices increased 2.4%. The combination of these negative effects required us to rapidly adapt during the quarter. For example, we quickly redeployed the capacity for from port delivery to other cities in our network. While we were forced to sell this capacity quickly at a lower quality, than we would have liked, we still were able to mitigate part of the impact.

Not just to the routes to and from the library, but also the network contribution from the largest city in the fourth largest state in Brazil.

August: We also believe that the damage caused by this slide affected demand throughout the system.

August: Other deepening the weak seasonality into Q.

Audrey: Finally, we have to rapidly reallocate this capacity in the months of May and June to other parts of our network and sell this capacity quickly with little advance notice. As John already mentioned, this resulted in lower quality revenue but still mitigated a good part of EBITDA income. On slide A, you can see the tangible positive results from the improving fare and demand environment. Comparing 2Q RAS to what we just flew in July, RAS has improved by a very strong 15% on a year-over-year basis, while 2Q was down 5% in RAF.

August: Finally reader rapidly reallocate this capacity in the months of May and June to other parts of our network and sell this capacity quickly with little advance notice as John already mentioned this resulted in lower quality revenue, but still mitigated a good part of the EBITDA impact.

John Rodgerson: Turning to slide six, our business units were very instrumental in our ability to adapt. We are extremely proud of the performance of our business unit, which accounted for more than 20% of our rest in over 30% of our EBITDA. Azul Cadeli Dodge, our loyalty program, delivered strong results with all-time records in members, gross filling, and active credit card sales, highlighting our customer's preference in Azul. Azul viagem our vacations packaging business grew 63% in gross bookings in the second quarter versus second quarter 2023. Our logistics business grew 12% quarter over quarter. In total, Azul's revenue was 60% above 2019 levels on an airline that is roughly 35% larger.

John Rogers: On slide eight you can see the tangible positive results from the improving fair and demand environment.

John Rogers: Comparing <unk> to what we just flew in July.

John Rogers: RASK has improved a very strong 15%.

Speaker Change: On a year over year basis, while <unk> was down 5% in RASK July was actually up 5% versus last year.

Audrey: July was actually up 5% versus last year. This clearly indicates that the demand environment is improving faster than seasonality, and the market is showing signs of strength. The July trend continues in August and beyond as we see stronger booking curves for the rest of the year. These booking codes are supported by the strong economic indicators here in Brazil. Contrary to what some are seeing in the U.S., where there are some signs of reduced consumer demand, Brazil's indicators like GDP and unemployment are strong, and this gives us further confidence as we look to demand for the second half of the year.

Speaker Change: This clearly indicates that the demand environment is improving faster than seasonality and the market is showing signs of strength.

Speaker Change: The July trend continues in August and beyond as we see stronger booking curves for the rest of the year.

John Rodgerson: Looking ahead to the rest of the year, we are very encouraged by the normalization of demand and capacity and the favorable seasonality with positive bookings and average fares. Plus additional revenue initiatives we are putting in place.

Speaker Change: These booking curves are supported by the strong economic indicators here in Brazil.

Speaker Change: Contrary to what some are seeing in the U S where there are some signs of reduced consumer demand, Brazil indicators like GDP unemployment are strong and this gives us further confidence as we look to demand for the second half of the year.

Abhi Shah: To give you further details, I will now turn it over to us. Thanks, John. Let me start by talking about recent trends in bookings because as we all know, good bookings will always lead to good, flown revenue. As you can see on slide seven, we are seeing significantly improved average fares since the beginning of the quarter and even better since the bottom in mid-May.

Audrey: Moving to slide nine, I want to talk about our international network and the challenges we faced during the quarter. As we migrated from the departure of the A350s earlier this year, our plan was to add six A330 aircraft as replacements.

Speaker Change: Moving to slide nine I want to talk about our international network and the challenges we faced during the quarter.

Speaker Change: As we migrated from the exit of the <unk> hundred <unk> earlier. This year. Our plan was to add six AC 30 aircraft as replacements.

Abhi Shah: The closure of voter legray had three major impacts to our revenue. First, a demand shock where 10% was immediately lost, not just to the routes to and from voter legray, but also the network contribution from the largest city in the fourth largest state in Brazil. We also believe that the damage caused by the flood affected demand throughout the system further deepening the week seasonality into Q. Finally, we are to rapidly reallocate this capacity in the months of May and June to other parts of our network and sell this capacity quickly with little advanced notice. As John already mentioned, this resulted in lower quality revenue but still mitigated a good part of the EBITDA impact.

Audrey: This transition resulted in a temporary reduction in our 2Q net. Due to global fleet challenges, aircraft we had planned to enter into service in two queues were moved to three queues. As a result, we had to significantly cancel almost half, as you can see, our international long-haul flights. This created a large volume of customers we had to re-accommodate on our own flights, blocking those seats for sale. This had a big impact on our bookings and our flow unit revenue as we were not able to sell those closer in higher yielding fairs.

Speaker Change: This transition resulted in a temporary reduction in our <unk> network.

Speaker Change: Due to the global fleet challenges aircraft, we had planned to enter into service in two Qs were moved to <unk>.

Speaker Change: As a result, we had a significantly canceled down almost half as you can see our international long haul flights.

Speaker Change: This created a large volume of customers Victoria common date on our owned flights blocking dosage for sale.

<unk> had a big impact on our bookings and affluent unit revenue as we were not able to sell those closer in higher yielding fares.

Audrey: The very good news is that we are now beyond those effects, and looking ahead, we see a 50 percent growth in our international long haul capacity. This will have a very significant positive impact on Brookings and Ferris.

Speaker Change: The very good news is that we are now beyond those effects and looking ahead, we see a 50% growth in our international long haul capacity.

Abhi Shah: On slide eight, you can see the tangible positive results from the improving fare and demand environment. Comparing QQ RAS to what we just flew in July, RAS has improved a very strong 15%. On a European basis, while QQ was down 5% in RAS, July was actually up 5% versus last year. This clearly indicates that the demand environment is improving faster than seasonality, and the market is showing signs of strength. The delight trend continues in August and beyond as we see stronger booking curves for the rest of the year.

Speaker Change: This will have a very significant positive and back in bookings in pairs.

Audrey: Finally, on slide 10, I wanted to show a longer-term view that demonstrates the resiliency in our business and our ability to recapture cost increases from unfavorable macro drivers. As David will explain later on, this is all because we have been true to our model as we have grown over the years. A good part of our expenses and financing is dollar-denominated, and that creates some uncertainty when the Brazilian real devalues. Given our financial structure, a 5% increase in the dollar requires only a 3% increase in fares to offset the impact on expenses and cash. But looking all the way back to 2018, while the dollar has increased about 5% a year, our average fares have increased much more than the required 3%. They grew at a CAGR of 8%.

Speaker Change: Finally on slide 10, I wanted to show a longer term view that demonstrates the resiliency in our business and our ability to recapture cost increases from unfavorable macro drivers as David will explain later on this is all because we are true to our model as we have grown over the years.

David: A good part of our expenses and financing is dollar denominated and that creates some uncertainty with the Brazilian real devalues.

David: Given our financial structure, a 5% increase in the dollar requires only a 3% increase in fares.

Abhi Shah: These booking curves are supported by the strong economic indicators here in Brazil, contrary to what some are seeing in the US where there are some signs of reduced consumer demand. Brazil indicators like GDP, unemployment are strong, and this gives us further confidence as we look to demand for the second half of the year.

David: To offset the impact on expenses and cash.

David: We're looking all the way back 2018, while the dollar has increased about 5% a year.

David: Our average fares have increased much more than the required 3%. They grew at a CAGR of 8%.

Audrey: And this has happened even as Azul has doubled in capacity. The point here is to show that 100% of our revenue can be thought of in dollars because we have the ability to overcome the effects of currency. It does take some time to realize the effects of this revenue recapture, and during that time, you will see some negative impact.

Speaker Change: And this is haven't happened even at a zoo has doubled in capacity.

Abhi Shah: Moving to slide 9, I want to talk about our international network and the challenges we faced during the quarter.

Speaker Change: The point here is to show that 100% of our revenue can be thought of.

Abhi Shah: As we migrated from the exit of the 850s earlier this year, our plan was to add 680-30 aircraft as replacement. This transition resulted in a temporary reduction in our 2Q network. Due to the global fleet challenges, aircraft we had planned to enter into service in 2Q were moved to 3Q. As a result, we had to significantly cancel down almost half, as you can see, our international long haul flights. This created a large volume of customers we had to reoccommodate on our own flights blocking those seats for sale. This had a big impact on our bookings and our flow unit revenue as we were not able to sell those closer in higher yielding fares.

In dollars, because we have the ability to overcome the effects of currency. It does take some time to realize the effects of this revenue recapture and during that time, you will see some negative impact but over the long term we are able to.

Speaker Change: Expand our margins continued to grow and offset these effects.

David Neeleman: But over the long term, we are able to expand our margins, continue to grow, and offset these effects. As John mentioned in his opening, the key to this quarter and our long-term success has been our ability to adapt. The recent challenges have encouraged us to do so again. And so now I would like to turn over to David, who can talk about his vision for how Azul continues its growth trajectory. David. Thank you, Abhi.

As John mentioned in his opening the key to this quarter and our long term success has been our budget to adapt.

David: The recent challenges have encouraged us to do so again and so now our Delaware, David who can talk about his vision on how it will continue its growth trajectory David Thank you Robby <unk>.

David Neeleman: David. Thank you, Abhi. First, I'm someone who's been in the industry for 40 years, and I've been part of six airlines. I'm deeply saddened by the tragic events of Friday. My heart and prayers go to the families and crew members, and, of course, we will do everything we can to provide support during this difficult time. As we went through the quarter and realized that the new exchange rate, the gravities of the new exchange rate, it became clear to me that Azul once again had to adapt, something we have done incredibly well as we have navigated the last 15 years.

David: First as someone who's been in the industry for 40 years and part of six airlines I'm deeply saddened by the tragic events of Friday.

Abhi Shah: The very good news is that we are now beyond those effects and looking ahead, we see a 50% growth in our international long haul capacity. This will have a very significant positive impact in bookings and fares.

Speaker Change: My Heart and first go to the families and crew members and of course, we will do everything we can to provide support during these difficult times.

Speaker Change: As we went through the quarter and realized that the new exchange rate.

Abhi Shah: Finally on slide 10, I wanted to show a longer-term view that demonstrates the resiliency in our business and our ability to recapture costs increases for an unfiable macro drivers. As David will explain later on, this is all because we are true to our model as we have grown over the years. A good part of our expenses and financing is dollar denominated and that creates some uncertainty with the Brazilian rail devalues. Given our financial structure, a 5% increase in the dollar requires only a 3% increase in fares to offset the impact on expenses and cash.

Speaker Change: The ground lease of the new exchange rate it became clear.

Speaker Change: To me the zoo once again had to adapt something we have done incredibly well.

Speaker Change: As we have navigated the last 15 years Slide 10 gives you a summary of just how much the environment has changed.

David Neeleman: Slide 10 gives you a summary of just how much the environment has changed throughout the years, yet how consistent our growth, revenue, and earnings have been. We launched Azul 15 years ago with a single fleet type, aiming to serve regional destinations in Brazil.

Throughout the years, yet how how consistent our growth in revenue and earnings have been with licenses were 50 years ago with a single fleet type Amy.

Speaker Change: Amy to serve regional destinations in Brazil, we soon realised.

David Neeleman: We soon realized that the opportunity was much larger, and we expanded that strategy via fleet diversification, a merger, and our expansion into international travel. At the same time, we diversified our business with high growth and high yield, high margin business units like loyalty, vacations, and logistics. Most recently, our response to the pandemic and our capitalization, our capital optimization plan, was another clear example of our ability to evolve and adapt, from a real of 1.67 to $1 to almost six real to the dollar and from a fuel price of two real per liter to five real per liter.

Speaker Change: That the opportunity was much larger.

Speaker Change: And we expanded that.

Speaker Change: That strategy bias.

Abhi Shah: But looking all the way back to 2018, while the dollar has increased about 5% a year, our average fares have increased much more than the required 3%. They grew at a cager of 8%. And this has happened even as a zoo has doubled in capacity. The point here is to show that 100% of our revenue can be sought-off in dollars because we have the ability to overcome the effects of currency. It does take some time to realize the effects of this revenue recapture and during that time you will see some negative impact. But over the long term, we are able to expand our margins, continue to grow and offset these effects.

Speaker Change: The diversification of merger.

Speaker Change: And our expansion into international travel.

Speaker Change: At the same time, we diversified our business with high growth and high yield a high margin business units like loyalty vacations and logistics. Most recently, our response to the pandemic and our capitalization of our capital optimization plan.

It was another clear example of our ability to evolve and adapt.

Speaker Change: From a real up 1.67 to $1 to almost six treehouse to the dollar for from a fuel price of.

Speaker Change: Two real per liter to two.

Speaker Change: Two five rehab per liter.

David Neeleman: We can count at least six major evolutions in our business. And the bottom line is, through it all, we have continued to grow and to be more prompt. Turning to slide 12, you can see the core business, the core elements of our resiliency and growth. Our network is the foundation of our structural and long-term competitive advantage. We continue to be the only carrier on 84% of our routes.

Speaker Change: And we can count at least six major evolutions in our business and the bottom line is through it all we have continued to grow.

Abhi Shah: As John mentioned in his opening, the key to this quarter and our long term success has been a particular adapt. The recent challenge is having courage just to do so again.

Speaker Change: And to be more profitable.

Speaker Change: Turning to slide 12, you can see.

David Neeleman: And so now I'll turn over to David who can talk about his vision on how a zoo continues its growth trajectory. David, thank you, Abby.

Speaker Change: The core business and the core elements of our resiliency and growth. Our network is the foundation of our structural and long term competitive advantages we continue to be the only carrier in 84% of our routes. This is a direct result of our fleet flexibility, where we put the right aircraft on the right market at.

David Neeleman: First of some of you who has been in the industry for four years have been part of six airlines.

David Neeleman: I am deeply saddened by the tragic events of Friday. My heart and fares go to the families and crew members. And of course we will do everything we can to provide support during this difficult. Times.

David Neeleman: This is a direct result of our fleet flexibility, where we put the right aircraft on the right market at the right time. We have more than doubled in size over the past several years. We are always staying true to our business model. Our business units, as I mentioned, have played a critical role in empowering our growth, while our team has done an incredible job of maintaining the special culture and passion amongst our more than 15,000 crew members.

Speaker Change: The right time.

Speaker Change: We are more than we have more than doubled in size over the past several years.

David Neeleman: As we went through the quarter and realized that the new exchange rate, the realities of the new exchange rate, it became clear to me that once again had to adapt, something we have done incredibly well as we have navigated the last 15 years. Slide 10 gives you a summary of just how much the environment has changed throughout the years, yet how consistent our growth and revenue and earnings have been. We launched this little 15 years ago with a single fleet.

Speaker Change: Always staying true to our business model our.

Speaker Change: Our business units as I mentioned have played a critical role empowering our growth.

Speaker Change: While our team has done an incredible job of maintaining the special culture and passion amongst our more than 15000 crew members. Our history shows a clear and key to trend of evolution and improvement building. Upon the successful completion of our capital optimization plan last year the team was.

David Neeleman: Our history shows a clear and key trend of evolution and improvement. Building upon the successful completion of our capital optimization plan last year, the team was able to turn focus 100% back to the business. To maintain this, once we realized the external factors affecting Q2, I challenged the team to an annual target of more than a billion in incremental value. As we show on slide 13, the team developed and started implementing a plan which we named Elevate, with multiple opportunities across revenue, cost, fleet, and financing that, once again, allows Azul to continue to adapt and thrive for many years to come. With that, I want to turn the call over to Alex to give more details on our Elevate plans.

David Neeleman: We have a fleet type, any to serve regional destinations in Brazil. We soon realized that the opportunity was much larger. And we expanded that strategy by fleet diversification, a merger, and our expansion into international travel. At the same time, we diversified our business with high growth and high yield, high margin business units like loyalty, vacations, and logistics.

Speaker Change: We're able to turn focus 100% back to the business to maintain this.

Speaker Change: Once we realize the external factors affecting Q2, I challenged the team to an annual target of more than $1 billion and incremental value.

Speaker Change: As we show on Slide 13, the team developed and started implementing a plan, which we named elevate.

Speaker Change: With multiple opportunities across revenue cost flea and financing that once again allows us to continue to adapt and thrive for many years to come with that I'm going to turn the call over to Alex to give more details on our elevated plants.

David Neeleman: Most recently, our response to the pandemic and our capitalization plan was another clear example of our ability to evolve and adapt. From a real of $1.67 to $1, it's almost $6,000. From a fuel price of 2,000,000 to $5,000,000, we can count at least 6 major evolutions in our business. And the bottom line is, through it all, we have continued to grow and to be more profitable.

Alex Lafitte: Thanks, David.

Alex: As David said, the Elevate Plan we are announcing today is a natural extension of the work we did last year to optimize our capital structure. As we said then, we're now able to focus 100% on our business, and the Elevate Plan galvanizes that focus across the entire company. I'm really excited about this opportunity and the early results we are seeing. Slide 14 illustrates some of the multiple opportunities we are already working on to generate revenues. A main one, of course, is the co-chair with Goal.

Alex Lafitte: David said the elevate plan we are announcing today is a natural extension of the work we did last year to optimize our capital structure.

Alex Lafitte: As we said then we're now able to focus 100% on our business and the elevate plan galvanizes that focus across the entire company.

Alex Lafitte: I'm really excited about this opportunity and at the early results we're seeing.

David Neeleman: Turning to slide 12, you can see the core elements of our resiliency and growth. Our network is a foundation of our structural and long-term competitive advantages. We continue to be the only carrier in 84% of our routes. This is a direct result of our fleet flexibility, where we put the right aircraft on the right market at the right time. We have more than doubled in size over the past several years. Always staying true to our business model. Our business units, as I mentioned, have played a critical role in powering our growth, while our team has done an incredible job of maintaining the special culture and passion amongst our more than 15,000 crew members.

Alex Lafitte: Slide 14 illustrates some of the multiple opportunities we are already working on the revenue side.

Alex Lafitte: Our main one of course is the codeshare with goal.

Alex: We're now jointly selling about 150 origins and destinations that connect the two networks. These connections provide increased options and convenience for all of our customers. We started selling the co-chair in July, so we're only in the beginning, but we're very happy with the early results, and I want to thank our partners.

Alex Lafitte: Now jointly selling about 150 origins and destinations that connect the two networks.

Alex Lafitte: These connections to provide increased options and convenience. So all of our customers. We started selling the culture in July so are only in the beginning but we're very happy with the early results and I want to thank our partners Joel.

Alex: Ancillary revenues are another area of growth and focus. For the month of July, we hit a record in ancillary revenues with a 17% increase in revenue per passenger versus July 2020. I especially want to thank our airport crew members for selling double what they sold a year ago. Our business units continue to be a key driver of revenue expansion. On the loyalty side, direct point sales to our customers, enabled by our credit card, our club, and our buy points product, are now our largest source of revenue, providing dependable recurring cash.

Alex Lafitte: Ancillary revenues are another area of growth and focus for the month of July we hit a record in ancillary revenues with a 17% increase in revenue per passenger versus July 23.

Alex Lafitte: I, especially want to thank our airport crew members were selling double what they sold a year ago.

Alex Lafitte: Our business units continue to be a key driver of revenue expansion on the loyalty side direct point sales to our customers enabled by a credit card or club and our buy point products are now our largest source of revenue providing dependable recurring casuals under.

David Neeleman: Our history shows a clear and key to trend of evolution and improvement. Building upon the successful completion of our capital optimization plan, last year, the team was able to turn focus 100% back to the business. To maintain this, once we realize the external factors affecting Q2, I challenge the team to an annual target of more than a billion in incremental value.

Alex: On the vacation side, we are creatively using idle capacity available off-peak not only on weekends but also on weekdays to provide expanded customer choice and flexibility. This was one of the reasons that our vacation business grew more than 60% in a quarter. Finally, as Abhi mentioned, the recovery and growth in our international network is a key driver of earnings and cash generation going forward. On slide 15, turning to the cost side, we see some really exciting opportunities in fleet, utilization, efficiency, productivity, and procurement. These will all allow us to reduce costs, utilize our resources more effectively, and generate more cash. Let me share some examples on the next slide.

Alex Lafitte: While the vacation side, we're creatively using idle capacity available off peak not only on weekends, but also on weekdays to provide expanded customer choice and flexibility.

This was one of the reasons that our vacation business grew more than 60% in the quarter.

Alexandre Malfitani: As we show on slide 13, the team developed and started implementing a plan which we named Elevate. With multiple opportunities across revenue, cost, fleet, and financing, that once again allows us a little to continue to adapt and thrive for many years to come.

Alex Lafitte: Finally, as Avi mentioned, our recovery on growth in our International network is a key driver of earnings and cash generation going forward.

Avi: On slide 15, turning to the cost side, we see some really exciting opportunities in fleet utilization efficiency.

Alexandre Malfitani: With that, I want to turn the call over to Alex to give more details on our Elevate plan. Thanks, David. As David said, the Elevate plan we are announcing today is a natural extension of the work we did last year to optimize our capital structure. As we said then, we're now able to focus 100% on our business and the elevate plan galvanizes that focus across the entire company. I'm really excited about the opportunity and at the early results we are seeing.

Avi: Our activity in purchasing these will all allow us to reduce costs utilize our resources more effectively and generate more cash let.

Speaker Change: Let me share some examples in the next slides.

Alex: On slide 16, I want to highlight one of the key initiatives to further expand margins this year, our aircraft utilization. We were already increasing utilization across the operation, but in late June, we decided to make a structural change by implementing a reduction in ground times across our network. Such a reduction of between 5 and 15 minutes for every aircraft turn allows aircraft to be in the air longer, generating more capacity, and therefore improving earnings.

Speaker Change: On slide 16, I want to highlight one of the key initiatives to further expand margins. This year our aircraft utilization, we were already increasing utilization across the operation, but in late June we decided to make a structural change by implementing a reduction in ground times across our network.

Speaker Change: Such reduction of between five and 15 minutes for every aircraft turn allows aircraft to be India longer generating more capacity and therefore improving earnings.

Alex: The team immediately jumped to the task and developed a series of operational process changes that allowed us to safely implement this ground time reduction and, most importantly, maintain the quality of our operation. This new network is already operating, and I want to really thank the entire Azul team for their incredible work.

Speaker Change: The team immediately jumped to the task of develop a series of operational process changes that allowed us to safely implement this ground time reduction and most importantly maintain the quality of our operation. This new network is already operating and I want to really thank the entire <unk> team for their incredible work. So far this month, we have a 99.

Alexandre Malfitani: We've got three options and convenience to all of our customers. We started selling the coach here in July, so are only in the beginning, who are very happy with the early results and I want to thank our partners for all. Ancillary revenues are another area of growth and focus. For the month of July we hit a record in ancillary revenues with a 17% increase in revenue for passenger versus July 23. Especially want to thank our airport crew members for selling double what they sold a year ago.

Alex: So far this month, we have a 99.2 completion factor with an on-time performance of 87.2%, the best in Brazil. On slide 17, you can see another great example of opportunities on the fleet side, which is our move from E1 to E2. Now we ended 2Q with approximately 83% of our capacity coming from next generation aircraft, considerably higher than any competitor in the region. This is extremely beneficial as these two are much more profitable aircraft that fly more hours per day with much lower seat costs. In July, for example, our E2s flew for an average of almost 12 hours per day.

Speaker Change: Two completion factor with an on time performance of 87, 2% the best in Brazil.

Speaker Change: On Slide 17, you can see another great example of opportunities on the fleet side, which is our move from <unk> into <unk>.

Alexandre Malfitani: Our business units continue to be a key driver of revenue expansion on the loyalty side, direct point sales for our customers, enabled by our credit card, our club, and our buy points product are now our largest source of revenue providing dependable recurring cash. On the vacation side, we are creatively using idle capacity available off peak, not only on weekends, but also on weekdays to provide expanded customer choice and flexibility. This was one of the reasons that our vacation business grew more than 60% in a quarter.

Speaker Change: While we ended <unk> with approximately 83% of our capacity coming from next generation aircraft considerably higher than any competitor in the region. This is extremely beneficial as these two is a much more profitable aircraft that flies more hours per day with much lower seed costs. In July for example, our <unk> fluent average of almost 12 hours per day.

Alex: Plus, the E2 has 18 more seats and delivers 18% lower fuel burn in total than the E1, leading to a 26% reduction in cost. As we expect to receive another 15 E2s over the next 18 months, this difference in utilization and seed costs will significantly drive earnings. But we want to further expand this advantage, and we have made the decision to reduce utilization of the E1s and increase utilization of the E2s by prioritizing the E2 as the scheduled aircraft type and using E1s as a spare, leveraging the commonalities across the two models but increasing profitability and also reducing capex, significantly improving cash.

Speaker Change: Plus the E. Two has 18 more seats and delivers 80% lower fuel burn in total than the one leading to a 26% reduction in cost per seat as.

Alexandre Malfitani: Finally, as Abby mentioned, the recovery and growth in our international network is a key driver of earnings and cash generation going forward. On slide 15, turning to the cost side, we see some really exciting opportunities in fleet utilization efficiency productivity and purchasing. These will all allow us to reduce costs, utilize our resources more effectively and generate more cash. Let me share some examples in the next slides. On slide 16, I want to highlight one of the key initiatives to further extend margins this year, our aircraft utilization.

Speaker Change: As we expect to receive another 15 E twos over the next 18 months. This difference in utilization and seed costs will significantly drive earnings growth.

Speaker Change: But we want to further expand this advantage and we have made the decision to reduce utilization of the ones and <unk> increased utilization of these tools by prioritizing. These two as the scheduled aircraft type and use <unk> as a sphere leveraging the commonalities across the two models, but increasing profitability and also reducing capex significantly.

Speaker Change: Improving cash.

Alexandre Malfitani: We were already increasing utilization across the operation, but in late June, we decided to make a structural change by implementing a reduction in ground times across our network. Such reduction of between five and 15 minutes for every aircraft turn allows aircraft to be in the air longer, generating more capacity and therefore improving earnings. The team immediately jumped to the task and developed a series of operational process changes that allowed us to safely implement this ground time reduction and most importantly, maintain the quality of our operation.

Alex: I also want to show how our focus on efficiency and productivity has yielded significant results already. On slide 18, you can see that just within a period of four months, we are 17% more efficient at airports, and the company overall is generating 16% more revenue per effort. These levels of productivity will improve further as we continue our growth into the seasonally stronger Q3 and Q4. Summarizing these actions on slide 19, compared to 2Q23, CaskXFuel decreased by almost 3%, mainly driven by our cost reduction initiatives and productivity gains. We made a promise to you that we would emerge from the pandemic as a more efficient airline, and that is exactly what we're doing. These are just some examples.

Speaker Change: I also want to show our focus on efficiency and productivity has yielded significant results already.

Speaker Change: On Slide 18, you can see that just within a period of four months, we are 17% more efficient in our airports and the company overall is generating 16% more escape for FC These levels of productivity will improve further as we continue our growth into the seasonally stronger Q3 and Q4.

Speaker Change: Summarizing these actions on slide 19, compared to <unk> 33, cask ex fuel reduced almost 3%, mainly driven by our cost reduction initiatives and productivity gains we made a promise to you that we would emerge from the pandemic is a more efficient airline and that is exactly what we're doing.

Alexandre Malfitani: This new network is already operating and I want to really thank the entire zoo team for their incredible work. So far this month, we have a 99.2 completion factor with an on time performance of 87.2% the best in Brazil. On slide 17, you can see another great example of opportunities on the fleet side, which is our move from E1 into E2. Now, we ended 2Q with approximately 82% of our capacity coming from next generation aircraft, considerably higher than any competitor in the region.

Speaker Change: These are just some examples as part of our elevate plan, we have a list of over 40 initiatives spread across the entire airline and this plan will be our number one priority for the entire company as we move forward.

Alex: As part of our Elevate plan, we have a list of over 40 initiatives spread across the entire airline. And this plan will be our number one priority for the entire company as we move forward. Putting all this together, on slide 20, you can see how, throughout the years, our EBITDA trajectory has exhibited strong and consistent growth, obviously excluding the pandemic. For 2024, we expect there to be over 6 billion reais, a 17% increase from 2023, and once again, an all-time record for the hour.

Alexandre Malfitani: This is extremely beneficial as the two is a much more profitable aircraft that flies more hours per day with much lower seed costs. In July, for example, our E2 flew an average of almost 12 hours per day plus the E2 has 18 more seeds and delivers 80% lower fuel burn in total than the E1 leading to a 26% reduction in cost. As we expect to receive another 15 E2s over the next 18 months, this difference in utilization and seed costs will significantly drive earnings growth.

Speaker Change: Putting all this together on slide 20, you can see how throughout the years, our EBITDA trajectory has exhibited strong and consistent growth obviously, excluding excluding dependent for.

Speaker Change: For 2024, we expect EBITDA of over 6 billion Reais, a 17% increase from <unk> 23, and once again, an all time record for the airline.

Alex: To wrap up on slide 21, I couldn't be prouder of being a part of this. We're running an incredible, incredible operation. Our customers love to fly with us, and our crew members love to work. As David noted, we have adapted and evolved many times over the years but have remained true to our ethics. Everything we do is to build a stronger Azul and to expand our competitive advantages, benefiting all of our multiple stakeholders. Our Elevate plan is another step in this direction. We're truly excited by the opportunities ahead. With that said, we're all available to answer your questions, so I'll turn the call over to the operator for Q&A.

Speaker Change: To wrap up on slide 21, I couldnt be prouder of being part of US we're running an incredible incredible operation our customers love to fly us and our crew members love to work for US as David noted, we have adapted and evolved many times over the years, but have remained true to our essence everything we do is to.

Alexandre Malfitani: But we want to further expand this advantage, and we have made the decision to reduce utilization of E1s and increase utilization of E2s by prioritizing the E2 as the scheduled aircraft type and use E1s as a spare, leveraging the commonalities across the two models, but increasing profitability. And also reducing cap-ac significantly improving cash. I also want to show our focus on efficiency and productivity has yielded significant results already. On flight 18, you can see that just within a period of four months, we are 17% more efficient at airports, and the company overall is generating 16% more in case for FD.

David: To build a stronger rule and to expand our competitive advantages benefiting all of our multiple stakeholders are elevate plan is another step in this direction. We're truly excited by the opportunities ahead.

Speaker Change: With that we're all available to answer your questions. So I'll turn the call over to the operator for Q&A.

Speaker Change: Okay.

Operator: Ladies and gentlemen, thank you. We will now begin the Q&A session. Remember that if you have a question, click on the Q&A icon at the bottom of the screen and write your name and company. When your name is announced, please activate your microphone and proceed. For those who are listening to the conference on the phone, press nine to join the queue and six to accept the audio when requested. Our first question comes from Fernanda Reque, Sales Site Analyst, BTG. Fernanda, we will open your audio so you can ask your question. Please proceed.

Speaker Change: Ladies and gentlemen, thank you we will now begin the Q&A session remembering that if you have a question click on the Q&A icon at the bottom of the screen and write your name and company. When your name is announced please activate their microphone and proceed.

Speaker Change: For those who are listening to the call for some deform press nine to join the queue Asics chips F D audio when requested.

Alexandre Malfitani: These levels of productivity will improve further as we continue our growth into the seasonally stronger Q3 and Q4. Summarizing these actions on flight 19, compared to Q23, CASC X fuel reduced almost 3%, mainly driven by our cost reduction initiatives and productivity gains. We made a promise to you that we would emerge from the pandemic as a more efficient airline, and that is exactly what we're doing. These are just some examples.

Speaker Change: Let them move on to our first question.

Speaker Change: Our first question comes from another hakea sell side analysts BTG Jana we will open your orders. So you can ask your question.

Speaker Change: Please proceed.

Fernanda Reque: Thank you and good morning everyone. Thank you for taking the time to answer my questions. Two from our side. First, I would like to get an update on the debt conversion terms. If I'm not mistaken, the lock-up period for the debt conversion expires now in Q3. So maybe if you could comment a little bit, how are you thinking to tackle the 3 million shares that are expected to be vested by the lessors? We know that there is a difference between the strike price and the current price that the stock is at.

Speaker Change: Thank you and good morning, everyone. Thank you for taking my questions.

Speaker Change: Zhou from our side the first I would like to get an update on the debt conversion terms.

Alexandre Malfitani: As part of our elevate plan, we have a list of over 40 initiatives spread across the entire airline, and this plan will be our number one priority for the entire company as we move forward. Putting all this together on flight 20, you can see how throughout the years our EBITAS trajectory has exhibited strong and consistent growth, obviously, excluding, excluding the pandemic. For 2024, we expected a bidile of over six billion reais, a 17% increase. So we have an increase from 2023, and once again, an all-time record for the airline.

Speaker Change: If I'm not mistaken the lockup period for the debt conversion expires now in Q3.

Speaker Change: So maybe if you could comment a little bit how are you thinking to tackle.

Speaker Change: The 3 million shares there are expected to be invested by the lessors.

Speaker Change: We know that there is a.

Speaker Change: The difference between the strike price and the current price that is pockets so maybe.

Alex: So maybe, guys, if you could comment, what are the alternatives that you're thinking of or if you're thinking of using cash to close this gap? This is my first one. And the second, regarding the supply chain issues that led to the downward revision in terms of ASM. Could you update us on the latest fleet plan that you have for this year and the next? If I'm not mistaken, you were expecting to receive around 12 E2 and around 2 Airbus A320. What is the latest? And if you could comment on next year, how are you thinking about the aircraft deliveries? That's it from my side. Thank you.

Guys. If you could comment what are the alternatives Degas feen Cynwulf argue for roofing keen on using cash to close. This gap. This is my first one and the satcom regarding the supply chain issues.

Alexandre Malfitani: To wrap up on flight 21, I couldn't be prouder of being a part of the Zoom. We're running an incredible operation. Our customers love to fly us, and our crew members love to work for us. As they've noted, we have adapted and evolved many times over the years, but have remained true to our essence. Everything we do is to build a stronger Zoom and to expand our competitive advantages, benefiting all of our multiple stakeholders. Our elevate plan is another step in this direction. We're truly excited by the opportunities ahead of us.

Speaker Change: Let 40 guidance.

Speaker Change: Downward revision in terms of E S.

Speaker Change: Could you update us on the latest fleet plan that you have for this year and the Max if I'm not mistaken you were expecting to finish two sorry to receive around 12 I.

Speaker Change: <unk> and around two.

Operator: With that, we're all available to answer your questions.

Speaker Change: Airbus a three 200 to 320 <unk> what is the latest and if you could comment on next year. How are you thinking on the aircraft deliveries that.

Operator: I'll turn the call over to the operator for Q&A. Ladies and gentlemen, thank you.

Operator: We will now begin the Q&A session. Remembering that, if you have a question, click on the Q&A icon at the bottom of the screen and write your name and company. When your name is announced, please activate your microphone and proceed. For those who are listening to the conference on the phone, press 9 to join the Q and 6, check out the audio when requested.

Speaker Change: From my side. Thank you.

Operator: Let's then move on to our first question.

Alex: Hi Fernando, this is Alex. I'll talk about what we call the lessor equity structure. Just to remind everyone on the call what that is, right? So this is essentially COVID deferrals that our lessors agreed to transform into essentially what's an interest-free debt where Azul has the option of paying in cash or equity. And then, if there are shifting conditions that it may not be a good idea to pay in cash or equity, we always have the ability to talk to our lessors and negotiate new terms. And that's essentially what we're doing.

Speaker Change: Hi, Fernando this is Alex I'll talk about the what we call. The lessor equity structure now just to remind everyone first on the call what that is right. So this is essentially COVID-19 deferrals that our lessors are agreed to transform into essentially what's the interest.

Speaker Change: Interest rate that were absorbed has the option.

Fernanda Recchia: Our first question comes from Fernanda Hakey, a cell site analyst, BTG. Fernanda, we will open your audio so you can ask your question. Please proceed. Thank you, and good morning, everyone. Thank you for taking my questions to from our side.

Speaker Change: Of paying in cash or equity Alright, and then if there are shifting conditions that you know it may not be a good idea to pay in cash or equity. We always have the ability to talk to our lessors and negotiate new terms right and that's essentially what we're doing with bilateral bilateral conversations with artless source.

Fernanda Recchia: The first I would like to get an update on the debt conversion terms. If I'm not mistaken, the lock up period for the debt conversion expires now in Q3. So maybe if you could comment a little bit how are you thinking to tackle the three million shares that are expected to be vested by the last source. We know that there is a difference between the strike price and the current price that is stocked. So maybe guys, if you could comment what are the alternatives that you're thinking of or if you're thinking on using cash to close this gap. This is my first one.

Alex: We have bilateral conversations with our lessors, and we always like to remind everyone of the relationship that we have with our lessors. Lessors are partners who have a very long-term relationship with the airline, and they look at a very long-term horizon. And for them to maximize their economic value, obviously, they need a thriving business, right? So we are always able to kind of come up with a construct that works for us but also works for them. Obviously, they have their own constraints as well, but they were able to count on their supporters last year.

Speaker Change: Yes.

Speaker Change: We always like to remind everyone also of.

Speaker Change: The relationship that we have with our lessors right Lessors are partners, who have a very long term relationship with the airline and they look at a very long term horizon and for them to maximize their economic value. Obviously, a L would they need a thriving business right. So we always are able to kind of come up with a construct that works for us but.

Speaker Change: Also works for them, obviously, they have their own <unk>.

Speaker Change: Constraints as well, but you know they were able to we were able to count on their support last year and we know that we can count on their support going forward as well. So we are in these bilateral conversations with our lessors and as we reach new terms with them will.

Alexandre Malfitani: And the second regarding the supply chain issues that led to the guidance downward revision terms of the ASM. Could you update us on the latest fleet plan that you have for this year in the next. If I'm not mistaken, you were expecting to finish to start to receive around 12. E2 and around two Airbus A3 220. What is the latest and if you could comment on next year, how are you thinking on the aircraft deliveries?

Alex: And we know that we can count on their support going forward as well. So we are in these bilateral conversations with our lessors, and as we reach new terms with them, we'll update you all. But, as you've seen, we have not issued shares. And so we are having these conversations, and we'll update you over time.

Speaker Change: Update you all but as you've seen we have not issued shares and so we are having these conversations and we'll update you over time and again as Alex said their partners their partners in this business and they've seen what's happened I don't think anybody expected the exchange rate to devalue, 12% inside of a quarter I've been here for 15 years, we've never seen that and so.

John Rodgerson: And again, as Alex said, they're partners, they're partners in this business, and they've seen what's happened. I don't think anybody expected the exchange rate to devalue 12% inside of a quarter. I've been here for 15 years. We've never seen that.

John Rodgerson: And so, as all partners do, you sit down at the table, and we work through it and figure out what's the best path forward. As for the fleet projections and the OEM delays, I'll pass it over to Alex.

Speaker Change: So as all partners do you sit down at the table and we work through it and figure out what's the best path forward as for the fleet projections in the OEM delays I'll pass it over to Avi.

Alexandre Malfitani: That's it for my side. Thank you. Hey, Fernanda, this is Alex. I'll talk about what we call the Lesore Equity Structure. You're just to remind everyone first on the call what that is, right? So this is essentially COVID deferrals that our listeners agreed to transform into, especially with the, you know, interest-free dad, where Azul has the option of, you know, paying in cash or equity, all right? And then if there are shifting conditions that, you know, it may not be a good idea to pay in cash or equity, we always have the ability to talk to our listeners and negotiate new terms, right?

Alex: Thanks, John. Yeah, hi Fernanda.

Thanks, John Yeah, Hi, Fernanda, so I'll start with the <unk> hundred Twenty's, we've already received the <unk> hundred <unk> you were going to for the year. So Airbus has delivered for this year on the wide bodies. As we said our plan was six <unk> hundred 32 are already in the fleet. We expect two more in September and then we <unk>.

Alex: So I'll start with the A320s. We've already received the A320s we were going to have for the year. So Airbus has delivered six A330s for this year. On the wide bodies, as we said, our plan was six A330s. Two are already in the fleet, and we expect two more in September. And then we expect the final two between December and January in that time frame. As you said, the focus is on the A320s for this year and for the next couple of years. Actually, we are working very, very closely with Embraer. The number is moving around a little bit.

Speaker Change: Expect the final do between December and January in that timeframe.

Speaker Change: As you said the focus is on the E twos for this year and for the next couple of years actually we are working very very closely with embraer. The.

Speaker Change: The number is moving around a little bit.

Alexandre Malfitani: And that's especially what we're doing. We're in bilateral conversations with our listeners. You know, and, you know, we always like to remind everyone also of, you know, the relationship that we have with our listeners, right? Lesore is our partners who have a very long-term relationship with the airline, and they look at a very long-term horizon, and for them to maximize their economic value, obviously, you know, they need a thriving business, right?

Alex: For example, in September, we have two deliveries, and then down the road every month, August and beyond. So I would say we're working with them. It is moving around a little bit to the right as well.

Speaker Change: For example in September we have two deliveries and then down the road every month August and beyond so I would say, we're working with them. It is moving around a little bit to the right as well. This is one of the impacts for this year you will see some deliveries in December for example.

Alex: This is one of the impacts for this year. You will see some deliveries in December, for example, which will help us next year. So overall, I would say around 15 to 18 between now and the end of next year. And it's also important. A lot of the OEM deliveries are back and loaded, so that actually impacts leverage at the end of the year as well as kind of what's happening with the exchange rate. But on average, they've been shifting by 30 to 45 days to the right.

Which will help us next year so.

Speaker Change: Overall, I would say around 15 to 18, we can now and the end of next year and he is also important a lot of the OEM deliveries are backend loaded so that actually impacts leverage at the end of the year as well as kind of what's happening with the exchange rate but.

Alexandre Malfitani: So we always are able to kind of come up with a contract that works for us, but also works for them. Obviously, they have their own constraints as well, but, you know, they were able to, we were able to count on their support last year, and we know that we can count on their support going forward as well. So we are, in these bilateral conversations with our listeners, and as we reach, you know, new terms with them will update you all.

Speaker Change: On average they've been shifting 30% to 45 days to the right.

Speaker Change: Yes.

Fernanda Reque: Perfect. Thank you very much for your answers.

Speaker Change: Perfect. Thank you very much for your answers.

Speaker Change: Thank you.

Operator: Thank you. The next question now comes from Savvy Sisk, Raymond James. Savvy, we're going to open your audio so that you can ask your question. Please proceed.

Savi: The next question now comes from Savi <unk>, Raymond James outside Allison from Raymond James Savi, We're going to open your August that you can ask your question. Please.

Alexandre Malfitani: But as you've seen, we have not issued shares, and so we are having these conversations, and we'll update you over time. And again, as Alex said, their partners, their partners in this business, and they've seen what's happened. I don't think anybody expected the exchange rate to devalue 12 percent inside of a quarter. I've been here for 15 years, we've never seen that. And so as all partners do, you sit down at the table and we work through it and figure out what's the best path forward.

Speaker Change: Please proceed.

Savvy Sisk: All right. Thank you. Good morning, everyone.

Savi: Alright, Thank you and good morning, everyone.

Savi: I was curious for my first question on the flooding and the 200 million impact in the second quarter was that matter redirecting of capacity, yet and I'm trying to do is I'm trying to understand what kind of drag we should be modeling here.

Abhi Shah: As for the sleep projections and the OEM delays, I'll pass it over to Abby. Thanks, John. Yeah, hi, Fernanda. So I'll talk with the H320s. We've already received the H320s you were going to for the year. So Airbus has delivered for this year. On the white bodies, as we said, our plan was six H330s, two are already in the fleet. We expect two more in September, and then we expect the final two between December and January in that time frame.

Savi: Until it kind of open back up in the fourth quarter.

Savvy Sisk: I was curious about my first question on the flooding and the 200 million impact in the second quarter. Was that net of redirecting of capacity? What I'm trying to do is I'm trying to understand what kind of drag we should be modeling here until it kind of opens back up in the fourth quarter.

Ivy: Yes, Ivy that was net and also it doesn't really include the fact that we had to sell the other capacity so quickly which contributed to the reduction in year over year RASK as well. So certainly as we move forward now that we have a little bit more time, you can already see how much of July improved AGA.

Abhi Shah: Yes, Abhi, that was net. And also, it doesn't really include the fact that we had to sell the other capacities so quickly, which contributed to the reduction in year-over-year RAS as well. So certainly, as we move forward, now that we have a little bit more time, you can already see how much July improved. August, September, and October, when the capacity comes back, we certainly expect to be back to normalized RAS. And actually, I expect positive year-over-year RAS in 3Q as well.

Ivy: September and October when the capacity comes back we certainly expect to be back to normalized rats, and actually I expect positive year over year RASK.

Abhi Shah: As you said, the focus is on the E2s for this year and for the next couple of years, actually, we are working very, very closely with Embraer. The number is moving around a little bit. For example, in September, we have two deliveries and then down the road every month, August and beyond. So I would say we're working with them. It is moving around a little bit to the right as well. This is one of the impacts for this year.

Abhi Shah: So we're certainly getting back to normal, but it was just something we had to sell very, very quickly. So we were able to use our assets for the back half of May and the month of June. We actually believe...

Ivy: And in <unk> as well, so we're certainly getting back to normal but it was just something we had to sell very very quickly. So we were able to use our assets for the back half of May and the month of June we actually believe operating at port delay agree and being the largest airline will be a benefit to us going forward is there is enormous amount of economic activity.

John Rodgerson: We actually believe operating at Porto Alegre and being the largest airline will be a benefit to us going forward as there's an enormous amount of economic activity projected in the city to rebuild it. And so, you know, right now there are about seven flights a day into a military base in Porto Alegre when, previously, there were a hundred and twenty flights a day at the airport. There are just not enough people traveling in that region right now.

Ivy: Projected and the city to rebuild it and so right.

Abhi Shah: You will see some deliveries in December, for example, which will help us next year. So overall, I would say around 15 to 18, which now in the end of next year. That is also important. A lot of the OEM deliveries are back and loaded. So that actually impacts leverage at the end of the year as well as what's happening with the exchange rate. But on average, they've been shifting 30 to 45 days to the right. Perfect. Thank you very much for your answers. Thank you.

Speaker Change: Right now there's about seven flights a day into our military base in port delivery. When previously there was 120 flights a day at the airports Theres just not people traveling in that region right now.

Savvy Sisk: That's super helpful. And if I might follow up on the previous kind of fleet question. Is there any kind of A320 delivery next year? And just along the lines of fleet, I think that was kind of an agreement with Benday's on financing. I'm curious, you know, how that financing looks, and I'm getting back to the E2s.

Speaker Change: That's super helpful.

Speaker Change: And if I might on me.

The follow up on the previous kind of fleet question.

Speaker Change: Is there no kind of <unk> hundred 20 deliveries next year and just along that line.

Speaker Change: Lines of fleet I think that was kind of an agreement with Ben days on financing I'm curious how that financing left and I'm guessing that's in the evening.

Savanthi Syth: The next question now comes from Sabi Syth, Raymond James. I'll slide down from Raymond James. Sabi, we're going to open your audits in that you can ask your question. Please proceed. All right. Thank you. Good morning, everyone. I'm curious for my first question on the flooding and the 200 million impact in the second quarter. Was that net of redirecting of capacity? What I'm trying to do is I'm trying to understand what kind of drag we should be modeling here until it kind of opens back up in the fourth quarter.

Alex: Yeah, so we're not planning A320 deliveries next year. They've been pushed off for 2026 and beyond. And actually now, it's mostly A321s, to be honest, and we're very excited about that aircraft. Not the LRXLR, just the domestic ones, which are doing very well. But the next two years, really, the focus is going to be on the E2s. We're in the back half of this year, and the next 18 months, the focus is going to be on the E2.

Speaker Change: Yeah. So we are not planning 80 brain deliveries next year.

Speaker Change: I've been pushed off for coding 26, and beyond and actually now is most of the <unk> hundred 20 ones to be honest with they're very excited about that aircraft.

Speaker Change: Not the LR XLR, just the domestic ones, which are doing very well, but the next two years really their focus is going beyond the issues, where the back half of this year and the next 18 months of focus going beyond the aegis, yes and beyond.

Alex: Yeah, and BNDS financing is kind of standard ETA financing, right, that's available to Embraer customers. The terms are set by the aircraft sector association. So they're, you know, pretty standard. And we have approval for up to 10 aircraft, and we've decided to take two for now.

<unk> financing is.

Speaker Change: Kind of.

Speaker Change: Standard ECA financing that's available too.

Savanthi Syth: Yes, Avi, that was net. And also, it doesn't really include the fact that we have to sell the other capacities so quickly, which contributed to the reduction in Euro-Veer-Raff as well. So certainly, as we move forward, now that we have a little bit more time, you've already seen how much July improved, August, September and October when the capacity comes back, we certainly expect to be back to normalize Raffs. And actually, I expect positive Euro-Veer-Raff in 3Q as well.

Speaker Change: Embraer customers. This is the terms are set by the <unk>.

Speaker Change: Aircraft sector understanding so they're pretty standard and we.

Speaker Change: We have.

Speaker Change: Approval for up to 10 aircraft and we've decided to take two for now.

Alex: The majority of the E2s that we expect to take delivery of should be operating leases and will not provide additional cash outflows. And these two, also, the reason why we took them is that we were able to structure them in a way that also didn't provide cash outflows, even though they were financial leases, as opposed to operating leases. But all of these deliveries between now and the end of 2025, you know, you don't have to expect any cash outflows for the delivery.

Speaker Change: The majority of these tools that we expect to take delivery off should be operating leases and robot can provide additional cash outflows and these two are also the reason why we took them is because we were able to structure in a way that also didn't provide.

Savanthi Syth: So we're certainly getting back to normal, but it was just something we had to sell very, very quickly. So we were able to use our assets to the back half of May in the month of June. We actually believe, upgrading a portal, and being the largest airline, will be a benefit to us going forward as there's enormous amount of economic activity projected in the city to rebuild it. And so right now, there's about seven flights a day into a military base in port delivery, when previously there was 120 flights a day at the airport. So there's just not people traveling in that region right now.

Speaker Change: Cash outflows, even though there.

Speaker Change: Financial leases as opposed to operating leases, but all of these deliveries between now and end of 2025, you don't have to expect any cash.

Speaker Change: Outflows for the deliveries.

Speaker Change: Helpful. Thank you.

Speaker Change: Thank you.

Operator: The next question comes now from Alberto Valerio, Sales Site Analyst, UBS. Alberto, we will open your microphone so that you can ask your question. Please proceed.

Speaker Change: The next question comps now from our Bath <unk> sell side analyst UBS.

Speaker Change: <unk>, we will open your microphone. So that you can ask a question. Please proceed.

Savanthi Syth: That's super helpful.

Savanthi Syth: And if I might on the follow up on the previous kind of fleet question, is there no kind of A320 deliveries next year and just along the lines of fleet, I think that was kind of an agreement with Bendays on financing. I'm curious, you know, how that financing looks, and I'm getting up to the E2. Yeah, so we're not planning 80-20 deliveries next year. They've been pushed off for 2026 and beyond.

Alberto Valério: I, Alex, and John, thank you for taking my question. I'm interested to know about the five deliveries that you have this quarter, whether you have an intention to make a sales visit back on this aircraft. I think it was two 320s, two 330s, and one Embraer. And also about the government's announcement last week that it would provide financing from BNDS to the airlines. I think they made a condition that you own Embraers, and I know you guys already own them. My only question is if you have to order further more issues from Embraer and when this finance will arrive for you guys. Thank you.

Alex John: Hi, Alex John.

Thank you for taking my questions.

Speaker Change: I mean traditional above the five delivers that to have it this quarter.

Speaker Change: Whether you have any pension true made a sale leaseback on this aircraft.

Speaker Change: Kraft to ICU was true.

Speaker Change: The 20 meals and to treat <unk> and also about the announcement of the government last week.

Savanthi Syth: And actually now it's mostly 80-21s, to be honest, we were very excited about the aircraft, not the LRXLR, just the domestic ones, which are doing very well. But the next two years, really, the focus is going to be on the E2s. Where the back half of this year and the next 18 months, the focus is going to be on the E2s. Yeah, and the BNDF financing is kind of standard ETA financing that's available to Embroer customers.

Speaker Change: It may provide a financing from Ian desk to the airlines.

Speaker Change: They made a condition to AWN and brass and I know you guys already on my only question is if you have two audits further more you chose Troy and Brad and win this finance food arrived two guys. Thank you.

Alex: So the deliveries, they're operating leases, right? So no sale leasebacks would apply here.

Speaker Change: But for the deliveries they are operating leases right. So no sale leasebacks.

Savanthi Syth: This is, the terms are set by the aircraft sector understanding, so they're pretty standard. And we have approval for up to 10 aircraft, and we've decided to take two for now. The majority of the E2s that we expected to take delivery off should be operating leases and will not provide additional cash outflows. And these two, also the reason why we took them is because we were able to structure in a way that also didn't provide cash outflows, even though they are financial leases as opposed to operating leases. But all of these delivers between now and end of 2025. You don't have to expect any cash outflows for the delivery. Thank you.

Speaker Change: Would apply here.

Alex: And the BNDS financing, like I said, it's kind of a financing for the order that we already have. Yeah, but what you're referencing is the FNAC financing that was already approved by the Senate. The expectation is that it gets approved by the House. And so Mayor Kadanchi, the president of BNDS, has referenced that this is something that, you know, we expect to be approved in the third quarter and probably dispersed in the fourth quarter.

Speaker Change: And then beyond yesterday I feel like I said, it's kind of a financing for the order that we already have.

Speaker Change: What you're referencing is the snack financing that was already approved by the Senate expectation as that gets approved by the house and so methodologies. The president of the NDS has referenced that this is something that we expect to be approved in the third quarter and probably dispersed in the fourth quarter. So this is this is exciting so there should be less.

Alex: So this is exciting. This should be less expensive debt that the government is providing. There will be some things that we need to do. We need to add growth. Obviously, they're very anxious for Embraer, but we already have enough Embraer aircraft in our backlog to kind of make up for those conditions. But I think you're going to hear a lot more about the FNAC financing in the next couple of weeks, which is a very positive thing for the sector overall. Perfect. Thank you very much, Alex and John.

Speaker Change: Expensive debt that.

Speaker Change: That the government is providing there will be some things that we need to do we need to add grow obviously theyre very anxious for embraer, but we already have enough embraer aircraft in our backlog to kind of make up for those conditions, but.

Speaker Change: I think youre going to hear a lot more about the finocchi financing in the next couple of weeks, which is a very positive thing for the sector overall.

Alberto Valério: The next question comes now from Alberto Valerio, cell site analyst, UBS. Alberto, we will open your microphone so that you can ask your question. Please proceed.

Alex: Perfect. Thanks, very much Alex syndrome.

Alex: Yes.

Okay.

Speaker Change: Thank you.

Alberto Valério: I, Alex, John, thank you for taking my question. I'm interested to know about the five deliveries that you have in this quarter, whether you have an intention to make that say this back home, this aircraft, I think was two, three, 20 news and two, three, three 30s and one everywhere. And also about the announcement of the government last week that would make provider financing from the end of the, the lines. I think they made a condition to own embrairs and I know you guys are right on. My only question is if you have to order further more issues from embrairs and when this finance would arrive to you guys.

Alberto Valério: The next question now comes from Gabriel Rezende, a sales side analyst from Ita. Gabriel, we will open your microphone so that you can ask your question. Please proceed.

Speaker Change: The next question now comes from capital.

Speaker Change: <unk> and his age a sell side analyst from <unk>.

Speaker Change: <unk> will bring your microphone. So that you can ask your question.

Speaker Change: Please proceed.

Operator: Hello, can you guys hear me? Yes. Perfect. Good morning, David, John, Alex, Abhi, and Thais.

Speaker Change: Hello can you guys hear me.

Speaker Change: Yes.

Speaker Change: Perfect.

Speaker Change: Morning, David John Alex Abby please.

Gabriel Rezende: Two questions on our side as well. Just confirm the chart you showed on slide seven about tariffs increasing week by week. Can you confirm that the increase we have seen so far that you just showed us is enough to deliver your current guidance? Or are you considering that you need to make additional increases? I mean, obviously, considering the seasonality that I've seen in the fourth quarter, but should this trend continue in order for you to deliver the guidance, or could it be stable, again, just by the seasonality for you to be able to deliver?

Speaker Change: Two questions on our side as well just.

Speaker Change: Just to confirm the chart you show it on slide seven on the tariffs increasing week by week.

Speaker Change: Can you confirm that.

Speaker Change: The increase we have seen so far that we just showed us is enough to deliver your guidance are you considering that you need to make.

Speaker Change: Additional increases I mean, obviously, considering that seasonality doesn't seem that the fourth quarter, but.

Speaker Change: Should this trend continue in order for you to deliver the guidance or could it be stable again, just by the seasonality for you to be able to deliver so that's the first question and the second question.

Alberto Valério: Thank you. So the deliveries they are operating leases, right? So no sale lease backs would apply here. And the BNDS financing, like I said, is kind of a financing for the order that we already have. Yeah, but what you're referencing is the FNAC financing that was already approved by the Senate, expectation is it gets approved by the House. And so, the President of the BNDS has referenced that, you know, this is something that, you know, we expect to be approved in the third quarter and probably disperse in the fourth quarter.

Gabriel Rezende: So that's the first question. And the second question, we saw a much lower maintenance expense booked in the quarter. You mentioned some insourcing and some cost-cutting initiatives, and we did see a higher personal expense in the quarter. But I would just like you to understand what the additional upside that we could have on these maintenance lines, which we are looking forward to putting into our model. Thank you.

Speaker Change: Saw much lower maintenance expense booked in the quarter.

Speaker Change: You imagine at some in sourcing that some cost cutting initiatives and we did see a higher personnel expense in the quarter, but I would just like to understand what.

Speaker Change: What is the additional upside that it could have on these on these metals line outlook in Florida.

Speaker Change: To put into our model. Thank you.

Abhi Shah: Hi Gabriel. Look, on the demand and fair side, we're pretty happy with the trends that we're seeing right now. The key is to maintain that as we go through the quarter and the second half of the year. Seasonality is going to help. It is a period of better corporate demand. It is a period of better consumer demand. And so the situation is pretty good in terms of the level of the fares.

Speaker Change: Yeah, Hi, Gabrielle look on the demand and fair side, we're pretty happy with the trends that we're seeing right now.

Alberto Valério: So this is exciting. So this should be less expensive debt that the government is providing. There will be some things that we need to do. We need to add growth. Obviously, they're very anxious for Embraer, but we already have enough Embraer aircraft in our backlog to kind of make up for those conditions. But I think you're going to hear a lot more about the FNAC financing in the next couple of weeks, which is a very positive thing for the sector overall.

Speaker Change: The key is to maintain that as we go through the quarter and the second half of the year seasonality is going to help.

Speaker Change: It is a bit of better corporate demand. It is a period of better close in demand.

And so it's the situation is pretty good in terms of the level of the first what is key now is that you have to maintain this level. So that you can continue to build the booking curves every single month as we go forward.

Abhi Shah: What is key now is that you have to maintain this level so that you can continue to build the booking curves every single month as we go forward. What was difficult in the second quarter, especially after Porto Alegre, and the chart shows that is the dip that happened in May. And then we had to take time to recover from that dip. But there should be no reason for that to happen now in the second half of the year, given strong seasonality, given the strong economic indicators.

Alberto Valério: Perfect. Thank you very much, Alex. And John.

Operator: Thank you.

Speaker Change: What was difficult in the second quarter, especially after both the <unk> and the chart shows that is that dip that happened in May and then we have to take time to recover from that dip.

Gabriel Rezende: The next question now comes from Gabriel Hiveanges, tell side analysts from Edo. Gabriel, we will open your microphones so that you can ask your question. Please proceed. Hello, can I hear me? Yes. Perfect.

Speaker Change: There should be no reason for that to happen now in the second half of the year given strong seasonality given the strong economic indicators. So the fare levels, where they are good fair levels are the keys for the industry overall to maintain those levels as we go through the second half of the year.

Abhi Shah: So the fare levels where they are are good fare levels. The key is for the industry overall to maintain those levels as we go through the second half of the year. So if we're able to do that, then I do believe we can produce very good unit revenues overall.

Gabriel Rezende: Good morning, David, John, Alex, Abby, and ladies. Two questions on our site as well. Just go from the chart. You show it on the flight seven on the terrorist increase in week by week. Can you confirm that the increase we have seen so far that we just showed us is enough to deliver your guidance? Are you considering that you need to make additional increases? I mean, obviously, considering that this is anality that I've seen in the fourth quarter, but should this trend continue in order for you to deliver the guidance or could it be stable? Again, just by the, by this is anality for you to be able to deliver.

Speaker Change: So if we're able to do that than I do believe we can produce a very good unit revenues overall and I just want to add.

John Rodgerson: And I just want to add, you know, CodeShare exists in the third quarter, didn't exist in the second quarter, the ancillary revenue that Alex was talking about being up 17%, you know, year over year, that exists in the third quarter, wasn't there in the second quarter. And the story around Elevate as a company is, it's really a cost story, right? As Alex kind of walked us through increased utilization, being more efficient as an airline, kind of going through all of the initiatives that we have.

Alex: Codeshare exists in the third quarter didn't exist in the second quarter. The ancillary revenue that that Alex was talking about being up 17% year over year that exists in the third quarter wasn't there in the second quarter and the story around elevate as a company is it's really a cost story right as Alex kind of walk through increased utilization being more efficient as an early.

Speaker Change: <unk> and are going through all of the initiatives that we have so I think one thing that's being lost in the second quarter. It was a great cost quarter as we focused ourselves on the business negotiated with the Oems negotiating with our suppliers across the board and really driving better cost results and so avi needs to do his job and Alex need to can.

Gabriel Rezende: So that's the first question and the second question. We saw much lower maintenance expense booking the quarter. You mentioned some in sourcing and some cost-cut initiatives, and we did see a higher personal expense in the quarter. But I would just like to understand what is the additional upside that we could have on these on these maintenance lines looking forward to putting it to our model. Thank you.

John Rodgerson: So I think one thing that's being lost in the second quarter. It was a great cost quarter, you know, as we focused ourselves on the business, negotiating with the OEMs, negotiating with our suppliers across the board, and really driving better cost results. And so Abhi needs to do his job, and Alex needs to continue to take costs out of the business on a going forward basis.

Speaker Change: Peter to take cost out of the business on a go forward basis.

Alex: Yeah, and on the maintenance side, you know, also to remind everyone, we have a maintenance line as part of operating expenses. That's mainly line maintenance. So some of that obviously is driven by our own internal work, where the initiatives that John mentioned can really, you know, have a positive impact. And some of it is driven by capacity, right? So, because this is mainly line maintenance, there is a correlation between this line and capacity.

Speaker Change: Yes, and on the maintenance side also to remind everyone.

Abhi Shah: Hi, Gabriel. Look, on the demand and fair side, we're pretty happy with the friends that we're seeing right now. The key is to maintain that as we go through the quarter and the second half of the year. Seasonality is going to help. It is a period of better corporate demand. It is a period of better closing demand. And so it's the situation is pretty good in terms of the level of the fairs.

Speaker Change: We have a maintenance line as part of operating expenses, that's mainly line maintenance. So some of that obviously is driven by our own internal work, where the initiatives that John mentioned can really.

Provide a positive impact.

Speaker Change: And some of it is driven by.

John Rogers: Capacity right. So because this is mainly line maintenance there is a correlation between.

Abhi Shah: What is key now is that you have to maintain this level so that you can continue to build the booking curves every single month as we go forward. What was difficult in the second quarter, especially after Porto Legre, and the chart shows that is the dip that happened in May. And then we have to take time to recover from that dip. There should be no reason for that to happen now in the second half of the year, given strong seasonality, given the strong economic indicators.

John Rogers: This line and capacity.

Alex: Right on the CAPEX side, I think that's where you can see really big numbers because, you know, then we're talking about numbers that are in the, you know, billion rail plus a year in terms of maintenance CAPEX and where a lot of our initiatives that we mentioned in terms of, you know, utilizing aircraft more efficiently or using the next generation aircraft more than the ones. That's where you can see a lot of the benefit coming from the elevator.

John Rogers: Alright, and on the Capex side, I think Thats, where you can see really big numbers because.

John Rogers: Then we're talking about numbers that are.

John Rogers: In the building rail plus a year in terms of maintenance Capex and where a lot of our initiatives that we mentioned in terms of <unk>.

John Rogers: Utilizing aircraft more efficiently or using the next generation aircraft more than the ones. That's where you can see a lot of the benefit coming from the elevate plant.

Abhi Shah: So the fair levels where they are are good fair levels, the keys for the industry overall to maintain those levels as we go through the second half of the year. So if we're able to do that, then I do believe we can produce a very good unit revenues overall. And I just want to add, you know, co-share exists in the third quarter, didn't exist in the second quarter. The Ancillary revenue that Alex was talking about being up 17%.

John Rogers: Okay.

Gabriel Rezende: That's very clear. Thank you.

Speaker Change: That's very clear thank you.

John Rogers: Yeah.

Operator: Okay, moving on to the next question comes from Guilherme Mendes, a Sales Side Analyst from J.P. Morgan. Guilherme, we will open your microphone so that you can ask your question. Please go ahead.

Speaker Change: Okay moving on to the next question comes from <unk> majors sell side analysts from J P. Morgan and me we will open your microphone. So that you can ask a question. Please go ahead.

Guilherme Mendes: Hey, good morning, everyone, John, David, Abhi, Alex, and Thais. Thanks for taking my question. I have first a follow up on the fares discussion. It is pretty impressive how the industry has been able to increase fares. And Abhi, you mentioned that you expect to maintain such levels. And but back to the exercise of a five percent depreciation leading to a three percent price increase. How do you guys see illicitity going forward? Meaning, how much more do you think you can increase prices without actually impacting demand?

Drew Majors: Hey, good morning, everyone drawn David Abbey, Alex and Pasting for taking my question I have first a follow up on the on the spheres discussion.

Abhi Shah: You know, year over year, that existence in the third quarter wasn't there in the second quarter. And the story around elevate as a company is, it's really a cost story, right? Is Alex kind of walk through increased utilization, being more efficient as an airline, kind of going through all of the initiatives that we have. So you, I think one thing that's being lost in the second quarter, it was a great cost quarter.

Abhi Shah: You know, as we focus ourselves on the business, negotiating with the OEMs, negotiating with our suppliers across the board, and really driving better cost results. And so Abby needs to do his job and Alex needs to continue to take costs of the business on a go forward base. Yeah, and on the maintenance side, you know, also to remind everyone we have a maintenance line as part of operating expenses. That's mainly line maintenance.

Speaker Change: Putting presses are how the industry has been able to increase fears and arguments about do you expect to maintain such levels and back to the dig for Cytosorb, a 5% depreciation leading to a 3% price increase.

Speaker Change: E <unk> facility going forward.

Speaker Change: Meaning how much more you think you can increase prices with Dol in Israel impacting demand.

Guilherme Mendes: And the second question, it's a follow-up on the Elevate plan. If you can help us quantify the potential benefits of it into 2024 or into 2025, or in other words, if something is included in the six billion guidance for this year. Thank you.

Speaker Change: And the second question, it's a follow up on the elevate Glenn.

Speaker Change: If you can help us quantify the potential benefits a bit into 2024 or into 2025 or in other words. If something is included on the 6 million guidance for this year. Thank you.

Abhi Shah: So some of that obviously is driven by our own internal work where the initiatives that John mentioned can really, you know, provide a positive impact. And some of it is driven by capacity, right? So because this is a mainly line maintenance, there is a correlation between this line and capacity, right? You know, building rail plus a year in terms of maintenance capax and where a lot of our initiatives that we mentioned in terms of utilizing aircraft more efficiently or using the next generation aircraft more than the ones. That's where you can see a lot of the benefit coming from the elevate plan.

Abhi Shah: Yeah, thanks. So, you know, like I said, July's year-over-year RASC was already positive year-over-year, and that was really just the first month of kind of getting back to normal booking levels post Porto Alegre. You know, our job is to continue to test the market. We think that the fares that the industry has now would probably not have anticipated in a sort of pre-pandemic situation, but as we showed on the slide, in dollar terms, our fares have actually gone up about 8% every single year.

Speaker Change: Yeah. Thanks, So like I said, we saw July year over year RASK already positive.

Speaker Change: Year over year and that was really just the first month of kind of getting.

Abhi Shah: That's very clear. Thank you.

Speaker Change: Getting back to normal booking levels post Porto Alegre.

Speaker Change: And our job is to continue to test the market, we think that deferred that the industry has now we probably would not have anticipated sort of pre pandemic, but as we showed on the slide in dollar terms, our fares have actually gone up about 8% every single year. So it's a matter.

Abhi Shah: So, it's a matter of testing the market. I feel pretty good about overall industry discipline. I'm seeing the industry disciplined in terms of actions, in terms of network actions, and so I don't see any reason why there should be a limitation. We're going to keep testing it, and I think the strong economic activity in Brazil, the second half seasonality, are going to be very supportive of us maintaining these fare levels.

Speaker Change: Of testing the market I feel pretty good about overall industry discipline.

Speaker Change: I'm seeing the industry discipline in terms of.

Speaker Change: Actions in terms of network actions.

Speaker Change: And and so I don't see any reason why there is a limitation, we're going to keep testing it.

Speaker Change #100: And I think the strong economic activity in Brazil, the second half seasonality are going to be very supportive of <unk>.

Gilean de Azevedo: Okay, moving on to the next question comes from Gilean in the ages, cell side analysts from JP Morgan. Gilean, we will open your microphone so that you can ask your question. Please go ahead. Hey, good morning, everyone. John David Abby, Alex and anti East and for kicking my question, I have first to follow up on the on the fear discussion. So pretty impressive how the industry has made between freeze fears and I will mention about the expected maintain such levels.

Speaker Change #100: Maintaining these fare levels.

David Neeleman: As for the Elevate plan, I just want to remind you that we had a 12% devaluation of our currency and 10% of our network knocked offline. And so we have fewer ASKs in the plan, but we're still going to deliver above $6 billion of EBITDA. So Elevate helps us get there. But we, you know, as you go forward into 2025, that's when you should get an incremental billion of EBITDA. And that's making the assumption that the exchange rate remains devalued.

As for the elevated plan I just want to remind you we had a 12% devaluation of our currency and 10% of our network knocked offline and so we have less afk's in the plan, but yet we're still going to deliver above $6 billion of EBITDA. So elevate helps us get there, but we as you go forward into 2025.

Gilean de Azevedo: And the back to the exercise of a 5% depreciation leading to a 3% price increase. How do I see a lot of facility going forward? Meaning how much more do you think you can increase prices without a certain impact in demand?

Speaker Change #100: That's when you should get an incremental $1 billion of EBITDA and that's making the assumption that the exchange rate remains devalued, but the structural changes, we're making to the business will be permanent the things like we're doing on the revenue side with ancillary codeshare all of them. They will be permanent changes on the cost side, they will be permanent changes as well and so we're shifting and adapt.

David Neeleman: But these structural changes we're making to the business will be permanent. The things we're doing on the revenue side with ancillary, code share, all of these, they will be permanent changes. On the cost side, they will be permanent changes as well.

John Rodgerson: And the second question is it's a follow up on the elevate plan. If you can help us quantify the potential benefits of it into 2024 or 2025 or in other words, if some things included on the 6 million guidance for this year. Thank you. Yeah, thanks. So, you know, like I said, we saw July Eurovia Rask already positive Eurovia and that was really just the first month of kind of getting back to normal booking levels post Porto Alegre.

David Neeleman: And so we're shifting and adapting, but it's part of the Elevate program in the 6 billion. But there's a lot more as we roll forward into 2025. Yeah.

Speaker Change #100: But it's.

Speaker Change #100: As part of elevate is in the $6 billion.

Speaker Change #100: But theres a lot more as we roll forward into 2025 and think about the ramp up right.

Guilherme Mendes: And think about the ramp-up, right? You know, some of these initiatives were things that we were talking about, we were looking at, but we decided to accelerate. Some of them are brand new, but overall, all of the initiatives are going to have much less than a full year's worth of contribution in 2024. But then they should have a full year's worth of contribution in 2025, right? And so the 6 billion kind of includes the ramp up that we're going to do this year. We haven't provided guidance on 2025 yet. But in terms of what the initiatives should contribute, you should have a full, you know, billion of contribution from the initiatives available to us for a full year.

Speaker Change #100: Some of these initiatives were things that we were talking about what we're looking at but we decided to accelerate some of them are brand new but overall all of the initiatives are going to have much less than a full year's worth of contribution to 2024, but then they should have a full year's worth of contribution.

John Rodgerson: You know, our job is to continue test the market. We think that the fair that the industry has now, we probably would not have anticipated sort of pre-pandemic, but as we showed on the slide, in dollar terms, our fairs have actually gone up about 8% every single year. So, it's a matter of testing the market. I feel pretty good about overall industry discipline. I'm seeing the industry discipline in terms of actions, in terms of network actions.

Speaker Change #100: 2025, right and so the fixed bill kind of includes.

Speaker Change #100: The ramp up that we're going to do this year, we havent provided guidance on 2025 yet.

Speaker Change #100: But in terms of what the initiatives should contribute you should have a 4 billion reais of contribution from the initiatives bearing.

Speaker Change #100: Available to us for a full year.

Speaker Change #101: Super clear thank you all.

Speaker Change #100: Okay.

Victor Mizusaki: Okay, moving on to the next question. The next question comes from Victor Mizusaki, Sales Site Analyst, Bradesco. Victor, we will open your microphone so that you can ask your question. Please proceed.

Operator: Super clear. Thank you all. Okay, moving on to the next question. The next question comes from Victor Mizusaki, Sell-Site Analyst, Bradesco. Victor, we will open your microphone so that you can ask.

Speaker Change #102: Moving onto the next question next question come from today's term zadkine sell side analysts Bradesco Victor we will open your microphone. So that you can ask your question. Please proceed.

John Rodgerson: And so, I don't see any reason why there's a limitation. We're going to keep testing it. And I think the strong economic activity in Brazil, the second half seasonality are going to be very supportive of us maintaining these fair levels. As for the elevated plan, I just want to remind you, you know, we had a 12% evaluation of our currency and 10% of our network knocked off line. And so, we have less days, caves in the plan, but yet we're still going to deliver above 6 billion of EBITDA.

Victor: Hi, Joe.

Speaker Change #104: <unk> the first one.

Speaker Change #104: Slide nine basically shorter than that.

Speaker Change #106: Kind of a guidance for international growth in the second half.

Speaker Change #107: So my question here is with kind of comment how these international craft will impact the demand for nomex gravel give me or help us book model and the second one if you can give any.

John Rodgerson: So, elevate helps us get there, but we, you know, as you go forward into 2025, that's when you should get an incremental a billion of EBITDA. And that's making the assumption that the exchange rate remains devalued. But the structural changes we're making to the business will be permanent. The things like we're doing on the revenue side with ancillary, code share, all of the, they will be permanent changes. On the cost side, they will be permanent changes as well. And so, we're shifting and adapting, but it's part of elevate is in the 6 billion, but there's a lot more as we roll forward into 2025.

Speaker Change #107: It's all going negotiations were far better thank you.

Abhi Shah: Hi Victor, on the international front, the truth is it actually helps our domestic because it allows us to sell seats that we didn't have. So in the second quarter, if somebody wanted to go from Curitiba to Fort Lauderdale, chances are they would not just find a seat on Azul. And now we're starting to see that availability come up.

Speaker Change #107: Yes, Hi, Victor on the international the truth is it actually helps our domestic because it allows us to sell seats that.

Speaker Change #109: That we didn't have so the second quarter. If somebody wanted to go from could achieve to Fort Lauderdale chances that they would not they would not find a seat on azure and now we're starting to see that availability come up.

John Rodgerson: In Recife and Belo Horizonte, we actually went to zero flights to the US for about a six-week period, and that affected the demand domestically in those regions in the Northeast and the Belo Horizonte region. So and having Porto Alegre back in October in October is a big driver of international demand as well. So actually, yeah, international demand was blocking demand on the domestic side as well. So having those seats available, given the strength of our network, it's going to help an international audience, and it also helps domestic. As we've stated, as has Alvaro, yes, we are in active discussions. I think you'll get the news.

Speaker Change #110: <unk> in Belo Horizonte, we actually went to zero a flight to the U S for about a six week period and that affects the demand domestically in those regions in the northeast and the Belo Horizonte regions, So and having put the negative back in after October <unk>.

John Rodgerson: Yeah, and think about the ramp up, right? You know, we, some of these initiatives were things that we were talking about. We were looking at, but we decided to accelerate. Some of them are brand new, but overall, all of the initiatives are going to have much less than a full years worth of contribution to 2024. But then they should have a full years worth of contribution for 2025, right? And so, the 6 billion kind of includes the ramp up that we're going to do this year.

Speaker Change #110: Big driver of international demand as well so actually.

Speaker Change #110: International was blocking demand on the domestic side as well so having those seats available given the strength of our network is going to help it in international and and also helps domestic.

John Rodgerson: We haven't provided guidance on 2025 yet. But in terms of what the initiatives should contribute, you should have a full, you know, billion rise of contribution from the initiatives being available to us for a full year.

Speaker Change #110: John.

John Rodgerson: Super clear. Thank you all.

John Rodgerson: We've stated, as has Avra, yes, we are in active discussions. I think you'll get news about that in the not-too-distant future. We have to respect the process that Goal has today in their bankruptcy, but we'll update the market at the appropriate time.

Speaker Change #111: As we've stated as has <unk>, yes, we are in active discussions I think youll get news about that in the not too distant future.

Speaker Change #111: We have to respect the process that goal has today and their bankruptcy but.

Speaker Change #111: We will update the market at the appropriate time.

Operator: Okay, moving on to the next question. Next questions come from these terms to Zaki. Telefide analyst, but a desk, Victor, we will open your microphones so that you can ask your question. Please proceed. Hi, two questions here. The first one, I think it's like nine. We basically show that we're kind of a guidance for international track growth in the second half. So my question here is if can comment all these international track will impact the demands for domestic travel, giving you our haven't spoke model.

John Rogers: Thank you.

Operator: Okay, moving on to the next question comes from Joo Frizo, Southside Analytics at Goldman Sachs. Joo, we will open your microphone so that you can ask your question. Please go ahead.

Speaker Change #112: Okay moving on to the next question comes from mine shrunk fears of sell side analysts at Goldman Sachs.

Speaker Change #113: Wrong, we will open your microphone. So that you can ask a question. Please go ahead.

João Frizo: Hey, good morning, everyone. Thanks for taking my question. I have two quick ones. The first one is on CapEx. You guys mentioned that you expect over R$1 billion in CapEx on maintenance only. So I just wanted to get a sense on the CapEx on the back end of this year, if we should expect the same run rates as we saw in the first half. And for 2025, how should we think about it?

Speaker Change #114: Hey, good morning, everyone. Thanks for taking my question I have two quick ones. The first one is on Capex you guys mentioned that you expect over 1 billion unrealized and Capex for maintenance only.

Speaker Change #115: So I just wanted to get a sense on the capex on the backend of this year or if we should expect the same run rates as we signed the first half and for 2025, how should we think about it.

Operator: And the second one, if can give any updates on the negotiations with other. Thank you. Yeah, Victor, on the international, the truth is it actually helps our domestic because it allows us to sell seats that we didn't have. So the second quarter, if somebody wanted to go from Curitiba to Fort Lauderdale, chances are they would not just, they would not find a seat on Azul. And now we're starting to see that availability come up.

João Frizo: And then following on cash generation, how should we also think about this in the second half of the year? It's a seasonally stronger semester. So just wanted to get your view on this as well. Thank you very much.

Speaker Change #115: And then following.

On cash generation, how should we also think about this on the second half of the year right, it's a seasonally stronger San.

Speaker Change #116: Master So just wanted to get your view on this as well thank you very much.

Alex: Thanks, Joe. Now, just to clarify, you know, what I mean is, within CapEx, you're talking about orders of magnitude of billions of AIs on spend per year. We did not provide guidance on what the maintenance capex is going to be or what the impact of Elevate on maintenance capex is going to be, right? But that is where the opportunity is, right? There is some maintenance that flows through the operating expense. But as you see, it was kind of less than 200 million AIs this quarter.

Speaker Change #117: Thanks, Joe So just to clarify you know what I mean.

Speaker Change #118: Within Capex, you're talking about orders of magnitude of billions of values on spend per year, we did not provide guidance on what the maintenance capex is going to be or what the impact of elevate on maintenance capex is going to be right, but that is where the opportunity is right. There is some.

Operator: Racifi and Belohar is on Chi, we actually went to zero flights to the US for about a six week period. And that affects the demand domestically in those regions in the Northeast and the Belohar is on Chi region. So, and having put a leg right back in October in October, it's a big driver of international demand as well. So actually, international was blocking demand on the domestic side as well. So having those seats available given the strength of our network, it's going to help an international and it also helps domestic.

Speaker Change #119: Some maintenance that flows through the operating expense, but as you see you know it was kind of less than 200 million higher this quarter when youre talking about maintenance Capex that you talked about.

Alex: When you're talking about maintenance capex, then you're talking about a bigger number. And that's, I think, where we think Elevate can really provide help, because our line maintenance is not going to reduce dramatically. But we could always be more productive, more efficient, right? Work more intelligently.

Speaker Change #120: A bigger number and Thats I think where we think elevate can really provide health because our line maintenance is not going to reduce dramatically always we can always be more productive more efficient right works more intelligently, but when you decided to fly E twos.

Operator: As we stated, as Albra, yes, we are an active discussion. I think you'll get news about that in the not too distant future. We have to respect the process that goal has today in their bankruptcy, but we'll update the market at the appropriate time. Thank you for that.

Alex: But when you decide to fly E2s more often, right, with your newer aircraft and you decide to reduce the utilization on E1s, that is primarily going to help maintenance capex as opposed to maintenance opex. On maintenance capex or maintenance as a whole, if you remember, we also had announced a while ago that we now have access to a maintenance capex line from, you know, kind of guaranteed by sovereign risk. We have not drawn upon that facility yet, right?

Speaker Change #120: More often right, which are newer aircraft that you decided to reduce the utilization on the ones that is primarily going to hell maintenance capex as opposed to maintenance opex on the maintenance capex or capex as a whole. If you remember we also had announced a while ago that we had had that we.

Michael Linenberg: Okay, moving on to the next question comes from Strong Physus, outside the announcement of Goldman Sachs. Strong, we will open your microphone so that you can ask your question. Please go ahead. Hey, good morning, everyone. Thanks for taking my question. I have two quick ones. The first one is on topics. You guys mentioned that you expect over one billion realizing topics on maintenance only. So I just wanted to get a sense on the topics on the back end of this year.

Speaker Change #120: Now have access to a maintenance Capex line.

Speaker Change #120: From.

Guaranteed by sovereign risk, we have not drawn upon that facility, yes, right that is about $200 million of capital that's available to us and so this year. When you look at the Capex that happened in the beginning of the year. There was no benefit from this line yet but.

Alex: That is about 200 million dollars of capital that's available to us. And so this year, when you look at the CapEx that happened at the beginning of the year, there was no benefit from this line yet, but that benefit should be available to us going forward. So to reduce

Michael Linenberg: I think we should expect the same run rates as we saw in the first half in for 2025. How should we think about it? And then following on cash generation, how should we also think about this on the second half of the year, right? It's a seasonally stronger semester. So just wanted to get your view on this as well. Thank you very much. Thanks, Joe. Just to clarify, you know, what I mean is, you know, within capex, you're talking about orders of magnitude of, you know, billions of eyes on span per year.

Speaker Change #120: That benefit should be available to us going forward. So it will reduce the cash capex in the third and fourth quarter exactly.

Alex: So it'll reduce cash CapEx in the third and fourth quarter.

João Frizo: And yes, you know, if you take a look at the Bloomberg consensus that breaks it down quarterly, what the market expects us to generate in the first half, and what the market expects us to generate in the second half, there's a big difference, right? And so that translates to a better cash performance, also according to Bloomberg, because a lot of the cash generation comes from EBITDA products.

Speaker Change #120: Yes.

Speaker Change #121: When you think about if you take a look at Bloomberg consensus that breaks it down quarterly what the market expects us to generate in the first half with the marketing such as to generate in the second half Theres, a big difference right and so that translates to a.

Speaker Change #121: Better cash performance also accordingly.

Speaker Change #122: Mono a lot of the cash generation comes from.

Michael Linenberg: We did not provide guidance on, you know, what the maintenance capex is going to be or what the impact of elevate on maintenance capex is is going to be right. But that is where the opportunity is, right. There is some maintenance that close through the operating expense. But as you see, you know, it was kind of less than 200 million highs this quarter, when you're talking about maintenance capex, then you're talking about a bigger number.

Speaker Change #122: The EBITDA production.

Operator: Thank you very much guys, super clear.

Speaker Change #123: Thank you very much guys Super clear.

Michael Linenberg: Thank you. The next question now comes from Michael Linenberg, Southside Analyst from Deutsche Bank. Michael, we will open your microphone so that you may ask your question. Please go ahead.

Speaker Change #123: Thank you. The next question now comes from Michael Berg.

Speaker Change #123: <unk>.

Speaker Change #124: Sell side analysts from Deutsche Bank, Michael We will open your microphone. So that you may ask your question. Please go ahead.

Michael Linenberg: Oh yeah, hey, good morning guys. You can hear me, right? Yeah. Oh, great.

Michael Berg: Yeah, Hey, good morning, guys, you can hear me right.

Alex: Hey, just a question here on your immediate liquidity of 2.5 billion reais. One, does that include that guaranteed maintenance CapEx line? And as we sort of think through the year, what is your target liquidity level for you, you know, as we go into 2025? And as I think about Elevate, how that's going to contribute on the EBITDA side, is that 1 billion of EBITDA? You know, I know that that's a P&L impact, but should we think of that as also a cash impact as well? Is it one to one? Or are there other elements to that? And then I have a follow up.

Speaker Change #126: Yes, great.

Michael Linenberg: And that's I think where we think elevate can really provide health because our line maintenance is not going to reduce dramatically. Always, we could always be more productive, more efficient, right, works more intelligently, but when you decide to fly e2s more often, right, which are newer aircraft and you decide to reduce the utilization on you ones that is primarily going to help maintenance capex is a post maintenance. On the maintenance capex or capex as a whole, if you remember, we also had announced a while ago that we had had that we now have access to a maintenance capex line from, you know, kind of guaranteed by sovereign risk, we have not drawn upon that facility yet, right, that is about 200 million dollars of capital that's available to us.

Michael Berg: Great.

Speaker Change #127: Just a question here.

Speaker Change #128: On your immediate liquidity of $2 5 billion re is one does that include that.

Speaker Change #128: That guaranteed Matt maintenance Capex line.

Speaker Change #128: And as we sort of think through the year what.

Speaker Change #129: What is the target liquidity level for you.

Speaker Change #130: You know as we go into 2025 and as I think about elevate.

Speaker Change #131: That's going to contribute on the EBITDA side is that 1 billion of EBITDA I know that that's a P&L impact, but should we think of that is also a a cash impact as well as at one to one or is there there are other.

Speaker Change #132: Elements of that and then I have a follow up.

Alex: Sure. So the immediate liquidity does not include that line, right? That is just essentially cash plus receivables, as we normally provide. And the main part of that is that the majority of the receivables are credit card receivables, which do not have any cardholder risk, and are very easy to advance and transform into cash. So it does not include that guaranteed maintenance line that's available to us. And thirdly, target liquidity, you know, we As we grow, right, we expect to want to increase our liquidity, we like to have something between 10 and 20% of last year's revenues in cash, where we're going to end up between that 10 and 20, some of it depends on seasonality, some of it depends on the cost of capital, right, but we can kind of comfortably operate within those.

Speaker Change #133: Sure. So for the immediate liquidity does not include deadline, Brian that it's just essentially cash flows receivables as we normally.

Speaker Change #133: Provide and the main part of that the majority of the receivables are credit card receivables, which have not.

Michael Linenberg: And so this year, when you look at the capex that happened in the beginning of the year, there was no benefit from this line yet, but that benefit should be available to us going forward. So it'll reduce the cash capex in the third and the fourth quarter. And yes, you know, when you think about, you know, if you think a look at Bloomberg consensus that breaks it down quarterly, what the market expects us to generate in the first half, what the market expects us to generate in the second half, there's a big difference, right? And so that translates to a better cash performance also accordingly, because you know, a lot of the cash generation comes from the EBITDA production. Thank you very much, you guys, super clear. Thank you.

Speaker Change #133: Any cardholder risk right and are very easy to to advance and transform into into cash. So it does not include <unk>.

Speaker Change #134: She'd maintenance.

Speaker Change #134: And thats available to us in terms of a target liquidity.

Speaker Change #134: We.

Speaker Change #134: As we grow where do we expect to want to increase our liquidity, we like to have something between 10 and 20% of last 12 months revenues in cash.

Speaker Change #135: Where we're going to end between the 10 and 20 some of it depends on seasonality some of it depends on the cost of capital, but we can kind of comfortably operate within those those ranges.

Alex: And in terms of elevating that $1 billion, Mike, sorry. So there are a lot of initiatives in Elevate that provide a benefit beyond the P&L. They're not included in the $1 billion. The $1 billion, I think, is more on a recurrent basis.

Speaker Change #135: Okay, and then in turn.

Speaker Change #135: We have elevated the 1 billion, Mike sorry, sorry.

Speaker Change #135: No.

Michael Linenberg: The next question now comes from Michael Linenberg, Feltside Danielins from Deutsche Bank. Michael, we will open your microphones so that you may ask your question. Please go ahead. Oh, yeah, hey, good morning, guys. You can hear me, right? Yeah. Oh, great. Hey, just a question here on your immediate liquidity of 2.5 billion reais. One, does that include that guaranteed maintenance capex line? And as we sort of think through the year, what is the target liquidity level for you, you know, as we go into 2025?

Mike: So there are a lot of initiatives and elevate that provide a benefit beyond the P&L.

Mike: They are not included in the 1 billion the $1 billion I think it's more on a on a recurrent basis. What you can expect once these initiatives are all ramped up what they <unk>.

Alex: What you can expect once these initiatives are all ramped up, what they incrementally contribute to what Azul kind of steady state would be. But you know, some of the initiatives in Elevate also include some cash benefits, especially in twenty twenty four. And I just want to highlight one other thing, too, before you go on to your next question.

Mike: Incrementally contribute to what absorbed kind of steady state would be but we are you know some of the initiatives and elevate also include.

Mike: Some cash benefit, especially in 2024 and Mike I just want to highlight one other thing too before you go on to your next question, obviously, when 10% of the network is offline impact AGL when international is offline impact AGL as well those are two things that come back to us in the third and into the <unk>.

John Rodgerson: Obviously, when 10 percent of the network is offline, it impacts ATL. When International is offline, it impacts ATL as well. Those are two things that come back to us in the third and into the fourth quarter.

Michael Linenberg: And as I think about elevate, how that's going to contribute on the EBITDA side, is that one billion of EBITDA? You know, I know that that's a P&L impact, which we think of that as also a cash impact as well as it one to one, or is there other elements of that, and then I have a follow-up. Sure. So the immediate liquidity does not include that line, right? That is just essentially cash was receivables as we normally provide.

Mike: Quarter.

Michael Linenberg: You know, we will have those sales going forward from both those two major events. I mean, it's not often that an airline is impacted so severely by those two big impacts. Can you just sort of remind us about what sort of stake, if any, in TAP? I'm only bringing it up because it now seems like that there is going to be something that happens there maybe sooner rather than later.

Speaker Change #138: Add those sales going forward from both those two major events I mean, it's not often that an airline has impacted severely by those two big impact.

Michael Linenberg: And I know there was some restructuring around that, but as I recall, I still thought you had some claim there, some value there. Can you just remind us what you have left with respect to TAP Air Portugal?

Mike: No good point, Thanks, John and then.

Speaker Change #139: As we can you just sort of remind us about what sort of stake if any in tap I'm only bringing it up because it now seems like that there is going to be something that happens there may be sooner rather than later and I know there was some restructuring around that but as I recall I still thought you had some claim there.

Michael Linenberg: And the main part of that is that the majority of the receivables are credit card receivables, which have not any cardholder risk, right? And are very easy to advance and transform into cash. So it does not include that guaranteed maintenance line that's available to us. And there's a target liquidity, you know, we, as we grow right, we expect to want to increase our liquidity. We like to have something between 10 and 20 percent of less 12 months revenues in cash, where we're going to end between that 10 and 20. Some of it depends on seasonality. Some of it depends on the cost of capital, right, but we can kind of comfortably operate within those, those ranges.

Speaker Change #139: There are some value there.

Can you just remind us.

Speaker Change #139: What.

Speaker Change #141: What you have left with.

Speaker Change #142: With respect to tap Air Portugal.

Alex: Yeah, thanks Mike. They owe us, I think at the current rate, you know, A-A-A-A-A, currently, they owe us around 150 to 165 million euros, right? And where they are today is that it's widely reported that they are in a privatization process. And our expectation is that that privatization process can't really go forward until we settle this issue. And so there are discussions happening as we speak, and our expectation is that that could be a source of liquidity for us this year.

Mike: Yes, Thanks, Mike.

Speaker Change #143: O us I think at current.

Michael Linenberg: Great. That's good to hear. John, can I squeeze in just one more question as it relates to the code share?

Speaker Change #144: Currently they owe us around $150 million to $165 million euros, right and where they are today is it's widely reported that they are in the privatization process and our expectation is that that privatization process can't really go forward until.

John Rodgerson: Okay. In terms of elevate the one billion, my sorry, so there are a lot of initiatives in elevate that provide a benefit beyond the P&L. They're not going to include it in the one billion. The one billion, I think it's more on a on a recurrent basis, what you can expect once these initiatives are all ramped up, what they incrementally contribute to what a zool kind of study state would be. But we are, you know, some of the initiatives in elevate also include some cash benefits, especially in 2024.

Speaker Change #144: We settle this issue and so there are discussions happening as we speak.

Speaker Change #144: And our expectation is that that could be a source of liquidity for us.

Speaker Change #144: This year great.

Speaker Change #144: That's good to hear and Jonathan can I squeeze in just one more.

Speaker Change #145: As it relates to the co chair.

Abhi Shah: You know, the fact that a few weeks back, maybe it was three, four weeks ago, we did get the headline from the regulators, the competition authorities, that they were going to examine or look into. Is that just a formality, right? That's a perfunctory process. They have to do it. We shouldn't read into that or whatever you can say about that process.

Speaker Change #146: You know the fact that a few weeks back maybe it was three four weeks ago, we did get the headline from the regulators the competition authorities that they were going to examine our look into.

Speaker Change #147: Is that just a formality right. That's a perfunctory process they have to do it we shouldn't read into that or what.

Whatever you can say to that process.

John Rodgerson: Hey, Mike, I just want to highlight one other thing too, before you go on your next question. Obviously, when 10 percent of the network is offline, in fact, ATL, when international is offline, in fact, ATL as well, those are two things that come back to us in the third and into the fourth quarter. You know, where we will have those sales going forward from both those two major events. I mean, it's not often that an airline is impacted, so severely by, you know, those two big impact.

Speaker Change #148: Would be great. Thanks for taking my questions.

John Rodgerson: Yeah, yeah, Mike. Yeah, look, we are in constant communication with the regulator about the co-chair. We're talking to them about how we're phasing in the markets. So yes, I mean, given the scale of the co-chair, it's absolutely expected and not a surprise that they ask some questions and do some analysis. And we're constantly in communication with them. No, no restrictions; we're selling it, and we continue to be in our plan. So, yes, it's part of their analysis.

Speaker Change #148: Yes, Mike Yes look we are in constant communication with the regulator about the codeshare.

We're talking to them about how we're phasing in the market.

Speaker Change #149: So, yes, I mean, given the scale of the Codeshare, it's absolutely expected and not a surprise that they ask some questions do some analysis.

Speaker Change #149: And we're constantly in communication with them.

John Rodgerson: Yeah, no good point. Thanks, John. And then, you know, as we, can you just, you know, sort of remind us about what sort of stake, if any, in tap, I'm only bringing it up because it now seems like that there is going to be something that happens there maybe sooner rather than later. And I know there was some restructuring around that. But I, as I recall, I still thought you had some claim there, some value there.

Speaker Change #149: No restrictions.

Speaker Change #149: We're selling it.

Speaker Change #149: And we.

Speaker Change #149: We continue to be in our plan. So yes. It is part of the further analysis.

Mike: But it's just part of the process, if you will and Mike, but what they're specifically looking at is should there been a pre notification to the antitrust authority before the Codeshare went into place and out of respect went there jointly and told them, but we didn't do an exact filings nor did we do that when we were with Latam in a codeshare a similar coach.

Michael Linenberg: the process, if you will. Hey Mike, but what they're specifically looking at is whether there should have been a pre-notification to the antitrust authority before the code share went into place. Out of respect, we went there jointly and told them, but we didn't do an exact filing, nor did we do that when we were with LATAM in a code share, a similar code share. And so this is part of the process. We respect, you know, their process. We responded to it, I believe, roughly 10 days ago. And so we hope to get resolution on that in the next couple of days. Great. Thanks, everyone. Thank you.

John Rodgerson: Can you just remind us what you have left with respect to tap airport to go? Yeah, thanks. They owe us, I think at current, currently they owe us around 150 to 165 million euros, right? And where they are today is, it's widely reported that they're in a privatization process and our expectation is that that privatization process can't really go forward until we settle this issue. And so there are discussions happening as we speak and our expectation is that that could be a source of liquidity for us this year.

Mike: And so this is part of the process, we respect that.

Mike: The process, we responded to it.

Mike: I believe roughly 10 days ago, and so we hope to get resolution on that in the next couple of days great. Thanks, everyone.

Speaker Change #150: Thank you.

Speaker Change #150: Okay.

Operator: Thank you. The next question now will come from Ian Snyder, Sales Idealist from J.P. Morgan. Ian, we're going to open your microphone so that you can ask your question.

Speaker Change #151: Thank you. The next question now will come from my youngest neither sell side Dallas from J P. Morgan Yeah, we're going to open your microphone. So that you can ask your question.

Speaker Change #151: Please proceed.

Dallas: Great. Thanks, a lot and thanks for taking my question.

John Rodgerson: Great, that's good to hear. Johnny, can I squeeze in just one more as it relates to the code share? You know, the fact that a few weeks back, maybe it was three, four weeks ago, we did get the headline from the regulators, the competition authorities that they were going to examine or look into, is that just, that's a formality, right? That's a perfunctory process, they have to do it. We shouldn't read into that or, whatever you can say to that process would be great.

Speaker Change #154: And our perspective, I think maintaining good liquidity is very important to us as it will given the cash needs in the next two years and the environment that we're in can you help us better understand the main drivers of the working capital build we felt this quarter what were you able to accomplish in this quarter regarding working capital to help with the build and offset any sort of impact that.

Speaker Change #155: Would have resulted in a cash burn and then what can we expect for the second half of this year, including any progress on working capital initiatives Youre working on.

John Rodgerson: Thanks for taking my questions. Yeah, Mike. Yeah, look, we are in caution communication with the regulator about the code share. We're talking to them about how we're facing in the markets. So, yes, I mean, given the scale of the code share, it's absolutely expected and not a surprise that they ask some questions, do some analysis. And we're constantly in communication with them. No, no restrictions, you know, we're, we're selling it and we're, we continue to be in our plans.

Ian Snyder: Hey Jay, yeah, so we agree.

Joe: Hey, Joe Hey.

Joe: Yes, so if we agree rug, our liquidity is very important but as we have demonstrated we will always have the necessary liquidity because it's essentially a good business right. We use when you made reference to in terms of the bill for this quarter a lot of seasonality that we start selling.

Joe: The higher capacity and higher demand in the second half of the year, but that mainly happened in July right, but as we demonstrated in the past also the operation generates a lot of cash right. It's a good business and it only becomes stronger and stronger.

John Rodgerson: So, yes, it's part of the, it's part of the analysis. But, you know, it's part of the process, if you will, you might, but what they're specifically looking at is, should there been a pre notification to the antitrust authorities before the code share went into place. Out of respect went there jointly and told them, but we didn't do an exact filing, nor did we do that when we were with letam in a code share, a similar code share.

Speaker Change #157: The question is where does that cash go and that cash goes essentially to our partners drive go solar source. It goes to suppliers and it goes mainly to interest on our debt as we don't have any relevant.

Speaker Change #157: Debt amortization over the next few years so.

John Rodgerson: And so, this is part of the process. We respect, you know, their process, we responded to it. I believe roughly 10 days ago. And so we hope to get resolution on that in the next couple of days.

Speaker Change #157: The question of how to manage liquidity goes back to what we talked about the partnership right since all of that cash flow we're generating.

Speaker Change #157: Goes to our partners some of the liquidity management that we did last year for example.

Michael Linenberg: Great. Thanks, everyone.

Operator: Thank you.

Speaker Change #158: Was with the support and with bilateral amick.

Operator: The next question. Now we'll come from my young neither fell side down from JP Morgan. Yeah, we're going to open your microphone so that you can ask her a question. Please proceed. Thanks a lot. And thanks for taking my question. You know, in our perspective, I think, you know, maintaining good liquidity is very important to a zoole given, you know, the cash needs in the next two years. And the environment that we're in, you help us better understand the main drivers of the working capital build.

Speaker Change #158: Amicable conversations with with our partner so that is always going to be some.

Speaker Change #158: Back and forth.

Speaker Change #158: And some ebb and flow in those numbers, but the important part is kind of going forward in terms of seasonality the majority of that help.

Speaker Change #158: Which again goes to the split between the <unk>.

Speaker Change #158: EBITDA generation in first half versus EBITDA generation in the second half.

Operator: We sell this quarter. What were you able to accomplish in this quarter regarding work capital that helped with the build and offset any sort of impact that. What a result in a cash burn. And then what can we expect for the second half of this year, including any progress on working capital initiatives you're working on. Hey, yeah, yeah. Yeah. So we agree, right? The liquidity is very important. And but as we've demonstrated, we will always have the necessary liquidity.

Speaker Change #158: You see a lot of positive trends from seasonality from higher capacity from <unk>.

Speaker Change #158: New aircraft coming in and then the elimination of all of those headwinds that we saw especially into Q right like the lack of ability to sell portfolio. The lower capacity in international I think that's the major I think shift that you can see in the liquidity and working capital.

John Rodgerson: will come from there. I just want to highlight a couple of other things. Right. You know, Mike, Mike Linenberg mentioned the TAP bond source of liquidity. I mentioned FNAC has already passed the Senate and should pass the House this week.

Mike Lindenberg: Will come from there I just want to highlight a couple of other things right, Mike Mike Lindenberg mentioned, the tap bond source of liquidity I mentioned <unk> has already passed the Senate should pass the house this week.

Operator: It's essentially a good business, right? We use what you've made reference to in terms of the bill for this quarter. A lot of seasonality that we start, you know, selling the higher capacity and higher demand in the second half of the year, but that mainly happened in July, right? But as we demonstrated in the past also the operation generates a lot of cash, right? It's a good business and it only becomes stronger and stronger.

Speaker Change #160: From $2 million to $300 million of incremental liquidity that can come into the business. We mentioned the GE line that we haven't tapped into yet we haven't unencumbered cargo business right. So these are access to capital right, but again as Alex said the core business needs to continue to operate well and I think you can see that even in the extremely challenging second.

Alex: You know, that's anywhere from two to 300 million dollars of incremental liquidity that can come into the business. We mentioned the GE line that we haven't tapped into yet. We have an unencumbered cargo business.

John Rodgerson: Right. So these are access to capital. Right. But again, as Alex said, the core business needs to continue to operate well. And I think you can see that even in the extremely challenging second quarter that we just got through, we had pretty good numbers overall. You know, when 10 percent of your network is knocked offline, you're not selling international in a 12 percent devaluation of the currency. So the core business of Azul is strong, and even with that, we still have access to other sources of capital.

Operator: The question is where does that cash go and that cash goes essentially to our partners, right? It goes to the source, it goes to suppliers and it goes mainly to interest on on our debt, as we don't have any relevant. And you know, debt amortizations, you know, over the next few years. So the question of how to manage liquidity goes back to what we talked about the partnership, right? Since all of that cash that we're generating goes to our partners, some of the liquidity management that we did last year, for example, was with the support and with bilateral amicable conversations with our partner.

Speaker Change #160: Quarter that we just got through.

Alex: We had pretty good numbers overall, when 10% of your network is not offline youre not selling internationally and a 12% devaluation of the currency. So the core business of <unk> is strong and even with that we still have access to other sources of capital.

Ian Snyder: Great, thanks. And if I could ask one more question, and I do tend to agree on, you know, liquidity being better than I expected, given the unforeseen circumstances of the quarter, as well as the seasonality. But you touched on, we already touched on the National Aviation Fund, as well as the lessor equity instrument, which we're trying to do with bilateral negotiations. Can you touch a little bit on the cargo business, what you think you could do there, where you would potentially look to raise financing and where that could be pledged, if you ultimately look to go that route?

Speaker Change #162: Great. Thanks, and if I could ask one more follow up and I do tend to agree on.

Speaker Change #163: Liquidity being better than I expected given the.

Unforeseen circumstances of the quarter as well as the seasonality, but you touched on are we already touched on the National Aviation fund as well as the lesser equity instrument, what youre trying to do with bilateral negotiations can you talked a little bit about the cargo business. What do you think you could do there where you would potentially look to raise financing and where that could be pledged. If you ultimately look to go that route.

Operator: So, you know, that is always going to be some, you know, back and forth and some advent flow in in those numbers, but the important part is kind of going forward, you know, in terms of seasonality, the majority of that help, which again goes to the split between the EBITDAF generation in first half versus the EBITDAF generation in the second half, you know, you see a lot of positive trends from seasonality from higher capacity. From new era of coming in and then the elimination of all those headwinds that we saw, especially into Q, right?

Alex: Sure, that was part of our capital optimization plan. You always need to demonstrate, and I think that gives a lot of comfort to all of our stakeholders that we have the ability to access capital if we need to, right? Because obviously, when we did the capital optimization plan last year, we couldn't go to our list stores and our suppliers and say, hey, give me enough working capital and deferrals so I can face a 10% knockout of my capacity, right? That would never fly with them.

Speaker Change #164: Sure that was part of our capital optimization plan.

Speaker Change #165: You always need to demonstrate I think that gives a lot of comfort to all of our stakeholders that we have the ability to access capital if we need to right because obviously when we did the capital optimization plan last year, we Couldnt go to wireless doors, and our suppliers and say Hey give me.

Speaker Change #165: Working capital and deferrals, so I can face a you know.

Operator: Like the lack of ability to sell portfolio, the lower capacity in international. I think that's the major, I think shift that you can see in liquidity and working capital will come from there. I just want to highlight a couple of other things, right? You know, Mike, Mike Lindemberg mentions the tap on source of liquidity. I mentioned Fennac has already passed the Senate should pass the house this week, you know, that's, you know, anywhere from two to three hundred million dollars of incremental liquidity that can come into the business.

Speaker Change #165: 10% knock out of my my capacity right that would never fly with them. So they provided the support that we all combined jointly expected was needed and sufficient at that time, but obviously, we werent being we're working with an exchange rate of $5 60, we weren't working with you.

Alex: So they provided the support that we all combined, jointly expected, was needed and sufficient at that time. But obviously, we weren't working with an exchange rate of 560; we weren't working with some of these kinds of events that occurred. And so we wanted to have a rainy day fund, and so we were deliberate in creating that rainy day fund by kind of preparing the structure to potentially use our Azul Cargo business as collateral, the same way that we use our loyalty and vacation business.

Speaker Change #166: Some of these kind of events that occurred and so.

Speaker Change #166: We wanted to have a rainy day fund and so we were deliberate in <unk>.

Operator: We mentioned the GE line that we haven't tapped into yet, we have an unencumbered cargo business, right? So these are access to capital, right? But again, as Alex said, the core business needs to continue to operate well. And then you can see that even in the extremely challenging second quarter that we just got through, you know, we had pretty good numbers overall. You know, when 10% of your network is knocked offline, you're not selling international in a 12% devaluation of the currency.

Speaker Change #166: Creating that rainy day fund by kind of preparing the structure to potentially use our cargo business as collateral.

The same way that we used our essentially our loyalty and vacation businesses. So it's a very similar structure that we already setup.

Alex: So it's a very similar structure that we already set up, that collateral is available. We have used it for kind of short-term things, very small things that in an eventual capital raise would go away. But at the time, I think we talked about a debt capacity of hundreds of millions of dollars that was available to us. Now, that's not what we would need to raise. But that's what would be available to us.

Speaker Change #166: That collateral is available we have used it for kind of short term being very small.

Speaker Change #166: Saying that in an eventual capital raise would go away.

Operator: So the core business of Azure is strong. And even with that, we still have access to other sources of capital. Great. Thanks. And if I can ask one more follow up and I do tend to agree on liquidity being better than I expected given the unforeseen circumstances of the quarter as well as the seasonality. But you touched on, we already touched on the National Aviation Fund as well as the less or equity instrument what you're trying to do with bilateral negotiations.

Speaker Change #166: But at the time I think we've talked about a debt capacity in the hundreds of millions of dollars.

Speaker Change #166: That was available to US now that's not what we would need to raise but thats what.

Speaker Change #166: Would be available to us I think we kind of when you look at the documentation of that facility. It allows us to raise first debt capacity of $800 million. So.

Alex: I think when you look at the documentation of that facility, it allows us to raise a first debt capacity of $800 million. So obviously, we wouldn't need anywhere near that amount. But it's always good to have this capacity out there because it provides comfort to everybody that is providing credit to Azul. And then, on top of that, as you mentioned, there are these other potential sources of liquidity that we all talked about.

Operator: Can you touch a little bit about the cargo business, what you think you could do there where you would potentially look to raise financing and where that could be pledged if you ultimately look to go that route? Sure, that was part of our capital optimization plan. You always need to demonstrate, I think that gives a lot of comfort to all of our stakeholders that we have the ability to access capital if we need to.

Speaker Change #166: Obviously, we would need anywhere near that that amount, but it's always good to have this capacity out there because it provides comfort to everybody that is providing credit tourism and then.

Speaker Change #167: On top of that as you mentioned there are these other potential sources of liquidity.

Speaker Change #168: <unk> talked about already.

Ian Snyder: Great thing! That's it for me.

Operator: Obviously when we did the capital optimization plan last year, we couldn't go to our list sores and our suppliers and say, hey, give me enough working capital and deferrals so I can face a 10% knockout of my capacity, right, that would never fly with them. So they provided the support that we all combined jointly expected was needed and sufficient at that time. But obviously we weren't working with an exchange rate of 560, we weren't working with some of these kind of events that occurred.

Speaker Change #169: Great. Thanks, that's it for me I appreciate the answers.

W.L. Flazon: Moving on to the next question, then. The next question will come from Gabriel Flaison, a sell-side analyst from Bank of America. Gabriel, will you open your microphone so that you may ask your question? Please go ahead. Good morning, gentlemen. Thanks for the opportunity.

Speaker Change #170: Thank you moving on to the Unasked question. Dan next question will come from nobody else knows on sell side analyst from Bank of America.

Operator: I appreciate the answers. Thank you. Moving on to the next question, the next question will come from W.L. Flazon, Southside Analyst from Bank of America. W.L., will you open your mouth?

Speaker Change #171: Open your microphone. So that you may ask your question. Please go ahead.

Good morning, gentlemen, thanks for the opportunity I have a question on the equity instruments lessors apart from the FX translation window said $287 million, increasing does that counts in alignment that you call the transfers.

Speaker Change #172: Could you kindly give us some idea on what was this increase is related to.

Operator: And so we wanted to have a rainy day fund. And so we were deliberate in creating that rainy day fund by kind of preparing the structure to potentially use our Zulcargo business as collateral, the same way that we used our essentially our loyalty and vacation business. So it's a very similar structure that we already set up that collateral is available. We have used it for kind of short term things, very small things that in an eventual capital raise would go away.

Gabriel Flaison: It should be FX basically, right? There's no interest accrual on the facility. And it's essentially a debt in terms of accounting. It is recognized as that. So it should be a fact if you're not kind of able to reconcile it. You know, we can take this question offline. Okay, thanks, Alex.

Speaker Change #173: It should be FX basically right. There is no interest accrual on the on.

Speaker Change #174: The facility.

Speaker Change #175: And it's essentially a debt.

Speaker Change #176: In terms of accounting it is recognized as debt. So it should be effects, if youre not kind of able to reconcile if we can we can take this question offline.

Speaker Change #176: Okay.

Alex: Thanks, Alex.

Yes.

Alex: Yeah.

Operator: Okay, moving on to the next question coming from Dan McKenzie, South Island Seaport Global. Then we will open your microphone so that you may ask your question. Please go ahead.

Alex: Okay.

Operator: But at the time, I think we talked about that capacity in the hundreds of millions of dollars that was available to us. Now that's not what we would need to raise, but that's what would be available to us. I think we kind of when you look at the documentation of that facility, it allows us to raise first that capacity of 800 million dollars. So obviously we wouldn't need anywhere near that that amount, but it's always good to have this capacity out there because it provides comfort to everybody that is providing credit to us. And then like on top of that, as you mentioned, there are these other potential sources of liquidity that that we all talked about already. Great thing. That's it for me. Appreciate the answers. Thank you.

Speaker Change #177: Our next question come from Dan Mckenzie sell side analysts support global <unk>.

Speaker Change #178: And then we will open your microphones that you may ask your question. Please go ahead.

Operator: Moving on to the next question, then.

Speaker Change #178: <unk>.

Dan Mckenzie: Okay, here we go. Hopefully, you can hear me okay. Hey, just a couple of questions here. Thanks for the time.

Speaker Change #179: Okay. There you go hopefully you can hear me okay.

Dan Mckenzie: Hey, just a couple of questions here. Thanks for the time, just given the change in the macro how is that impacting your outlook for 2025 growth at this point and potentially also its composition and I guess I hear you on improved utilization I'm, just trying to reconcile longer term growth with macro instability in and of <unk>.

Speaker Change #181: Course, elevate the self help initiatives that you guys are implementing.

Hey, Dan.

Dan Mckenzie: On a percentage basis, the number moves around because this year, we're flying less than what we actually would have liked to do so in some sense that pushes up the percentage for next year.

WL: Next question will come from WL. So outside the end of this from Bank of America. We will open your microphones so that you may ask your question.

Alexandre Malfitani: Please go ahead. Good morning, gentlemen. Thanks for the opportunity. I have a question on the equity instrumental lessons. Apart from the effects translation, we know said 287 million increasing this accounts in a line that you call the transfers. Could you kindly give us some idea on what was this increase related to? It should be FX basically. There's no interest to cruel on the facility. And it's essentially a debt. In terms of accounting, it is recognized as debt. So it should be FX. If you're not able to reconcile it, we can take this question offline. Okay. Thanks Alex. Okay.

Dan Mckenzie: But obviously, what's important is kind of the absolute level of flying that we want we still want the E twos as Alex said, there they really work very well for us given the fuel burn economics, given the fact that we're able to fly much high utilizations on the E twos than and we're going to be reducing utilization on the E. One so.

Speaker Change #182: That will have to really sit down with embraer and see what's possible for next year. The international is just coming full circle of where we're going to finish. This year are two additional wide bodies will have an impact next year. So you can kind of model that as well so on a percentage basis a lot of it is going to be.

Speaker Change #182: <unk> by kind of the impacts from Port Alegre of this year and from the international reduction of this year, but our focus is on the <unk> for next year, reducing even utilization increasing E twos and again, 84% of our routes have no nonstop competition.

Demi Kinsey: Moving on to the next question coming from Demi Kinsey, South Island support global. Then we will open your microphone so that you may ask your question. Please go ahead. Yeah, you're dead. Okay, there we go. Hopefully you can hear me. Okay. Okay, just a couple of questions here. Thanks for the time. You know, just given the change in the macro, how is that impacting your outlet for 2025 growth at this point?

Speaker Change #182: And that as we have grown over the years David mentioned this so we continue to be very true to our network, even as we grow that's not going to change and we focus on where we're stronger.

Abhi Shah: You know, just given the change in the macro, how is that impacting your outlook for 2025 growth at this point, and potentially also its composition? And I guess I hear you on improved utilization. I'm just trying to reconcile longer-term growth with macro instability and, of course, elevate the self-help initiatives that you guys are implementing.

Dan Mckenzie: Hey Dan, on a percentage basis, the number moves around because this year we're flying less than we would have liked to. So in some sense, that pushes up the percentage for next year. But obviously, what's important is kind of the absolute level of flying that we want. We still want the E2s, as Alex said; they really work very well for us given the fuel burn, the economics, given the fact that we're able to fly much higher utilizations on the E2s, and we're going to be reducing utilization on the E1.

Dan Mckenzie: No Dan I think everybody is focused on the exchange rate, but if you look at the other macro indicators in Brazil, Unemployment's going down GDP is going up and I think what is a testament to that is that <unk> was able to have increased RASK in July year over year, 5% with port to library still offline right and so that's a.

Dan Mckenzie: So we'll have to really sit down with Embraer and see what's possible for next year. The international is just coming full circle to what we're going to finish this year. Two additional widebodies will have an impact next year, so you can kind of model that as well. So on a percentage basis, a lot of it is going to be influenced by the kind of impacts from Porto Alegre this year and from the international reduction this year.

John Rodgerson: But our focus is on the E2s for next year, reducing E1 utilization, increasing E2s, and again 84% of our routes have no non-stop competition. And that's how we have grown over the years. David mentioned this. So we continue to be very true to our network. Even as we grow, that's not going to change. And we focus on where we're strong.

Abhi Shah: You know, Dan, I think everybody's focused on the exchange rate, but if you look at the other macro indicators in Brazil, unemployment's going down, GDP's going up, and I think what's a testament to that is that Abhi was able to have increased RAS in July, year over year, 5%, with Porto Alegre still offline, right? And so, you know, that's a big indicator that the Brazilian economy is actually going in a different direction than what you're seeing in the U.S. right now.

Demi Kinsey: And potentially also it's its composition. And I guess I hear you on improved utilization. I'm just trying to reconcile longer term growth with macro instability and, of course, elevate the self health initiatives that you guys are implementing. Hey, Dan. You know, on a percentage basis, the number moves around because this year we're flying less than what we actually would have liked to. So in some sense that pushes up the percentage for next year, but obviously what's important is kind of the absolute level of flying that we want.

Dan Mckenzie: A big indicator that the Brazilian economy is actually in a different direction than what youre seeing in the U S right now.

Dan Mckenzie: Yeah, given that economic growth, can you elaborate a little bit on how that's rippling through to the corporate side of the story, just in terms of either accounts or the share of the wallet that you're getting domestically?

Speaker Change #183: Yes, given that economic growth to elaborate a little bit on how thats rippling through to the corporate side of the story just in terms of.

Speaker Change #184: Either accounts or share of the wallet that youre getting domestically.

Abhi Shah: Yeah, no, we feel pretty good about the corporate market, Dan. If you look at the latest results from AbraCorp, which is the Association of Brazilian Corporate Travel Agencies, we have about a 33 percent revenue market share from the corporate market overall, which is much higher than our fair market share if you look at our capacity in the domestic market. So we are overachieving in the corporate market. One reason is our expanded presence in Congonhas since last year, where we doubled our network.

Speaker Change #185: Yes, no we feel pretty good about the corporate market Dan If you look at the latest results from the from Abra Corp, which is the association of Brazilian corporate travel agencies, we have about a 33% revenue market share from Thunder from corporate overall, which is much higher than our fair market share.

Demi Kinsey: And we still want the e-tunes. As Alex said, they've really worked very well for us, given the fuel burn economics, given the fact that we're able to fly much higher utilization on the e-tunes. Then and we're going to be reducing utilization on the E1. So that will have to really sit down with Embraer and see what's possible for next year. The international is just coming full circle of what we're going to finish this year, two additional wide bodies will have an impact next year.

Speaker Change #184: If you look at our capacity in the domestic market. So we are.

Speaker Change #184: Over achieving in the corporate market are one reason is our expanded presence in <unk> since last year, where we doubled our our our network and one reason is where were strong in the Midwest and the agro market of Brazil, which is doing very well right now given given exports and things like that so.

Abhi Shah: And one reason is where we're strong in the Midwest and the agro market of Brazil, which is doing very well right now, given given exports and things like that. So you can go online and check out the AbraCorp information. It's public, and we have about a 33 percent revenue share, which is well above our fair share in the market. If I could squeeze one last one in here, just given the conversations with Abra,

Demi Kinsey: So you can kind of model that as well. So on a percentage basis, a lot of it is going to be influenced by kind of the impacts from photolegre of this year and from the international reduction of this year. But our focus on the e-tunes for next year, reducing E1 utilization, increasing e-tunes. And again, 84% of our routes have no non-stop competition. And that's as we have grown over the years, David mentioned this.

Speaker Change #186: You can go online and check out the Abra corporate information its public.

Speaker Change #186: We have about a 33% revenue share which is.

Speaker Change #186: Well above our fair share in the market.

Abhi Shah: I'm wondering if you could just help us understand the flexibility with United and that international code share if, you know, things potentially move around here or the potential to add a stronger U.S. partner at some point.

Speaker Change #187: Great if I can squeeze one last one in here just given the conversations with <unk> I'm wondering if you could.

Speaker Change #188: Just help us understand the flexibility with United and that International code share it if things potentially move around here or the potential to add a potentially a stronger U S partner at some point.

Demi Kinsey: So we continue to be very true to our network, even as we grow, that's not going to change. And we focus on where we're strong. You know, Dan, I think everybody's focused on the exchange rate, but if you look at the other macro indicators in Brazil, unemployment is going down, GDP is going up. And I think what's assessment of that is that I'll be able to have increased rast in July, year over year, 5% with Port Televary still offline.

Dan Mckenzie: We think United is a great, strong U.S. partner, but what you're talking about is something much bigger, and I think the U.S. carrier is pale in comparison to what combining two Brazilian networks and the strength of that could do, Dan, and so I think that that's

Speaker Change #189: We think United is a great strong U S partner.

Speaker Change #190: But what you're talking about is something much bigger and I think the U S carriers pale in comparison to what combining two Brazilian networks and the strength of that could do down and so I think that thats, a phase II and not a phase one in the discussions.

Demi Kinsey: Right. And so, you know, that's a big indicator that the Brazilian economy is actually in a different direction than what you're seeing in the US right now. Yeah, given that economic growth, can you elaborate a little bit on how that's rippling through to the corporate side of the story just in terms of either accounts or share of the wallet that you're getting domestically. Yeah, now we feel pretty good about the corporate market, Dan.

John Rodgerson: But, just technically speaking, there is no exclusivity.

Speaker Change #191: Just technically speaking there is no exclusivity.

Speaker Change #191: In place anymore.

Abhi Shah: Yeah, thanks for the time, you guys.

Speaker Change #192: Yeah. Thanks for the time guys.

Thank you.

Dan Mckenzie: Thank you. This now closes the Q&A session for today. I would like to turn the floor to John for final considerations.

Speaker Change #192: Thank you.

Speaker Change #192: <unk> does not close the Q&A session for today online I would like to turn the floor to John for a final.

Speaker Change #193: The durations.

John Rodgerson: Great, thanks everybody, and we'll be available to talk to you on an individual basis over the coming days, and we appreciate your support, and we look forward to talking to you.

John Rogers: Great. Thanks, everybody and we'll be available to talk to you on an individual basis over the coming days and we appreciate your support and.

Demi Kinsey: If you look at the latest results from the Abra Corp, which is the Association of Brazilian corporate travel agencies, we have about a 33% revenue market share from the from corporate overall, which is much higher than our fair market share if you look at our capacity in the domestic market. So we are overachieving in the corporate market. One reason is our expanded presence in Congonius since last year, where we doubled our our network.

John Rogers: We look forward to talking to you.

Operator: Thank you. This concludes the ASUS audio conference call for today. Thank you very much for your participation, and have a good day.

Speaker Change #194: Thank you. This concludes <unk> audio conference call for today. Thank you very much for your participation and have a good day.

Speaker Change #194: Goodbye.

Demi Kinsey: And one reason is where we're strong in the Midwest and the agro market of Brazil, which is doing very well right now given given exports and things like that. So you can go online and check out the Abra Corp information. It's public. We are about a 32% revenue share, which is well above our fair share in the market. Great.

Demi Kinsey: If I get squeezed one last one in here, just give them the conversations with Abra. I'm worried if you could just help us understand the flexibility with United and that international code share, if, you know, things potentially move around here or the potential to add a a stronger US partner at some point. We think United is a great strong US partner. But what you're talking about is something much bigger. And I think the US carriers, failing comparison to what combining two Brazilian networks and the strength of that could do Dan. And so I think that that's a phase two and not a phase one in the discussion. I think speaking, there's no exclusivity in place anymore. Yeah, thanks for the time you guys. Thank you.

John Rodgerson: This now closes the Q&A session for today. I would like to turn the floor to John for a final consideration. Great. Thanks, everybody. And we'll be available to talk to you on an individual basis over the coming days. And we appreciate your support. And we look forward to talking to you. Thank you.

Operator: This concludes the Azuzaga conference call for today. Thank you very much for your participation and have a good day. Good bye.