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

Welcome to Gol Linhas Aéreas Conference Call to discuss the Third Quarter 2023 Results. This morning, the company released its results. After Gol's presentation, we'll begin the question-and-answer section initially for analysts and investors, followed by the journalists present at which time, further instructions will be provided. This event is being broadcast via Zoom and can be accessed on the company's website in voegol.com.br/ir. We inform you that all participants will only be listening to the event during the presentation. And then the participants will also be able to send their questions on the platform and they will be answered by the management during this conference call or by Gol's Investor Relations team after the end of the conference call. From now on, participants are already free to submit questions through the Zoom platform. All you have to do is click on the Q&A button located at the bottom bar of your screen and type your question. Before proceeding, I would like to emphasize that the forward-looking statements are based on the beliefs and assumptions of the company's management and the current information available to Gol. These statements may involve risks and uncertainties as they relate to future events and therefore, depends on circumstances that may or may not occur. Investors, analysts and journalists should take into account that events related to the macroeconomic environment, the segment and other factors could cause results to differ materially from those expressed in the respective forward-looking statements. Now, I give the floor to Mr. Ferrer. Please, Mr. Ferrer, you may begin your conference.

Good morning, everyone. Thank you for your availability today on our earnings call. This morning, we published our third quarter earnings release and a presentation on Gol's Investor Relations website. So, we will just make a few brief comments here and get straight to your questions. The third quarter was another solid milestone to demonstrate that Gol's strategy and execution in adding profitable growth is generating consistent results as we expected. This has been achieved by the trust we have retained from our customers, investors, suppliers, lessors and in particular, our team who have done an impressive job and whose dedication has been the key factor that continues to drive us in this space of recovery. Between July and September, Gol transported more than 8 million passengers in more than 57,000 departures. This represents a year-over-year increase of 16% and 13%, respectively. We continue to launch and inaugurate new bases in the regional markets, such as cities as Uberaba in Minas Gerais and Aracatuba in Sao Paulo. In the international markets, we increased our ASK supply by 5%, mainly South America markets compared to the third quarter of 2022. We continue on our disciplined path to profitable capacity recover. As can be seen, the 2.4 percentage points increase in our load factor, while our aircraft utilization rate increased by 2% to 11.3 hours per day. Yield grew 4.5% in the period, while our RASK is up by 7.6% and our RASK increased 10.7%. This demonstrates the potential we have been achieving through the initiatives to diversify other revenues with Smiles and GOLLOG businesses. The first Smiles, which has a direct relationship with the perception of a better flight experience expanded its customer base by more than 80% year-over-year and reached more than BRL 1 billion in revenue. Our GOLLOG cargo unit more than doubled its revenue, even with our organic capacity still constrained by the slower pace supply of our passenger aircraft fleet. We have further expanded our partnership with Mercado Livre, which has already provided GOLLOG with leadership in cargo volume shares in tonnes per kilometer. And we have been exploring new opportunities for cargo synergies between the dedicated fleet of freighters and the space in the cargo belly of the Gol's aircraft. In addition, this partnership has the option to expand up to 6 more incremental aircraft, reaching a fleet of up to 12 aircraft in the coming years. This quarter, we also maintained the growth pace of our tour operator, Smiles Viagens. Launched last quarter, which, at this moment, in addition to expanding its portfolio of products and partnership has also been expanding directly negotiations with hotels, which already added to more than 800 distribution agents in the Brazilian and international segments. Combined, other revenues represents a 65% year-over-year increase to BRL 413 million. For another consecutive quarter, we achieved record revenues for the third quarter of BRL 4.7 billion, with an EBIT operating margin of 17.7%, an increase of more than 11 percentage points comparing to the previous years, positioning Gol among the companies with the best operating performance in the sector. The attractiveness of our network and positioning in the main markets of high traffic and demand for Leisure and Business segments has been the main differentiator for our revenue performance. As corporate demand picks up, the number of take-offs has increased by 13% with a reduction in the average stage length of 7.5% and which has an impact on our costs. Our CASK ex-fuel for passenger operations increased 4.9% comparing to third quarter 2022, mainly due to return of 4 aircrafts this quarter and lower dilution of our fixed costs that are still impacted by a number of nonoperating aircraft that remain temporarily in our fleet. Without the aircraft returns in this quarter, our CASK ex-fuel would represent stability in the same comparison. Even so, we managed through our disciplined capacity management to preserve profitability with yields that also increased in the same proportion with higher occupancy rates, which grew 2.4 points compared to the previous year. While our ASKs increased by 5.2% compared to last year, they are still 19.3% lower comparing to third quarter 2019. In terms of operating fleet, we operated 108 aircraft in the third quarter 2023, while in the third quarter in '19, we had 115 operation aircraft, 7 more than this quarter. We are committed to increase the productivity of our fleet while we operate with temporarily low capacity and to incur higher costs for returning on operating aircraft. We expect a transitory impact of our ex-fuel cost to the levels higher than 2019 levels. We are focused on resuming capacity discipline. The rightsizing of our fleet will allow Gol to deliver even higher levels of profitability and to optimize its low-cost business model supported by higher aircraft utilization. We believe this is an opportunity to upside in cost efficiencies that does not exist for our competitors who are already pushing to the upper end of their historical fleet utilization. The industry has been impacted by uncertainties in the schedule of deliveries of neo aircrafts by manufacturers. In our case, of a total of 15 aircrafts scheduled for the year of 2023, Gol has so far added only 1 neo 737 MAX 8 aircraft to our passenger fleet. On another side, as part of our fleet renewal plan and recovery of our productivity and operational efficiency, we returned 4 737NGs aircraft in this quarter and 7 since the beginning of the year. We will continue with the plan to replace NGs with MAX over the next few quarters. As part of the exclusive agreement with Mercado Livre for cargo transportation, we received the fifth 737-800BCF aircraft this quarter. And in the month of October, we received the sixth freighter aircraft completing the commitment of 6 aircraft for the year 2023. We have invested in improving our digital channels, which have reached the highest level of self-services. As capacity increased our fleet returns to 2019 levels, we believe that our dedication to cost efficiency and our team's commitment to provide the best customer experience, we reinforce Gol's already consolidated competitive position in the market. In terms of discipline and commitment to executed by the Gol team, we will continue on the right track with our plans to continue to be the benchmark for the lowest unit cost in the region. Excluding the effects of the freighter fleet, our total unit cost decreased by 9.5% comparing to last year. The consistent results we have presented in recent quarters, an important for a recovery in our cash flow from operating activities, which reached BRL 0.9 billion in the quarter. Finally, we would also like to highlight that this October, we renew for another 10 years, our exclusive commercial agreement with Air France-KLM, which represents the expansion of the code share that will provide better connectivity to more than 125 destinations in Europe and Brazil and also in the future, new destinations through Latin America. This strengthening of the partnership also provides for the enhancement of joint sales and more benefits for customers of Gol's Smiles and Air France-KLM's Flying Blue loyalty programs as well an expansion of the Air France-KLM workshop existing engine maintenance support for Gol's CFM56 and LEAP engines. We are sure that some of the initiatives we have taken to increase our productivity will be fundamental to take Gol to a new level in the coming months. I will now turn the floor to Mario, who will represent some other highlights.

Thanks, Celso. I want first to start to thank our entire Gol team for this very incredible hard work and dedication during this quarter. They have been doing excellent and tireless work to improve our operational efficiency and our clients' experience, which has been reflected in the achievement of record net revenue in this Q3 and consistency of margins quarter-over-quarter. And even the EBIT and EBITDA margin is reaching a strong levels of 17.7% and 26.8%, respectively. Our EBITDA for the quarter was BRL 1.25 billion, while our operating profit was BRL 825 million. Our yields and RASK also reached record levels, growing 4.5% and 10.7%, respectively to BRL 0.47 and BRL 0.43. We reached BRL 5.4 billion in sales volume this quarter, demonstrating that future booking curves remain strong and with continuously high load factors. Our demand in domestic market continues to grow consistently and resiliency. We had the best Gol ever according to ANAC with 8.2 million passenger support in Brazil. In addition, business travel saw also 17.3% increase compared to the previous quarter and continues to improve consistently as companies continue to show return to office initiatives. With a comprehensive and proven business strategy, together with the most qualified team in the industry, have created a healthy combination of capacity recovery and yield growth. Our total unit cost was decreased by approximately 8% year-over-year, helped by the decrease in the jet fuel prices during this quarter. We are committed to continue to deliver the best cost performance in the industry. We also, this quarter, we completed 2 major liability management transaction. The first one was related to the refinancing of BRL 1 billion debentures with the Brazil local banks, which resulted in 30 months extension as the new term now is June '26. And we have the support of those local debenture banks in allowing us to better adjustment of the debt to the Gol's growing cash flow. The second was the completion of the conversion of $1.2 billion of SSN, senior secured notes into a convertible debt instrument, the ESSN maturing in 2028. So, no change in terms of the -- the terms and condition of the SSN. In the middle of this process, a total of BRL 992 million of Gol's warrants has been subscribed and has been issued, which may be converted into shares in the future at an exercise price of BRL 5.82 per share, which would result in a pro forma deal in a reduction of approximately BRL 6 billion in Gol's total indebtedness, the total leverage. Strengthening our balance sheet remains a top priority. Our fundamentals continue to improve as we reduce our leverage to 4x as of September 30 of this year, this third quarter from 9.5x by the end of last year. So, it's almost 5x reduction in terms of leverage, mainly impacted or contributed by the recovery in our EBITDA and the reduction of net debt in this period. To conclude my highlights and in order to provide the usual transparency to our investors, we are pre-dating our financial outlook for this year 2023, reflecting the 9 months results, that has been already delivered with a more challenging scenario for fuel cost for 4Q '23 that practically offset the benefit generating throughout the second quarter '23 mostly. And also the impacts on capacity derived from the current uncertainty in our fleet plan that generate a lower dilution in our fixed costs, especially on the CASK ex-fuel impact for the 4Q '23. Now, I return the floor to Celso.

Thank you, Mario. We will maintain our dedication through initiatives that promote a broader diversification of revenue sources and above all, those that lead to improvements in productivity and efficiency. Our operation continues to build on the solid foundations we have established in recent years and our commitment to provide reliability, profitability and strengthening our balance sheet. Our business model has proven to be [ robustic ] with a strong track record of execution and industry leadership. We are confident in our ability to deliver significant improvement, particularly in capturing upsides for reduction of our ex-fuel CASK. So to conclude, I would like to thank our Eagles team for the new record on revenues, that higher margins and the excellent experience they provide daily to our customers. I'm extremely proud of this team's role in rebuilding the best-performing airline in the region. Their dedication is what continues to propel us to the top. Carrey, you can start the Q&A question.

Thank you. The conference call is now open for questions initially only for analysts and investors. At the end of this stage, we will open for questions from the journalists present. [Operator Instructions] Please wait while we receive the questions from investors and analysts. Our first question comes from Savi Syth from Raymond James.

Just on the utilization front, given that there is so much opportunity there, I was wondering if you could talk a little bit more about the biggest impediments to getting that utilization back to 12 hours and your kind of visibility on how you get there.

It's Celso. Thank you for your question. And as you know, we are working hard to achieve, let's say, the numbers that we used to fly for 12 hours per day. And we are almost there with the existing fleet. We still have some planes -- more planes that we normally have. In maintenance lines, we used to have 4 maintenance lines. Now, we have up to 8%, depending on the quarter. And so this is one of the hurdles we are facing. As well, we are now focused in this quarter, specifically the third quarter is where we reduce the stage length. We concentrate a lot of the operation in the short-haul to make sure we would be able to fly the customer -- the corporate customers' traffic. But as we go to the fourth quarter, we start to increase the red-eye flights, increase the stage length and especially now with the changes in Santos Dumont to Galeão that we are anticipating, even though we need to change in January, but we are anticipating to November-December. We want to increase the utilization of those planes for above 14 hours, which will drive our average to the 12 hours that you are mentioning.

That makes sense, and that explains why the ASKs are increased kind of unchanged there. If I might, just on your partnership with Air France-KLM, is there significant changes from the agreement that was there before and or tied to that, like what happens to some of the partnerships that you had to Europe, such as with TAP. Does that kind of get excluded with the new partnership?

No. We are not [ expanding ] any additional curve out of what we already have. I mean what we have with Air France-KLM is very special. We have been building long-term projects together. It's not only a code share. We are working for them to develop new gateways in Brazil, also making sure that we provide more connectivity. Now in Rio, we are reinforcing this by growing the Beyonce in Rio International. One of the main difference, it's not on the commercial passenger side, it's more on the MRO side that we increased, let's say, our contract with them for the next years to have more slots and also give access to maintenance for our NGs, CFM56 engines and also the LEAP. I think that's the big change that we're coming in a good time for us.

So, no kind of change to your other partnerships that are existing.

Not.

Our next question comes from Daniel McKenzie from Seaport Global.

Hopefully, you can hear me okay. Just following up on Savi's question here, if we're just kind of to approach that from a different perspective, what percent of the CASK ex-fuel eventually goes away when the structural overhead that you're carrying today normalizes. So for example, the excess pilots versus what you can fly the 8 lines of maintenance that eventually would potentially get to 4? And then if you could just clarify sort of a time line for when you might think this could normalize? Is it sometime in 2024? Or is it more realistic to assume that it's probably going to be closer to 2025 sometime?

Dan, very good question. And as I was explaining here this morning, we expect to have a higher cost ex-fuel for -- temporarily and to address, I mean, all the fleet constraints we have on the engine side but also on the delivery side and primarily on the delivery side, like you saw, we took delivery of 1 MAX out of the 15, and we may take [Technical Difficulty]. I think we had a problem with our connection.

I can hear you now.

You can hear me now. So sorry, we had a problem with my connection here. And so as I explained in my first comment here, we are going to face temporary increase in our CASK ex-fuel for at least 12 months. So, we expect to reach the level of productivities only by half of next year. We are -- as you said, we have this drag of fixed cost, which is not related to crew because in Brazil, we have a variable payment and we have a good agreement with our crew. So, we can fly more or fly a little bit less, not too much less like in the pandemic, but we can fly a little bit less with our crew. And we can accommodate this situation for, let's say, 6 to 9 months. We expect to have, let's say, the right ASK production with our existing fleet by third quarter next year with the same levels of cost ex-fuel that we have in 2019. It's not only on the CASK that you see the inefficiency, there is also on the lease payments. So, if you look at the lease payments, we still have 20 aircraft on the ground. This is the biggest drag that we have at this moment.

Let me add one point as well. Because of that constraints related to capacity, if you look to what we have been doing, especially in order to recover the efficiency of fleet, we are returning more -- a higher number of aircraft in order to reduce that level of, let's say, aircraft that is currently not under operation. So, this number came from something around 30 to 40 aircraft since by the end of pandemic and now is a number that is lower than 20%, but we still, as mentioned, said, we have some inefficiency on the cash flow because we are paying some of the leases that is either is not producing profit, right? So that is something that we are planning to be able to reduce until the end of next year. Potential is not going to be producing, let's say, all the revenue profitability already within the next year, but definitely is going to be preparing the company for entering 2025 without any leakage on that. And the constraint on the fleet as well is that we are probably going to be impacted by temporary unit cost is going to be a little bit higher, given the cost associated to return on the aircraft. And at the same time, we are not extracting gains for potential new deliveries that used to have if we receive all the deliveries according to the original plan. So basically, we have been very committed to drive the unit cost, the CASK ex-fuel in U.S. dollars to a similar level 2019. If you look to this quarter, maybe it's about USD 0.05 of CASK ex-fuel that is deviated mostly related to that capacity constraint. If you remember in the first guidance that we provided, we're expecting to increase much more towards 15% to 20% of [ SK ] this year and now we are reducing to maybe a low end of low double-digit area. So that's, of course, that impacts most of that cost because there's some limitation what we can do in terms of reducing the fixed cost and given the certainty, of course, this is structural overhead is something that's temporarily, but is that -- there's not a lot of room to reduce until we have a more clear view of what's going to be happening in the future. And if you look to the baseline, the company is generating a healthy profit, a healthy EBITDA, so it means that for every aircraft that we're going to be adding back to the operation, we're going to be creating additional cash flow that can help of course, the next coming year cash flow in order to address higher CapEx going forward.

And just following up on that last point, Mario, as we think about 2024 and as we think about some of these structural costs going away, what is the level of EBITDA next year that gets you to, say, free cash flow breakeven just based on the CapEx that you're looking at? So, I'm not asking for a forecast. I'm just trying to get a sense of the hurdle rate for generating cash next year. And then just kind of as a follow-on to that, to what extent is Gol's loyalty program unencumbered currently? And could it be used as a source of refinancing future debt that comes due in 2025?

Sure. For your first question, if you look this year, even with the EBITDA margin that we're providing, now Gol is reaching a neutral cash flow for the ongoing operations. So, for the current obligation, we can cover not only all the necessary related to the P&L, but also the CapEx for the ongoing operation. Of course, one of the main challenges right now is how we can address the balance sheet issues, right? And also the CapEx that has been remained from the previous years. So, some of the engines that you need to cover also this lack of new aircraft that was going to be supposed to be delivered, that's the impact on the cash flow. And the main problem, especially in this year was not the level of what Gol can generate in terms of EBITDA, but also the lack of credit availability, especially during the first half of the year. That is something that we are working in order to establish the credit capacity, especially for the CapEx, there has been one of the important sources that we have been able to create a financing support in the previous year. So, the point is that going forward, if you can consider that the recovering capacity can help the company in order to start to dilute fix a cost and also to drive the CASK ex fuel going down and at the same time, the market is still very aligned in terms of the discipline of continuing to keep yields and fares in a sustainable way that's going to be a natural expansion in terms of EBITDA. If you look prior to 2018 it was a number that's much closer to 29% to 30%. So we don't expect that, that recovery is going to be taking so fast. So maybe 1 percentage point every single year is something that is reasonable if you think that we can add capacity in conjunction to huge preservation going forward. And that definitely, if we resolve that about 15 to 20 idle aircraft in our fleet and put that back in operation, producing that EBITDA level that it has been healthy that can add as additional source in order to handle the CapEx going forward.

Yes. If I just squeeze one last quick one in here. The 15 MAXs that were planned for this year, the final expectation for 2023, if you could just remind us. And are those all going to get bunched into 2024? Or are there additional discussions with Boeing at this point for either additional compensation or for kind of a repacing of the order book?

Yes. Dan, sorry, I was answering your question and I had a connectivity problem. I was answering exactly this. And we took delivery of one plane, and we expect to take delivery of at least additional 4 until the end of the year. That's what we are working really close to Boeing now to -- it's like kind of almost everyday call to make sure that we take this capacity, which is now a little bit to the right of what we were expecting in the fourth quarter. And our main discussion today is how can we make sure that we -- I mean, we catch up as soon as possible next year on the deliveries because the best-case scenario today is to take 5 out of 15. So we need the extra 10 sooner than later at the beginning of the year, and this is what we are discussing with them, no answer yet.

Our next question comes from Joao Frizo from Goldman Sachs.

I have two from our side. The first one relates to the guidance you guys updated. So we were just wondering if you could help us reconcile the downward revision in net revenue guidance. If you were to take into account your capacity guidance for the year into your new net revenue guidance, this implies a deterioration quarter-over-quarter in RASK in 4Q. So I'm just trying to understand to what do you attribute this worsening? And the second question is related to the new exchangeable senior convertible notes. If you could just help us with the calculations to the [ BRL 3.9 billion ] you guys recognized as a derivative liability. Those are my 2 questions.

Sure. So thanks, John. So the first one, let me answer first the exchangeable first. So we -- this quarter, we issued the ESSN, right, that has converted about $1.2 billion of -- on the previous SSN. And if you look to the financial statements, we still have some portion of around $100 million of SSN that has still not been converted and is still sitting in the balance sheet. So you still have those 2 instruments in the balance sheet, but the major portion of the SSN has been already converted. And we -- followed by the IFRS accounting rule by converting into a SSN that is a convertible instrument, we need to split out 2 components. So first is a debt portion, what is going to be the fair value of the debt portion. And the second is to value what is going to be the implicit option, the embedded option because this is a convertible instrument that's going to be splitted in a different line of the balance sheet. So you see that in the loans and financings, the regional SSN now has recorded [ BRL 3.4 billion ], so it's about $680 million. And the separate component that's related to that derivative is splitting in another line. So we are just following what is required in terms of accounting rule because this is kind of a convertible instrument. And of course, by the end of the material conversion or even in the material of this debt, the lender, the Sabre will continue to collect the same $1.2 billion. But the books tended to reflect the time value for this option features. So if you add the 2 components in aggregate, it's probably going to take the same amount. And this fair value of the option will be valued each quarter. But that's already reflects kind of a derivative instrument that go against the equity. That's why it's not considered as a debt anymore. That answer the last question for you?

Yes. Super clear.

Okay. And the second was related to the guidance, right? So if you look to what we did, specifically everything was correlated to the fact that we reduced the number of operating fleet, and that was a result of that impact that we answered in the previous questions related to the lower number of MAX to be delivered. At the same time, we are still keeping the same rate of redeliveries that that's one of the main efforts that we are implementing in order to reduce that gap between the total fleet and the operating fleet. So the reducing -- in terms of new deliveries has been reducing the number of SKs. Actually, the SKs didn't change, but because we were in the middle end of SK and now we're moving much more into the low end, but you can see that in terms of seats and also departures, we were in the low end and now we reduced that guidance related to seats. So we are considering departures. And of course, that has been impacting lower number of revenue. You mentioned about RASK, we expect that yield is going to be more stable, but at the same time, RASK that is related to the contribution from loyalty and also from cargo, especially cargo because of the reduction in terms of the SKs so the capacity on the value of the aircraft, we're also going to be impacted. And if you look to, especially the revenue performance for this quarter, even though yields has been increased by 4.5% year-over-year, the RASK increased about 11% and has been mainly driven by the revenues that, that potential impact in terms of capacity will be also lower the contribution on the RASK coming from the revenues going forward, and that's why you have a lower revenue implicit in the guidance.

And just if I may, just a follow-up on the secured notes. If I'm not mistaken, you guys have not drawn everything you could draw from the [ $450 million ] in cash you could do. Could you just update us on how much have you guys already withdrawn with the SSN and how much is left?

Yes. Until the second quarter it was around [ $200 million ] that has been drawn. That's why we converted from the -- up to [ $1.4 billion ] of the SSN. We have been converting something above [ $1.2 billion ]. In this quarter, we utilized it primarily for the CapEx essential activities like acquisition of spare parts, something additional [ $50 million ] roughly.

Our next question comes from Victor Mizusaki from Bradesco BBI.

I have 2 questions here. The first one, you mentioned in the presentation that you have 6 options for cargo freighters for 2024. So my first question is, what will make you exercise these options? I mean can we assume that maybe you can announce a big contract maybe in Q4 or next year to treat these options? And the second one is related to the leasing contracts. In the income statement I think that you booked like BRL 60 million of gains with lease negotiations. So can you give additional details about this?

So on the cargo options that we have, we are -- the first commitment was the 6 aircraft and the number 6 has now arrived in October. And from the 7 to the 12, we go one by one. We don't need to go like an additional 6. And this is what we are working close to Mercado Livre to understand the demand environment. And of course, they do their forecast. And we are working to make sure that until the end of this year, we have a clear picture because we need to commit well in advance with those planes. So we are working with lessors, especially on our returns. If we can combine a lease return that we have on our existing passenger fleet to a conversion into cargo that's the best thing for us and for Mercado Livre. And this is what we did, by the way, in the 6 airplanes that we have. So we are discussing right now with the lessors, those options to make sure that we can start receiving those planes by second quarter next year. We go one by one. I'm sure it's going to be more than 6, but it's still early to say how many out of the 12 that we have. And on the second question that you raised, the gain was related to sale leasebacks that we did on the engines and also in one of the MAXs that we received. So we used to have finance leases on some engines that we turned into operating leases during the quarter.

Our next question comes from Jay Singh from Citi.

You guys have already answered one of my questions, but the other one I wanted to ask is, what sort of flow are you seeing from American Airlines?

Okay. Jay, we are -- I mean, constantly reviewing how can we improve the partnership with American that has been very strong since we signed that deal. And we are happy that American has now increased the capacity to Brazil. So especially, we have been feeding them a lot from Guarulhos, which is the main gateway, but we didn't have a great network so far in Rio International. And from this winter season and on, we are going to provide, let's say, a sizable beyond point from Rio International, and I'm sure that we will be contributing a lot to the American Airlines flights in Brazil. And they will probably stay with their flights for -- in the future. They have seasonal flights and for now, and I'm sure they will be seeing a lot of traffic going from Gol. We have with them the highest contribution that we already have with a partner in this corridor, which is more than 35% connectivity in most of their flights. So it's pretty strong. It's pretty strong also on the frequent flier in both frequent fliers. Our customers are now really understanding the partnership and flying with us, flying with them, advantages miles. And so we foresee that the flows will continue to increase during next year.

Just before the operator, going back to the other analysts, I wanted to have a question. We received some questions on the webcast platform. So I will be handling some of those questions. So first one was coming from [ Matt ], from one of our investors. Can you discuss the yield environment and the competitive landscape? So I would defer to Celso to respond on that one.

Yes. Thank you, Mario. And I think all the industry now has some sort of hurdling to grow capacity and no matter the fleet. And in our case, we mentioned a lot of the constraints we have right now, and we are facing a very rational environment in terms of yield and how the industry is behaving. We expect the yields to stay at this level. We don't -- of course, it's not our goal to increase fares. We want to grow, again, bring back planes back to the operation, be more productive with the fleet and give people better access to better fares. That's what we want. But we see that, especially in the next quarters, a very stable environment in the yields and a very rational industry potentially for the first time in many, many years in Brazil, not only in Brazil but also in the region. As we are expanding international, we are also seeing healthy yields on the regional international flights that we do.

Yes. And there's also another question from the webcast platform on -- can you give us some details about the fuel cost hedge? And what is the percentage of expected yields that is hedged? So we generally have a more concentration of hedge during the short term. So we have, for the next 2 quarters, 4Q and first Q, something around 30% to 40% hedge ratio. That, of course, hedge activities right now has been something, especially here for the Brazilian lines that is more costly. So we have been focusing much more in terms of the cash usage to the CapEx and to return the essential investments and we have been trying to select most costless instruments that can create some protection for the company, especially in this kind of a very volatile environment where we envision definitely for the fourth quarter, and that's one of the reasons why we kept the guidance for jet fuel per liter unchanged, even though we have some benefit during the second and the third quarter. But we started to see the prices on jet fuel for the 4 quarters. So beginning of fourth quarter now in October to stay higher than what is the level they produce. So ultimately, that most of the benefits on the first, let's say, 6 months prior to this quarter, it's going to be somehow compensated offset by more upside risk on the oil price going forward. But we have this strong yield environment, very disciplined in terms of the competitors that somehow creates a lower pressure to being so much hedged but we are much more constructive in the next 6 months. And there's also one question that came from Deutsche as our sell-side. He's putting here in the webcast and also getting back to us as well. With exclusivity with Air France-KLM, what does that mean for historical frequent flier problem tied with TAP airport to go? Does that no longer exist?

Thank you again for your question. And as I said, no changes in the TAP agreements, Air Portugal that we have today. TAP is a great partner. They are, I mean, very big in Brazil, flying to many gateways, and we are going to continue our partnership, our codeshare and also the frequent flier with them.

Our next question comes from Gabriel Rezende from Itau BBA.

I have just a quick follow-up regarding the delay to receive the aircraft from Boeing. So it is clear that you mentioned that you have some ground aircraft that are generating lease expenses not tied to revenue generation, and that is weighing on your cash flow. And you mentioned that this should also weigh on the gas figures looking forward. I would just like to confirm that we should see maybe a spike on maintenance expenses in the coming quarters because of these effects. I mean you're going to have to return these aircraft do some maintenance, some work on them to return them following your checklist and that we should see these higher maintenance expenses. Is that going to be one of the negative effects you're going to have because of this idle capacity?

Gabriel, it's -- as you can see in -- even in this quarter, which is a very robust results that we are delivering, but it has already the impact of 4 lease returns on the cost side, and that will probably continue. As we grow, we are looking to every airplane sit down with the lessor and say, "Look, can we bring those this plane back to the operation? Can we extend that lease? Can we invest in the right CapEx, invest on the engines and stay flying these NG or let's return?" So we are doing this and the other moving piece is the deliveries that we have very low visibility so far. That's why it's something that we are managing in the like 2-month time frame rolling basis. So we go and say, look, those are the candidates to bring those planes back to fly. We sit down with the lessor try to have a negotiation to return or to make sure we can fly those airplanes or we can take a MAX and return those planes. The level of maintenance will continue to be impacting the cost as we saw this quarter. I don't think it's going to be much bigger than what it was in the quarter. But also, there is the challenge on the CapEx side, if we decide to return more planes than to fulfill the gap on the deliveries. And that's what Mario answered before. We are budgeting 2024 to make sure that we have enough room to address those engines, sit down with lessors, with MROs to have more ability to finance those CapEx. That's what we are doing right now and working with new engine facilities, especially with the Brazilian government to make sure we can address a higher CapEx than we usually face. So cost and also CapEx will be impacted, especially in the next 12 months.

Yes. I just wanted to add, Gabriel, the following. If you remember, we have been -- we provisioned some of the return costs, the maintenance return costs in our balance sheet back in -- by the end of 2021. So of course, part of that impact is going to be compensated, not all because the provision is prorated as long as the cycles we're going to start to be constituted. So given that we anticipated some of the deliveries of the aircraft in 2025 and 2026 and now we are anticipating some of the returns as one of the big efforts that we're doing in order to rebalance our fleet and recovering the efficiency and also the productivity, we have been impacted by these higher costs going forward. And at the same time, the potential profits on gains for the new deliveries now we have some uncertainty. So that has been driving the results to be temporarily -- with the cost temporarily increased from what we previously forecasted. But at the same time, what you probably can think is that at the same time, we are doing that effort in terms of reducing that idleness and we can potentially start to have some impacts on the P&L on the maintenance line. At the same time, on the cash flow perspective, as we mentioned before, we are also paying right now some inefficient drag related to leases with no aircraft available. We also -- we need to perform into additional leases for spare engines and maintenance reserves. So everything that in order to address that impact on the maintenance going forward, we can expect that we can also compensate or offset that cost impact going forward with a lower drag in the cash flow, at the same time to have a more neutral scenario because we are fixing that issue now, right? So that's only another way to think in terms of cash flow impact.

Our next question comes from Diego Villalobos from Moneda Asset.

I just want to follow up in the lessors topic. Could you update us on the situation within the negotiations? How that been, any updates? And what are you seeing as the main bottlenecks? And the second question is regarding the 2024 and 2025 maturities. What are you expecting to confront those? And are there any plans there?

So on the lessor side, we continue to talk with all the lessors. We have 25 lessors. And to address, I mean, the accumulated liabilities that we have on the leasing side, most of them reflected as lease deferrals that we -- of course, we are trying to negotiate to push to the right. But also, we are discussing with lessors now. I mean, how can we address the end of leasing compensation of the airplanes, especially the planes that we are not flying and also maintenance facilities that we are discussing to how can we address the engine. So I think ourselves and the lessors, we don't want to have planes on the ground here or any other places. So we are going lessor by lessor, especially with the ones that have the situation of engines and planes on the ground to make sure we can address a way and expedite the way without a tremendous cash burn all at once. So the negotiations are improving. We have -- I mean, it takes time. So we have been in this since last year when we issued the SAN. It takes time, but we are -- I mean, we are making progress with them.

Yes, for the second question related to the outstanding amount on the bonds, Diego, as you know, the 2024, we have already reduced the spring maturity risk. So now the outstanding amount is below BRL 42 million, and that, of course, have the shortest maturity in the middle of next year. And the '25 and '26 are still 2 years into the maturity. So the point is that we are focused on now on putting the company back on track in terms of operational performance and also that resolving most of that capacity plus the CapEx issue that is something that if we can fix that company will be behaving much better in terms of their financial performance, right? Because something that I wanted to highlight is that we are producing that EBIT and EBITDA generation even carrying this drag in our balance sheet. So we really understand that with the efforts and this very good work with our team, we kind of really been outperforming our results when we have this CapEx and capacity being addressed. So that's our main priority right now. And of course, if that happened, we can turn it into higher margins, better cash flow. And when the scenario will happen, we will drive to all alternatives that Gol has available that we can access wherever it's going to be the best way to address all those '25, '26 bonds. So this is far away right now. Of course, we try to think what we can do in some anticipation, but this is not the top priority right now or neither the best use of cash at this point in time. So when the time is appropriate, of course, we're going to be discussing that topic. And right now, of course, all the alternatives are on the table, but we need to put the company back on track first. Otherwise, there's no room to discuss anything on the '25, '26 bonds. And the '24, as I mentioned, is pretty much more reduced as a risk, and that's something that we're also going to be handle when we can get into the 2023 results and start to look on '24. [Audio Gap]