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

Good morning. I want to thank you guys, GOL investors, for joining us today for this Investor Roundtable at the New York Stock Exchange, as well as those of you that are listening in from around the world on the webcast. I'm Richard Lark, CFO. And with me today is [indiscernible], our Finance Director, to share with you where we are currently and where we're going in the near term. This is our [ 18th ] 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 decade. Today is also a huge follow-on for Eletrobras, which is one of those largest follow-ons, I guess, in Brazil. So there a ton of Brazilians here today. And as I saw them walking this morning, it reminded me going back 18 years ago, I was standing on the platform here with Junior and his brothers ringing the bell after our original listing, after which I had lunch at Barney's on the Upper East Side and then I went back to my [ hotel ] lost my voice for 2 days. I also want to welcome the many members of our team of Eagles, who are listening from Brazil, Argentina and Florida. We know that many of you listen into our webcast and follow us in all possible ways. GOL is in its 21st year providing passenger transportation in Brazil and 2 other destinations in South America, Caribbean and the U.S., as you can see on the map, on the first page of our presentation today. And our team of Eagles has been a key driver in our achievements. GOL has become Brazil's leading passenger airline because of it's great product, it's fares and it's lowest cost. One of the key individuals in the development of this over the last decade has been Paulo Kakinoff, GOL's CEO. Next week is his last week as CEO, after which he'll keep working with us from the Board. On behalf of all of us, I want to thank Kaki for his work over the last decade in taking GOL to it's leadership position. We're also very excited to begin our next cycle under the leadership of Celso Ferrer who I've had the pleasure of working with over the last 2 decades. So with that, we'll dive into the presentation of the webcast here. I think those of you on the platform have to press the button and move the slides along. Here on Page 3, you have our disclaimer. After our formal presentation, we'll have a Q&A session. For those of you here sitting at the table, let's see. What -- if you could just write your questions on a piece of paper and hand them to Mario. And for those of you participating remotely, you can send your questions by the webcast platform. [Operator Instructions] Moving to Page #3. GOL is emerging stronger after the recent pandemic. We have proven our flexibility and capacity management with one of the most experienced teams in the industry. We have lower leverage than our competitors with more unencumbered assets available. We have valuable brands and very high customer loyalty. All these brands are top of mind with our customers. In Brazil, in the first quarter of '22, GOL has the highest margins through the lowest unit cost and relative better improvements in yields relative to our competitors. And we've been very disciplined with both our capacity and liquidity. And the volume MAX is increasing our productivity and cost advantage. Moving to Page #4. During the pandemic, our team focused on 2 primary objectives. Normally, we manage our company with roughly 50 direct as a kind of guide us of what we do in terms of policies and procedures. But during the pandemic, we homed in on 2. One, emerging with a unit cost lower than we came into the pandemic. And two, maintaining economic equilibrium, now matching our cash outflows with our cash inflows matching our assets and liabilities. And we achieved both of these objectives. Here on this slide, I show our unit cost performance over the last few years. During the pandemic, our unit cost increased primarily due to the fleet idleness, which was a result of the rapid demand destruction and our desire to preserve the fleet for the eventual recovery. In the fourth quarter of '21, with the acceleration of our fleet transformation to the 737 MAX and the gradual normalization of the operating fleet, our CASK ex-fuel began decreasing. Excluding accumulated inflation in Brazil since 2019, that accumulated inflation since 2019 has been over 20%, our CASK ex-fuel in the first quarter of '22 would have been $0.03. Our cost position is well below our competitors. And it's going to continue to be supported by our more efficient single-fleet type business model. And so you can see how we're expecting the ex-fuel cost to track for the rest of the year with our objective of getting it back to where we were pre-pandemic at around [ $2.7 ]. Moving to Page #5. As I mentioned, we had kind of a second primary objective, which was the proper matching of assets and liabilities of cash inflows with cash outflows, and that continues to be one of our key management objectives. This slide here summarizes the last 9 quarters of cash flow management. Obviously, one of the challenges of the quarterly reporting process which most of you follow, especially during the pandemic period, it didn't really allow a proper measurement of how we were managing. And so one of the reasons why I put this slide together so you can see how we manage this. What we have to do is match this in with the span of the pandemic, which ended up being longer than I think anyone expected. Since the beginning of 2020 until the first quarter of this year of 2022, and you can see it on this slide here, but I'll summarize it. We generated BRL 2.3 billion of positive operating cash flow, which was from BRL 1.1 billion of positive operating results and BRL 1.2 billion of negative working capital. Negative working capital for us is and continues to be a strategy. In addition to that, BRL 1.4 billion of cash from aircraft sales allowed us to match that with about BRL 1.6 billion of CapEx -- operating CapEx. And then we raised BRL 6.3 billion of new capital, which included BRL 422 million from an equity sale, and that was used to allow us to affect BRL 5.3 billion of debt amortization and a one point -- a little over BRL 1 billion acquisition of the minority stake in Smiles and as you can see at the end of this year, we paid BRL 4.4 billion in leasing and interest payments. Moving to the next page, Page #6. I highlight the results now, which is at the end of -- I think this week is the 1-year anniversary of our take in of the minority interest of our loyalty program, Smiles. Over the last year, we generated BRL 1.3 billion of incremental cash flow, which represents a 1-year payback on the acquisition on a cash basis. Almost 40% of the synergies have derived from better yield management of our inventory with that synergy coming from customers. And around BRL 300 million was derived from NOL usage and lower taxes on revenues in Brazil through the reduction in the PIS/COFINS tax. Additionally, Smiles sales levels today are approximately 40% higher than pre-COVID levels. And so with that, I'll hand you over to Mario, who's going to review for you some details kind of drilling down a bit and go with you through our performance in the management of sales, working capital, management, liability management and fleet management. I think as most of you know as well, we don't have a official permanent IR team. Mario and I basically take care of the IR in addition to our day jobs are actually managing the items that we're presenting to you here. So you have in front of what you hear today that people actually have been managing these things. That's just philosophically, we think that's the best way to interact with you on the buy side and the sell side. So with that, I'll turn it over to you, Mario.

Thank you, Richard. Good morning, everyone. So in this Page 7, we show our current sales per ASK that is higher than pre-COVID levels increased 35% compared to pre-COVID levels, even in [ bond ] and ASKs. While we continue to keep capacity below pre-pandemic levels to ensure the continuity of the economic equilibrium, sales increases has been pretty much supported by this year first half, a strong recovery in demand for travel to leisure destinations, also driven by the hybrid working formats and the return of the corporate events especially between the middle of the beginning of the first -- the second quarter when we start to see the lift of mask being relaxed in Brazil. We show here, when you compare to the level of sales that is pretty much driven by the recovery demand and also on the strong yields that are seeing in the market, the focus of goal to pass through the increase in the fuel costs into higher yields and to higher fares as well. So moving to Page 8. Here on Page 8, we present how our management of the main components of the working capital represented by suppliers payable and accounts receivable maintain the equilibrium in the working operating cash flow through the last 2 years of pandemic. The negative working capital translated into operating cash generation, during pandemic sufficient to pay the negotiated monthly lease payments and the CapEx obligations. While cash, the remaining cash was reserved to meet and pay all the debt service, especially interest obligations. We extended payment terms from 45 to 50 days average pre-pandemic to beyond 100 days during the pandemic, and we are continuing to keep structural around 70 days in the post-pandemic period in terms of the payment terms or suppliers payable. Suppliers payable has increased mainly by the deferrals that have been negotiated with the suppliers, but grew much less than the industry average, and has been reduced right now as accounts receivable continue to increase due to the demand and also driven by the yield management. Those components that are moving in a different direction will lead working capital going forward, should be expected to be neutral in the upcoming quarters. Moving to Slide 9. Here on this page, we show the operating CapEx management, mainly related to capitalized engine overhaul performed since 2019. The net CapEx is going to now 50% financed through dedicated credit lines, while in 2018, around 85% was financed through dedicated CapEx financings like finance, import finance in Brazil and also some CapEx financing supported by Exim Bank guarantee. In 2022, a major portion of the CapEx is going to be for engine overhaul supporting the existing operating fleet. And in order to allow the continuity of the growth of the recovery in terms of supply and capacity for the company. Expected CapEx in 2022 is going to be stable of BRL 700 million. While in 2023, we expect to start to ramp up when compared to 2018 levels. Switching now to Page 10. We're going to show in the aircraft CapEx management. From 2018 until the end of the year, GOL will be returning 33 NGs and receive 38 new MAXs. So this is part of a very active fleet management as related to the current fleet transition. The fleet transformation drives significant multiyear benefits from reducing unit costs and also increasing productivity in the company. GOL is renewing its fleet to our newer type of aircraft, that is a 737 MAX, that will represent more than 40% of the total operating fleet until the end of the year. And at the same time, we started to rebuild our finance lease portfolio this year. To renew the fleet, GOL will utilize a portion of the existing maintenance deposits that is part of the total liquidity. And we also utilize credit lines, dedicated credit lines that was obtained from the new MAX finance, lease financings, especially that has been -- is a keen of this year. I presented what is going to be the movement in terms of the fleet management. And here in this slide, we show that through the fleet renewal what we will achieved. The following breakdown of MAX on the left graph, that through 2028, MAX is going to be accounted by more than 70% of the total fleet. Until 2025, 50% of the total fleet is going to be represented by MAX as well. That's going to be represent a much larger portion of the current operating fleet represented by MAX. As the new MAX, 737 MAX consumes 15% less fuel consumption and also carbon emission, the fee transformation towards the 737 MAX represent important cash reduction, but also a much less CapEx requirements as new aircraft have lower heavy maintenance requirements compared to the current energies. With that transition goes average age, the fleet average age is going to be reduced from the current 11 years to 7 years and to 2028. In addition to the more efficient fleet, the fleet idleness will be reduced through a combination of organic, with contractual deliveries with the existing partner lessors. And conversion of up to 12 aircraft into dedicated cargo aircraft for the Mercado Libre partnership. Now here on Page 12, I want to move to the liability management. So I'm going to present how our active liability management reduced short-term debt to the lowest since 2014. As Richard mentioned previously in the slide, during the pandemic, GOL executed the matching between assets and liability and inflows and outflows. So here's the breakdown on how we'll raise and amortize over than BRL 6 billion during these last 2 years. By doing that, GOL's achieved lowest short-term debt position in this last 8 years, demonstrating the focus on preserving a sustainable balance sheet even in the middle of pandemic. In the next page, Page 13, I present the current debt breakdown and amortization schedule. The gross debt when translated into USD debt, that is in the table on the left side was stable even after the impact of the COVID,consider the difference on FX for 2019 and the beginning of 2022. On the right graph, we show that GOL has no significant financial debt to be amortized in the next few years. While the print amortizations that is in this slide, gray, the bar for the next 2 years is represented by BRL-denominated debt that is manageable considered the current relationship with the Brazilian banks. Moving to Page 14. In this slide, on the top of the graph, I show GOL's unsecured bond prices. GOL delivered everything that has been promised during this dynamic. So GOL's capacity, CASK and yields are now close to pre -- pre-COVID levels. And short-term debt is much lower than back in 2018 showing that the print bond prices appear to be somehow disconnected with the fundamentals and the current recovery trends in the Brazilian demand market. So with that, I'll now hand it back over to Richard. Thank you.

Here on Page 15 is our full year guidance that we have already provided previously. The fuel price per liter for the year is currently tracking around -- a little over 20% higher than our initial expectation of the BRL 4.3 per liter. But thus far, the increase -- this increase in fuel cost has been offset by fare increases. They could result in net revenues being around 10% higher for the full year if those trends were to maintain. The main priorities of GOL in the near term, I'm now on Page 16 of the presentation are, as follows. We'll continue to keep capacity and demand discipline. Let's say, capacity discipline matched with demand by deploying new revenue initiatives and continue to capture synergies from the reincorporated Smiles. If you remember in the previous slide, I showed that we've captured over BRL 1 billion of synergies that generate the 1-year payback on the around BRL 1 billion that we used to do to take in, but we still got another $3 billion of synergies left to capture in the near term. These factors will allow us to keep load factors around 80%. The combination of the capacity discipline and new revenue initiatives and the synergies from Smiles will allow us to keep load factors around 80%. Smiles, the work we do with Smiles is an important component of load factor to produce sufficient cash generation in operations to finance our growth. As we mentioned, we're committed to bring back productivity to 2019 levels, absorbing the effects of inflation in order to maintain our over 15% cost advantage versus competitors, and that was reflected in some of the previous data we showed getting back to our 2019 CASK ex-fuel level. We think that's going to be achieved in the fourth quarter when we'll have a full normalization of our operating fleet in terms of the idleness that we've been keeping in the fleet since the second quarter of 2020 when the pandemic started. That will be fully normalized operationally by the fourth quarter of this year and will allow us to return to our pre-COVID CASK ex-fuel. We're also going to enhance additionally Smiles' work in creating new products. And also combined with our new aircraft and new routes in the domestic international markets. GOL will continue to be the best positioned and the preferred airline for both leisure as well as corporate clients. The fleet transition and repayment of deferrals will allow us to meet our policy of 3x leverage, which is what we believe minimizes our WACC and we're increasing the number of initiatives to reduce GOL's carbon footprint beyond what we have already achieved. In 2019, GOL had the lowest CO2 emissions per ASK in the Americas. Moving to Page 17, that will wrap up our formal remarks for today's session. We'll now move to the Q&A session. [Operator Instructions] And then it will be filtered and pass up to here, I will read the question and provide an answer. [Operator Instructions] However you guys want to do it.

Okay. So first question from the platform. Take this off. Please detail the source of liquidity, available liquidity. One is untapped and then there's a second, how you do it in recession or higher oil prices. Well, the liquidity numbers that we've presented represent how we actually manage our liquidity. I think very few people here to ask you how much money you keep in your checking account, it's probably not all of your liquidity is not in your checking account. And so what you see in our cash account there is basically what's in our checking account that's meant to manage day-to-day operations. The other amounts that we have in there that -- where you've seen that we've been kind of maintaining our liquidity bouncing around between BRL 3 million to BRL 4 billion throughout the pandemic. Those other sources are accounts receivable. Those are available. We factor those as needed. And as was highlighted, our sales levels today are approaching BRL 50 million per day, which is above our pre-COVID loss on a sales basis, with more or less a -- almost 100% normalization on the volume side and the rest coming from [indiscernible]. So that continues to be enough to financial operations. But in addition to that, we still manage our deposits, which are sources of liquidity, which can be used to cost out expenses such as aircraft redeliveries and engine overhauls. In addition to that, we also have in our secured capital markets vehicle, an LTV below -- well below 50%. Market permitting, would also allow us to potentially add on additional cash from that. And also, we have a substantial amount of the collateral available from our loyalty program, which can also be used to generate additional sources of long-term funding, if that would be needed. I think those -- that data has provided an extreme detail in all of our monthly and quarter releases over the past 2 years. So I just kind of would direct you to study that if you need some more information there. But that's how we've been managing the business over these last 9 quarters. And if anybody has any doubts that we're going to continue to manage the business that way, I don't think I can provide any additional information to you. That's how we manage the business, is also pre-pandemic. There was much less focus on in pre-pandemic, but it's nothing new in terms of how we're managing our working capital. We consider ourselves working capital optimizers and we'll continue to be so. The other question of how to deal with recession and high oil prices. I think since the end of February, at February 24 to be exact when the cold war II started and the pandemic officially ended, we, in our markets, experienced over the following weeks, the return of the missing large corporate clients, mega corporations in Brazil. So that allowed us to basically pass on, for all intents and purposes, the effects of the combination of increasing oil prices plus the appreciation of the Brazilian real. I think what you also have to do, for those of you who look more intensely at U.S. Airlines, we did not get as big of an increase as the U.S. Airlines had because we also had the benefits of the depreciation of the U.S. dollar reflected into our local costs. So far, so good. Obviously, there's a lot of pressure on that. I think, fortunately, we were able to bridge the gap through our weak quarter, which is the second quarter. Normally, April and May are our weakest months of the year. And now we're basically selling into our high season, July is our high season. So we'll have to see how things are in August. We did over the last couple of months -- before the recent run-up over the last couple of weeks, revised our view upward on oil prices, and we did add some additional hedges. We didn't get as much as we wanted to, but we did add some additional hedging exposure, not just for 2023, but also for the short term. To the extent you want to delve into that for your modeling purposes, we can come back to that, and Mario can give you some more detail on that. We don't expect a recession in the terminology that they're talking about it up here in the U.S., in Brazil, economic growth has been fairly poultry since the 2015, '16 recession. But how we deal with that is on the capacity side. I mean I think you guys have seen how we've managed capacity. We've kept it at the lower end of the possibility where during the pandemic, flights have to, at a minimum, cover the variable cost of operations, and we'll continue to manage that way. But in the overall toolbox, how we would deal with a potential recession, in other words, lower passenger demand and/or higher oil prices effectively has to come through the capacity management dynamics. Another question here. To what extent can you still increase your yield without lowering the load factors? Well, I was just saying, we -- through the third quarter, we probably -- if we need to, but I would say our social mission is not to charge increasingly higher ticket prices to passengers, it's quite the opposite. It's to stimulate demand and grow the market. And so we're not happy about having to be forced to increase ticket prices. We probably do have a little bit of capacity left to do that, but it's not ideal. Part of that will depend on the strength of corporate demand, especially from the large corporates, which are relatively price inelastic in Brazil. As you kind of in Brazil, air transportation is strategically important for business activity. And so I would say we do have with the corporate customer as -- they're using air travel as a tool, an ability to, at least for 70% of our business, pass on any additional increases in oil prices. Okay. A lot of questions coming here. So let me just kind of filter here. A question about if we're satisfied with the pace of the MAX delivery so far. Yes, I think we're satisfied with the pace of the MAX deliveries, yes, that we've contracted. Having said that, it has been challenging for us to accelerate further our transition from NG to MAXs because of the lack of availability of MAXs currently. From 2023 on, our needs are hopefully satisfied from our order book with buying. This year, we've been working a lot on getting additional aircraft from the whitetail market, from aircraft that were already produced and don't have a current destination. That has been more difficult. As you know, in our forecast for this year, we have 44 -- our objective is to get the 44 MAXs in the overall fleet. We're still short a couple of MAXs source to be able to meet that target. Having said that, we have financing lined up for another 20 MAX aircraft if we would be able to find those. And so the problem is not on the availability of financing, it's on the availability of the assets. I'm going to leave the ABRA questions in a separate category here. There's a couple of questions on what we're doing with ABRA. Let's see here. Okay. Here's a question from the webcast participants. When do you expect to achieve 3x net leverage? Will that be achieved through EBITDA. Yes, that will be achieved through EBITDA. As we're showing in the presentation, if you look at it on a dollar basis, we basically have the same amount of debt today as we had pre-pandemic. On a real-denominated basis, that's higher because of the depreciation of the real today versus where it was in 2019 pre-pandemic. So yes, going -- we've done all the work we need to do on the balance sheet is documented. We don't have any plans to use any cash, to return cash to bondholders, to get that question also out of the way. That would not be the highest return use of our cash today. We will obviously, in 2023 and '24, we'll be working on refinancing of our long-term debt, and we'll continue to have a constructive relationship with the debt capital markets in that regard. GOL is going to need secured and unsecured financing to continue to finance it's asset growth and it's fleet growth for the next cycle over the next 10 years, which has generally been how we've done it through a combination of operating leases and finance leases, complemented with long-term funding from the capital markets. Now in terms of coming back to the 3x leverage, the reason for that, that we set that, that is roughly the number that we believe minimizes our weighted average cost of capital, which is very hard to quantify today. It's almost impossible to quantify what the true WACC is today given the uncertainty beyond the normal volatility. But that should be over the next 24 months. It will depend on the -- on EBITDA. But we just need to get the EBITDA roughly back to where we were in 2019. And if you remember, 2019, we were below that number. We were at 2.8x and we're even starting to think about some bond buybacks in the beginning of 2020 before the pandemic because that -- at that point in time, it was more attractive to do that, which is not the case today. I thought there was another question here. Your 2024 and '25 notes, will you look to address all through at the same time? We actually we've had a lot of questions recently about people -- it's been interesting to me over the last 30 days, a lot of people provoking me to start talking about 2024 and '25, which I guess is glass half full, people which I count myself among. But no, we're not thinking about the 2024, 2025 maturities now. We are still emerging from stabilizing our operations and our working capital and our operating CapEx because of the effects of the pandemic. Q3, we expect to have a normalization on the sales side, right? We're not fully normalized on sales. We expect that to be Q3 and then we expect operationally us to be normalized in Q4. And so we're not -- even with the current level of the market today, it's not feasible to try to think about doing any capital raising. Now having said that, we have a maturity on the exchangeable in mid-'24 and then we have maturity in 2025. And so I think you should expect we will do how we normally would do these things with the instruments that we have in very constructive dialogues with the buy side in terms of how we piece these things together. But those will be done in the -- whatever the 2023 market environment is going to be, not the 2022 market environment. So thanks, everybody, for asking that. Also, I found a very curious number of questions I've got people ask me if I consider bond buybacks today. I guess that's -- I'll take it as complement that I would have been getting those questions. Here's another question, I guess, from the webcast platform. Does GOL have any deferred lease payments or step-up lease payments that are due in the near term like it's competitors? I'm not sure what like it's competitors mean. But yes, we have deferral. When we engage with less core relationships at the beginning of the pandemic. We did on a very slow basis between March and October. And we achieved what we were able to do during the pandemic with the combination of reductions in our cost of ownership, reductions in the lease payments. If you will, mark-to-markets on aircraft that we have leasing that was above market at the time, powered by the hour to kind of allow us to keep our fleet on the ground for as long as possible, which was roughly through the fourth quarter of last year and deferrals. And so yes, we do have deferrals, which are on the upper right-hand side of the balance sheet. Well, we also have agreements with respect to how those deferrals are managed across our leasing portfolio of almost 30 lessors. So generally, those deferrals are returned over a multiyear period. There's nothing that is -- some of those are in short-term liabilities. Some of those are in long-term liabilities. I think what this person is referring to is that some of our competitors have very big maturity stacks in deferrals in the short term, but that's not the case with -- it's not the case with our airlines. That's not how we've managed our airline. Let me just take a quick look here and see if there's any questions that I haven't already answered. All right, I'm going to make you do some work here. And maybe I already should have done. I can't get really quickly here. So there's a question here to comment on our hedging strategy and how much fuel and currency do we plan to hedge going forward.

So we never changed our policy, we need to have at least 50% of hedge for fuel risk being covered by derivatives given that always in a normalized market, we can achieve up to 60% of pricing power coverage through our management. Right now, if you [ going to see ] the first quarter or the movement in the last 4 months, on the beginning of 2022, the recapture on the use -- the pass-through on the fuel quarter is almost 100%. And then we have this new scale up of fuel prices combined by also the devaluation of U.S. -- Brazilian real. But we are -- given that we are starting to get back some of the private capacity, especially for derivative counterparties, we, of course, are not wasting a lot of premiums or cash to buy derivatives. And also, we are not taking so much risk on some derivatives that are going to have some downside risk as well. So we are building that in some opportunity when the markets can take some volatility. So as Richard mentioned in the beginning, we roughly right now have about -- we have been increasing the derivative position in a very attractive prices. So right now, below $100, some close to $90, around 50% to 20% in terms of the next 12 months for fuel price. FX in Brazil, as you know, emerging markets have been suffering due to this external inflation or what's happening related to rates. So -- and also in Brazil, due to the carry cost to buy hedges for FX will be very expensive. So we protect short-term volatility on FX in order to buy something close to 20%, but no more than that because it's going to be very expensive, not going to be attractive. So the best way to protect margins, especially on the FX volatility really through our management and doing on the fuel side, given that it's more structural, we try to focus more in terms of the hedge strategy for the fuel side.

We have another question. Maybe you can take this one. It's a question on cargo. Because as you see, we've been doing a lot with the cargo business. Question here is to provide some further perspective on our initiatives in cargo that can drive competitive advantages.

Yes. We -- our business model, we never intended to have dedicated cargo aircraft or to take the risk of cargo business as some of the comparisons because -- we really need to fulfill those aircraft, lift cargo and manage the yield. So that new partnership that we made with Mercado Libre, Mercado Libre takes the risk. So we operate the aircraft to them. Why they choose us because as a single-type fleet model, we can deliver the lowest unit cost for Mercado Libre, where, in Brazil, we are experiencing the same shortening in terms of delivering packages, as you have seen right now in the U.S. So that can allow Mercado Libre also to increase the price with the more fast deliver and also with the lowest cost that we can provide to them. So one strategy for us is not only to capture the revenue coming from the cargo -- dedicated cargo business without the cost that's going to be associated to that. And at the same time, we can start to address the ironies of the company as was disclosed in our recent press releases this year, we're going to be starting, especially in the second half of the year to operate between 2 to 3 aircrafts. So 3 aircrafts are going to be expected for the next year. And that can be achieved up to 12 aircrafts until the end of the long-term partnership. So we can start to reduce the idleness by converting the existing NGs into cargo. The conversion of the aircraft into cargo aircraft is much cheaper than actually the ending -- end of lease adjustments or end of these obligations that we need to pay back to the lessor. We can decide to return aircraft to them. So that creates, of course, a new opportunity to increase the ancillary revenues through cargo and also have a benefit on the cost side.

So what I'll do now is I'm going to -- there's a couple of questions on ABRA. I think we'll wrap up this kind of the prior Q&A, but we can also have a dialogue here. I mean however you guys want to do, I just -- just in terms of the efficiency for the platform, and then we can have a conversation here if you guys have other questions. And so just there's kind of some general questions about ABRA, how does it make GOL stronger? Could it be a source for additional capital? What synergies. And then the question for -- what role would GOL play in structure that the controlling shareholder growth is created. And then there's a final one here. How do you do this transaction for GOL [ BZ ], which is specifically the bonds in terms of synergies and future growth, change in control? Is it a JV with equal parts or is it a permitted holders group in control out of. So kind of going through these things. We tried to explain the basics when we did the announcement. The closing is expected for the end of July. We already have the antitrust approval from the relevant markets, which is Brazil and U.S. That's already occurred. And the closing that is expected towards the end of July. I think at that point in time, we will have a much more detailed conversation about what things are going to look like going forward. I think what was announced was -- what the shareholders did -- the controlling shareholder of GOL and the principal shareholders of Avianca, also the expectation that the shareholders of Sky Airlines in Chile will come up with -- into the ABRA structure at a moment in time in the future. And so there's 4 operating companies involved, GOL, Avianca, Viva, and Sky in the overall birth of this portfolio, which is called ABRA. This is obviously something that's developed over a long period of time in terms of building the social relationships and the trust to allow this type of an adventure to happen. At the highest level, it's going to bring very important benefits to putting more stability into the business models of all of the companies that are participating. For those of you who follow airlines closely, I think some of you could back me up on this, that some people in this room when I did -- working with airlines for around 25 years, some people in this room, I think that have been even longer than that. But the airline business model on it's own requires high level of stability, just airlines specifically. And I'm not talking about loyalty, which is a much more agile business that has helped a lot in this current cycle. And stability is something that we have increasingly not have at present, especially if you look at post 2008, which has been a big problem, especially for airlines in developing markets, emerging markets. And that's the problem has increased over time where black swans that just became constant flock of swans, anyway. And so one of the objectives at the business level that we believe will achieve this greater stability in the business model, which will allow us to pursue our strategies more successfully and create more value out of the core airline business model. So this pan-regional group will bring those benefits. As we made clear in the announcement, we're not doing merger, right? We're not merging airlines. Each operating airline will keep its consumer, focus its brand, its operating teams and its culture and its agility on the ground. It's very important. Yes, there are substantial synergies in the future. Interesting thing probably compared to what you would normally characterize as the benefit of what you would call are high mergers, majority of the synergies are not on the cost side, but on the revenue side, which is cross-selling and loyalty and network and along those lines. But we'll provide -- for those of you that are interested in our ecosystem, many of you are already part of our ecosystem. We'll provide more details on that once we get beyond closing. But the second benefit in addition to the increased stability that we're going to be able to put into our business model through the creation of this portfolio is a better equilibrium in the environment, which is separate from stability, but better overall equilibrium to allow us to manage our businesses through what is a longer cycle than you are looking at as investors. I mean our cycle is -- our economic cycle is 8 to 12 years, in terms of the assets we have to invest in and how we have to finance them. It's over a very long cycle where it has become increasingly difficult to keep the average level of margins that allow to have a return on capital excess of the WACC and we only had very few smart years where you've been able to be at a certain level. And then the descent into the bad part of the cycle has been very fast and usually we stayed longer in the bad part of the cycle and the emergence out of the bad part of the cycle has been very slow. And so there's going to be other benefits on an industry level that we believe will give us a better economic equilibrium through this longer cycle. Now just going through some of the other questions here. Could it be the source for a capital raise. Well, as you saw, we announced, we've got $350 million coming into the holding company at closing, which is -- then we'll be at the discretion of the managers of the group in terms of how that gets deployed and that's private capital coming in. Just looking at the other questions here on this, and I'll lump them in here. There is some questions about how the governance and the shareholdings are coming out here. Yes. Yes, the controlling share of the GOL will be the largest individual shareholder of the group at closing. There'll still be a shareholders group. Sorry, a sales agreement among the group at closing. Constantino de Junior, the original CEO of GOL for the first 10 years will be group CEO. And the question there is no change of control in terms of how this -- legally how this was structured through the governance of the holding as well as the relationships between the holding and the operating companies there at the GOL level, which is the question of some people holding bonds. We have 3 different bonds and indentures. There's slightly different versions of the language around change of control and the convert, it's called fundamental change and the other 2 bonds is change in control. There is no change of control that would impact any of GOL's contractual relationships be the bonds or any other contracts that GOL has, we've stated that. And at closing when we move on the other side of that, I don't expect that we'll provide information to show that. Obviously, right now, we're in the pre-closing phase and so we can't provide any information -- additional information on that other than what I just said, but there is no change of control at GOL. So with that, I think -- we've covered all the relevant questions. We had allocated an hour for this presentation. So we've got about 4 minutes left. But of course, Mario and I can stay a little bit longer, if you want. Maybe another 10 or 15 minutes. To the extent that anybody else has any questions, otherwise, we can just wrap up and you can go to lunch. Yes, Michael.

You hadn't talked about.

Mike, can you just...

Press your button at the green.

Do I have to -- the name and affiliation. Mike Linenberg, Deutsche Bank. Rich, can you -- or Mario, just to pine on the slot reallocation at Congonhas. There's been a lot written about that. There's a lot out there. I guess it still hasn't been formalized. Do you get any additional slots? Or can you maybe give us some color on -- a lot of interpretations and I'm trying to...

It is finalized. As you know, the overarching driver there is the government's objectives for privatization, right? So the -- I believe in August, we'll be issued the -- begin the process for the privatization of the Congonhas airport, which is extremely important. It's kind of one of the crown jewels in the what formerly was the federal government's huge portfolio of the majority of airports. For the most part, the airport privatization program has been successful in terms of improving the passenger experience if you look at the various spaces that happened. So the beginning of that process is August for the Congonhas Airport. And so this is something that they want to get done prior to that, so there'll be clarity for that process on what's going to happen. And at the Congonhas airport, this relates to basically an increase in the operations at Congonhas which -- and I'll kind of keep it general as opposed to giving specific numbers which can sometimes be confusing if it's per hour or per day or so. But basically roughly take the airport back to the capacity it operated prior to the [ tarmac ] in terms of the number of operations per hour, roughly goes back to that. You can complement with some specific numbers after this. And so when the [ tarmac ] that had happened, there was a big reduction in capacity, they had to do some refurbishments at the airport, if you remember that. And so it goes back to that. And so at the macro level, it's a, it's positive because also whoever ends up effectively winning the concession of Congonhas, there's a multiyear project over about 3 years where they're going to expand the terminal. I don't know if you know, if you remember Congonhas, but the terminal is going to expand out. There's going to be additional fingers. It's going to replace that remote access. We have to take the bus and go up the stairs on the [ tarmac ] there. And it's going to go all the way down to -- I don't know that old vast hangars, it's going to go all the way down there. It's going to be a massive expansion. There's even on the drawing board potentially to have flights between Congonhas, which is the downtown São Paulo airport in Aeroparque, which is the downtown Argentina Airport. So probably not in this phase, but the government also wants to make it an international airport and have other activities there. So it's a fantastic project for the long term because as you know, one of the key constraints on our ability to grow as the airlines in Brazil is airport infrastructure. It's not a mystery that, if you look at just our 21 years, which we've finished our first 10 years, we went from 25 million employments per year when we started to 90 around year 10, Brazil basically has not grown that much. It's been bouncing around that. A lot of reasons, some of it related to what I was talking about, the increasing instability and ability to invest, but another big component has been infrastructure. It's like -- when I look at Mexico, Mexico now is the same size as Brazil roughly in terms of employment. One of the reasons for that is a big investment in airport infrastructure around Mexico. So this is a necessity for us. And so we have to embrace that and get behind it. Now specifically in terms of how it's being divided, a couple of things. Yes, it was complex in terms of the categories they created. But what I would say is what they did is the government came up with a scheme that basically reflected everybody's requests and a fair way to kind of, at the limit, keep everybody out. I think it was very smart what they did. And we, today, have only about 42% market share?

Yes. Around...

We got about 42%, 43% market share from Congonhas. One of the things that they will put in there as a rule. And then there's some cards out, but we'll be a capital on that of 45%. So that will be a capital market share of 45%.

But Rich, does that cap -- would that be applied to you plus your affiliates?

I'm going to go into...

Okay, because that's very nuance.

We're just going to go take it down. And then, of course, M&A would be excluded -- sorry, acquisitions will be excluded as we can't sell or trade slots. But if you acquire a company and the government approves the acquisition, well, then you can -- so there is a carve-out for that type of activity. What you're specifically referring to is the acquisition we did of MAP, which effectively kind of goes back to the Avianca Brazil bankruptcy process, where the slots, they were divided among 3 companies. Roughly, a 30 to [ sol ], MAP and Passaredo. And Passaredo MAP transfer the slots to MAP and so MAP does. That's under analysis if we want to proceed with that, we have the ability to not proceed with that if we do not want to or we could proceed with that if we want to. And it would more or less fall into the categories I just described. But that's being still discussed on our side.

When you say proceed, are you talking about acquiring Passaredo or...

No, no. Our...

[ Because you see on MAP. ]

Our -- if you remember, our acquisition of MAP is contingent upon certain things.

Okay. I see now.

And they relate to government approvals, okay? And the way that the -- this specific -- the new rules that came out, if we wanted to, we would not have to proceed with the acquisition because it didn't meet all the requirements there. But that's something that we're analyzing and discussing in terms of how it would be done. No, it would not be acquisition of Passaredo.

Okay. But you do have an affiliation with Passaredo as well through by any means boarding pass right?

We have a commercial relationship with that which Passaredo boarding pass, which is basically kind of like what you have here.

With the regional?

On the flight I took from Grand Rapids just to reach to New York.

But I'm saying that wouldn't be accounted against the 45%, if you have a marketing relationship with Passaredo and they bring on another 5% or 6%, 7%.

No.

Okay. That's important, I think.

No, no. That, no. That, no. I was going to say that the flight I took from Grand Rapids yesterday here was an endeavor. But it was a Delta branded.

Yes. Yes.

We don't have that. It's -- but we do effectively have a marketing relationship with Passaredo, where they are able to plug into our sales platform. And we also have capacity purchase agreements and so on. So -- but that would not be necessarily impacted by that. But these last 2 pieces that we discussed, they are still under -- I would say they are still under design and redesign because of the rules that came out when they cannot, right? And the government kind of had thread the needle on kind of keeping everybody happy. Now in terms of the categories that were created, there was a specific category created to which one company qualified. And that one company will go to 14% of this [indiscernible] that one company. And I think LATAM has like 42 were...

Yes.

So now you can go into some numbers because I know you'd like to give the exact numbers.

The numbers is still not defined. So we're still in the process. But I would say today, both going on, we split this kind of 42%, 44% of market share. The existing rule was supposed to -- even consider back to the Avianca [indiscernible] that those players are going to be expecting to divide the pizza in the 3-piece, in the 3-slice. So of course, the priority of the government is in order to bring in new entrants to the market that doesn't exist currently. So of course, all these loss are going to -- starting to be splitted by the existing players. You have some specific requirements in terms of recent track record, the size of the aircraft in order to be qualified in [indiscernible]. So that's why that's one player, as Richard mentioned, that it's going to be qualified in those terms. On existing pass-through, if nothing happened, probably the slots on when is going to be divided by equally by 3 pieces, but that -- after that...

We're trying to do swaps that would come.

Yes, there's slots.

Beyond this reallocation, if there's any slots in the future, then they would roughly [indiscernible].

So that's not going to be derived. So even though I know it's going to be a prior 2 slots, but it's not going to be changed significantly their market share. Of course, Azul is going to be growing market share but not that it's going to be achieving the same size. So as Richard mentioned, it was kind of something that is going to start to create more equilibrium for those. At the same time that we're going to start to increase market share for the third participant, Congonhas is going to be increasing also the number of hours that have been operating that has been reduced after the 10 accident in a few years ago.

And then, Rich, I had a second question just on -- with the creation of Abra, if we think ahead a few years, will people, when they want to invest in, say, GOL, will the option be that they will do it through an investment in Abra shares? Is that kind of like the long term? I know you said you can't reveal until things get [indiscernible].

No. A couple of things. No, I mean Abra is a private company. Obviously, the first level, the -- I don't see -- I think each company is going to keep its activities from a debt perspective, be it the aircraft leasing. I think also the GOL levels, it's going to be -- continue to be extremely important. Its relationship also with the debt capital markets in terms of financing, we don't see that changing at all. On the equity side, if on the Avianca side, there's a large number of investors that have just converted from debt to equity, many of a financial nature and they're going to want liquidity. So I think it's reasonable to expect that the way our equity is going to be generated as Abra is going to have to list be a public company and generate liquidity for those equity investors. And Abra will have huge benefits in terms of the equation. Your equation that are very much like, which is how to increase the spread between return on invested capital and WACC, right? And so Abra will be able to have significant reduction in equity cost of capital. It also potentially contribute to the reduction in the debt cost of capital of all the members of the group. And so yes, it would make strategic sense to concentrate equity at the holding company and not have full liquidity. Those are decisions I think we'll make down the road for us to make any decisions about would relate to that. How long Abra would stay as a private entity and if it wouldn't become a public entity. At that point in time, then we could sit down and discuss what to do with the GOL public flow. But I don't think anybody should think that we would do things -- the same human beings are evolved with this project going forward for at least the next phase, right? We just -- it's interesting because today, it's kind of like the end of the last 10 years of GOL, the end of this cycle, and we've had 2 10-year cycles. So this is really the beginning of the next 10-year cycle for us. And so I don't think anyone, either on the debt investor side or the equity side, should expect that we would treat them any different because also we, as an airline, it's an absolute requirement that we have equity capital market access to finance our business in the most efficient best way possible. So I think it's reason to expect that, that would be ultimately concentrating the equity capital raising activities on a group basis at the holding co.

Absolutely. I think just your point about cost of equity, I mean, I could proceed down the road where Abra ends up selling shares to take out or to take in the GOL minority but GOL can still maintain its own debt in the public markets and Avianca can do.

Yes.

And that's -- I mean, again, I know we've all -- I'm sure many people have said this, they've thrown on the IAG structure that today, Aer Lingus and Iberia financed using their own balance sheet, but at the end of the day, it's IAG that issues the equity capital. So no, I think it's...

Correct. So we didn't copy IAG. I mean, you kind of have 2...

There are some elements that are similar, for sure.

Yes, there's parts out there. The one that most people think is IAG, but Air also has some as it's on the other side of the planet, a lot of people here don't look at it. But we did obviously study the best practices of those companies. But it's adapted to South America. We have -- we're coming from -- I mean there's more similarities from AirAsia from a customer perspective than in Europe, right? I mean, because we're in developing countries. The problems we have to deal with are additional -- in addition to the problems that a U.S. or a European airline has to deal with. And so yes, we're more like Europe than we are in the U.S. And if you want to take South America, it's much more like say, if you take the portfolio, it's much more like a European reality than a U.S. reality. And so it's -- there's a lot of very interesting components there. Yes, in addition to the operating synergies, which will, I think, probably share after closing what we're seeing there as we continue to keep a dialogue with everybody. I mean, at some point, we'll pivot and share more about that. But also on the cost of capital side, there are substantial synergies. And from a credit perspective as well as from an access perspective, but we're going to do it in a very slow methodical way, but it has been a lot of anxiety to -- I would say, from -- in our ecosystem, more from the bondholder side. Frankly, we've gotten -- I would always mention to say that we've gotten 0 questions from equity investors. There's obviously a lot of reasons for that. But on the bond side, there's been a lot of anxiety to which I say 2 things, is one is our capital market access from the debt market is going to continue to be extremely important. And so we're going to continue to build those relationships and treat that in the right way. And number two, there is no change of control. And so nobody is getting any money back in the next 30 days. And so it's going to be status quo for the time being. And then next year, we -- at the GOL level, we'll be sitting down and probably like we've already done, having conversations with the buy-side people to figure out how we navigate the next couple of years from a financing perspective, like we've done during the pandemic and like we've done pre-pandemic. And our capital structure today and the GOL capital structure, the tools we have are the tools we're going to use. I mean we have -- the purpose was a bit of an opportunistic transaction. That structure doesn't exist today, okay? The exchangeable, if you will, to convert, we spent a lot of time developing that technology. Unlikely we would repeat that at the GOL level, but it's still a technology that we'd like to use in the group. And so the primary 2 tools we have in terms of the public capital markets are the secured and the unsecured structures. We spent a lot of time developing those and not just from a structural perspective, but also from an investor perspective, and there's no reason not to expect that we'll use those tools through the next cycle at GOL. We like those tools. They worked very well. We have some great relationships with the buy side, and it's kind of worked out very well. And including, we'll also look at ways we could replicate best practices across the group. If there's something that Avianca is doing well, operational financially that we could apply to GOL, we're going to do that. And so if we have some good technologies that GOL on the debt capital market side, we can also use them across the group. I would say it's unlikely that we'd be using the holding company to raise debt. It will be at the operating company level. I think that's how we'll do it. Not just from a tax perspective, I think that's the way that makes sense. But yes, at the tone, the equity, it would make sense to concentrate that at one level, not that's full liquidity. We'll have to analyze a lot to see how things are. I mean, right now, we don't really even have the luxury of -- there's several steps we have to get through before we can sit down and look at that. And I would say the earliest, that's more of a next year-type issue. Of course, we have to treat everybody fairly. There is no -- you have to not just respect the minimum rules of each local regulatory environment, but we have to respect the rules of playing repeat game with our investors. And that's how we've done it regardless of what some short-term anxieties would be. Part of the reason why we're here today in addition to we normally try to do this event on our anniversary here is also because there's been a lot of -- and it's not about the [ Abra ] transaction, just relates more to how we're managing the tail end of the pandemic here and how we're thinking about things. So it's an efficient way for us to kind of answer questions, but we don't have much more information that we provided today. That's -- that's as simple as that in terms of how we're managing the business. If there's other information that you guys have, it's not -- it doesn't come from us as managers of the business, be it competitively or otherwise. We continue to work on getting our operations fully normalized, which is going to be in Q4. And so you got to -- when you look at the numbers, those numbers are still there. They're going to be in the Q2 numbers also. There's still a lot of -- until we get GOL back to 12 hours a day of aircraft utilization, we're not satisfied, and we're not there yet. We're still carrying an efficiency on the operating side. But once that comes in, then we start to get on the other side of it fully where not just is our nose above the water, but the whole body then when we start to generate that excess liquidity that you see. And all of that has nothing to do with Abra, right? Abra is a separate element that's going to take time to build in the synergies and the structures to do it. But it does represent kind of a platform for our next 10 years, which is how we're looking at it also on a very long-term basis. But on a short-term basis, it's status quo and make short-term for at least the next couple of quarters, we're all in this together, and we'll have to navigate it. But we'll continue to have consistency in our management team, right? The same people that you've been dealing with us or the same people you're going to be doing what's in the foreseeable future as well. I mentioned very briefly at the beginning, we're doing a transition now from Kaki to Celso. Celso and I have been working together for almost 2 decades. Celso has grown up in the GOL structure, work in a variety of areas. Became a Boeing 737 pilot and has worked through all the relevant areas and crises to be the perfect guy to assume the shop.

Does he still fly the line?

Yes.

Okay. Is he going to continue as a CEO? Will he...

Every Thursday at about noon, he comes to the office with a huge smile on his face. Well, the MAX is a great aircraft just myself, just go at the coffee and kind of [ challenge ], if you will, when anybody comes back with that adrenaline. But yes, no, he does it. It's something that GOL's kind of always had. We've always had our COO person. But hopefully, he doesn't get consumed.

[indiscernible] Captain.

[indiscernible] and now Celso. It's kind of been our tradition. It makes a huge difference. It also gives us a lot of street cred with labor. It's a totally different scenario. But I think if you're asking the question, and I'll have to keep on him that he doesn't get consumed by other responsibilities that falls off. But generally, with pilot stay, you have the frequency issue, right? So at least once a week, you got to be doing something.

Take your time.

I don't think give he was going to give that up. And it's interesting because he's still a -- in that hierarchy there, he's still a subordinate as well, as seniority. So it kind of keeps his feet on the ground which is, I think as good as [indiscernible].

Does this pay rate per hours change? Is he a 12-year captain now? Okay.

But it's good. It's -- so they kind of keep him get grounded there. So that's a good question. I think that's a good place to kind of wrap it up, unless anybody has anything really important that you talk to me. Yes, you do.

No, just super quickly, any sort of very high level data, we think the 2028 sort of -- what sort of top line you can see coming from Smiles as a maybe a weighting of that?

For when?

2026, 2027. Just kind of longer term, the high level.

5 years ago. Sky is the limit.

Yes. Smiles has been using their buildings even in the middle of the pandemic. We've always treated Smiles as kind of a protected products, counter-hedged rather where when you see some slow down the traffic, you will see more empty seats to be fulfilled by a Smiles product that has been boosted, especially during this pandemic attributed to this new behavior of the customer related to e-commerce, buying stocks in the e-commerce platform. So Smiles has been consistent beating even the Black Friday month during the sequential last 4 months. And this has been also one of the main tools for us in terms of working capital management.

We take the rule of 72. At the rate Smiles is growing it, like '28 should be doubled. It should be doubled the rate it's at now. If you assume it's going to grow the average rate it's been doing. But it's -- the thing with Smiles, the wrong thing to do with Smiles is to try to think about it -- well, without getting into it, it's a very agile business, right? So just looking at it during the pandemic. Yes, it's like very beginning, it kind of -- but they're just kind of got it back, right? And it's not that it's a question of resilient, it's just very agile and dynamic as fungibility across the whole -- and we're also expanding it geographically. Smiles right now is the second largest loyalty program of any bank in Argentina. And it's been there for a couple of years. And so and also potentially together with life miles, there's a lot we can do on a pan-regional basis across that. So I said, really, the sky is the limit and the main customer there, remember, is banks. And even more basic than that, remember, the whole reason like airline loyalty program has such value, it's going to is a combination of the moral hazard with the aspirational nature of the product, meaning that most people think that they didn't pay anything to get that at [indiscernible] that mileage point, even though it was paid by -- if your [ C bank ] is -- you're traveling, you're getting the points for -- you think you got it for free, but you don't have 100% breakage. I mean if your points you got were to pay -- to buy toaster ovens, you probably have 90% breakage, 95% breakage, right? But why do we have 20 going to 15% breakage because there is this aspirational, emotional saying attached to -- and of course, people like you also value the status of components that you get in terms of making your travel a little bit marginally better. And the airline business has been one of the few businesses that maybe an exception is a little bit hotels, but very few of the businesses have been able to capture that. And so it's got a massive potential over the next cycle. The -- and we've also been able to use it and just kind of make it relevant for people here. They don't realize it, right? We didn't get [ cover ] for it. It's funny because I think -- the way I think about it, it took us 2 years, and then we got it done and then I think a little like 30 days later, but it was like, what's next, right? It was like nobody -- and so -- but when you look at the numbers, that was 5 -- since we took it in, that was BRL 5 million to BRL 6 million per day of cash flow that we would not have had access to, which is very large, right? It's about that BRL 146 million of cash flow. And so I think like from a credit perspective, when I look about how some of you, including in this room, let at GOL and thought about GOL, pre-pandemic and previous Smiles taken, you're not properly -- somebody is -- the market is not properly valuing what was structurally done. And that BRL 1.1 billion, of which BRL 700 million was cash. And when you look at it, it was BRL 1.3 billion gross and then about BRL 1 billion as because there was around a BRL 250 million dividend in recycle. We actually paid minorities with the dividend because once we announced it, it was pre-dividend, that was ex dividend, we paid them with the dividend. And so the BRL 250 million that went out of the dividend plus the cash portion we paid was BRL 750 million. So the cash that we used during the pandemic. I mean, [ alone ], right? And so we did that during the pandemic, and then we did BRL 600 million of equity as well. So we did BRL 1 billion of equity during the pandemic. The BRL 400 million that was anchored by Junior and the BRL 600 million of Smiles. I don't think we get credit. And that cash flow became our sort of July of 2020. And then by September of that year, we had already effected a 30% improvement in the yields on the inventory of GOL that was being sold by Smiles to Smiles customers as of September, and we shared this data with everyone. And we're just whatever -- so I don't mind because it made a big difference in how we're managing the working capital because we no longer have to do these kind of acrobatics to try to get the cash from one side to the other. And so we had a very different and which came in at the right time as well because if you remember, nobody expected the Delta [indiscernible], and we have that. And so we definitely have not gotten credit for that. When I say that, it's not just that we -- the Smiles taken is paid for. It's fully paid for already. We've got a 1-year -- and not just because we have a 1-year payback on it from a cash perspective, is that where we are right now, that is accruing and growing in the business. And that's definitely not in the -- I would say, the credit analysis. And frankly, I don't know exactly why because it's almost like you said, we hadn't done it. I still have the BRL 700 million of cash on the balance sheet. I get more credit to that than having done it. And it's BRL 5 billion NPV difference between having done it and not done it. So I don't know. But I always try to think that the market is efficient. So they're seeing something that I'm not seeing, but it's made a big difference in our working capital management, right? It would have been very different last 18 months that we not got it done. It was very difficult to get it done, too, obviously. So we how we kind of did it over a period of time. And so yes, when you think about it, you combine that with the answer to your question, which is 5 years from now, Smiles should on a scale basis should be doubled. And the way to think about the sales is basically 90% margin sales, right, because the costs are so de minimis. But in the old world, you had that 40% -- that 40% EBITDA margin that you guys always thought about for Smiles, at the end of the day, on a group basis, that was kind of 5%, right? But that 5% is already 7%, and it's coming from the outside in. So we've already increased the margin of GOL on an apples-to-apples basis because of the take it. We're also not getting credit for that 200 basis points. But it's in there, we know it's in there. And -- but then also as you look at the growth of it, you don't have to increase the fixed cost of Smiles to grow the business or just go to like a revenue stream that grows and it's mostly cash flow. So it's extremely large. But it always doesn't matter what I'm saying because tomorrow, we're not going to get credit for tomorrow or next week or next month or next year, which also I may say, fine. I don't need to get credit for it from investors because the banks are getting the credit for. That's what...

Yes, Rich, I was going to say just quickly to interject in a way, it's not that investors don't appreciate. It's the difference between the long game and the short game. The analogy I'm going to give you is there are still people today who will say, GOL overpaid for Varig. And if you think about that statement and where you are today and what you've got from Varig when we think about going from, what, 7% in Congonhas to 45% in Smiles and you think about all the value that the 2 of those have generated for the GOL franchise, which, absent that, think about how you would have done through the horrible recession of '15, '16 and '17, you probably would have been bankrupt. You probably would have gone bankrupt multiple times.

I think the acquisition was around 25% of Congonhas. And which you also remember, we've used the acquisition tools to pretty much the only one that has. And we paid $90 million of cash and we still got some money that a fund up here in New York still owes us that we might get people [indiscernible] ultimately end up being less than that right? And but exactly...

But the Smiles was the jewel.

You're right. But even on that, it's like, yes, whatever.

But they'll tell me today, someone will say, "Oh, they overpaid. That was the dumbest move everyone, I'm like, have you followed the company the last 10 years?

Okay. Just think about what 25% of operating rates in Congonhas is worth today. It's worth lower than $98 million. But yes, we're -- yes, you're right. But I think the way I view that is a little bit different. It's like -- I think you have to look at the human out, right? And I think there's also been -- because there's been a lot of competition of narratives out there, right? And we just don't waste a whole lot of time on that. We tend to take things very personally at GOL. And for us, it is more about the long-term value creation. Maybe to detriment a little bit of us kind of having a narrative that is super short-term focused. I think it's just kind of how we are as managers. We have more of an ownership mentality. And it also relates, I think, to our the way we're just structured as a strong shareholder. We have -- the most important thing for us is unit cost and a lot of these other things that we've been able to benefit from have come out of initiatives that have related to preserving the core business, such as Smiles, right? I mean you mentioned the VRG, the [ Varig ] acquisition, that's when we got the Smiles, right? And at the time, I don't think we would have predicted what we could have done with it. And my point is a little bit along the lines of, I think, in a way I've engaged with certain people. And I think the people we've been able to raise primary capital from because a lot of here is like secondary capital. It's like you guys are trading amongst yourselves, and we're not a direct beneficiary of that. But any time we've had to sit down and constructively raise primary capital, we do give credit for this of what we've done as managers, meaning the trust that people are going to put to us and we'll negotiate a reasonable deal. And so I think that's where I'm okay with maybe -- if we don't get credit for something in the short-term because I'm not raising partner capital. That was to me is when I got to open the door and bring the capital in, and I can't impair the business, right, by being a bad capital raise. And there, I think we've got the credit for who we are as managers. Because at the end of the day, you don't invest in a company, you invest in a manager, right? Especially when you talk about an airline, right? And remember, we're an airline, we didn't get a dime from the government during the pandemic, out of that. We got indirect help through postponement of fees and taxes and things like that. So a lot of times I remind it when I come up here now the $50 billion that went into the U.S. airlines, I just like to -- it's not even -- so everything we did that we showed today without that equivalent of $50 billion in Brazil.

Rich, when you say the -- you're getting credit from the creditors on the Smiles program, right, are they taking 7% of EBITDA and putting 15x to 20x multiple on that and just saying, hey, we like the value that's embedded on the balance sheet.

What do I mean by that?

Yes. I'm just asking, is that how the...

No, what I mean is that, for example, we do the Smiles asset has allowed us to raise debt capital directly and indirect. We've also brought to the number, we've used Smiles to generate additional cash. And so we have gotten credit in terms of primary capital coming in. We've also preserved as well. Just the fact that we have it and we can use it, it provides a big cushion. So that has helped us when it is bad. But we're like what really matters like WACC is a theoretical number. But when you raise capital, on that day you raise capital, it's a real number. It's like whatever -- if you raise it a too high of a number, you've been [indiscernible] business, which our competitors did, right? If you look at -- there's a lot of reasons why somebody might have to file for bankruptcy, but one of it might be that you have the wrong capital structure or you impaired yourself in a different way, right? If you want to impair it, you wouldn't have to do and other guys kind of live kind of half impaired, right? So we also kind of look at it from the lens of everything we have to do can't impair our business. And we made mistakes in the past as well with capital raising between 2009 and 2015. There were some capital raises done there. They've impaired the business. They're not going to -- no longer part of the capital structure. So yes, I think when it has mattered, we've been able to capture that. But you can only see it on a long-term basis because how would you see it? Well, we didn't file Chapter 11. And so we didn't impair our business. So I mean, you have to look at kind of that way, what you didn't do, right? So we have our stakes, too, no question, right? No question. That was more kind of what I'm saying because for me, it's kind of curious -- and but we would still do it, except for us, it's very personal as the longer-term value that we're creating and it can take into the whole Smiles project, if you go from start to finish, it's about a 3-year process, right? And most of you wouldn't -- you don't write about something over a 3-year period, right? Analyze something over a 3-year period, but we've had the ability to do that kind of look out to year 2 and 3 in and manage that. And that's very similar to what we're doing with the other strategic initiatives that you're saying. These aren't like financial arbitrages or a quick flip on something. These are long-term initiatives. That's what you get with us as managers, saying that's just our mentality. It's very personal. Mario has also been working at GOL as long as me and Celso. So there's also -- we're -- we really are building something for the long-term. in everything we do. That also relates to the Abra project. It's part of the same process. And so we very much expect to be having these types of conversations for the next 10 years, for instance. It's not something that we're just trying to fix a short-term problem during the pandemic, we have to be very methodical and very patient because it could have been very easy in 2020 to do some quick fixes so that you wouldn't have to work for a year, right? It's easy to file a Chapter 11 and then the hard thing is not to do it, right? And so no, I'm not judging people have to do it for different reasons. But -- that's just kind of our -- I think we are unique in that respect still, right? Anyway, with that, I guess we'll just wrap up now. Too hungry. Are we still on the webcast or we already disconnected?

No. Still on the webcast.