Gol Linhas Aéreas Inteligentes S.A. (NYSE:GOL) Q4 2022 Earnings Call Transcript

Gol Linhas Aéreas Inteligentes S.A. (NYSE:GOL) Q4 2022 Earnings Call Transcript March 8, 2023

Operator: Good day, everyone, and welcome to the GOL Airlines Fourth Quarter 2022 Results Conference Call. This morning, the company made available its results. After GOL’s presentation, we will initiate the Q&A session for analysts and investors, when further instructions will be provided. This event is also being broadcast in live via webcast and may be accessed through the company website at www.voegol.com.br/ir and the MZiQ platform at www.mziq.com. Those following the presentation via webcast may post their questions on the platform and their questions will be either answered by the management during this call or by the GOL’s Investor Relations’ team after the conference is finished. As of now, participants are free to submit questions through the webcast platform.

You just need to click on the question mark in the upper left corner and typing your question. Before proceeding, we emphasize that forward-looking statements are based on the beliefs and assumptions of the company’s management and on information currently available to GOL. They involve risks and uncertainties, given that they are related to future events and therefore depend on circumstances that may or may not occur. Investors and analysts should consider that events related to macroeconomic conditions, industry, and other factors could also cause results to differ materially from those expressed in such forward-looking statements. At this time, I will hand your call over to Mr. Celso Ferrer. Please go ahead.

Celso Ferrer: Hi everyone, and thank you all for your participation in this conference call. This morning, we posted our Q4 2022 earnings release, and a slide presentation on GOL’s IR websites. So we will make some brief comments and should straight through to your questions. I would like to start by highlighting our most important results of the period, which were made possible by the trust from our customers, investors, suppliers, partners and specially from our Team of Eagles. GOL delivered strong performance in Q4, a quarter with similar supply to the pre-pandemic period. We achieved a new record for revenues of R$4.7 billion and increased a return EBITDA to R$1.2 billion, the highest level since before the pandemic. Let me share how we got there.

2022 was characterized by the rebound of demand for air travel in all segments and this beats in the fourth quarter. We served more than 200 markets and ported approximately 8 million passengers, 90% of GOL’s fourth quarter last year. We operated more than 700 flights a day in December as post-holiday bookings and the recovery of business demand led to the strong ticket sales. Our supply measures in ASKs grew by 29% during the quarter, in part this is due to the resumption in corporate demand as workers returned to the offices and this strong and resilient demand of the leisure passengers. In line with this recovery, or flights frequencies increased by 26% when comparing to the fourth quarter 2021 and we reactivated frequencies in corporate markets predominantly in the downtown airports of Congonhas and Santos Dumont.

At the same time, our aircraft utilization continued to improve and we maintained our load factor around 80% during the quarter reflecting our focus on improving our operation fleet delivery as we expand our network. We are still serving a rational pricing environment among industry player and the resumption of strong load factors which in the GOL’s case were followed by an incremental combining offer of seats and profitability. GOL has the lowest unit cost in the industry and plans to reduce it even further to generate a faster recovery of its operating margin and increase efficiency. In the fourth quarter, in order to partially offset the effects of the jet fuel price increase, our recurring unit cost ex fuel decreased by 17% when comparing to last year to 3.6 cents a dollar.

By acting assertively and managing capacity, controlling costs and improving productivity, we maintained growth of our revenues in our operating results during this period recording the highest quarterly revenue figures in the GOL’s history, 62% and 24% above fourth quarter 2021 and fourth quarter 2019 figures respectively. It is also important to note that 25% growth in yield and 25% expansion in unit revenue, RASK. This yield is more than 45% higher than the pre-pandemic figures in the fourth quarter 2019. Gol’s ability to efficiently meet the increasing demand stems from the company’s key differentiator, our strong and disciplined capacity management with a continuous focus on preserving profitability and liquidity. We are highly committed to run an efficient operation and as our results show today, our productivity standards are getting better and better.

By generating higher revenues and reducing costs we are making significant progress on improving our balance sheet. By 2023, we expect that our ability to drive operational efficiencies will be our main competitive advantage. This will be critical in continuing to win the business of our customers and growing market share in the current economic scenario. Similar to growing profitable market share is expanding our offer in both domestic and international markets. In the case of the former, we expanded our presence in the regional markets during the quarter. The company has increased its offer to Rio Janeiro by over 40% during the high season. In addition to achieving a record level of seats available at Congonhas airport. In November, we announced the expansion of our operations in the Midwest connecting capitals in the region on direct flights to the south and the northeast regions during the high season.

In the international markets, we have added more frequencies on the Brazilian Orlando routes and we have now raised new flights from Congonhas airports to Rio Janeiro to Montevideo. We have also returned the series of Córdoba and Rosario which represents the return of 100% of pre-pandemic destinations in Argentina. I also want to highlight the beginning of our operations between Manaus and Miami connecting the north of Brazil to the United States. We have that in the customer experience at every stage of the travel journey from the continued refreshment of our reach with next generation and far more fuel efficient aircraft to technology investments that are providing our employees better tools and our customers a more seamless experience.

This quarter, we took delivery of one new Boeing 737-MAX 8. Ending the year, we had 38 aircrafts of this model, approximately 26% of our total fleet. Our goal is to achieve 50% of our fleet composed of the Boeing 737-MAX by 2025. The GOL brand was recognized as Top of Mind by Folha de Sao Paulo for the fifth time in a row. This recognizes our commitment to customers and strengths our presence in all segments. Turning to our loyalty program with Smiles Customers base reached approximately 21 million and revenues were BRL1.1 billion in the quarter, almost 35% higher when comparing to fourth quarter in 2021. The customer base at Smiles has evolved continuously demonstrating its potential in a scenario of increased volumes of Gol operations. Synergies were generated from tax management and seats inventory, important levers that optimize GOL’s working capital and liquidity.

I would like to conclude by highlighting the results produced by our Team of Eagles. And that we were projecting also next year in 2023. The actions we have taken in the recent years has put us in a position of strength and enable us to have a competitive position to extract maximum value creation for 2023. I now turn the floor over to Richard who will present some other highlights. Richard?

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Richard Lark: Listening our call today from our hub in Brasilia which is one of GOL’s big hubs. That’s where we have direct flights on access from Brasilia to Miami and Brasilia to Orlando and just a point of curiosity that the flight we are doing on the Brasilia Orlando flight is the longest flight done to-date on A-737. And I am here with some €“ at GOL’s headquarters with Mario who will be participating with us in the Q&A. GOL’s detailed analysis for the quarter, you have in the earnings release and the presentation that are made available on GOL’s investor relations website and also on this webcast platform. So please access those there is some additional information, as well in the presentation. Revenue in the quarter was higher, in the fourth quarter of 2022 was higher than any fourth quarter in GOL’s history.

As Celso mentioned the domestic and short haul international markets continued to lead the way as GOL judiciously added back additional capacity into these markets and routes. The management of working capital, together with the increase in accounts receivable and advance sales of both tickets and end miles has enabled GOL to maintain and finance the pace of growth necessary in a very challenging market environment and enabled operations in the high season with a reduction in unit costs, while at the same time maintaining fare levels. The transformation of the GOL fleet to the Boeing, which is in part guided by enhanced productivity and reduced unit costs. Yield and RASK in the quarter showed increases of 25% over the same period of €˜21, reaching 48.2 and 41.6 cents in Real respectively.

We increase average fares demonstrating our experiencing in managing variations in both fuel prices, as well as the exchange rate. GOL’s reccurring EBIT and EBITD margins reached 15% and 25% respectively. Our recurring EBITDA totaled R$2.8 billion in the full year of ’22. As we plan to maintain these new levels of yields and unit costs together with the resumption of capacity, back to pre-pandemic levels, we are maintaining our financial projections for 2023, which incorporate a more robust nominal EBITDA generation. In the fourth quarter of €˜22, we achieved approximately a 12% reduction in GOL’s Recurring CASK excluding fuel measured in dollars, compared to the fourth quarter of ’21. We will continue to be impacted by high oil prices the range increase of around 7% compared to the fourth quarter of €˜21, which along with higher costs associated with the oil supply chain and logistics, and refining have represented an increase of approximately 44% in the average jet fuel price denominated in Reais paid by GOL here in Brazil in the same period i.e., 44% increase in GOL’s average jet fuel price.

Q4 of €˜22 compared to Q4 of ’21. As for cash flow, as for GOL’s cash flow in the quarter, GOL had generated R$5.3 billion of operating inflows. This resulted in a positive operating cash flow of R$2 billion excluding interest expense, despite the impact of higher jet fuel prices. In the fourth quarter of ’22, we concluded the issuance of senior secured amortizing notes in the amount of $200 million, which allowed the extension of financial obligations with lessors mainly due to leasing deferrals and improved GOL’s expected cash flow for 2023. These secured amortizing notes have a collateral of unencumbered receivables and represented an average cost capital to GOL of 4.3% per year, and also added a new innovative initiative to the company’s liability management toolbox and this was done even in the midst of a capital market environment, which was not conducive to new issuances.

At the end of Q4 GOL’s total liquidity had increased by 13% to a little over R$4 billion and in pro forma. for the issuance of senior secured notes due to €˜28, which was finalized on March, 3rd in Q1, Pro Forma, for that GOL’s total liquidity would have been R$6.2 billion and you have some more detail on that on page 18 of the presentation put on the website and the webcast platform. Leverage is measured by the ratio of net debt using the seven times annual lease payment convention and excluding the perks divided by recurring LTM EBITDA was 9.5 times on December 31st 2022. This is about 0.2 times lower than the leverage at the end of 2021 and that includes the issuance of the $200 million of senior secured amortizing notes that happened in the Q4.

So a straight reduction in leverage but a substantial re-profiling of the maturity profile. Excluding payments made during the fourth quarter for deferred lease obligations, the leverage ratio was around 9 times and if you use – if you calculate aircraft debt under the IFRS 16, convention GOL’s leverage was a little over 6 times at the end of 2022. In the first quarter of €˜23 GOL completed one of the largest liability management and refinancing operations in the history of the company and the airline industry through the issuance of $1.4 billion of senior secure notes due 2028 in a private placement to Abra Group Limited, GOL’s controlling shareholder. These notes bear a total interest rate of 18%, of which 4.5% is paid in cash and 13.5% will be payment in kind with that pick feature giving substantial cash flow relief to GOL.

And these notes are guaranteed by the IP and brand of Smiles, GOL’s market leading loyalty program. And also a pari passu lean on the IP brand and spare parts of GOL. This issuance included $451 million in cash for specific uses at GOL subject to certain conditions and approvals and the contribution and retirement of approximately $1.1 billion in face value of GOL’s outstanding bonds, which was comprised of 83% of the bonds maturing in €˜25, 61% of the bonds maturing in 2026 and 10% of the perks. These bonds that were contributed and retired have been cancelled, which represents a discount to par of $313 million for GOL. Pro forma for this transaction, the net debt of GOL will be reduced by over $100 million and will result in over $30 million of annual interest savings for GOL.

As I said, you know, this transaction represented one of the largest completed liability management and comprehensive refinancing transactions in both the airline industry and the in emerging markets. It also represents the tenth liability management or capital raising transaction that GOL has completed since the onset of the Covid-19, pandemic, on page 14 of the presentation, you have a summary of that. GOL did three transactions in 2025 and 2021 the senior amortizing notes in €˜22 and the senior secured ’28 notes now in €˜23. And so with that, we’ve completed all of our liability and capital management transactions as it relates to what we need to do during the pandemic. As a result of this liability management operation GOL attained a series of important benefits in capital structure and a significant improvement in its credit profile by increasing the average maturity of its bonds from 2.5 to 4 .4 years.

Also the access of up to $451 million in cash resources and the significant reduction in a annual interest payments with the cash pay rate reduction on GOL’s bonds on average from 7% to 8% per year to a level of approximately 4%. And we will continue to work on both debt reduction opportunities and investments in the business, while continuing to meet appropriate target liquidity levels. Of course, you know, GOL’s successful liability management during the pandemic positions us with the lowest short-term debt among our competitors and as we mentioned we’ve updated our financial outlook for 2023. And we’ve also included our Q1 €˜23 projections, which take into account the increases in jet fuel prices, and are also based on the preliminary results for the first two months of the current year.

For the first quarter of €˜23, we expect an EBITDA margin of 22% on net revenues of R$4.8 billion. Back over to you Celso.

Celso Ferrer : Hey, thank you, Rich. Demand remains strong as passenger return to the skies while there is some supply constraints continue. As the industry leader with a proven strategy and strong execution track record, GOL is well-positioned to build on our momentum in 2023. We are confident in our ability to deliver significant improvement in earnings and free cash flow going forward. I’d like to thank our Team of Eagles for their outstanding work in delivering this quarterly results and serving our customers during our very busy holiday travel season. They are the reasons our brand and our customer loyal is at the top of the industry. I’m incredibly proud of our team for rebuilding the region’s best performing airline and importantly, we are not just building back, we are continuing to improve and extend our competitive advantage. Operator. You may initiate the Q&A session.

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Q&A Session

Operator: Thank you. Our first question today comes from Michael Linenberg from Deutsche Bank. Please, go ahead with your question.

Michael Linenberg : Oh yeah. Hey good morning everybody and congrats on getting this financing done team. Quick just question here on the guidance for 2023. You pulled down the capacity a little bit and you sort of point to the supply chain issues, which I think you know everybody’s dealing with that. But then you sort of there was another sort of part of the sentence that talks about in view of expectations of recovery and corporate demand. And I’m just trying to interpret is it that the recovery is more gradual or more moderate than maybe what you were anticipating. And so that’s part of it. Just if you can clarify, what is meant by that statement?

Celso Ferrer : Hi, Mike. This is Celso.

Michael Linenberg : Hey hey, Celso.

Celso Ferrer : Hey. So, as you just said, I mean, we are, we are of course facing supply issues all over the chain. Not only on OEMs, but also in the whole supply chain and being in terms of parts and maintenance, and that’s why we are reducing a little bit the guidance. It’s a, it’s a slight movement down. We are also, like you know us, we managed the capacity on a very detailed way. So we do – first part of this year, for example we are flying 33% less in February compared to January. So we do this short-term adjustments based on the seasonality, but also what is happening on the industry as a whole. So, we this is the best picture we have from now and what we expect for the corporate, it’s not related to the – this capacity itself because the capacity for corporate, the main routes in the corporate market, we have just returned in the fourth quarter, especially from, Congonhas and Santos Dumont we rebuilt the strong network we have with the main frequencies between the – all the most important shuttles.

And those will stay and we are following close how the corporate demand is coming. It’s coming in a pace that was lower than we thought, but we are compensating this with other segments. Like I said, these are demand and also VFR and VFR is super strong in those routes. They are very resilient so we are managing a way that we are able to keep use at this level even though the corporate. And when I say corporate, I’m talking about the large corporate, because PMEs and other segments are already there. It’s just large corporates that is still like, going in a slow pace. I hope that now after carnival, and we are starting to see now beginning of March, we are starting to see a strong demand coming from corporate, but we are not assuming that we would stay for the whole year.

So we €“ you know us, we are taking this as a cautiously approach.

Michael Linenberg : Okay, good. Thanks. And then, just I guess, Rich, when we look at the aggregate principal amount of the senior secured, the secured senior notes due 2028 up to $1.4 billion. So presumably, where it is today is before you’ve incorporated the 13.5% pick per annum, is that the way to think about it, or

Richard Lark : No, no Mike. It’s the bond buyback portion was 1.1.

Michael Linenberg : Okay.

Richard Lark : And the cash portion is the 450. So that’s roughly. The, this is the mark via the bonds, there is some other components in there. There were disclosed OID and so on. But that’s, that’s at the beginning.

Michael Linenberg : Okay? So the 1:1 and then, it’s going to grow 13.5% per annum over the next five years. That’s the way to think about it, that’s sort of 1:1 is the base.

Richard Lark : Yes, it’s days outstanding for five years.

Michael Linenberg : Yes, that’s right. That’s right.

Richard Lark : That was designed to – I think, the focus should be on the 4.5% cash back, which is not something that GOL or frankly any airline would have been able to achieve on its own and that gives GOL a lot of flexibility to conserve cash. Then that overall cost there is also – if you include the pick component is significantly lower than GOL would have been able to do on its own. But it’s but it’s important to mention that ultimately, this will be a transforming to convert as you saw at the ESSN the exchangeable, very similar to the structure that GOL did back in 2018 with its first exchangeable. We did not want to issue the exchangeable from GOL in a distressed state. And so, the using of the of the debt mechanism, at the beginning allows us to remove the stressed component from GOL’s security prices and eliminates any concerns over the going concern issue, allow the market the price and the information about the what the impacts are on of this financing transaction before issuing an equity-linked security.

But the ultimate destination on this will be, it’ll be transformed into an equity-linked security, which, we described in the in the public announcements. And so it’s don’t like to be the SSN if you will. The notes would be outstanding for the five years still have a much you have order life. And that ultimately the idea is that this will be a equity-linked transaction. The cash pay component will not change and when that’s done at the appropriate time when it’s done, when all the dust settles on this and everything is stabilized and properly priced and trading in the market. It’s mandatory in Brazil that we offer preemptive rights to our PN shareholders and of course, we historically, voiceover that including to the ADR shareholders. So, everybody will have a bite of the apple when that rights offering happens at some point in the future.

We don’t know when exactly we will do that. But would likely be in the in the near future and all of GOL’s shareholders would have the right to participate that. That’s also a way of issuing equity at a premium to the market because, if you all were illustrate equity offering in its the stressed state with the market cap is, and with the size of this capital raising it would have had to come at a significant discount to the existing market valuation. So, the way we’re doing this in a sequence than well thought about way will allow when the equity-linked offering happens, you done at a premium to a more correctly priced equity price. And so that’s the – that’s part of the reasons for the more complex structure that you guys all saw in the announcements and so, it’s being done sequentially.

So that it wouldn’t, it would have any negative impacts on an equity-linked issuance on the market perception of the company in a distressed state. And so, we’re – we’ll see where the market is up on this and how the market prices all these effects in over the next couple months.

Michael Linenberg : Yeah.

Richard Lark : Well, balance sheet and all that stress should probably know, hopefully gradually come out, going growing concern emphasis concerns will go away and the market will price in this initiative and ultimately what should be a, more proper price for the equity. How long it’s going to take, your guess is as good as mine. That’s a couple weeks or a couple months, but we will see.

Michael Linenberg : And we’ve seen some movement in asset prices. So that’s a good thing. Just my last thing and Richard or Celso. We now have Abra and, we have the foundation for the holding company. We have a better sense of the structure What about the potential upside, when we think about, in the past Rich, you’ve talked about the IAG holding company structure and there’s a lot of goodness in that type of structure. And when you think about, cross-utilization and joint procurement and synergies. And, I think about, if FIDA, I get preferential treatment on say, Iberia or Air Lingus and access to the club’s. When, when do we start rolling out that? Because I feel like that that’s, that’s an exciting part of the story and it would be sort of the first of its kind in Latin America.

Richard Lark : Yeah. No, we, yes, there are a lot of synergies across the group’s structure, starting with Bianca. Bianca will be rolled up under the platform company by the end of April, but a lot of the ground work on that has been laid where possible. We already have all of the approvals we need to start working together and do that. Yes, I know a lot of people will potentially use IIG As an example, we have a lot of differences in how we’re doing it, here in the South America market and what we’ve created effectively is a platform company that has its own reason for being – there’s going to be doing a lot of work to, generate a variety of different types of synergies from the members of the platform in terms of its focus on even being an even lower cost, higher efficiency group, which is obviously the main tenant.

Because, we believe that low-cost always wins and all the members of the Abra platform have that in their business models. As you know, Avianca did its transformation of its business model during its restructuring process. And it was in the process of finalizing its full transformation to an LCC. And then also delivering, above-market revenue growth, which is going to be through, better utilization of the of the massive networks that we all have. They can work together. It ultimately is also going to benefit, customers with, new city pairs and new ways to, get benefits from the loyalty programs. The combination of loyalty programs is one of the largest in the world and when you, when you go into the overall fleet size, we will have significant scale across the board to do things.

But obviously that’s something we’ll spend more time as we have developed on that. And obviously, the point today is to help people understand GOL’s fourth quarter results. And where we are in that and GOL is in the short term

Michael Linenberg : Great. Well, thanks. Thanks for the time.

Richard Lark : Thanks, Mike.

Operator: Our next question comes from Stephen Trent from Citi. Please go ahead with your question.

Stephen Trent: Thank you very much, operator and good morning, guys. Appreciate the time. Just two quick things for me if I may? I know that the Brazilian government is studying the idea of potentially making some adjustments in fuel taxation. And if we cross that bridge, would you anticipate revisiting your fuel hedging strategy? Or do you think that’s something that’s going to stay in place regardless of what happens? Thank you.

Richard Lark : Well, thanks for the question, Stephen. As I said I have Mario here with us on the call today. I think I’ll hand it over to Mario to respond.

Mario Liao: Sorry, Steve. Can you just repeat your last point on the question? Sorry.

Stephen Trent: Yeah, no, no worries Mario. So, presuming that the Brazilian government does move forward with some kind of adjustment on fuel taxation, would that possibly lead GOL to its long-term fuel hedging strategy?

Mario Liao: Yeah. So, we, first of all, what have you seen in terms over the last trend in terms of the movements on the jet fuel has been very correlated to the market. What’s been happening so far so we have been trying to avoid just to spend a lot of cash. And of course, we’re reserving right now the desk cash to other priorities, but we have been so far active on the market to do some hedges, especially for the next months when we build some good protection. Also, using some instruments that is related to the main supplier the Petrobras, there is a commercial hedge, using some fixed pricing for GOL. At this point in time, we still do that government can provide on that. So we, the most effective tool that were using is our natural hedge has been our capacity management using our instruments. So there’s nothing concrete in terms of the discussions with the government right now the change in that side right now.

Richard Lark : Stephen, not, no, we’re not, I mean, GOL is not, I mean, GOL’s hedging strategies for fuel FX is the same. I mean, we basically try to have something between 25% and 50% percent, 12 months out, and then beyond 12 months kind of months 12, 24, we will gradually build to the when we get, into 12 months out where roughly 25% hedged. We’ve obviously been strapped on cash and so we’ve had to be creative with instruments that we’ve been using to wrap around that. But now that the government is doing alters our – the way we’re doing heads as we continue to kind of, we’ve always generated a lot of value by getting ahead of the curve and doing it that way as opposed to reacting. So, hope that answers your question.

Stephen Trent: Yeah. No. Very helpful guys. Thanks Rich. Appreciate that. And just one more very quick one for me. I recall before the pandemic that GOL used to seasonally sublease some of its planes, overseas, Transavia or names like that during Brazil’s low season and, now that the world is kind of edged out of the pandemic. Do you anticipate maybe more potential operations, like that going forward?

Celso Ferrer: Hi, Steve. This is Celso and

Stephen Trent: Hey, Celso.

Celso Ferrer: So that’s a good question and it was kind of a part of our business model pre-pandemic. As I said to Mike, we have been managing capacity and Brazil became very highly seasonality market. I mean to compare the traffic like that we had in December and even in January now to the low season we should be managing the fleet in that way. As a Synergy of Abra one thing that we may do in the future is the sublease, but until then, we of course we have the same partners KLM and Transavia, I mean, they are really close to us and we are I mean, studying to continue this type of operation as soon as possible, if it’s not December, probably next one.

Stephen Trent: Okay. Very clear Celso. Thanks very much.

Operator: Our next question comes from Savi Syth from Raymond James. Please go ahead with your question.

Savi Syth: Hey, good morning everyone. Just on the capacity, could you talk a little bit about how you see that capacity kind of growth between domestic versus international? Do you need to open back up for the international markets as well, recently?

Celso Ferrer: Hi, Savi.

Savi Syth: Hey, Celso.

Celso Ferrer: We are going to, I mean, on the domestic side we are just growing to the slightly above to the levels, we had pre-pandemic. So if you look at the fourth quarter, we are still below. But as we go through the – this year, we are ramping up the capacity in the domestic market very cautiously to maintain the unit revenues that became very crucial for us. And international markets, most of the growth was already implemented at this point by the end of the year. Like I said, we launched the more frequencies to Orlando, more destinations from Brazil to Miami. And then, what you’re going to see is the full year effect of the international markets that we just resumed. So it’s going to be a significant growing international and some markets we have already operated before pandemic, we are approaching very cautiously to understand what would be the best time to restart.

Those markets, like, Santiago, Lima, we normally fly as a utilization flight. So we fly – so we may we may open during the year as we see those markets becoming healthier.

Savi Syth: That makes sense. That’s helpful. Thank you. And if I might on the ticket tax, like, is there an assumption, is there is a guidance to reflect kind of the ticket tax break? And does that assume any kind of continuation here?

Celso Ferrer: No, Savi. We are not assuming nothing from the tax and also we are not assuming anything on the fuel pricing so.

Savi Syth: That’s really upside, perfect. All right thank you very much.

Celso Ferrer: It’s going to be an upside. Yeah.

Savi Syth: Perfect. Thank you.

Richard Lark: Let me just insert, operator, let me just insert – because we have questions from the platform that people submit on the platform. And let me just, let me just leave one or two of them in before we go back to the queue on the people that are on live. We have a question here from Chris at Cowen, which asks, can you provide how forward bookings are looking. Talk about VFR and corporate passenger traffic. Celso?

Celso Ferrer: Yeah, so, bookings are performing very well at the beginning of this year. Like, better than the – on what we had in the fourth quarter as corporate is growing. We have now achieved more than 100% of the revenues that we used to have on the corporate, segment but not the same in number of passenger. So we are still around 72 to 75 depending on the month, depending on the week on the 70% to 75% level of in numbers of passengers and the corporate segment. As we grow those passengers, the huge, there is a room to improve the users. Those passengers, they book on a short ABs, so VFR demand and Leisure demand stay very resilient. That was kind of uncertainty during the pandemic. Those segments were the most important ones and the good news is that those segments stayed even in flights like in the shuttles that we used to have less leisure or less VFR.

We have now a significant portion of those slides with helps fares. So it’s a legacy from the pandemic that we will stay. The combination of these legacy with the rebound on the corporate, it’s going to be very helpful. And we are not assuming the whole upside. We are taking a cautiously step when we announce our guidance here.

Richard Lark: Okay. Another question regarding the platform, I’ll just read here and I think I’ll send it to Mario to answer. Despite a reduction in capacity, both non-fuel cash guidance of 3.6 cents is retained for 2033. Question is has GOL found savings to compensate the capacity decline, or is there another factor preventing cash guidance Rising with lower capacity?

Mario Liao : Yeah, thank you. This is a very good question, because it speaks how we’re managing this company, in terms of cost perspective. So since 3Q, €˜22, the company already achieved that level 3 6 – 3.6 and has been maintaining around this – in this fourth quarter. Just coming down from high 4s in terms of cash consuming as far as in 2021 and low 4s in 2022. So, not only related to potential capacity dilution as we preserve capacity and in this year, in terms of our guidance, we are expecting to recover most of the SKS that has been preserved since 2018. But there’s also some important drivers that has been leading to that cost reduction. So, there’s main three items that are more important to highlight. The first is, our discipline in terms of controlling the workforce.

So that the number of the total employees where we are achieving with the same, almost the same 2019 SKS right now in the fourth quarter, but we’ve – so just coming from an almost 16,000 to 14,000 right now. So, we have been able to reduce the payroll cost and compensate more than the effect or the impact of the cumulative inflation that impact the underline. So, second as you know, we have been preparing to provide a better visibility to the market. Especially in terms of the maintenance cost that is going to be impacted through the fleet’s transformation. So we recorded back in 2021 results almost R$1.6 billion of provisions for maintenance that help this maintenance lines to be outperforming now in the P&L. So, that can keep this line much more visible and below what has been the historical trend?

And also, as we were, still operating some of their credits doing the storage and we are preserving that liquid by not deciding to increase capacity or just focus on capacity. The third item is related to depreciation, because since we are doing a lower capitalized maintenance that has been translated also into a lower depreciation. And those are the three main items that is, the company is managing in order to keep that cash in this. And as we were probably, the only airline that was €“ or is still preserving that capacity and as long as towards the second half of the year, most of the capacity for 2023 were going to be expected to be linked to the high seasonality of the second half of the year. That can provide potentially represent, a better efficiency and productivity in terms of our cost control.

Capri can you go back to the queue, please?

Operator: Our next question comes from Pablo Monsivais from Barclays. Please go ahead with your question.

Pablo Monsivais: Hi guys. Thanks for taking my question. My question is, a bit on the medium-term outlook for you since you have a pretty good cost advantage and deals are high. And we expect those used to be high for the next foreseeable future. How would you – what’s your game plan in a year from now. Do you think you’re going to be more aggressive in terms of capacity or pricing to take advantage of your high yields and low cost that you have to out-compete your peers domestically? Or how – what’s on your thoughts, or how to compete in the medium-term. Thank you.

Celso Ferrer: Yeah. Hi Pablo. Thank you for your question. And as you said, we have the cost competitive advantage and that’s this is the reason why GOL became the most important low-cost in the region. And this is what we want to resume. So we want to preserve the revenue environment as much as we can, especially on the domestic market, which is still very volatile. And we want to expand our growth through the international markets, especially, next year and on. So with the synergies, we will have and with the extra range with on the 737-MAX we expect to grow next year more on the international routes with long sectors that will dilute even further our cost. So, we are – of course, we have potential to grow. We have more planes.

We have the cost advantage as is that, but it’s really, really important for us to keep the capacity spleen that is that we have been keeping since the beginning of the crisis into actually. And we want to maintain and make sure that our domestic is going to be growing as the market grows. So we still see room for health growth in the Brazilian market. But we also want to explore even further the international markets and as no low-cost always win.

Pablo Monsivais: Perfect. Thank you very much.

Operator: And our next question comes from Nick Frank from Jeffries. Please go ahead with your question.

Unidentified Analyst: Hi, this is a Nicholas from Jeffries. Thank you guys for the call. Congrats there on the results and transformative liability management transaction. Just had two follow-ups. There was one point that was not clear in Michael’s question at the beginning. So, on the capital structure pro forma, the buyback was R$1.1 billion. I think it’s actually R$1.077 of notional of €˜24, ’25, €˜26 and PERPS, and the new FSNs is R$1.4 billion today, right? It’s not up to, it’s just, right now it’s R$1.4 billion of FSNs, which are wholly-owned by Abra. Is, is that correct? I just wanted to confirm that point.

Celso Ferrer: That’s correct. Yes.

Unidentified Analyst: Okay. And then on, looking forward, right for GOL and I’m sure we’re all looking forward to ask questions and to get to know, the Abra story. But when we look at the remaining GOL bonds, most of which are unsecured except for the €˜26s. Can you can you give us a little color how we should think about those? The stubs kind of different options or how the company is thinking about addressing the remaining €˜24, €˜25s and eventually the ’26? And in particular, I ask because of the springing maturity of the new 28s. So, just wanted to clarify there how we should think about those remaining GOL bonds.

Richard Lark : Yes, on the July 24 maturity, which is what is that about 16 months from now, is about R$75 million dollars leftover. And of the mid 25 maturity, that’s about 340 or so million dollars leftover. So that R$400 million of 24, 25 maturities. You have the R$75 million that matures in July of 2024. Is that what you’re worried about? Or maybe €“ saying the question.

Unidentified Analyst: I mean, very much not worried about it, because the amount is small and the liquidity position is significantly improved. But just mechanically, right, because the understanding is that any repurchases today are capped at a certain price. I think it’s 50 cents and

Richard Lark : No, no, I am sorry to interrupt. No, I think you are referring to the – I understand what you’re saying, but no, there’s no all the €“ GOL just continue to pursue what €“ it was under the past. I mean, we’ve done bond buybacks. We’ve done different types of liability management, operations. GOL has lot of different tools on its balance sheet in terms of capital markets, insurance, obviously yet that market access which is not something that has been available to the company since the war started at the February last year. But the company will just continue to manage around those maturities and with the available tools that it has.

Unidentified Analyst: Perfect, that’s great. And I’m sure that will continue to be well received after the company has extended the runway here and

Richard Lark : And let me just okay, sorry, you cut out there.

Unidentified Analyst: Just said that that’s great and I’m sure those will continue to be well received as the company has extended runway and bolstered liquidity. The last one was just on the, on the equity. The listing of Abra versus a potential delisting of GOL in the future, kind of, how should we think about that for the perspective of the minority equity that is not owned by Abra?

Richard Lark : Oh, we are not – this is not the subject of this call Nick, okay? We’ll talk about that in the future. Let me just insert you we only got a couple more minutes here. Let me just insert a couple quick questions. Make sure we get everybody that asked on the webcast. Just a couple of quick questions here. One was how these secured amortizing notes that were issued, the leasing companies that €“ here will affect cash flow. The quick answer there, we mentioned that these notes have a very low cost of capital for GOL. And also have a grace period of 12 months, which has a big impact on cash flow to ’23. And GOL already had the lowest least stats among competitors, and that transaction gave additional relief for GOL.

But also, the lessors that participate in that were secured by, are secured by top tier collateral. Another quick question, let us read the question. The fleet transformation program is being affected by the bottlenecks at OEMs. Will these delays force the company to review its plan? Okay, well, we had previously planned to end last year with 44 I mean, in December of €˜22 with 44 B 737-MAX in the fleet. We finished with 38. And so, obviously, we’ve – GOL, as, you know, being affected by the OEM bottlenecks which are not just affecting Boeing operators. They are also affecting Airbus operators, that’s mainly due to logistics problem at all the manufacturers that are delivering aircrafts. And so that’s why we, we’re forecasting lower number of Maxes than previously for 2023, which would reach 53 by this December.

And so we’re still playing catch-up given the pandemic and given the MAX grounding, going all the way back to 2019 and those and those other issues that and we’re playing catch-up on that. Boeing has been working very closely with us in order to mitigate this and we’re confident that our long-term partnership with them will continue to work as we work together as partners on that. And then just one final, just to make sure we fit them all in by the top of the hour here, I’ll maybe extend for another couple minutes here. Just one last question, which I’ll send to Mario which is from He says you mentioned about increasing corporate traffic, actually maybe I’ll send this to Celso. What’s the main explanation on yield expansion quarter-over-quarter?

How is corporate traffic, comparing with pre-COVID-19 levels? Regarding yields do you see risk on achieving the additional yield increase implied by your guidance. How these yield increases should happen along 2023? And maybe I’ll just I’ll just chime in there before you speak Celso. There was no yield increases in the guidance. What you guys have to do when you look at, you have to be careful with the year-over-year comparisons. We mentioned this in the last call. We did when we had our, we didn’t change our €˜23 full-year guidance. We just provided some Q1 numbers. We just reaffirmed it, if you will. And we provided that in our last call and we made a point to explain that when the war started, at the end of February, there was a massive increase in oil prices in March April and we did a – we effected a significant shift in yields up in the second quarter.

And so, you need to strip out the Q1 of €˜21. Sorry, yeah €˜22 from your comparisons in the year-over-year, otherwise you won’t be able to do the comparison. And if you take the yield progression going forward, if you would kind of go Q2, Q3, Q4 and compare that to our, look at the data that we’ve provided in the releases and compare that to our €˜23 guidance, stripping out the Q 1 of last year, you’ll see reductions. I mean, for example, I think, if you take the nine-months comparison, last nine months versus of last year versus this year’s like an 8% reduction in yields. If you just look at the second half, it’s around a 10% reduction. And if we look at the Q4 comparisons, it’s like a 12% reduction. And so, that is, that is not correct.

And so your question on, do you see some risk in achieving the additional yield increase implied by your guidance? That’s not a correct question. There’s, there’s yield reductions in there which are also necessary to stimulate demand. And so maybe I €“ it looks like I answered the questions Celso. Okay, so we can skip that. Let me just check here real quick. We just make sure we got everybody’s questions. I think we were able to get through everybody’s questions. And if there were any questions unanswered, please shoot us an email to the GOL IR department and we’ll give you €“ we’ll get back to you on that. So, we can wrap up the call. And we can wrap up the call and if you have any closing comment Celso?

Celso Ferrer: Yeah, thank you. Thank you all. And I hope you enjoyed today webcast, and like Richard said, our investor relations and communications teams are available to speak with you as needed. Thank you. Thank you very much.

Operator: Ladies and gentlemen, this concludes GOL Airlines conference call for today. Thank you very much for your participation and have a nice day.