Gol Linhas Aéreas Inteligentes S.A. (GOLL54) Earnings Call Transcript & Summary

Good afternoon. We want to thank GOL'S investors for joining us today for an Investor Roundtable here at the New York Stock Exchange. I am Richard Lark, CFO. And with me are the company's Founder and Chairman, Constantino de Oliveira Junior; CEO, Paulo Kakinoff; VP of Sales, Marketing and Clients, Eduardo Bernardes; and VP of Operations, Celso Ferrer. We will share with you how we see the future of air travel, where we are currently and where we are going. Today is the 17th anniversary of our initial listing on June 24, 2004. And we appreciate the support and investment by many of you in our growth and development over the years. Today's Investor Roundtable theme is the future of flying. After our formal presentation, we'll have a Q&A session. For those of you here with me today at the NYSE, you can give me your questions here. For those of you participating remotely, you can send us your questions via the webcast platform. [Operator Instructions] The global management team will answer them in the Q&A session that will begin in approximately 30 minutes. I will now ask Chris Taylor, Global Head of Listings at NYSE to kick us off in style today. Chris?

Hi, I'm Chris Taylor, Global Head of Listings at the New York Stock Exchange. It is our pleasure to welcome the investors to GOL Airlines' Investor Roundtable. The beauty of today is that June 24 also marks the 17th anniversary of GOL Airlines listing on the New York Stock Exchange. To all its investors, to all its employees and the management team here today, congratulations. Now I'm coming to you from the boardroom of the New York Stock Exchange. And that's a really important thing. We are open for business. The trading floor is near full capacity. Our companies are coming back to the rooms at the New York Stock Exchange and the investment community is coming back to the New York Stock Exchange. So we can't wait to be able to host GOL at a future Investor Roundtable here at the NYSE and of course, welcome the investment community back. Until then, have a great day. And once again, congratulations to GOL Airlines. Thank you.

Thanks, Chris. As GOL's Founder, its CEO from 2001 to 2012, and the company's controlling shareholder, I am confident that the passenger demand will bounce back. I am committed to the airline business, which is the reason why I anchored recent GOL's equity capital increase. Today, the airline industry needs to leverage innovative technologies to be, on the one hand, more efficient in operations and on the other hand, less impactful to the environment. In addition, mobility will continue to be essential for customers traveling around Continental Brazil and on flights to Latin America, the Caribbean and the United States. Here on Slide 4, I share with you our views on air transportation in 2021 and beyond, segmented in 3 terms: connectivity, disruptive technologies and climate change. In connectivity, the question is how the pandemic will change consumer behavior and travel demand, resulting in network transformation. VFR and leisure passengers were the first to resume air travel in Brazil and family travelers will determine airlines' newest destinations. This trend will benefit the true low-cost carrier business model where GOL has a huge competitive advantage. We expect Brazil business travel to recover by first quarter of 2022. The best network and customer experience will be essential for bringing back the business travelers. And we believe our 2022 domestic volumes should be similar to 2019 figures. Cargo revenue has been gaining importance and will continue to grow as a result of the boom in e-commerce. Technology will help drive the return of business travel. Airlines will streamline their processes and make apps available to handle most of the activities within the customer journey, including ticketed sales, customer service, boarding, the in-flight experience and arrival services to ensure that travelers are comfortable with the contactless flight experience. In addition to contactless boarding, apps will facilitate a personal check list to comply with different countries, regulations regarding inbound travel. Customers will want to fly with airline they trust most on service and safety. Customer data, analytics and artificial intelligence will enable a quantum leap improvement in network planning, operations, sales and customer experience. They provide the basis for customization on the whole customer journey by delivering data maturity at the corporate level, exploring new applications and reshaping ecosystems. Fleet renewal will be practically mandatory as new aircrafts are more efficient and friendly to the environment. For instance, the 737 MAX is a key component for industry sustainability trends as it consumes less jet fuel and produces fewer carbon emissions than the 737 NGs. ESG is increasingly influential in how investors decide, which companies to invest. Airlines will have to demonstrate a long-term commitment to sustainability, primarily to the environment and make transparent their ESG goals. Responsible companies will describe and demonstrate how they will achieve the net 0 carbon emissions by 2050 and reduce greenhouse gas emissions per transported passengers. Moving to Page 5. I will turn the presentation over GOL's management team, one of the best in the airline industry. They have executed a robust strategy to ensure liquidity, maintain good relationship with all of our main business partners and employees, preserve the company's cost advantages and minimize dilution to our shareholders. Those well-implemented initiatives position GOL, post pandemic, to create significant shareholder value. Now I hand over to GOL's CEO, Paulo Kakinoff. Please, Kaki.

Thanks, Junior. Here on Page 6, I summarize key initiatives and accomplishments of the last 16 months. Our decisive actions position GOL to lead as demand returns. We are the only airline in South America to have raised equity capital during the pandemic. We capitalized the company's balance sheet with approximately BRL 1 billion of new equity via: number one, a BRL 423 million capital increase anchored by a BRL 268 million investment by the company's controlling shareholders; and number two, a BRL 607 million equity issuance as part of the BRL 1.3 billion take-in the minority interest of our allied program, Smiles. Pro forma, the Constantino family will maintain a 57% economic stake in goal, the most liquid airline stock in Latin America with an average daily trading volume of approximately BRL 300 million. Also, we are the only airline in South America to have returned capital to our fixed income investors. Since the beginning of last year, GOL returned $530 million in principal and interest to its debt investors, paid down BRL 800 million of bank debt with utilization of BRL 300 million of restricted cash, remained current on our interest expense paying more than BRL 800 million and raised $500 million through the issuance of long-term debt in the public markets. As a result, GOL emerges from the pandemic as the airline with the lowest leverage among its peers in South America. On cost and cash, we maintained a sufficient level of liquidity, converted 50% of our fixed expenses, aircraft and labor, to variable costs and properly matched working capital inflows and outflows. Regarding fleet, we reduced GOL's 2020 to 2023 MAX obligations by over BRL 10 billion via the reduction of 34 firm orders, moving out future deliveries by up to 3 years and receiving cash proceeds from our compensation agreement with Boeing. We also sold 11 NG aircraft, generating cash gains of over BRL 500 million, reduced the fleet by 15 NGs. We have plans to return an additional 5 NGs by the end of 2021, thereby decreasing aircraft lease by over BRL 1 billion. And reduced monthly lease cost by more than 50% through rent reductions, conversion of fixed contracts to power by the hour and deferral agreements. We have a strong foundation for recovery. Turning to Page 7. GOL is a socially responsible airline committed to sustainability, one of the industry trends highlighted by Junior. We are one of the greenest airlines in the world, and we continuously invest in becoming even more sustainable. The company is a member of below 50, which brings together entities that undertake to use renewable fuel that reduce greenhouse gas emissions by 50% or more when compared to equivalent fossil fuels. To achieve our environmental objectives, we are actively looking to adopt new aviation technologies that reduce fuel consumption and GHG emissions. The 737 MAX is a key component in GOL's objective to be carbon-neutral by 2050 as it consumes 15% less jet fuel and produces 16% fewer carbon emissions than the 737-800 NG aircraft. We are a front runner in the aviation industry when it comes to reducing greenhouse gas. Over the past decade, GOL has decreased its CO2 emissions per passenger by 26%. By the end of 2021, the company will seek to achieve IEnvA Stage 2 Standards for environmental performance improvement. GOL is the first airline in Latin America to offer customers the possibility to voluntarily carbon offset their flights via a strategic partnership with MOSS, the world's largest carbon credit environmental platform. For those investors looking for our ESG information, GOL has a dedicated section on its Investor Relations website, including detailed information using SASB and TCFD metrics, with a specific subsection for goals, projections and our plan to reach net 0 carbon emissions in 2015. We encourage the managers of ESG-oriented funds to review the company's sustainability actions and reporting philosophy as we welcome your feedback. Moving to Page 8. Here, we share GOL's strategy to outperform due to unique strengths deriving from lowest cost operations. As a pioneer of the lowest cost model in South America, the company has maintained the lowest unit operating cost of any Brazilian airline since our founding. The resilient operating model has served us well in contractions and expansions, always winning share throughout the cycle. GOL achieves the highest aircraft authorization for the newest and most fuel-efficient Boeing 737 fleet. The right product, we offer the best value proposition to customers via the most attractive product experience and best fares. The company is #1 in Brazil's main airports and destinations with high hub connectivity. Our product leads both the corporate high-value customer segment and the leisure, economy segment. We have a full digital relationship platform in all channels and the right market, our domestic market is still underpenetrated. North America has over 4x the number of flights per capita compared to Brazil. Our network will continue to evolve to address the country's unique geography and demographics. Moving to Page 9. I'm going to share data on Brazil's vaccination product. In terms of those administered, Brazil ranks first in Latin America and fourth place globally ahead of the U.K., Germany and France. The government has purchased 570 million doses of COVID-19 vaccines, sufficient to immunize over 140% of the total Brazilian population. And there are additional 90 million under negotiation to become available in 2021. Authorities expect that most adults above 30 years old, the age group that represents over 98% of the severe case of COVID-19 in Brazil will be vaccinated by the end of September, concurrently with the beginning of the summer travel season in Brazil. As observed in other countries, such as the U.S., demand for air travel has been highly correlated to the pace of vaccination. We believe that demand will continue to resume in Brazil with the progress of the vaccine rollout, which will eventually include the corporate segment as more people return to the workplace. Moving to the next slide. Our focus for 2021 and beyond are here on Page 10. We are concentrated on leading the domestic market recovery, maintaining a balance between supply and demand and looking for new ways to attract customers, maintaining economic equilibrium, ensuring a CASK 25% less than the closest competitor. We are convinced that the lowest cost always wins, increasing sales, capturing value in all our sales channels and expanding our sources of revenue, delivering a simple and safe service, seeking everyday protection of our customers and developing the best flight experience for them. This is the GOL way of serving, leveraging the GOL culture by being first for everyone and being recognized as the simplest, most human and intelligent company in its relations with its employees, suppliers and customers. Moving to the next page. GOL's value creation summarized here on Slide 11 occurs through aircraft acquisition, air transportation and loyalty. Our aircraft acquisition activities generated over BRL 2 billion of cash gains over the last 5 years. We maintain a rightsized fleet and focus on profitable routes. All investments for our product are already made, and GOL has the highest operating margin and the most resilient business model. We have the best network, the best fleet, the lowest cost base and a solid liquidity position. In early June, we announced the acquisition of MAP, a domestic Brazil with flight routes to 21 destinations. The acquisition reflects the company's ongoing commitment to expand the Brazilian passenger air transportation market, and what is the management perceives to be an unparalleled market opportunity for rational consolidation in the Brazilian aviation market. Going forward, we will continue our organic growth strategy in stimulating demand to expand the network. Yesterday, we concluded the take-in of the minority interest of our loyalty program, Smiles. This transaction is expected to provide various operational, financial and tax synergies that were not feasible as separate companies, and are estimated to exceed BRL 400 million per year. This will be achieved mainly through improvements to revenue management, more dynamic allocation of seats, unification of marketing initiatives, optimization of yields and tax efficiencies. We are confident that the reintegration positions the combined entity to maximize value in the post-COVID-19 operating environment by increasing market competitiveness and cash flow generation. With that, I end my part of today's Roundtable. [Operator Instructions] Now Eduardo Bernardes, our VP of Sales, Marketing and clients, we will elaborate on our competitive advantages in product, customer experience, pricing, sales and marketing. Please, Edu.

Thanks, Kaki. Here on Page 13, we show the breakdown of GOL's revenue and EBITDA from 2018 through the expected full year 2021. As Junior mentioned, we anticipated 2022 domestic traffic in Brazil will be similar to 2019 figures, and we are planning accordingly using the best of our applied technology tools and predictive analysis. Our data analytics have proven to be a competitive advantage. Moving to Slide 14. In the most critical moment of this pandemic, our objective was to maintain an operating supply-demand equilibrium to reduce cash burn. While competitors might have maintained capacity at uneconomical levels and saw their routes collapses, GOL reduces capacity to match demand in order to keep our load factors and yields high and our cash burn low. With the drop in the COVID cases in Brazil, the level of sales has recovered. Customers are planning for their vacations and leisure trips. The overall level of sales has been consistently raising over the past 6 weeks. The vaccine availability as well, the speed of immunization have increased creating an environment of higher confidence among our customers. As a result, we see the groundwork for the resumption of corporate travel demand, which is beginning to shape its recovery towards the end of the year. Moving to Page 15, where I will delve into the business segment in Brazil, the main component required for the complete recovery of Brazilian air travel. Historically, air travel demand in Brazil grows at 2 to 3x Brazilian GDP growth. Accordingly to the recent survey of Bank of America Global Research on the expected changes in the business travel pattern in the developed countries compared to 2019, 63% of an average respondent in those identified countries expected no changes or even an increasing business travel. While their survey did not include Brazil, we included, on the right side of this page, our judgment for business travel recover in this country. Given the lack of substitutes in Brazil, air travel is essential for the function of Brazilian economy, primarily driven by the commodities and low-end manufacturing sectors, is spread across a geographic the size of the continental U.S. Y-o-Y small percentage of white-collar business travelers in Brazil might be lost to virtual meetings. We expect the Brazil's economy growth and structure will create growth opportunities with our clients in the oil and gas infrastructure, agri business and real estate sectors. Technology will drive growth in revenues and opportunity to serve our customers during their personalized customer journey. Moving to Slide 16. The GOL business model along experience in Brazil has allowed us to operate with a significant differential in efficiency and performance versus our competitors. Our investments in new technology and advanced analytics is allowing us better optimize the company PRASK, operation and customer experience. Over the past years, we have accelerated GOL's digital analytics transformation and you can see demand components on this chart. We aim at improvements in customer excellence, revenue growth and operational efficiency is true in building data analytics in every component of our business, building our world debt functions and developing agile and new ways of working. Moving to Page 17. I'll show an example of the transformational impact of digital analytics at GOL. The use of machine learning and algorithms has improved the occurrence of our demand forecast model. As you can see in the chart, we obtained 65% [indiscernible] improvement in the demand forecast 4 to 6 months prior to departure. Moving to Slide 18. All investments made by GOL in our robust advanced analytics allow us to have the tools and the means to quickly position ourselves and take advantage of the moment when demand increases. We believe this strategy and its infrastructure are competitive advantage for our company. In the last 2 years, we have multiple and concrete results, both top line and in operations. We take data-driven technology, process and solutions, journeys very seriously. Even during a challenging 2020, we developed several features that will be key for a quick response to the market demand normalization. The solutions show in this slide increases efficiency, reduce costs, improve the customer experience in general and generate more results. Another example is the next-generation sales, which uses AI for communication with our sales team. It allows a personalized conversation, saves time and also provides engagement. Moving to Slide 20. As a final comment on the technology team Our journey in analytics is not new. We are prepared to leverage our big data-driven strategic advantage by consolidating the scalability and maturity of our process tools and technologies. We have built very solid foundations and delivered on multiple use cases. Now we are preparing to scale and accelerate applications and use cases toward our business. Moving to Page 21. I finalize my part of today's Investor Roundtable, and I hand over to our Operational VP, Celso, who will review what we do differently, our competitive advantage with our fleet and network. Thank you very much.

Thanks, Edu. GOL is well positioned for sustainable long-term results, with an operational model built firmly upon a safety and security culture. The highly successful operating model is based on a single-fleet type, high use of technology, industry-leading aircraft utilization, turnaround times and productivity. This altogether leads to the best operating performance and service levels. On Slide 22, you have a summary of why GOL is the leading LCC in South America. Our aircraft are deployed in a highly flexible manner to transport the leisure, corporate and VFR customers, achieving the high customer satisfaction and creating a structural basis for achieving the lowest unit cost. We achieved the world-leading aircraft utilization and a key component of a high operating efficiency are: number one, our ops analytics department, the use of big data, advanced analytics and new technologies to keep our process streamlined, improving disruption management and schedule optimization. And number two, our in-house MRO that uses predictive maintenance tool to maximize aircraft availability and keep costs low. Moving to Page 23. -- we have an advantage in generating efficiency because our flexible fleet management model and single aircraft type. As pointed out by Kakinoff, we are committed to our optimal cash usage and profitable operations through efficient capacity management. Capacity management is key. We were agile in matching capacity to demand even with the unpredictability of this pandemic, and we were able to maintain high load factors and preserve yields. Moving to Slide 24. I share our expected network plan through the second semester of the year, which considers the current downturn of COVID-19 cases in Brazil and the vaccinations roll out as commented by Kakinoff. We continuously redesign our network to best match capacity with demand of each moment. Our fleet and all maintenance costs were revised to accommodate the demand situation. The company's network is stronger and better connect to its hub of Guarulhos, Galeao and Brazilia with the new additions of Salvador in Bahia and Fortaleza targeting the boost of leisure travel. In the second quarter of 2021, GOL served 114 markets with an average of 220 flights per day, representing only half of daily departs we had in the second quarter of 2019. Moving to the next page on Slide 25. Here, I highlight a key component of GOL's ability to navigate through this pandemic, our disciplined and highly flexible capacity management. We were able to manage our fleet with aircraft deliveries and lease returns. We are one of the very few airlines in the world that advanced its fleet renewal during the pandemic. The majority of other airlines either simply stopped new deliveries or did not properly address the return of older aircraft. As we approach a better market demand scenario, our gap between the total and the operating fleet will be reduced. As you can see on the chart here, GOL plans to end this year with a total fleet of 129 Boeing 737s, comprised of 18 MAXs and 101 NGs and decrease of 8 aircraft when compared to the end of 2019. At the end, we plan to have 110 aircraft in operation. Moving to the next page. Our fleet management tool allow us to better match capacity with the variety of demand scenarios. You can see this in our number of over the last 16 months. At the end of 2019, GOL's total fleet was 137 Boeing 737 aircraft, comprised by 130 NGs and 7 nonoperational MAX. In May 2020, we operated 13 aircraft on the network with a reminder kept on the ground. During 2020, we reduced the NG fleet by 10 leased aircraft. And during 2021, we will return an additional 9 leased aircraft to finish the year with a total of 101 NGs and 18 MAXs in the fleet. We plan to further reduce our NG fleet by 18 aircraft in 2021 and 2022. And GOL has reduced its 2020, 2022 Boeing 737 MAX deliveries by 34 aircraft. Our strong partnership with our lessors and Boeing will continue to allow us to meet GOL's future needs. Moving to Page 27. Let's see how the fleet was deployed into the strongest network. As I have mentioned, GOL is able to respond fast to market demand changes. Our network was redesigned to accommodate VFR and leisure customers to the Northeast, primarily utilizing our hubs of Salvador and Fortaleza. GOL has increased its share in exclusive routes by 7 percentage points or 19% in May '21 and reduced overlap with competitors. As Kaki mentioned, the VFR and leisure market in Brazil is responding faster with the advances on COVID-19 immunization program. We expect business segment to recover by the first quarter of 2022 when we will increase the network to allow for high frequencies in the Sao Paulo and Rio de Janeiro market as we used to have prepandemic. We will resume international flights with discipline and following the restrictions and compliance rules of each country. Until the end of this year, we plan to resume flights to the Caribbean, whose tickets are already available to purchase in our website. And now moving to Slide 28. I have finished my part of today's presentation. [Operator Instructions] Now Rich will review how we are structured to compete and win on cost and liquidity.

Thanks, Celso. At GOL, we have worked smart to set the foundation for structurally better margins. Here on Slide 29, we show our expected cost plan progression, assuming expected 2021 full year at 66% of 2019 capacity. For the second quarter of 2021, we expect to operate at an average of 63 aircraft while maintaining personnel costs in their reduced position between 40% to 50% of prepandemic levels. Having converted a significant portion of fixed payroll costs and fleet costs into variable costs, GOL is well positioned to expand its leadership in unit cost. Moving to Page 30. We continue to invest in margin-accretive aircraft. GOL reduced investments in CapEx for engine maintenance by decreasing capacity during the pandemic period in order to reduce the use of cash for the current fleet. In 2021, we took delivery of three 737 MAX aircraft, and our current planning is to receive an additional 8 birds by the end of this year. Moving to Slide 31. In this chart, I present the variations in GOL's liquidity since the fourth quarter of 2019. During 2020, GOL amortized approximately BRL 3.7 billion of debt. In the first quarter of 2021, we retired approximately BRL 321 million of debt. And at quarter end, the company had short-term debt of BRL 2.3 billion, of which approximately BRL 1.4 billion corresponded to working capital debt with local banks and BRL 300 million was with aviation finance providers. Our company stands out among few airlines in the world that has deleveraged during the pandemic, and we are on track to pay down more than BRL 4.1 billion of debt since the beginning of 2020. This has been achieved through disciplined liquidity management and the extraction of value from current assets. In addition, we have unique capital markets funding mechanisms and significant collateral, part of which was used in December of last year in our inaugural senior secured notes issuance. In the second quarter of 2021, GOL expects to maintain around BRL 4.2 billion in liquidity, comprised of cash, receivables and deposits, supported by the expected growth in receivables and daily cash burn at breakeven. Moving to the next page. Our strong response to the pandemic with regards to liquidity was made possible by the extensive preparation and work done to bolster our balance sheet over the past 5 years. During the pandemic, we maintained a commitment to strengthen the company's balance sheet and GOL does not have any significant debt maturities until 2024. And -- the reincorporation of Smiles was important for the GOL group to improve sustainability and increase funding sources. The transaction is self-financing through Smile's own cash generation, which will also be higher when considering the potential operational, financial and tax synergies that were not available as separate companies. We expect annualized synergies to exceed BRL 400 million with a 5-year NPV of 2.8 billion. Here on this chart, you can see that our cash liquidity is expected to be more than sufficient for our debt amortizations. Moving to Page 33. You can see how our credit benchmarks stack up compared to our regional peers. Since the beginning of 2020, GOL generated over BRL 6 billion of liquidity through its working capital management while reducing its net debt by BRL 2 billion. At the same time, GOL completed 2 earnings accretive and credit positive strategic transactions, including the acquisition of the minority interest of its loyalty program, Smiles, and an agreement to acquire MAP Airlines, which provides for growth in our regional network from Sao Paulo and Manaus. All of the transactions and initiatives that we have initiated or implemented throughout the pandemic, have been focused on 2 primary objectives: one, ensuring that we keep within compliance of our strict financial policy; and two, emerging from the pandemic with our existing cost advantage over all of our competitors. Moving to Slide #34. We recently resumed GOL's regular guidance best practices as the successful completion of the vaccination rollout expected in Brazil this year, combined with our already improved cost base and stronger balance sheet gives us confidence in our performance for the second half of 2021. We returned the most aircraft in recent years among our peers, which demonstrates our flexibility to meet the market conditions of demand. Most of the aircraft returns occurred organically as they followed our renewal schedule, which provides for the return of NGs and the arrival of 737 MAXs. We will also benefit from a reduced fleet cost for the next decade as we take more deliveries of the 737 MAX aircraft that will compose a significant part of the GOL fleet. These strengths will enable GOL to capitalize on the many growth and expansion opportunities that are now available in our markets, enabling us to benefit from a strong rebound in demand for travel as we move into the Southern Hemisphere's summer season. We are committed to delivering profitable growth in an environmentally sustainable manner, with less fuel consumption and lower CO2 emissions per passenger while at the same time, improving GOL's industry-leading customer experience. And moving to the next page, I finalize our formal remarks today by reviewing some of the reasons why we believe GOL will emerge stronger after this crisis. Number one, GOL is Brazil's largest domestic airline with a strong presence in the main metropolitan areas in Brazil; two, GOL has a singular exposure to the underpenetrated Brazilian domestic market with organic growth opportunities; three, we have an unparalleled brand and customer loyalty program; four, we have a highly defensible network; number five, we have a proven ability to maintain reliable operations, control costs and CapEx and improve liquidity; six, we have a large fleet of modern Boeing 737s with high operational flexibility; and seven, we have a strong and committed controlling shareholder. With that, I will flip to Page 36 and initiate the Q&A portion of today's GOL's Investor Roundtable. [Operator Instructions]

Okay. We're just -- hopefully, I got that part right with the transition here to the Q&A session. We're just selecting some of your questions here. Just please give us one second. Okay. I'm hearing that everybody can hear me. We have with us today over 100 of GOL's investors and analysts from around the world, including those here with us in the Hamilton Room at the New York Stock Exchange. Speaking of which, although we've been coming to New York City almost every month during this pandemic. Today, it was great to see the -- both the traffic and the arts back in New York City. Definitely it was a very different, improving atmosphere. We originally were going to do this meeting virtually. And that was the original invite we had sent out and then we got requests to do it in-person. And so we were able -- so thanks to Chris and [ Niko and Stefan ] of the NYSE for accommodating us here in the Hamilton Room. And I also want to thank Rodolfo Zabisky and the MZ team, today's platform, which has us participating virtually from different geographies was one of MZ's latest innovations. And so with that, the way I'm going to work this year, we've already gotten -- I already have several questions that GOL management is going to answer. [Operator Instructions]. And so with that, we're going to turn to a Q&A session, and we'll do kind of slow transition here as I'm handling the questions around the GOL's management team that's working in different geographies around Brazil and South America. First question is from [ Martin Fernandez ], one of our big GOL investors [indiscernible] asset management. What's your view on the Azul and LATAM merger? Would the -- how do they approve it is [indiscernible] Brazilian Antitrust Authority. And then he adds a piece on to that, would you be open to make a co-share agreement with Azul, which is obviously a very specific-directed questions. And I'm basically just kind of relay the questions around our management team in the order that we receive them, with no filters and then hand them around the teams. So with that, I'm going to hand that question over to Kaki.

[ Martin ], it's really liked to talk to you via this conference. Thank you very much for sending your questions. Actually, it's really hard to speculate, whether that would happen or not. I mean possible merge between Azul and LATAM, I think that could be approved. Some discussions around [indiscernible] certainly would be on the table. And yes, we are -- we have today more than 73 different agreements with several airlines. So this company got to use it. I mean, GOL is pretty developed in implementing partnerships, different kinds of interline co-share agreements and we are, by design, always open for this kind of construction. We have said before, this pandemic, we will produce more and more agreements like this on the [indiscernible]. I mean surrounding this merged [indiscernible], which has different ways to be implemented, co-shares, joint ventures, interline agreements and even mergers are expected in this postpandemic world. This is at least our forecast. And this company has positioned itself -- I mean GOL has positioned itself to play a major role that kind of process. So we are open for every kind of discussions in order to improve the market condition and also to enhance our results.

Okay. I have a small delay because I'm also the MC and the IT person at today's conference, and we have this new platform where I have to mute and then simultaneously unmute something else so that we don't get some feedback here. And so it's working well. So far, so good. The second question that I have here is from Guillermo Mendez from JPM. He's got 3 questions. First is, what are the potential contributions from your business units Gollog and Aerotech in terms of revenues? And I'll just -- I'll go through them here, just going to be a little bit easier to going to go person by person here, even though if you have multiple questions, just as it will minimize the delay in the 2 platforms. The second question is [indiscernible] consolidation in your presentation, but what is GOL's view on a new competitor entering the Brazilian market? And then his final question here is, should we expect further leasing renegotiations? So with that, maybe I'll start off with Celso. And maybe you can take -- should -- he's asking, should we expect further leasing renegotiations? And then also maybe you can comment on-- Aerotech's contribution to GOL's revenues. And then you can -- Edu, you can finish the second part, which would be talking about the contribution of our cargo business, Gollog to GOL's revenues and potential for new competitors entering the Brazilian market.

Okay, Rich. And thank you, Guillermo, for your question. and talking about these agreements and achievements. We -- since the beginning of this pandemic, we worked hard to match the leasing payment level to the demand we were facing month after month with a very low visibility. As the demand recover, of course, we will keep matching. And the answer is, yes, it will require new rounds of negotiation that -- I mean it's in place right now. I mean, we are in continuous negotiations with lessors working with PVH, leasing deferrals, matching to a new market level of leases, extensions and also working hard to create this fleet renewal that Junior and Kaki mentioned during the presentation. So the answer is yes. It's a long journey that we are together with our partners, and we will continue this. On the Aerotech side we -- what we are seeing around the world is that the demand for MRO, especially in our case, for the Boeing 737, was kind of stuck during the pandemic. But now as many airlines like us are taking the fleet back to the operations from a long preservation mode, those airplanes, they need some checks. And so we have a spike in the demand for checks in our facility here. And we see a very positive trend. The revenues we expect this year is around $20 million, but then we have a forecast that we improve until $50 million. So with that, I will let Edu continue the answer. Thank you, Guillermo.

Guillermo, thanks for your question. I'll talk a little bit about Gollog, our logistics area. We see a lot of opportunities to increase our revenues coming from Gollog, especially because we are investing on a new way of working for GOLLOG that goes in line with the growth of the e-commerce in Brazil, especially from what we saw during this pandemic. It is a growth on logistics around the book. It's not different than in Brazil. We are, at Gollog, expanding the multi-model through the expansion of our activities like roads, transport interlines and [indiscernible] revenue. We are also increasing our logistics operations on domestic market and also international market, adding more capacity in our storage and terminals. And I think the most important thing, we have a very important project running at this moment that is the creation of our own marketplace, where we will have the opportunity to generate ancillary incoming through other sources of revenues like commission, fulfillment, extended warranty products and insurers. And when we put this all together, we see an opportunity to more than double the revenues coming from Gollog in the next 2 years, which is a very important movement for GOL. I think the other question that is regarding the competition. We born in a market with free competition since the beginning. So we believe that we have a business model that is very strong. The competitors at the best has helped us to even reinforce our business model based on single fleet aircraft, higher craft utilization and a strategic and very important network, focus on customer experience, being the leader of this market. We are ready for the competition. We see that the newcomers, they are already here at the marketing planning the start. This is a very challenging moment to start a new company in Brazil, not only in Brazil, but all over the world, especially here where when we have -- the demand is not fully recovered. And at the same time, we have a lot of pressure over cost structure, and we all know that the airline business demands high productivity, high efficiency. And of course, it's important to have demand, and it's important to have efficiency on the operation, and we are ready to compete. We see some competitors already here in the market, but they postponed the start because the market condition is really tough, and we are ready to beat.

Okay. Assuming everybody can hear me okay. I was just reminded by some of the guys here in the room that I was neglecting their questions, so -- I was. And so I have a question from Deutsche Bank. I'll get that one in a second. I have a question from Steve Trent at Citibank, which I'm going to send over to you, Kaki. Assuming that Azul acquirers LATAM Brazil, would this create more opportunities for GOL to collaborate again with [indiscernible]

Actually, as I said before, this is merely speculative. And I wouldn't say -- we are always open for different construction, so I wouldn't like mention specifically one or another airline, but there are several possible scenarios, and I don't believe it's going to be productive at the moment, trying to assume any specific one and discuss upon it. As I said before, I do believe this is a kind of trend created by the pandemic. And the company -- the most important thing, the company is about to reinforce to re-emphasize its role in promoting the region consolidation. So I think that we could spend hours here designing scenarios. And I wouldn't like to take one specific to discuss upon.

Okay. Next question I have here. I'm going to send it over to you, Celso. It is from Ken Monaghan, who's one of our big investors from Amundi. Would you please compare and contrast what actions you have taken with regards to fleet and financing of fleet versus your peers? Celso?

Thanks, Rich. And thank you, Kenneth, for your question. I will highlight the main differences I have seen during these 18 months. The first one that is important to highlight here is that we have entered into this pandemic with a need of additional planes. We -- as you know, Avianca Brazil has finished its operation prior the pandemic, offering new opportunities for all the airlines in Brazil, including us. And at that time, we were with the MAX on the ground with a need of NGs. And it's good. I mean it was a tough moment for us, but it was a positive point on us because we entered in the pandemic with, let's say, less excess capacity than our competitors. The second thing is that we -- I mean we were one of the few airlines that keep the fleet transformation, especially returning older planes. So we -- one of the things we have decided since the meaning of the pandemic is we need to keep the pace of lease returns, otherwise, we will not be able to renew the fleet and I mean fly with the new fleet with the older fleet on the ground. It doesn't make any sense to do this. So we keep returning planes during all the pandemics, more than 15 planes like Kaki said. And the third difference is that we also have agreed with Boeing a new settlement that allow us to have more flexibility on the deliveries, and it was just coincidently signed just prior to the pandemic as well. So we are now with the flexibility to take deliveries of the MAXs as needed. And with all this leverage, we were able to negotiate, I mean, customize solutions with each lessor, some power by the hour, some additional lease returns, some fleet transformation where we are taking MAX and returning NGs and with some because we have many leases expiring last year and also this year and next year, we were able to make kind of short-term extensions matching the lease brand to the new market conditions and -- with that, we were able also to accommodate partially the repayment of the deferrals we have made. So we have in mind that we cannot create a wave or a wall of leasing payments in front of us in the short term. So in that sense, we had all this leverage to work and to avoid this big wave. That's it, Rich.

The -- I have a question here from Chris Reddy from Cowen. With your balance sheet in good shape, do you have any plans to raise additional capital? And if so, any uses such as [indiscernible] expansion, et cetera. Well, as we've been pretty transparent about, we've built in a lot of financial flexibility to raise additional capital if we need to in our balance sheet, pretty much across the capital structure, be it -- we have basically a mature, secured financial instrument that we created last year and have raised $500 million on top of. And we have a good, unsecured financing program as well. And we also have the technology in our company for convertible bond issuance in the true sense of the word, and we have a controlling shareholder that can provide a stock borrow to facilitate the raising of those funds, and we also have the equity alternative. So we have a [indiscernible] existing financial flexibility in our balance sheet. As you know, yesterday, actually, we finalized the take-in of the -- June 23, we finalized the take-in of the minority interest of Smiles. And that signed, sealed, delivered and paid. And that gives us control over all of the loyalty program assets, accounts receivable and [indiscernible] property, et cetera, which also gives us additional financing capacity, which we're currently working on a variety of different tools that could make that viable. If you go across the capital structure, we probably have upwards of $1 billion of financing tools not related to aircraft acquisition if we needed to use them. But we have no plans today to do anything across our capital structure. We'll continue to preserve those options. I think what you saw with GOL during this pandemic is that we specifically avoided in the second and third quarter of last year doing schizophrenic capital raising. As you know, we have not received any financial support from the Brazilian government, which would hamper our ability to manage our business. So we maintain also management flexibility. All these are very important and it's how we manage our business. As we mentioned also, I believe we're the only company in South America to have raised equity capital during this pandemic. And so we've also used that tool, which had a huge anchor investment from our controlling shareholder. So we preserve all these options, I think, which is the message that we've articulated to our -- to GOL investors in terms of how we're thinking about how we do that. We want to preserve those until we have an interesting use. So for the second part of your question, for us, the way we approach is always [indiscernible] earnings accretive use of proceeds. And for us, the main use of proceeds and all the capital raisings that we've done up until now, the long-term capital raisings has been a combination of credit accretive liability management and aircraft acquisition. As you know, we've reserved around $100 million from the cap we did on the secured [indiscernible] equity capital increase for MAX aircraft acquisition. And as we're coming out of the pandemic, we're pivoting to reinitiate, if you will, our -- what will be our second long cycle of value creation through aircraft acquisition. The first cycle, we started back in 2005 where we did 80 NGs off of our Boeing order. We did 40 sale leasebacks and 40 finance leases. And as we said in the presentation, as Kaki said, that's kind of -- that's 1 of our 3 business -- economic business activities we have at GOL and it is the source of significant cash, equity, value, capital gains over a longer cycle, which may be a longer cycle than many of our investors look at. Generally for us, that's around an 8-year cycle. And we're about 3 years delayed on that because of what happened with the MAX grounding. The MAX was almost 2 years taken off the table. And now we're pivoting back to that. And so our main, if you will, proceeds to the extent we would do future capital raising would be to give us additional cash resources to accelerate the transition of the fleet from a [indiscernible] but we already have $100 million reserve. So that's [indiscernible] that we need or we would have been currently. We're roughly 34 aircraft behind plan because of the Boeing situation because of the MAX grounding, but we plan on catching up on that -- catching up on that over the next 6 to 12 months. And it's a really good market environment for that right now because the acquisition prices of white tails and other aircraft [indiscernible] are very attractive for us. And as we're a long-term investor in MAXs, and we believe in the MAX and its future residual value, that's the investment that we want to make. But to the extent that we wanted to increase that further, yes, we have those sources or if there was another opportunity. But currently, we don't have any specific opportunity and we need to preserve those liquidity options because they're not unlimited, because we have -- as I mentioned in the presentation, we have a very strict policy which we are not allowed to violate and maintain that during this pandemic, right? I mean we're also one of the few airlines [indiscernible] done some debt amortization during the pandemic to preserve our policy targets, which is all of you know that have been following us, is around 3x leverage, which we plan to be back at on a cosmetic measurement basis on a Q4 normalized annualized number, we'll be back at that number. And we don't need to do anything on the capital structure to get back to that. We just need the EBITDA to normalize at about 80% of what we had in 2019. And part of the message that's in our guidance, which you guys have through the second half of this year is that on an annualized, normalized basis, looking at what we expect in the Q4, we'll be back at that number. But we don't have to do anything else on the balance sheet side of the equation, as you mentioned, Chris, we just need the EBITDA recovered. And for that, we need the large corporates to come back. Next question here is another one from [ Martin Fernandez ], from [indiscernible]. How much of your fuel consumption is hedged? How much of your U.S. dollar debt is [Audio Gap]? Okay. I'll give you a specific answer, but just to understand things we like to do in these kind of meetings, these [indiscernible] or investor briefings that we do, we do a lot of -- we kind of have 2 external products at GOL. We have Investor Roundtable, which we like to do with our investors, and we have investor briefings that we do with our aircraft financing providers, and we do those regularly. And the -- and so the reason I'm saying that is that right now, it's not relevant how much we're hedged in either category because we're not doing margin management today, as I mentioned in the presentation, that's coming back on towards the second half of this year. We've been doing intense working capital management to get through this pandemic. It's been about matching cash outflows with cash inflows, irrespective of what the actual accounting margin is. But our policies continue in place. Another important point to mention is that we generated around BRL 1 billion of cash liquidity through the monetization of our hedges during the pandemic. And we didn't get a lot of credit for that, especially in the Q2 and Q3 of last year, even though we were doing it on an active basis. In the Q2 of last year, we had almost BRL 1.5 billion of restricted cash, a lot of that was tied up in margin calls as our counterparties in Chicago tripled margin requirements. And we fully marked to market, and we're fully deposited on all of our hedging activities. And we're the only company in Brazil that had that. Although our competitors flipped upside down, defaulted and ended up with big liabilities that -- with their counterparties that they turned into concrete liabilities on our balance sheet. We've rolled that out, we immunized during the Q2. We followed that up and then when oil went back up above $60 end of Q3, beginning of Q4, we started to take money off the table. We also did another round of monetization in January. And so most of our oil hedging positions, about 80% of what we had was monetized to help us finance working capital during the pandemic. And that's an example when we say we were using noncash current assets to finance our activity. It's a very, very, very concrete example. It requires a sophistication in terms of oil hedging policies and procedures and also involves very good counterparty relationships. We all remember when oil was at 0 for a couple of weeks, not so long ago and we managed through it. Now on the currency side, we also have. So that's kind of a long way of saying is that we're about, I would say, 20% hedged on future consumption on oil. We continue to maintain an oil hedging program that goes out 12 to 24 months, taking advantage of backwardation. But it ties into our view as well. And right now, our view on oil, we would only be going back to be adding positions as oil is back down to the [indiscernible]. We would not be adding any hedges at these levels right now. Now on the currency side, we've been in and out of the currency market consistently during the pandemic. But given the huge volatility and given our needs for cash, you guys actually never really saw that show up in our financial statements because sometimes we would put a hedge on. And within a month, we would be monetizing it because we generated a $5 million, a $10 million, a $15 million gain, and we will be taking that off the table and using it to finance operations. But generally, you can assume we're around 20% hedged on currency out 90 days. But if you remember, generally, that's what we will be doing if we're trying to basically buy time to increase prices to protect margins based on currency volatility, which is not the objective today. We're not focused on generating accounting earnings. And so I think it's important for you guys to understand the context. But definitely, if we had held on to all of our oil hedging positions up until now, we definitely would have sold all of them at these levels based on our view. We would have no hedging positions left over because our view is -- our fundamental view is below where the oil market is currently. And there's a lot of reasons for that. One of the interesting phenomenon -- I'm going to take advantage of this, I think one of the phenomenons that we're starting to see come back on is the negative correlation between oil prices and the currency, right? We [indiscernible] during Trump times because of the trade barriers and other things, and that's coming back on. I think that's going to be very useful as we come out of [indiscernible]. Given our huge cost advantage and our fuel-efficient aircraft, we actually -- we outperform in higher oil price environment. And so if the negative correlation with currency comes back on, that's the sweet spot for us because higher oil prices and higher commodity prices is great for Brazil. Our main corporate clients participate in the natural resources, raw materials, commodity cycle in Brazil. And so they're going to be traveling more and buying more tickets. And so we generally like a scenario where we see increasing oil prices. And then our aircrafts come in, and we were more efficient in the competition. Usually, the opposite is true in our world of low-cost carrier, when you have very low oil prices, it tends to nullify a lot of the benefits from being a highly efficient airline and creates a lot of capacity in discipline. But none of that's really relevant today because I don't -- I mean, nobody in our ecosystem is really managing around oil prices. We're not doing our normal pass-through because the normal absorption of that would be the corporate client. We don't have the corporate [Audio Gap] Next question, it's kind of linked to that question from Michael Linenberg, Deutsche Bank. With the 15 -- and I'll link this into the currency, with a 15% improvement in the Brazilian real versus the U.S. dollar over the past month, how should we think about the potential margin pickup. For example, every 10% move in FX improves EBITDA margin by how much? I'll give you what would be the normalized answer. But right now, we're not managing the business that way. It's held cash, obviously, payments to leasing companies and interest expense and amortizations that we might be doing on a dollar obligation with aircraft finance providers. And we do have a view of a real trending towards 4. If you remember, back to February last year, the last fair value -- the last prepandemic fair value calculation of the real I had for our exports was around 3.3. That was in February of last year. So think about that. I think Brazil has done a pretty good job of not blowing up the country's balance sheet during the pandemic. They've been very stingy with aid during the pandemic. And I think eventually, that will come through. The Minister of the Economy, Paulo Guedes and his team have done a pretty disciplined job on that component, which is obviously important for the currency. I don't think that's what's getting reflected in the appreciation of real right now. I think it's more of the devaluation of the U.S. dollar, and that also will affect what's happening with oil prices as well. But normally, it would be around -- it would be about -- the other component I wanted to mention is that normally, what we're doing there is that we would normally be in a normal environment, say, prepandemic or say, post pandemic, managing our capacity and our yield management to achieve a 50% to 60% recapture of whatever varies on the currency but we would have some leakage. And so for example, if you had a 10% move in the FX, we would only retain about 70% of the upside, but we only lose about 30% on the downside. And that would generally be about 1 to 2 points on a normalized margin. And so like on the upside, we'd be getting 1 to 2 points. On the downside, we'd be losing 1 to 2 points. But right now, it's not going into the margin because we still have a large portion of our fleet on the ground and kind of those effects. I have one more question for the GOL management team, but -- let me just check here the list here real quick. Guess what I'll do is I'll finish my questions here while I have the mic open for me, and then I can more easily flip it back over to the rest of our team in the final -- we've got about another 5 minutes for Q&A. And all of a sudden, we're starting to get a lot of questions here coming in. Let me see here. Everybody is submitting their questions in the last 5 minutes of the Q&A here. We just got about 10 questions, and I'll pick 2 out of here. And some of them -- I'm looking at the questions here, guys. I'll just -- given the short time here, and you guys -- really kind of specific technical questions, there's a question here about the collateral and our new bond emission, I [indiscernible] respond to that directly because it's obviously a very technical question. There's a question from Victor Misuzaki from Bradesco. GOL just concluded the deal with Smiles, can we say that this new structure will increase GOL's flexibility to stimulate demand? Most certainly, because it gives us -- we now have 100% consolidated deal management. One of the dis-synergies that we had with the Smiles situation was 2 separate bottom lines and 2 separate yield management teams and bringing those back under the same roof, we have much more flexibility to use both the price of the airline as well as the price of the loyalty program, mile to best stimulate demand on a consolidated basis. And that, it's significant. It's several cents of a potential yield once we have a more normalized situation on other side of the pandemic because, obviously, today, yield management is basically off now because we don't have full demand and we have excess capacity in the Brazilian sector. For us to be able to have yield management back on, we have to have the ability to either stimulate demand through lower fares or repress demand through higher fares and that doesn't exist today. Anyone who tells you that is not reflecting what's actually happening. We need the large corporates in Brazil to come back to the market, 70% to 80% of normal to get yield management back on, which we expect [indiscernible] to be in the Q3, Q4, maybe being kind of around 80% of that and then a normalization by Q1, which was also another question that we got in terms of -- is the question from Chris Dechiario from Marathon Asset Management. You stated that you expected 2022 traffic in Brazil to be similar to 2019 traffic. How do you expect the composition of that traffic in 2022 to be different than it was in 2019? And what does that mean for yields and cash flow? We don't expect it to be that different because structurally, Brazil, we have about 70% of demand for air travel is for business purposes. And within that -- within our overall portfolio, about 30% of volumes and 50% of total revenues are from the large corporates. We may use -- lose a little bit of the white-collar business traffic to virtual next year, but we expect Brazil domestically to have most of that back. One of the phenomenons that we saw here during the pandemic was a better-than-expected VFR traffic, more price, inelastic VFR traffic, but that will most likely get crowded out by the large corporate traffic when it comes back. And so 2019 characteristics structurally in terms of yields, and how that generates profitability and cash flow. We at GOL expect to start to see those characteristics in the Q4 of this year, definitely in the Q1 of next year and then by Q2 of next year. The normal seasonality path should be back on. Let me just try to squeeze in one more question here before Rodolfo tells me we're out of time. One more question here question from Mohit from Diameter, one of our big investors. Can you talk about consolidation through the pandemic and your view of market structure? For example, a number of players' market share coming out of the pandemic. Well, obviously, the pandemic, we had a fairly solidified market structure prepandemic. The pandemic across the board has shrunk the overall pie, which makes it extremely difficult for the smaller players around the region to survive. And so obviously, there's a trend towards the nonviability of the smaller players and that favoring the larger players. But in Brazil, specifically, we see a similar market structure coming out of the pandemic as we had [Audio Gap] pandemic -- sorry, had prior to the pandemic. And let me just see if I can squeeze in one more. I got a big list here, it's coming in here at the last minute. I'm putting in a couple of things here together, but general category, can you give us some more details about business travel? Before a lot of companies said that we were never fully returned to what we have in business travel and now you're projecting a full recovery in 1Q '21. No, not in 1Q '21 [indiscernible] expect a normalization in Brazil domestic. It's important to separate that because a lot of the focus has been on international traffic, which we do think is going to take more time to come back given the mobility restrictions and health-related standardizations across a variety of moats, we do think that's going to take a longer time to come back. When we talk about business travel, we're specifically talking about Brazil, you're starting to see the very large corporates start to announce about return-to-normal work patterns starting in Q3 and we expect the Q3 would start to be a transition on that. They're not currently in our booking curve. And we'll keep an eye on that and keep you guys appraised on that. But many of you -- many investors obviously are also investing in many of our large corporate clients. And so you also have a direct source to them in terms of [indiscernible] in-person activities. But in Brazil, Brazil [indiscernible] is absolutely essential for the conduction of Brazil's primarily raw materials and natural resources-based economy. We don't have substitutes to cover the full geography of Brazil and the characteristics, the demographic and business characteristics of Brazil. But again, what we're providing to you is based on our experience, we don't have 20 years of running a carrier in Brazil. Brazil domestic is how we make our living, and that's kind of how we see it and based on our conversations with our corporate clients and our corporate travel agents, but they're not currently in the booking curve. We expect Q3 to be a transition back so that we would have 70% to 80% of what would normally be the corporate and business traffic in the Q4 and then potentially looking to something of a normalization of that by the Q1 of next year. But right now, that's just a scenario in terms of expectations. I think with that, I will -- and we have an IT moderator here that's telling me I need to move to the end of the session here. Thanks for submitting a lot of these questions here right at the very end. We will endeavor -- I will get back to you on -- just looking through the list here. I got about another 8 or 10 questions that just came in here in the last 5 minutes or so. We will get back to you on the on those questions, guys, over the next couple of days. I appreciate you guys providing that feedback because we also like -- I'd like to get [indiscernible] because it also shows what you guys are thinking about and what you guys are concerned about, and we can also adjust our communications and help you with that. So anyway, this concludes today's GOL's Investor Roundtable. As my colleagues and I have discussed with you today, the GOL team is well prepared, strong and agile. We thank you for your interest and investment in GOL airlines. And we're now going to head, albeit virtually down to the NYSE floor here to bang the closing [indiscernible] in about 2 minutes. So for those of you that want to stay dialed in, you can see our virtual banging up the gable here on the New York Stock Exchange Trading Floor. Thank you very much.

Thank you all. Thank you very much.