Avianca Group International Limited (GOLL54) Earnings Call Transcript & Summary

Thank you for joining us today. We are truly excited to announce that the principal shareholders of Colombia's Avianca and the controlling shareholder of Brazil's Gol have signed a landmark agreement to create a leading air transportation group across Latin America under the holding company structure name Abra Group. We will bring together iconic brands under a single group with a vision to create an airline group that tackles 21st century issues, making air travel increasingly simple, accessible, reliable and sustainable by driving economic development, further integrating Latin America with the rest of the world and minimizing the airlines' environmental footprint. I am Roberto Kriete, Abra's Group Chairman. Here today, together with Constantino Oliveira Junior, Abra Group's CEO. I have spent my career working in the airline industry. I led Central America back up for 30 years, growing it from a carrier with 3 aircraft into an airline group that was generating $1 billion of revenue before merging with Avianca. I also founded the leading Mexican carrier Volaris in 2006. Today, I serve as Chairman of the Board of Avianca. Junior and I would like to walk you through why we think this is such an exciting and unique opportunity to these companies, our employees, customers, partners and the communities in which we operate. Let me start with an overview of what we're announcing today and what this means for our principal stakeholders. Subject to customary regulatory approval and closing conditions, the group we are announcing today will control Avianca and Gol and bring together the iconic brands under a single group. Abra Group will be co-controlled by the principal shareholders of Avianca and the majority shareholders of Gol. Through recent investments made by Avianca's and Viva's shareholders, Abra Group will own a noncontrolling 100% economic interest in Colombia's Viva and its operations in Colombia and Peru. It will also own a convertible debt, representing a minority interest investment in Chile's Sky Airline. Avianca is the leading airline in Colombia, Central America and Ecuador. And Gol is the leader in Brazil. Both airlines connect numerous markets with Latin America as well as providing service between North and South America. And in the case of Avianca, Europe as well. It is important to point out that the airlines will continue to maintain independent brands, talent, teams and culture. More on that later. Together, Avianca and Gol will anchor a pan-Latin American network of airlines that will have the lowest units caused in its respective markets. The leading loyalty programs across the region and other synergies in businesses. In the aggregate, the airlines of the Abra Group ownership will offer customers the largest network of complementary routes with minimal overlap across our markets. To lead the group, we have assembled an executive team with significant airline experience across the region, a long history of entrepreneurial ship and a proven track record of growth and successful airline transformations. Abra Group management will focus on achieving synergies to ensure that lowest cost structure in each carrier's relevant market and expanding routes, services, product offerings and loyalty programs. It will also focus on developing innovative new products and services that will meet the evolving needs of passengers and our cargo customers in the highly competitive Latin American air transportation market and beyond. Junior will now share more detail about which inspirations led to today's announcement. Junior, please?

Thank you, Roberto. I am Constantino de Oliveira Junior. And as Roberto mentioned, I will serve as the CEO of Abra Group. Similar to Roberto, my career spans decades dedicated to driving growth and innovation in this industry. I cofounded Gol in 2001. And with that, introduced the low-cost carrier model to Latin America. One of our biggest drivers in creating Abra was the desire to increase the accessibility of air travel in Latin America starting the revolution that Gol kicked off more than 20 years ago. Through the formation of Abra Group, customers will benefit from the best fares, access to more destinations, more frequent flights and seamless connections and the ability to earn and use points across life miles and smiles, the brand's market-leading loyalty programs. We are also very much focused on supporting employees across the airlines. Our people have been vital to our success so far and especially in navigating through the challenges of the past few years. As Roberto said, the participating airlines will continue to maintain independent brands, talent, teams and future. The formation of Abra Group will provide to our people with more opportunities for personal and professional growth at every stage of their careers. For the airlines, other partners, suppliers, lessors, the travel agent they work with and many other partners that make up the aviation ecosystem, the fact that the airlines will continue to maintain independent brands means continuity as well. Last, but not least, we hope to scale and pull the group's expertise to truly find ways to solve 21st century problems. Notably, the ESG challenges our industry faces as we strive to lower our carbon footprint and make air travel more accessible. We will ensure that our operating airlines are ESG market leaders by providing an asset governance as well as the financial strength to continue to invest in a lower carbon footprint fleet, which will significantly accelerate the airline industry's path towards meeting carbon neutrality targets. Building on the efforts and relationships in place at the brands, Abra Group will ensure that its operating airlines are ESG leaders in their markets, providing enhanced world-class governance, supporting employees and the communities that Abra's airlines serve and leveraging the group's financial stability to continue to invest in a lower carbon footprint fleet. Over the long term, Abra will aim to redefine sustainable aviation in the region, providing an attractive platform for environmentally conscious growth and innovation using the most advanced green transportation technologies and fuel efficient aircraft. Roberto will now take you through the financial rationale as well as the structure and management of the group.

Thank you, Junior. Under the proposed structure, the group's strong projected consolidated profile will provide long-term stability and agility to the participating airlines. This will allow consistent and sustained investment in innovation and synergies. Abra will provide a platform for the operating airlines to further reduce costs, achieve greater economies of scale, continue to operate at state-of-the-art fleet of aircraft and expand their routes, services and product offerings and loyalty programs. Through this partnership, Avianca and Gol will each be able to expand operations into markets where they are not active today. The new group will enhance the airline's presence in the international long-haul and cargo markets in the Americas. The group will relentlessly focus on costs, will aim to achieve the lowest cost per seat on long-haul flights connecting its markets, will be an efficient and low-cost provider of cargo solutions and will offer the broadest and most efficient loyalty program, all while providing the best value to customers. With its scale and diversified market presence, the new group will be able to better compete with large legacy carriers and global carriers active in our region. As I already outlined, upon closing Abra will control Avianca and Gol and as a consequence, we'll also hold Avianca's noncontrolling economic interest in Viva and its operations in Colombia and Peru. They will also hold a convertible debt, representing minority interest investment in Sky. Certain financial investors have committed to invest up to $350 million in shares of Abra upon closing, further strengthening the group's balance sheet and liquidity position. Abra Group is a U.K.-incorporated closely held company. I will now hand it back to Junior to close. Junior, please go ahead.

Thank you, Roberto, and thank you all for your time today. We look forward to updating you when we are ready to close, which is expected to be in the second half of 2022, subjected to customary closing and regulatory conditions. Finally, we would like to reiterate how excited we are about the opportunity to create this unique air transportation group and drive value for all of our stakeholders. We look forward to working closely with the operating airlines teams over the coming weeks and months. Thank you for listening.