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

To those of you here in the Americas. Good afternoon to Europe, and I guess, a very good late evening to those of you dialing in from Asia. This investor roundtable is also recorded for those of you who want to access it later. And also, a lot to you guys here with us at the New York Stock Exchange, where we're holding today's event in a hybrid format to make it easier for those who can't buy tickets to come with us here in New York or if you still have prohibitive travel policies. I'm Richard Lark, CFO, and I want to thank our investors and analysts for joining us today. We appreciate the investment and support by many of you in our growth and development over the years. Today, I will share the latest developments regarding a couple of themes that have been -- the most predominant questions that we've gotten from the -- both the buy side and the sell side community, and that is unpacking a bit the domestic demand recovery in our markets, in GOL's markets, a report to you all on the synergies that are already being captured from the Smiles incorporation. Our fleet strategy leading to further unit cost reductions and our preliminary expectations new year term followed by a Q&A session. And for those of you here with me today in the room at the New York Stock Exchange, you can give you your questions in writing. I'll read them and answer them on the Q&A session. And for those of you participating remotely, please, you can send us your questions via the webcast platform at any time beginning now. To send your questions, you need to click on the question mark just below the video area. In the upper left corner, of the platform. So I don't know how, it's just below the video area in the upper left corner, but it must be on there, and you can type in your question. And I'll answer them in the Q&A session that will start in around 15 minutes. So moving to Page 2 of the presentation. Before beginning, I'd like to remind you that this presentation is being recorded. And forward-looking statements are based on the beliefs and assumptions of the company's management and information currently available to GOL. They involve risks and uncertainties because they relate to future events and therefore, depend on circumstances that may or may not occur. Investors and analysts should understand 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. With that said, I'll start by unpacking the domestic revenue recovery here on Slide 3. In Brazil today, overall domestic travel has almost completely recovered to pre-pandemic levels. And that's been primarily driven during the pandemic by VFR, visitors, friends and relatives and leisure traffic. While normal demand elasticity in Brazilian domestic market is around 2x GDP. For 2022, we're seeing it in the range of 2.5 to 3x GDP. Moving to Page 3. I share with you the evolution of GOL's domestic sales over the last 2 years. showing month-to-month growth rates as well as the growth over 2019 and a 2019 comparison that all of you like to do, that's in the line on the bottom of the chart. GOL averages over BRL 20 million per day of sales in the Q3. And the Q4 is running at over BRL 30 million per day on average, and we expect to finish this year, 2021, at a run rate of around BRL 35 million a day. In relation to the pre-pandemic levels, GOL's large corporate sales in October were around 60% of 2019 levels. And in November, this number has recovered to 80% of 2019 levels. And I highlight that because up until the third quarter, as I mentioned, domestic travel was driven by VFR and leisure demand. And in the end -- towards the end of the third quarter and more strongly now in the fourth quarter, we've seen a significant recovery in the air travel by large corporates. And I'm going to unpack what we're seeing in the recovery of corporate travel here on Page 5 of the presentation. This chart group's large corporate clients in Brazil into 4 archetypes based on how they have recovered versus their 2009 volumes. On the right side of the page, you see the sectors that are grouped in these archetypes, starting on the lower right, sectors that are still far from recovering. In there, we have finance, IT, agricultural, metals, that's about 1/3 of overall corporate sales in Brazil. 2 right above that sectors that still have low volume. In there is retail, energy, oil, oil and gas, chemicals and pharmaceuticals. It's about 30% of corporate travel in Brazil. Right above that, sectors that are still recovering and mainly in the last few months and there is mining, food, communication, electronics, construction materials and medical services, about 25% of total large corporate air travel purchases. And then finally on the top there, the leaders, those who have led the recovery, and the sectors there are beverages, education, industrial equipment, vehicles, spare parts and transportation, about 12% of the total. And they're pretty much back to -- some of those clients are already above 100% of what their 2019 travel volumes were. The sectors that improved most in the month of October were vehicles and parts, beverages and machinery and equipment. The 2 laggard sectors, the finance and the oil and gas sector are at around 30% to 40% of what they were in October of 2019. The financial sector represented around 18% of industry sales in 2019. And in October, had only recovered around 30%. The oil and gas sector represented around 10% of industry pre-pandemic sales and in October, it only had recovered around 40%. Now these sectors are significant. Banks, oil and gas companies that are very important for the Brazilian economy. And so on one side, the large corporate recovery has been driven by -- up until now by these less important sectors. And so we're still waiting for the return to office, return to travel of these sectors and so you can see what impact that will be. It should translate into an even faster increase in the corporate, higher-yielding business traffic, and the demand for flights on those city pairs in the next couple of months. Now switch to Page 6 and report on the synergies already captured from the reincorporation of Smiles. Since the end of June, when we determined the finalization of the incorporation, we have already been generating significant operational, financial and tax synergies that were not available when Smiles was a separate company. Now within the over BRL 450 million of estimated synergies per year from these categories, operational, financial and tax, I want to highlight here some of our operational synergies in the revenue management category. Integrated Revenue Management, which has now been the case since the end of June, has increased both the average fare and the volumes to the Smiles redemptions. And this chart here on Page 6 shows the average fare of the Smiles redemption. Since we realigned inventory management at the end of June, the average fare on client redemptions has increased almost doubled and improving the redemption margin by around 15% and our consolidated group margins by around 200 basis points. And you can see the difference between the gray line on the bottom, which is the 2020 average fare and the orange line, which is the average fare in 2021. And moving to Page 7. The gray area on the right of this graph shows the average increase in sales for Smiles redemptions due to the changes in revenue management and inventory management since the reincorporation of Smiles. The average increase in sales volumes for Smiles redemptions in recent weeks on a relative basis versus what it was in the previous year is at over BRL 3 million per day. So we already have significant proof of concept on what arguably is the most difficult synergy to achieve through the Smiles take in, which is operational and revenue synergies. The other synergies, financial and tax are more structural and more binary. We're also realizing those. But I thought it would be interesting to highlight this as a significant proof of concept that we have already captured what we needed to capture in terms of the synergies as it relates to the takeout. Now moving to Page 8. I show our fleet plan and highlight the transition to the 737 MAX, which is the other significant activity that we've been working on at GOL now that the MAX is back fully in service. At the end of September 2021, or at the end of the third quarter, our total fleet was 129 Boeing 737s, which was comprised of 114 NGs and 15 MAXs. We have 95 firm orders for the MAX, of which 73 are from MAX 8s and 22 are from MAX 10s. And we recently signed agreements to acquire 28 additional MAX 8s, which are expected to help reduce our unit costs by around 10% next year. These 28 MAX 8s will replace 23 800s by the end of next year when we plan to have 44 737 MAX in our fleet, almost 1/3 of the total. And with the current purchase commitments and our fleet plan for the 737 MAX, we expect to have a fleet comprised of 50% MAX aircraft by 2025 and meet our goal of a 75% MAX fleet by 2030. Aircraft acquisitions will be financed via sale leasebacks by finance leases and long-term loans, including USX and bank guarantee financing. The MAX also has lower carbon emissions, lower -- higher -- larger cargo capability, improved ancillary revenues and is over 15% more efficient in fuel burn compared to the NG. And also provides lower maintenance costs over the next 4 to 5 years, which are all important for maintaining GOL's unit cost advantage, as I show here on the next page, Slide #9. At GOL, we worked very hard to set the foundation for structurally higher margins. One of our key objectives during this pandemic was to emerge with a unit cost better than we came in, better than 2019, which we are targeting. Here we show our expected cost plan progression for 2022 full year compared to 2019. For 2022, we expect to operate an average 108 aircraft and only getting back to more normalized peak utilization in the second half of the year, but still with fixed costs, 15% lower than pre-pandemic levels, fixed costs being aircraft and labor. Compared to 2019, our total unit costs in U.S. dollars are expected to be reduced by over 10% in 2022. Moving to Slide 10. I want to highlight the financing component of the fleet plan. To support the acceleration of the fleet transformation, we are incorporating more finance leases going forward. By 2025, we plan to have 24 aircraft in finance leases and the remaining under operating leases to preserve our capacity flexibility. The incorporation of the new MAXs allows us to accelerate the return of 700s and 800s that are on short-term leases while maintaining the flexibility to align our capacity with fluctuations in the demand for air travel post pandemic. But as you can see, a portion on this chart, a portion of these operating leases that are rolling off are going to be replaced with finance leases. And as the Boeing 737 is the most liquid commercial aircraft in history, it provides us the ability to increase our unencumbered assets with low residual value risk. On the next slide, Slide #11. I show the evolution of some of the main balance sheet indicators through the end of the third quarter for our liability management, our rational supply management and our cost reduction actions and measures. We will continue to match our assets and liabilities and manage our cash flow as we always have pre-pandemic, during the pandemic and as we emerge. Since the COVID-19 pandemic started, GOL has paid down around BRL 12 billion of debt and GOL's short-term financial debt is now below BRL 500 million. And in the third quarter, the adjusted EBITDA margin, excluding the depreciation and other effects of the grounded aircraft reached 25% on an LTM basis. Moving to Page 12. And again, this is -- presentation is focused around the most common themes that have produced inquiry into us about how we're thinking and how we're managing. On this page here, Page 12, I'd like to share a few considerations about the opportunities for mergers and acquisitions in Latin America. Prior to the pandemic, GOL is at the forefront of forging codeshare and interline agreements. In addition to our 14 codeshare agreements, we have over 75 interline agreements with global airlines creating a vast global network for our customers. I mean since the very beginning of GOL, GOL added this component to the traditional LCC model, which normally you wouldn't see this, but this was a way for us of expanding our share of customer wallet through these partnerships. And this was a very efficient way of expanding our network. In the post-COVID environment, we believe that the landscape will shift in the region with the easing of air travel restrictions within Latin American countries and among them -- and between North America and Europe and Latin America, we see previously more isolated economies in the region becoming more interconnected. This all means that going forward, it may be time to reconsider whether the codeshare and interline approach goes deep enough to capture the full set of available synergies from expanding network and access for travel alternatives for our customers. Previously, this would have been difficult due to airline ownership restrictions in each country. But as most countries have largely done away with their ownership restrictions, there is now an opportunity to revisit what the landscape of the future of the 21st century might look like. We think our current strategy for the market but we're prepared to pivot our strategy so these trends change or accelerate and adapt to new and [indiscernible] opportunities as they arrive. Moving to the next page, Slide #13. We shared some data on the macro environment where we get a lot of questions about how we're managing our business in the context of the Brazilian macro environment. Brazil's balance of trading goods had a surplus of almost $3 billion in September. And international reserves totaled a little under $400 billion. Net inflows of foreign direct investments in the country were a little under $5 billion at the end of the third quarter. Brazil's economic recovery is enabling its return to the pre-COVID fiscal situation. The country should end this year with a nominal deficit of around 6% of GDP. That is the same level as 2019 and much lower than last year's 14%. This compares very favorably with other countries. For example, the U.S. expects to reduce its nominal deficit from 15% of GDP in 2020 to 12% in 2021, much higher than Brazil. And while Brazil recently raised its overnight interest rates by 1.5 percentage points, which is a key anti-inflationary measure, we expect that supply chain and commodity prices will normalize as the effects of the pandemic side, reducing inflationary pressures. But GOL is prepared to ride out an inflationary scenario due largely to the effectiveness of our liability management program and our cost progression. And while estimates for GDP growth have recently been revised down, we believe that air travel demand will continue to resume in Brazil with the progress of the vaccine rollout, which will eventually include more of the corporate travel segment, as I highlighted in the beginning of the presentation, as more people return to the working environment in offices and out in the factories and in the mines and in the fields. Here on page -- on the next page, Page 14, I share some data on Brazil's vaccination status, which is part of this theme. Brazil is a vaccination leader with a full vaccination rate 5 percentage points higher than the U.S. The parcel vaccination rate is higher in Brazil at 77%; it's higher than the U.K. which is at 75%; Germany at 71%; in the U.S., it's 71%. In terms of doses, 315 million doses administered in Brazil and boosters, a little under 20 million. Brazil ranks first in Latin America and fourth place globally ahead of the U.K., Germany and France. 100% of the São Paulo City adult population is vaccinated with at least 1 dose. And the Brazilian government has managed to purchase almost 600 million doses of the vaccine, which is enough to cover more than 140% of the total Brazilian population. With regard to the Omicron virus stream, discovered initially in South Africa and currently identified in 15 states in the U.S., the initial data shows this variant is obviously more transmissible. However, some of the earlier reports suggest it may also be less deadly, which would fit into the pattern of virus evolution observed historically as suggested by some market strategists that this might ultimately be a positive for risk markets because a good signal of the end of the pandemic is in sight. According to some of these strategists, the Omicron can be a catalyst for steepening, not flattening of the yield curve, rotation from growth to value, sell off in COVID and lockdown beneficiaries and rally in reopening things, of which, obviously, the airline sector would be one of those. Moving to Page 15. This morning, we issued our preliminary guidance for 2022. And this is a practice that we have been aggressive with over the years in giving to you indicators that not only tell you how we're thinking about our business, allow us to be able to talk with you all about the numbers. Normally, our practice would be to provide a view for the next 2 years. We're only comfortable now providing a view to next year. And the data we provided this morning provides that view compared to the pre-pandemic 2019, which I would only highlight if you remember, in 2019, we were also very constrained by the MAX grounding, by the pickle fork problem and by a whole bunch of other issues, where we had a suboptimal 2019 given those other constraints that we have been living with prepandemic. But in 2022, we'll benefit from a reduced fleet cost, and this will extend for the next decade as we take more deliveries of the 737 MAX aircraft that will compose the significant part of the gold fleet. And the strengths coming out of that will enable us to capitalize on the many growth and expansion opportunities that are now available in our addressable markets and will enable 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 carbon emissions per passenger while at the same time, improving goals leading -- industry-leading customer experience. So moving to the last slide of today's presentation. I'll just wrap up by summarizing some of our key initiatives and accomplishments over the last 22 months which we believe were decisive actions that position GOL to lead as demand returns. We're the only airline in South America to have raised equity capital during the pandemic. We capitalized the company's balance sheet with around BRL 1 billion of new equity via a BRL 423 million capital increase, which was anchored by a BRL 268 million investment, a significant vote of confidence by the company's controlling shareholder that was in the second quarter of this year; and two, a BRL 607 million equity issuance as part of the BRL 1.3 billion taken of our -- of the minority interest in our loyalty program, Smiles. Pro forma, the Constantino family maintains close to a 60% economic stake in GOL, which is one of the most liquid airline stocks and the most liquid airline stock in Latin America. Also, we're the only airline in South America to return capital to our fixed income investors. Since the beginning of last year, GOL returned $530 million of principal and interest to its debt investors, paid down BRL 800 million of bank debt with utilization of BRL 300 million of restricted cash, remain current on all interest expense payments of more than BRL 800 million and raised over $500 million through the issuance of long-term debt in the public markets. Now with that, I'll go to the Q&A portion of today's investor roundtable, flipping to Page 17. And a reminder, to send us a question, you need to click on the question mark on the upper left side below this video on the platform and type in your question, that we will receive here -- that I will be here at the podium. So just reset to shift to that modality here so I can see the questions. And I will just organize a bit here.

So some of you guys that are going to be 1 question, you give me 1 question. It's actually 6 questions. Okay. So no particular order here. I'll just go through the questions. Okay. First 1 from the webcast platform. [indiscernible] he expects an effective income tax rate of 11%. Is there anything that GOL can do to zero income taxes in the coming years given the utilization of tax credits and goodwill amortization? That's a good question. There's 2 main tax synergies. One is the reduction of taxes on revenues. Smiles is paying around 10% taxes on revenues. When it's reincorporated back into the airline platform that goes down to around 3%. So that is a significant reduction in taxes on revenues. In Brazil, it's the [indiscernible] tax. In terms of income taxes, which is your question, the over $1 billion of NOLs at goal. The way that works is that what you generate in a loss in the current year can be 100% compensated. But once it goes beyond 1 year, you can only compensate a portion of that to the extent you have income, number one. And number two, within that, we have 7 different companies in the group. And in Brazil, the way taxes work, you don't consolidate taxes on a group basis. You have to pay taxes based on what each individual company does. And so the reason why there is a positive effective income tax rate there is because the NOLs can were generated, which is primarily at the operating company, which today includes the revenues of both the sale of tickets as well as the operation of the loyalty program, but there are some other activities where you can't do that offset. So it's very difficult to get below that number that you're seeing there of 11%. But that's a significant reduction in cash taxes versus where we were prior to the delisting of Smiles. Okay. Another question here. Regarding the preliminary guidance for 2022, is it fair to assume an implicit yield recovery to 2019 levels? So -- okay. So obviously, the way yields are going today in 2022 is absolutely nothing to do with what the yields were in 3 years ago. Yields go based off of yesterday, not off of 3 years ago. But in terms of the comparison, if you did just do kind of that blanket comparison, given what's going on with oil prices and the exchange rate that's getting upward pressure on yields in Brazil, we have normalized capacity in yield management that is a significant level [indiscernible] of the exchange rates and oil price variations up and down on fares. And so yes, it's a yield improvement, not a yield recovery. 2019 yields were not depressed. We are achieving good rational, I think, for the most part, industry capacity management and revenue management, which was post the Avianca Brasil liquidation. But yes, I think implicit in those numbers on an absolute basis is higher yields than -- but I think from our guidance, you can work with those numbers there to see what we're assuming for next year's yields and compare that to 2019. A couple of questions. A lot of questions here, so I'll try to move a little bit faster to get through -- to get through the questions here. A question here from the room. Regarding profitability in 2022, if you have a full fleet utilization for the full year? That's a good question. That's something near and dear to our heart because GOL has been one of the standouts in global airlines in terms of achieving high levels of aircraft utilization. We'll get back eventually to 11 to 12 flights per day per aircraft. We have been as high as 14 in previous cycles where we're doing a significant night flight business, but our target is to get back to something in the 11 to 12 hour range, which is really we have peak and high operating efficiency, and it has nice effects on fixed cost dilution. For 2022, right now, we only expect to see that in the second half of next year. In the first half -- in the first quarter, we're still normalizing out of the pandemic. And so there still is a high level of inefficiency there from an operational perspective. And then in the second quarter is our down quarter in Brazil seasonality-wise. And so it's harder on a total fleet basis to get really full fleet utilization. But in the second half of next year, we expect to have that tool fully back. Another question. Would you speak to your free cash flow on a gross and net CapEx basis? Yes, on a net CapEx basis, net being for the effects of financing, financing for engine overhauls and financing for aircraft acquisitions for next year, we would be free cash flow positive if you look at it that way. Obviously, on a gross basis, no, because we do have a significant number of aircraft acquisitions and lease return conditions and engine overhauls that need to be financed. And we provided you guys that data in the guidance which you can kind of work through and ask us questions about. Okay. Another question here. How much is the Smiles integration playing a role in 2020 growth? Well, you saw that on a gross basis, and this was in our third quarter numbers, Smiles is looking at a BRL 2.5 billion figure for next year for their gross revenues where there is substantial growth there. The big difference is that we're doing that now with -- and for 2022, we'll be more or less a full realization already at the synergies to the tune of around BRL 450 million of cash flow. About half of that is operational. So if you want to think about it in terms of a margin basis, it's about a 200 basis point net increment versus pre take-in of Smiles, that's an increase in operating margin due to the Smiles taken. So that is a significant component of the increase in EBITDA. And then the other components are below EBITDA, which is reduced financial expense because of better working capital management and better access to the cash flows generated. They don't get trapped earning certificate of deposit rates, they get put to better use in the environment of the overall business and lower tax is BRL 450 million of incremental cash generation for next year is significant. Another question. What sort of maintenance honeymoon should we expect on the MAX? Well, for us, it will be about 4 to 5 years. So on those aircraft coming in, it will be a significant reduction in maintenance expenses for a 4- to 5-year period, all of the structural engine overhaul expenses disappear. It's a good point to mention because of the MAX grounding and because of the pickle fork MAX grounding and the pickle fork problem in the pandemic, our company has been almost 5 years now, basically maintaining the engines on an older fleet. We're about 11 years average rate, which is not what our business model has designed at. And by the end of next year, we should be back to around 7 years. And that's another way of saying that when we're back at that number, what you would see in terms of the maintenance holiday would come back into effect 2023 and on. Next year, we have significant work to do on doing a catch-up and getting back to that 7 years. But to some extent, it's a reflection of what began with the MAX grounding. It was extended by the pickle fork and then with now 2 years in the pandemic, we have a lot of catch-up to do on that. But the benefit, if you will, or the reward will be a significant maintenance honeymoon between 2023 and 2028. Somebody here was asking me about corporate travel demand trends but you're in the room here. And so were you in the first part of the presentation or -- what do you mean by that? Okay.

[indiscernible]

That was before. That was before. Okay. So as I was saying, it's one of the things -- okay, got it. That was one of the themes that we tried to give you guys an update on. But I think the key message on that is that we -- more or less, I would say, through the beginning of the third quarter, much less than 20% of overall volumes were coming out of large corporates. And then towards the end of the third quarter, things started kicking in, and where we are right now, we're back at about 60% of say, what 2019 volumes were. We expect to be pretty much fully recovered by the end of the Q1. But part of that is going to depend on those laggard sectors, which is you guys, the financial sector, right? Because a lot of you guys are still trying to phone it in. And without getting on -- I had a conversation yesterday with the airline investor, I said, at some point, you have to consume airline tickets, so you have to stop investing in airlines, right? But I'm making an effort to go see them, so to generate revenues for our sector. And then the oil and gas sector are the kind of the 2 sectors that are missing. But within that, there's stratifications. I mean, for example, if you take the financial sector, like the largest -- oldest and largest bank in Brazil is 15% of one of our top 5 clients -- I won't mention their name, but they're a 15% of 2019 volumes. But there's a brand-new entity that also went public recently that is at more than 100% of 2019. So maybe that's a message for the competitive element that air travel is a competitive tool. And beverage sector, I don't think it's a mystery why they're already 100% recovered of 2019. It's a highly competitive sector in Brazil. You got to be at the front end, keeping an eye on what's going on and the education sector they are consuming more than they consumed in 2019. But we want to -- so I think the upside on that, the positive news on that is the financial sector of the banks tend to be a follower on the economic activity. So eventually, they're going to kind of come in. I mean we were here in June. It wasn't a ghost town, but you couldn't go down on the trading floor. I came here today and everybody wants to bring me down trading floor. And so things are -- the financial sector is a laggard, but it's catching up. And the oil and gas sector, for example, you take those companies for us. We're not -- our volume there is not their white collar workers, it's their blue collar workers that are traveling around doing that. And of course, there's all those issues and safety concerns related to that. And so they are working through those issues okay. So that was some of the questions here in the room. Let me go back to some of the questions on the platform because there's a lot coming in here. And let me -- I'll try to group a couple of them. In regards to your year-end '22 operating fleet of 108 aircraft versus a total fleet of 136, if utilization should return to more normal levels in the second half, what is the lag returning all 136 back to operations? It's a good question. And so that was a little bit of echo on what I said there. That 108, that's the average operating fleet for next year. That's not the -- it's not the year-end. Those numbers -- that average operating fleet is operating fleet for the year. And there's a lot of inefficiency in the Q1 and then we have the downward seasonality effect of the Q2. The 136, it's a combination of what we need to really meet demand in the second half and also how we have to deal with seasonality in Brazil. In a normal year, we will have a variance of almost 20 aircraft between trough and peak. As you take like a month of January and July, we'll have 0 aircraft in maintenance but you'll go all the way to kind of like April, where you can have as much as 20 aircraft on the ground, and we'll take advantage of that doing structural maintenance. And just because there's a very, let's say, exaggerated seasonality in the January and July high seasons, we get a massive uptick in leisure travel. And that goes a little bit into how you do airline yield management. Most people think about yield management as -- because in our business, the challenge you have is that you're -- in some parts of the year, your lowering fares stimulate demand. And in some parts of the year, you're raising fares to suppress demand because if you were to always be stimulating demand because for instance, you take GOL, you'd be operating -- you need 150 aircrafts because in the peak part of the year, you need 150 aircraft to transport all the demand you can stimulate, but then in the lower part, you'd only need 100. And so when you think about us operating between a range of maybe a 100 , that's optimizing yield management given we have in Brazil. Obviously, this would not necessarily apply to the U.S. market or to a European market, it's about maximizing the match in Brazil. And another question here, if you segmented your business between domestic corporate and domestic leisure, what percent of 2019 demand are you currently operating at? Okay. Yes. So in the corporate, run rate today, which is already December, we're a little over 60%. But if you take VFR and leisure, we're above 100%. That was also the case last year. If you were to strip out the corporate piece from the denominator, Brazil was already back at over 100% recovered if you just look at the VFR and leisure. But on a consolidated basis, we're about 85% or so fully recovered domestic. And we think at some point in end of February will probably be on a total basis 100% back with about 80% of the corporates back. We don't need 100% of the corporates back to do that. There's a couple of questions, could [indiscernible] recovery do you have nowadays? I think I've heard 60% of the company expects you by 80%? Yes, that's right. So there's been some questions around that. That's where we see things. The question, is the BRL 1.1 billion mentioned in 2020 guidance, is that the full cash outflow for MAX acquisition? Well, it's the full cash outflow that's going to go to Boeing. But out of our coffers, it's close to 0. I mean we generally do around an 85% LTV on those, when we do a sale leaseback, it's 100%. So part of that will depend on ultimately what the financing mix is but there is potentially a 5% to 10% leakage in use of our own cash, if we can't get to 100% LTV on the finance leases. But right now, we've lined up enough finance lease money with pretty much upwards of 25 MAXs. If Boeing would produce them, we would buy them. But it would not create a cash outflow for us. Let me go through some of the questions here. There's about 12 questions on the webcast platform. Here is an interesting question that has been asked. How has the labor market been? And if you could provide an update on the hiring dynamics? Well, each company has taken a different approach with respect to labor. It's not blanket. In our business, obviously, the labor market is favorable. We have taken the strategy, a goal of using mechanisms such as furloughing and other types of mechanisms to retain the labor force in tough times. In the '15, '16 recession, we did a significant amount of furloughing. Almost all of those people, I think, with the exception of maybe 3 or 4 were fully back integrated into the company pre-pandemic. And obviously, in the pandemic, what you saw we did is we negotiated basically a transformation of roughly half of the cost of our labor into fixed and half into variable. That's more or less coming back off now. And there was some news that a potential strike in Brazil recently, but the industry union dynamics on the side, it was really just about what the annual cost of living adjustment was going to be for the [indiscernible] geared to be inflation, which is a fair number. But so we have taken a goal, a different kind of tactic with our employees in terms of prioritizing retention and then working out mechanisms, financial mechanisms so that we wouldn't have to lay people off because also it's very expensive. The amount of money we have to invest in training pilots and mechanics is a lot of money. Now if you're asking specifically about pilots, we don't have any issues with that because we kept all of our 1,600 pilots with us, and we'll have -- we'll be counting on those going forward. And we've been investing a lot in creating future pilots through training. And so in terms of the technical employees, we, at GOL, have a good partnership there with the formation of new future talents in the future in pilots and flight crews and mechanics and so on. Okay. Moving on to another question here. What is your net leverage target in the medium term? And when will you read it? Okay. Well, from a policy perspective, we always share with you how we have thought about policies. Our policy has been -- is and always will be at or below 3x leverage. Now we were below that using the IFRS 16 methodology in the end of 2019. And I should actually make a highlight. The information we provided in the guidance, you'll see it later I think most of you that understand will agree. We went back to the 7x annual operating -- annual lease payment methodology because there's many management teams out there that have taken advantage of the ability to manipulate the IFRS 16 calculations, where they have now become entirely incomparable. You have to do a whole amount of work of standardizing all the assumptions which is not our job, right? To try to guess on that. So we're now reporting to you guys our leverage of going back to the old methodology pre-IFRS 16, which is using the 7x time lease payments, okay? That's a more pure, easy -- and that's why the leverage went up a little bit because it's just taking 7x 2022 operating leases. So it was like the current fleet -- what is that capitalized at 7x. But having said that, we're not changing our leverage policy because of that because that was a leverage policy we had even before that. And because that is -- that's like the number that effectively minimizes our weighted average cost of capital. So the short of it is -- that's the number that gives us the lower overall cost of capital. And how we will get back to that number is through operations through EBITDA. Right now, we have balance sheet more or less that makes sense for us. So the problem is not the size of the balance sheet, the problem is we need to get back to more normalized EBITDA generation to get those numbers back into that 3x range. Using the 7x operating lease methodology, the when is going to be 2024. You'll see we're getting next year. We're still above that at around 6x. That's going to be LTM and EBITDA dependent. And part of the problem with that in the 2020 numbers will be a relatively weak first half, but it will be a much stronger second half. Moving to another question. A lot of questions here about competitors, but I'm not dissing your questions. I just think that those are questions that you should ask the competitors and if they're not providing the answer, then they're not providing the answer. Yes. And there's also some questions about some of our partners, and I won't comment on our partners, but I think the answers I would provide would be positive of the changes that are happening there. Here's a question. It's very personal. I think it's [indiscernible] so I'll answer it. Has Junior ever talked about wanting to receive dividends? And as CFO, what financial metrics would you like to see? That was you? Okay. That's -- I like the personal questions, right, because it's an opportunity to tell you how we think. So the answer to the first question is, no, okay? Now we have paid dividends, right? But it's always come from company management, but we've never gotten a request to pay dividends. Now our policy in Brazil, we followed the fall policy, which is 25% minimum dividend, which can be suspended, 25% dividend of the payable amounts. Right now, with our negative capital account even if we had the cash flow to pay a dividend, we could. It's going to be many years before structural that we could pay a dividend. So it's kind of a moot point. But I would say -- another way I can answer that question is Junior and the brothers invested $50 million in the business in the second quarter, right, of this year. And so the objective is to have been more growth capital appreciation, not dividends. In the first cycle of GOL, I think we paid BRL 700 million of dividends. That was kind of the, let me say, the first cycle between going public and maybe the first 4 years, and that was just based on the 25% of earnings. And -- but I think we're a long way away from that. As CFO, what financial metrics would you like to see? You're saying generically or?

Yes.

Well, we have a specific policy and it relates -- one of it -- we talked about as our leverage, which is that 3x leverage target. The other is a through-the-cycle margin. And you can look at that in a variety of ways because in our business, you have to be cognizant of what the down margin cycle is going to be and what the up cycle margin is going to be. For us, from a policy perspective, that range is 10% to 30%. And so as CFO, when whatever we've defined is we're in the good part of the cycle. These are long cycles, it's like 8 to 12-year cycles, right? Economic, business like -- and that's where we were. If you look at kind of where we're getting to, 18, 19, would have been 20 if we didn't have the pandemic. We were in the high 20s. And so you kind of want to see kind of the most we can kind of squeeze out of our economics structurally given the structure of this business is like a low 30s EBITDA margin. But it's unrealistic to think that those are the numbers that you can maintain in a business where you're dependent on one domestic market, right, because you're subject to that. Now if you have a diversified business search, you're in different continents that to be a different thing. But in the low cycle, the minimum for us would be 10% in the low part of the cycle. I mean below that, you're going to put a company into a seriously distressful situation and have to take other drastic measures like you've seen with what some other companies have had to do. Now so you say, what is kind of the -- what is the mid-cycle margin out of that? It's mid- to low 20s EBITDA margin. That would be like the mid through the cycle, which is kind of what next year would be. And of course, return on invested capital in excess of our weighted average cost of capital. And we have some -- we have -- we use these things to kind of drive how we do planning, with assets, liabilities and things like that. And so with that, I'm just going to do one last check here on the platform because I wanted to -- we've got about [indiscernible]. I won't be able to get to all the questions. So I apologize because I have there's like another 15 questions. Just filter here real quick. Can you discuss the prospects of international operations reopening? How that influences your revenue estimates for 2022, which are flat to 2019? For 2022, if you were to go to '19, that was from a capacity perspective, it was about 85% domestic Brazil, 15% flights between Brazil and Argentina, Chile, U.S., International. In 2022, the [indiscernible] will be around 7% and about 93% would be domestic. But that will be heavily weighted towards the back end of the year. We've already started flights again to some Caribbean destinations and Uruguay, eventually the most important markets for us are Argentina and Florida. But we're going to be followers in those categories. It's very expensive to reopen bases if there's a risk of another shutdown, which depends on international travel restrictions. And we're also prioritizing right now with our limited resources investing in getting grounded aircraft up and flying again, we're prioritizing our domestic network and , which has been, for the most part, deactivated since March of last year. When we created that network running out of Guarulhos, which is basically a VFR network where if you wanted to travel from South to North Brazil, you have to do a couple of connections. We're now reactivating our very valuable point-to-point short hole network -- shuttle network, downtown airports, São Paulo and Rio. And that's happening as we speak. So we're prioritizing the allocation of our assets onto those markets, which give us the highest returns. But by the first and second quarter of next year, we do plan to have the majority of our 2019 domestic destinations reactivated. That also depends on our partners. In Argentina, we partner with Aerolineas Argentinas. In the U.S. -- in [ Miami ], Florida, we partner with American Airlines. I think we just have time for one more question here. Just give me a second, try to put together a couple of them. [indiscernible]. I think we kind of -- and the question that I think makes sense for us to respond on because we have authority to respond on that. Here's a question. How are you seeing the channels through the pandemic? What percentage of your sales are direct and to shift sticky? Interesting comment there. I think one of the -- and I'll take advantage of it. One of the reasons why we were able to -- you saw the slide on the revenue -- the synergies capture out of Smiles, right? But obviously, that inventory has to come from somewhere. And so part of that was shifted away from the OTAs, which is a very low profitable segment of the business to that now that the Smiles segment is now more profitable with us because it doesn't have that structural constraint of the contract, number one. But the larger effect had been because of the collapse or let's say, disappearance of the corporate sector from the end of March last year into the beginning of the third quarter this year, the sales coming through corporate travel agents were very small. And normally, the sales coming through the corporate travel agents would be more than half, 60% or so we're kind of like 60% through travel agents, 40% what you would call direct. And having said that, it doesn't increase our costs. I mean those travel agents are also going through the Internet platform. It's just that the corporate contracts and the way it works in Brazil structurally go through those corporate travel relationship. So if you were to look at it on that more simple direct versus agency basis, the majority of the pandemic, it was, I want to say, 90% direct and 10% through agents, but that will come back to the more normal thing, eventually, say, 60-40 or 65-35 in that category. That -- I think I'll put a pin in it here. What I will do with some of you even able to get to the question, I have them here, and to the extent it makes sense, we can circle back with you separately to get to some of those questions. This is normally what we do in December of the year in terms of trying to give a view. We didn't do it last year. During the pandemic, we were doing these monthly updates, giving a very, very short-term view what we're seeing yesterday, today and tomorrow. But now we're going back . So with that I'll conclude our roundtable today. We're feeling well prepared and energetic and strong and agile to get into 2022, and we thank you for your interest and your investments in GOL Airlines, and have a good weekend to all of you. Thanks very much. I'm going to disconnect now.