Q3 2024 Gol Linhas Aéreas Inteligentes SA Earnings Call

Welcome to Go Lean Zahara's conference call to discuss the 3rd quarter 2024 results.

This event is being broadcast via Zoom and can be accessed on the company's website at www.poego.com.br.

We inform you that all participants will only be watching the event during the presentation. Before proceeding, I would like to emphasize that the forward-looking statements are based on beliefs and assumptions of the company's management and incur information available to you.

These statements may involve risks and uncertainties as they relate to future events and therefore depends on circumstances that may or may not occur.

Investors, analysts, and journalists should consider that events related to the macroeconomic environment, segment, and other factors could cause results to differ maturely from those expressed in respective forward-looking statements.

Speaker Change: Now, I'll give the floor to Mr. Ferrer. Please proceed, sir.

Mr. Ferrer: Good morning, everyone, and thank you for joining us today for our earnings call. It's a pleasure to be here to share with you goals results for the third quarter of 2024.

Mr. Ferrer: This morning, we published on the Goals Investor Relations website our earnings release and the supporting materials for this third quarter presentation. We will cover the company's performance during the quarter and discuss key updates regarding the Chapter 11 process.

Mr. Ferrer: Before we move to the financial analysis, I would like to express my gratitude to our entire team of eagles who have been working tirelessly to ensure the safety of our operations and provide quality services to our customers.

Mr. Ferrer: The challenges we faced in recent years only reinforce the impressive work and dedication of our team of eagles as a key factor in driving our recovery.

Mr. Ferrer: We are proud to announce that for the fourth consecutive month, we have been recognized as the world's most punctual low-cost airline with an on-time performance rate of 87.9%.

Mr. Ferrer: We were also the most punctual company in Brazil over the last seven months, with an on-time performance rate of 88.1% in the third quarter.

Mr. Ferrer: This performance reflects our commitment to operational efficiency and customer satisfaction and was a key factor in the 24% increase in our NPS over the past year.

Mr. Ferrer: In the third quarter, we kick-started Gold's capacity recovery strategy, focused on sustainable growth. For the first time this year, we increased capacity compared to the same period in 2023, reflecting our efforts to recover our assets and reduce fleet idleness.

Mr. Ferrer: In this quarter, our total capacity in ASKs reached 11.5 billion, representing a significant increase of 6.7% compared to the same period last year.

Mr. Ferrer: In the domestic market, we increased our capacity by 18.9% compared to the previous quarter.

Mr. Ferrer: focus on the key high-demand markets such as Galeão Airport in Rio de Janeiro.

Mr. Ferrer: In the international market, gold continues to strengthen its presence with a 57% increase in ASKs, highlighting destinations such as Buenos Aires and Miami.

Mr. Ferrer: We resume flights from Natal, Porto Seguro and Confines to Buenos Aires.

Mr. Ferrer: We also resumed direct flights between Rio de Janeiro and Montevideo. As a new development, we launched a new route to Bogota, from Brazilian, and we are excited about launching in February 2025.

Mr. Ferrer: In addition, for the eighth consecutive year, we reached the top-of-mind award from Folha de São Paulo, being recognized as the most recalled airline in Brazil.

Mr. Ferrer: This recognition reaffirms our purpose of being the first choice for our customers and democratizing access to air travel for all Brazilians.

with approximately 600 daily pipes.

Mr. Ferrer: We completed 55,000 takeoffs in the quarter with our modern Boeing 737 fleet.

Mr. Ferrer: We operated 107 aircraft during the quarter with an average utilization of 11 and a half hours per day, reinforcing our commitment to using our assets efficiently, reducing the number of grounded aircraft.

Mr. Ferrer: Smiles celebrates its 30th anniversary this quarter with more than 1.1 million members in the Smiles Club, a 9.3% increase compared to the third quarter 2023.

Mr. Ferrer: This group demonstrates the success of the initiatives we have implemented to increase the perceived value for our members, reinforce customer loyalty and satisfaction.

Mr. Ferrer: Another highlight this quarter was the doubling of miles redeemed for non-airline products. This growth is due to our continuous effort to seek and implement new strategic partners, improving the shopping experience and the creation of innovative products.

Mr. Ferrer: It's a result of our commitment to offering unique redemption opportunities and benefits that enhance the travel experience in the daily lives of millions of Brazilians.

Mr. Ferrer: Finally, our cargo division also delivered positive results this quarter. One of the main reasons for this growth was the expansion of operations with MercadoLivre.

Mr. Ferrer: which resulted in an addition of a new freighter aircraft compared to the third quarter of last year.

Mr. Ferrer: bringing a total to six aircraft dedicated to this operation. Additionally, we experienced a robust organic growth in the strengthening of low-load operations in the cargo compartments of our passenger aircraft.

Mr. Ferrer: We are very pleased with the results for the third quarter 2024, which reflects our commitment to growing sustainably and our ability to adapt in a dynamic market.

Mr. Ferrer: Goals, continue to strengthen its operation across all business units, maintaining a focus on customer experience and operational efficiency. I'm confident that with the continuous effort of our team and the strategies we have implemented, we will continue on a path of success.

Speaker Change: Now, I will turn the floor over to our CFO, Eduardo Godzilla, who will talk about the financial results.

Thank you, Selsa. Good morning, everyone.

Eduardo Godzilla: Let's begin with the results for the passenger business unit. We increased our capacity by almost 7% year-over-year, serving 8 million passengers and achieving an average load factor above 83%.

Speaker Change: As mentioned by Celso, the significant highlight this quarter was a 57% growth in our international capacity. As a result, passenger revenue reached 4.4 billion reais this quarter and 11.6 billion reais for the first nine months of 2024.

Speaker Change: Smiles and Go Log were instrumental to our financial performance this year, driving other revenues higher by roughly 20% when compared to 2023.

Speaker Change: Over the last 12 months, Smiles added 1.5 million new customers to its member base, reaching 23.6 million customers overall.

Speaker Change: Smile sales amounted to 1.3 billion reais this quarter, growing by 14% when compared to Q3 2023.

Speaker Change: On the lower part of the slide, we can see that the number of miles redeemed grew by 23% year over year, while redemption transactions increased by 18%. This high level of engagement from our members reflects Miles' strategy of being the most complete travel platform to its clients.

Speaker Change: On slide six, we can see that Golog's revenue grew by 34% in the first nine months of this year, owing to a 38% increase in the transported tons and the addition of the six dedicated cargo aircraft for our MercadoDV partnership.

Speaker Change: Moving on to our financial results, in the third quarter of 2024, we reported $5 billion in net revenue, 6% higher year over year.

Speaker Change: RASC, or Metric for Unit Revenues, was flat when compared to the third quarter of 2023, despite a 10% increase in the average stage length.

Speaker Change: The supply-demand imbalance in our current market has led to an average fare that still lags the 13% currency devaluation in the period.

Speaker Change: Regarding our costs, despite the slight decrease in fuel prices, total cask was 3.7% higher than the third quarter of 2023, reaching 36 cents.

Speaker Change: The main reason for this increase was a significant depreciation of the Brazilian real during the period, as a substantial portion of our costs are linked to the U.S. dollar.

Speaker Change: With our cask increasing by about 4% and our capacity growing by around 7%, total recurring costs increased by 10.8% during the period, reaching $4.2 billion.

Speaker Change: It's important to mention that this metric for unit costs does not include either the cargo operation nor non-recurring costs.

Speaker Change: We had 700 million reais in non-recurring costs this quarter, primarily related to the Chapter 11 process.

Speaker Change: Moving on to EBITDA, in the first nine months of 2024, our recurring EBITDA and EBITDA margin were basically in line with 2023.

Speaker Change: This performance reflects operational KPIs such as capacity, unit costs, and unit revenues that were all stable year over year, as discussed in the previous slides.

Speaker Change: In regards to our cash flow, I would like to highlight a few relevant topics that affected our cash position in the first nine months of 2024. The most relevant number on this slide is the nearly $5 billion of capital raised as a dip loan during the first semester.

Speaker Change: This cash was used to fund, first and foremost, our strategy to overhaul engines and rebuild our fleet, as seen in the $1.2 billion investment in Capex.

Speaker Change: This allowed for the addition of five aircraft to the operational fleet, even while reducing three aircraft in the total fleet, improving the number of aircraft out of operation.

Speaker Change: This capital also allowed us to decrease the use of receivables factoring to generate liquidity, as seen in the 2.5 billion reais dropped in accounts receivable.

Speaker Change: Finally, this amount also covered the $1.2 billion in non-recurring expenses, again primarily related to the Chapter 11 process.

Speaker Change: In regards to our capital structure, we ended the third quarter with an adjusted net debt of $27.6 billion and a net leverage ratio of 5.5 times.

Speaker Change: Finally, if we add our cash equivalents of $1.9 billion to our accounts receivables balance, we reach a liquidity position of $5.3 billion.

Speaker Change: Well, to conclude, I'd like to thank everyone for their attention during the presentation of our financial results. Now our CEO, Shelsa Fajar, will provide updates on the Chapter 11 process and share his final remarks. Thank you.

Thank you, Gratia.

Shelsa Fajar: Last week, we reached a very important milestone in our Chapter 11 process with the Restructuring Support Agreement signed with ABRA. All the details are included in our material fact published on November 6th.

Shelsa Fajar: But to highlight the key points, the agreement will address up to 1.7 billion dollars in Chapter 11 debt, either through conversion into equity or cancellation.

Shelsa Fajar: Furthermore, Goal plans to raise up to $1.85 billion in new capital through an exit credit facility, with up to $330 million of that in new equity.

Shelsa Fajar: With this agreement, we have the majority of the key terms of the restructuring plan defined and we project that our exit from this process will take place by the end of April 2025.

Shelsa Fajar: Despite the challenges we have faced, this process is positive for growth history, addressing all the necessary points to support our sustainable growth in the coming years.

Shelsa Fajar: During this quarter, we also reach an important milestone in our fleet liability restructuring plan, where we conclude all the commercial negotiations with our aircraft and engine lessors, with all the agreements approved by the bankruptcy court.

Shelsa Fajar: A total of 129 F-RAT and 58 engine leases have been renegotiated and approved, whose signatures of definitive contracts are in process.

Shelsa Fajar: Since the end of third quarter, we have continued to sign contract amendments with the lessors.

Shelsa Fajar: with changes to the payment flows to ensure the financial health of the company.

Shelsa Fajar: We are very excited about this next phase for GO. We anticipate challenges months ahead, but we are confident that we have what it takes to exit the Chapter 11 process successfully.

Shelsa Fajar: I would like to thank everyone for joining us today and for your attention during our presentation of the third quarter 2024 results.

Shelsa Fajar: We are confident that the strategies we are implementing will lead to even better performance in the future. Once again, I want to thank our team of eagles who have been working incredibly hard to ensure we continue to face the industry's challenges with resilience and innovation.

Shelsa Fajar: Thank you all for being here today and have a great day.

Speaker Change: Thank you Celso and Godzilla. With Celso's remarks we conclude the results presentation. The Go investor relations and communication teams are available to address any questions you may have. This concludes today's teleconference of Go Airlines. Thank you very much for your participation and have a wonderful day.