Azul - Q4 2022
March 6, 2023
Transcript
Operator (participant)
Hello everyone, welcome all to the 4Q earnings call from Azul. My name is Zach, I will be your operator for today. This event is being recorded, and all participants will be in a listen only mode until we conduct the Q&A session following the company's presentation. If you have a question, click on the Q&A icon at the bottom of your screen and write your name and company. When your name is announced, please turn on your microphone and proceed. For those who are listening to the conference on the phone, press nine to join the queue and six to accept the audio when requested. I'd like to turn the presentation over to Thais Haberli, head of Investor Relations. Please proceed, Thais.
Thais Haberli (Head of Investor Relations)
Thank you, Zach, and welcome all to Azul's 4Q earnings call. The results that we announced this morning, the audio of this call, and the slides that we reference are available on our IR website. Presenting today will be David Neeleman, Azul's founder and chairman, John Rodgerson, CEO, and Alex Malfitani, our CFO. Abhi Shah, the president of Azul, is also here for the Q&A session. Before I turn the call over to David, I'd like to caution you regarding our forward-looking statements. Any matters discussed today that are not historical facts, particularly comments regarding the company's future plans, objectives, and expected performance constitute forward-looking statements. These statements are based on a range of assumptions that the company believes are reasonable, but are subject to uncertainties and risks that are discussed in detail in our CVM and SEC files.
During the course of the call, we will discuss non-IFRS performance measures which should not be considered in isolation. With that, I will turn the call over to David. David?
David Neeleman (Founder and Chairman)
Thanks, Thais, and welcome everyone, and thanks for joining us for our fourth call. As you can see on slide 3, there is a lot to talk about today. I know you all want to hear the details of our comprehensive go forward plan. John and Alex and their teams have worked very hard over the past 55 days to successfully reach commercial agreements for more than 90% of our aircraft leases. These agreements fundamentally change the financial future of our company. I would like to personally thank our management team and our partners who have shown a tremendous amount of confidence in our business and for good reason. As you can see in the presentation, we have created a company creates billions in cash flow annually.
First, let me tell you about our great business, and then John and Alex will share with you the details of our plan. Moving to slide 4, 2022 was a record for Azul. We generated BRL 16 billion in revenue, up 40% compared to 2019. Unit revenue was also a record BRL 0.49, up 26% from the full year 2019. Revenue performance due to our structural competitive advantages in our network, combined with the strong growth of our business units, made this possible. Our wholly owned and unencumbered business units also had record results this year compared to 2019. Compared to 2019, our loyalty program, Tudo Azul, almost doubled its gross billing.
Azul Cargo, our logistics business, an impressive 153% in revenue and ended the year as Brazil's largest domestic air logistics provider. Finally, our travel business, Tudo Azul, Azul Viagens, grew 9%, BRL 1.3 billion in gross bookings. Looking at 2023, we are excited at the opportunities we see. Later this month, we'll begin flying our expanded network from São Paulo's downtown airport, Congonhas. More than double to 84 daily flights, which will serve all the largest corporate markets. We cannot wait to show these new customers all that Azul has to offer. Overall for the year, we expect BRL 20 billion in total revenue and EBITDA above BRL 1 billion. That's more than a percent increase from 2019. Moving to slide five, we show the development of our route network and unrelenting focus building and expanding our competitive advantage.
We serve 158 destinations, Azul is the only carrier in 80% of our routes and the market leader in more than 90% of them. In addition to our domestic network, our annual capacity will fully recover this year. We recently announced exciting new destinations such as Paris and Curaçao. Together with Miami, Fort Lauderdale, Orlando, Lisbon, and Montevideo, we are putting together a very relevant international network. In addition, our codeshare partnerships with United, JetBlue, TAP, and Air Europa will allow us to connect our customers all over the U.S. and Europe, significantly increasing our position in these markets. Finally, turning to slide six, I am very happy to say that 2020 was another exceptional operating year in which we followed up with the world's best airline award with the world's most on-time airline award.
Just last week, we celebrated this achievement in our hangar and, with our crew members, there was not a dry eye in the house. I think I even spotted John shedding a few tears. I'm just so proud of this team. As John will explain, we have an amazing business which generates billions of reais in cash flow from operations. We have built something very special. I am so excited about what is ahead of us. With that, I'll pass the word to John to give you more details on our 4Q results and our go-forward plan. John?
John Rodgerson (CEO)
Thanks, David. Yeah, I did get emotional last week. It was very special, and I cannot thank enough our crew members who repeatedly shown their dedication for Azul. Without their passion and support, these results would simply not be possible.
I would like to remind everyone that we had more than 11,000 of our people took unpaid leave of absence to help Azul during the pandemic. When they came back, they came back stronger and more dedicated, and that dedication led us to be the most on-time airline in the world. As you can see on slide seven, revenue for the 4Q was another all-time record at BRL 4.5 billion, 37% above 4Q 2019. Yield, also an all-time record, was BRL 0.506, an increase of 16% compared to 4Q 2021 and 32% versus 4Q 2019. We also had a record RASK. Compared to 4Q 2019, our RASK was up 27%. Operating income was BRL 525 million in the quarter at an operating margin of 12%.
Our EBITDA margin was 25% with an absolute value of BRL 1.1 billion. This is even more impressive when you consider that fuel was up 116% versus 4Q 2019, and the currency devalued 30%. On slide eight you can see the sequential improvement in our RASK. First, you can see how significant and sustained the RASK improvement has been since 2019, and then how it improved through the year 2022. This is a clear signal of not just pent-up demand, but a new level of sustained revenue performance. Second, you can see that for 2023, our assumptions are not aggressive. I know Abhi and his team will always try to maximize RASK, but this chart shows that for 2023, we're just assuming what we've already achieved in 2022.
Azul has one of the highest EBITDA margins among its peers, as you can see on slide 9. The strength in the revenue performance, the improvements in the fuel environment, and the milestones such as our Congonhas growth give you a clear indication as to the earning strength of our airline and why we're so excited for this year and beyond. On slide 10, we bridge our 4Q 2019 results to 4Q 2022. You can see the negative impact from fuel, currency, and inflation, and how we were able to offset those cost increase through our growth, revenue performance, business units, and being a more efficient airline exiting the crisis. With these initiatives, we were able to offset over 90% of the cost impact during the quarter alone, an impressive achievement given how fast and how much fuel prices increased during the year.
Even more impressive is our strong cash contribution from operations. Slide 11 shows that in 2022, we had a cash contribution of BRL 5.5 billion when comparing the cash inflows to the outflows from operation. We paid over BRL 5.1 billion in rent and debt. These are significant payments that supported our de-leveraging process. As a result, we ended the year with leverage below six, consistent with the guidance we gave you at the start of the year. On slides 12 and 13, we want to highlight further the magnitude of these aircraft rent and debt payments and how they have grown since 2019.
On slide 12, you can see that in 2022, we paid over BRL 3.6 billion in aircraft rent, BRL 1.6 billion more than 2019, mainly due to the devaluation of the Brazilian real, COVID rent deferrals, and our fleet growth. Debt and in-interest payments also increased in 2022, as you can see on slide 13. In 2022, Azul paid over BRL 1.5 billion in principal debt and interest, BRL 1.1 billion more than 2019, mainly due to the debt that we had to take on during the pandemic. As a reminder, unlike subsidized airlines in the U.S. and Europe, we did not receive any government financial help during that challenging time. With the strong results from our operations, we've been able to significantly accelerate our de-leveraging process.
These levels of aircraft rent and debt payments are clearly challenging, and this is why we're so focused on optimizing these so that we can strengthen our balance sheet and improve our cash flow going forward. As David mentioned at the opening, we have already made significant progress on that front. Moving forward to slide 14, you can see our yearly results since we launched Azul and where the pandemic, currency devaluation, and high fuel prices have impacted our results. As mentioned before, for 2023, we expect a full and strong EBITDA recovery of over BRL 5 billion. That's more than $1 billion of EBITDA. The strength of our business is evident. On slide 15, you can see that from 2017-2019, Azul consistently traded at about 8x EBITDA, while we currently are trading at 4x.
It's incredible to think that just going back to a five multiple, which would still be well below our historical average, our valuation would need to triple. Moving to slide 16, we show what we believe is the main reason that our valuation is held back. As we showed you on Azul Day, here you can see the net effect of the combination of higher cash outflows, recovering EBITDA, and the lack of government financial support during the pandemic. We have continued to address these challenges through revenue and productivity initiatives. Together with the valuable support of our partners, we made significant progress since 2020, and we've had previously projected a cash gap of BRL 3 billion for 2023.
Thanks to the progress we have made, not only have we already eliminated that gap, but our comprehensive go-forward plan results in significant cash flow and balance sheet improvements for the foreseeable future. Let me now turn it over to Alex so he can give you more details on this plan.
Alex Malfitani (CFO)
Thanks, John. I'm really excited to share with you the details of what we have been working on, starting with slide 17. As you can see here, we have developed and started to implement a comprehensive plan that provides a permanent solution to our capital structure, significantly improves our cash flow, and provides maximum value generation for our stakeholders by ensuring that they receive 100% of what was committed to them. We started implementing this plan by negotiating with our lessors. On slide 18, you can see why. About 80% of our gross debt is related to aircraft leases. Therefore, addressing this debt in a comprehensive way results in significant cash flow improvements. On slide 19, you can see the progress we have already made over the last 45 days.
As we announced in our material fact last night, we've already reached commercial agreements with lessors representing more than 90% of our lease obligations. I am confident we will reach an agreement with the remaining share. We have seen strong support from our partners as they understand that this is a smart business decision. It maximizes their return on investment, and I want to thank them for their support and confidence. Throughout this negotiation, we've had zero aircraft withdrawals. In fact, our partners have delivered to us 12 additional new aircraft in the last few months, including four A320neos. On slide 20, we describe these lessor agreements in more details. Under these agreements, subject to certain conditions and corporate approvals, lessors will reduce our lease payments to eliminate the COVID-related deferrals.
They will also eliminate the gap between Azul's contractual lease rates and agreed-upon market rates. In exchange, lessors will receive a tradable note maturing in 2030, and equity priced in a way to reflect our new capital structure, our improved cash flows, and our reduced credit risk. Out of the total value that is being exchanged, which again is the reduction from both the COVID-related deferrals and the rent gap, the long-term node represents 40% while the equity represents 60%. Consistent with our reputation and our track record, this plan is designed to give lessors 100% of our committed payments through this combination of long-term debt and equity in a reset balance sheet. Moving on to slide 21. We have also engaged with our OEM partners, another vital stakeholder group, so we can address our CapEx requirements.
With a similar comprehensive permanent plan, we are making tremendous progress with this group as well. Once again, we're committed to significantly improving the cash flow for the airline at the same time that we follow the principle of 100% recovery for our partners. On slide 22, you can see the cumulative effect of this plan. In 2023 alone, we convert the cash gap of BRL 3 billion that we have talked about from a negative to breakeven. The main items that were reduced or eliminated, as I mentioned, are the monthly lease payments, the maintenance CapEx, and the COVID-related deferrals. Remember though, this plan does not cover just 2023. This is not a stopgap for one year only. The results of this plan go well beyond, as you can see on slide 22.
This is truly a permanent solution that aligns the interests of all of our stakeholders and creates a balance sheet and cash flow generation that is consistent with our strong profitability. Let me turn it back over to John for the conclusion.
John Rodgerson (CEO)
Thanks, Alex. Now you can see why we're so excited to share all of this with you today. On slide 24, we start to look a little ahead. We have always talked about the incredible growth opportunities and margin contribution from our wholly owned and unencumbered business units, Tudo Azul, Azul Cargo, and our packaging business, Azul Viagens. We recently had them appraised by an independent firm, and in total, these fast-growing businesses appraised at more than $5 billion or BRL 25 billion. Our comprehensive solution and its corresponding reduction of our credit risk, combined with our growth in EBITDA, cash generation, and our valuable unencumbered assets, gives us strong confidence that we can access the capital markets when needed to invest in our growth. Finally, on slide 25, we have to show you why we're so excited for the future. Our business is doing incredibly well.
Abhi will talk about the revenue. We're hitting record revenues and record EBITDA. Our customers love to fly us, and our crew members love to work here. COVID and macro effects have had a negative impact, which is why we presented today real progress towards a permanent and comprehensive plan to improve our cash flow, optimize our capital structure, and continue to invest in our business. I realize we gave you a lot of information today, but just in the last 45 days, we've made incredible progress, and there's much more to come. David, Alex, Abhi, and I will answer your questions. Thank you for your time.
Operator (participant)
Ladies and gentlemen, thank you. We will now begin the Q&A session. Remembering that if you have a question, click on the Q&A icon at the bottom of the screen and write your name and company. When your name is announced, please activate your microphone and proceed. For those who are listening to the conference on the phone, press nine to join the queue and six to accept the audio when requested. Let's go to the first question from Fernando Gekke, sell-side analyst, BTG. Fernando Gekke, we will open your audio so that you can ask your question. Please proceed.
Fernando Gekke (Sell-side Analyst)
Thank you. Can you hear me?
John Rodgerson (CEO)
Yes.
Fernando Gekke (Sell-side Analyst)
Great. Great. So hi John, Abhi, Alex. Thanks for taking my question, and congrats on the deal with lessors that you recently announced. Just two question from our side. I was wondering if you guys could provide us additional color regarding the terms agreed with the lessor, especially in terms of the equity portion of it. I was curious to see if you could provide us the strike price you agreed with them, or if you could give somehow any color on the potential equity dilution from the deal. Second question, if you could please update us regarding the discussion with United Airlines. Is this something that it's behind or discussion are still ongoing? Thank you.
John Rodgerson (CEO)
Yeah, let me start. Abhi and Alex can kind of add color to the rest of the questions. You know, first of all, obviously today's price does not reflect Azul's value, right? When you have a business that produces over $1 billion of EBITDA, I think our partners recognize that. The strike price at which the lessors will come in is higher than it is today, we're 90% done. We'll communicate when we're 100% done with our lessors, right? It's more reflective of a 7-8 times multiple based on where we are. It will give full recovery to our partners. We're excited for them and excited for us.
It'll minimize dilution to the company, because it's not being done at today's prices, which don't reflect Azul's true value.
Alex Malfitani (CFO)
Yeah. You know, just to add to that, I think the main objective here that we had on this call today, you know, if you trace back to Azul Day, you know, we talked about the BRL 3 billion cash gap. We talked about how it was the smallest cash gap since the pandemic happened. We said that, you know, obviously the, you know, preferred alternative would be to access the capital markets to finance that cash gap. If that weren't possible, we knew we could count on the support of our stakeholders. We even provided, you know, some, you know, information that we were, you know, getting a lot of support from our stakeholders. That in spite of us being very public about the cash challenges that we were facing, lessors were delivering new aircraft to us.
We were seeing a narrative in the market that lessors... You know, it made sense for lessors to support airlines in 2020, but, you know, it didn't make sense to support in 2023, which obviously we disagreed. Today I think the main message that we wanted to communicate to the market is that that support has materialized, right? You know, it's not because lessors are nice or because they like us. I mean, you know, I think they are nice, and I think they like us, but that's not it, right? That is... It's a good business decision, and they know that a company that produces more than $1 billion in EBITDA a year, you know, is not fairly priced at these levels, right? We will provide additional color over time. We will provide additional details.
As John said, we want to be fully finalized with our negotiations with lessors, and over time, we will provide that information.
John Rodgerson (CEO)
We entered COVID with, as one of the most profitable airlines in the world, and we will end 2023 as one of the most profitable airlines in the world. COVID wasn't our fault. The devaluation of the currency wasn't our fault. We've done enormous things to combat those challenges, including having our people go on unpaid leave of absence. I think the market and our partners give us a lot of credit for what we've done, and they want to invest in Azul going forward because they know it's a good business decision. I'll let Abhi talk through the relationship with United.
Fernando Gekke (Sell-side Analyst)
Yeah.
Abhi Shah (President)
Fernando, about United, we have a great commercial partnership with them, as we do with JetBlue, with TAP, Air Europa, and others as well. We continue that commercial partnership with connectivity in Brazil and in the U.S. We're always looking at opportunities, but there's nothing in the short term, more than a commercial partnership to announce.
Fernando Gekke (Sell-side Analyst)
Perfect, guys. Thank you very much.
Operator (participant)
The next question comes from Bruno Amorim, sell-side analyst from GS. Bruno, we will open your audio so that you can ask your question. Please proceed.
Bruno Amorim (Equity Analyst)
Hi. Good morning, everybody. My question is on the unit revenue assumption for the year. As you laid out, your assumption seems to be conservative indeed. What can you comment in terms of, you know, this flattish RASK going forward in light of falling jet fuel prices? Have you been feeling the pressure from the market, you know, to lower unit revenues? Since, you know, everybody, Azul included, needing to see higher margins going forward means that even under lower jet fuel prices, the pressure is not there. Can you comment on that dynamic, please?
Abhi Shah (President)
Yeah. Yeah. Hi, Bruno, Abhi here. Sure. A couple of things. Overall, I think the industry is very disciplined, and I think the industry is going to be very disciplined. You know, we certainly are doing our part, and if you look at the 4Q of last year, we were actually down 3% in capacity domestic, and that was because of fuel prices and the adjustments we made to our network. Looking ahead this year, we're gonna grow about 15% total, but only about 6%-8% domestic. We're not seeing the volume pressure or the load factor pressure that would cause us to sacrifice the hard work that the industry has done in increasing average fares.
I think the industry did a really good job, you know, when the war started last year. I think that overall we want to keep those gains. The customer is used to these new prices, customers are not asking for lower prices. In fact, as we talk today, we're just coming off the last seven days, as John referenced, record booking revenues. We're seeing good momentum on the booking side. Our intention certainly is to be very disciplined on the average fare side, not give back the gains regardless, you know, if fuel goes down or not. I think the industry overall wants to recover the profitability in the best way possible.
Bruno Amorim (Equity Analyst)
Thank you. If I may, just a quick follow-up. Your guidance implies an EBITDA margin of at least 25%, right? BRL 5 billion EBITDA, BRL 20 billion revenues. Should we think about the target as around 30%, which was the pre-pandemic level? Is that the level that you are targeting for the next couple of years, or are you thinking differently?
John Rodgerson (CEO)
Yeah, you know, Bruno, there's no reason why Azul shouldn't get back to those levels, right? You know, we showed you what we did in the 4Q at a 25% EBITDA margin. We're going into 2023 with lower fuel prices, a strong revenue environment, there's no reason why this business shouldn't be there. If we don't get there, it'll be a big disappointment. We're not saying that we're gonna get there in 2023, but obviously, that's our target going forward, and we're gonna continue to kind of go after it.
Bruno Amorim (Equity Analyst)
Perfect. Thank you so much, and congratulations.
John Rodgerson (CEO)
Thank you.
Abhi Shah (President)
Thanks, Bruno.
Operator (participant)
Okay. The next question now comes from Gabriel Rezende, sell-side analyst from Itaú BBA. We will open your audio so that you can ask your question, Gabriel. Please proceed.
Gabriel Rezende (Sell-side Analyst)
Thanks. Thanks. Hello, everyone. Thanks for giving the space to make the questions. Two on our side as well. 1 regarding your announcement regarding the negotiations with lessors. Just trying to confirm here, the debt due in 2023, 2030, it will not be convertible, right? Just confirming that. Also, just try to get a caller on what the cash outflows regarding to this debt should be in the coming years until it is paid fully in 2030. Also on the operational front, I was just trying to get your color, your view, on what your expectations are for the room you have to recover things back to pre-pandemic levels regarding your passengers.
For example, corporate customers, they're still not back to pre-COVID-19 levels. Just like to understand what is the additional room that you have to expand on those clients, and what is already incorporating in your guidance for a BRL 5 billion EBITDA in 2023 as well.
Alex Malfitani (CFO)
Hey, Gabriel. thanks for the questions. Alex here. Correct. The 2030 note is not convertible. In terms of cash outflows in coming years, that is, you know, additional detail that we are looking forward to providing to you over time once we conclude all of these negotiations, you know? Like we said, this plan is a comprehensive plan that involves more than what we've done so far. I think the main message is the -BRL 3 billion that we have for 2023 is gonna be breakeven. We had talked about a breakeven for 2024, which is now going to be positive and should be positive every year after that, right? We look forward to providing you with additional details over time.
Abhi Shah (President)
Hey, Gabriel. About the opportunities, you know, I can just think of three quick ones. Corporate, you are correct. We are seeing about 85% corporate volume recovery. Revenue is above 100% because the average fares are 50% higher. We are over 100% in revenue, but still corporate volumes are 85%, and we expect that recovery to continue. Another great opportunity we have is our utilization. You will notice our utilization is still below our pre-pandemic levels, and that's for a couple of reasons. One is higher fuel. As you have higher fuel, you tend to reduce your flights that are at the end of the day, early at the day, or nights and weekends.
As fuel is coming down and stabilize at these levels, we are seeing opportunities to increase utilization, which is obviously very, very positive for EBITDA. International, at the end of last year, we were still only about 85%-88% recovered in terms of our international network. By the end of this year, we will be 100% recovered in our international network. That's future opportunity as well. Overall, we're seeing great momentum with the industry, with discipline, with demand, you know, there's still some significant upside to come.
John Rodgerson (CEO)
I just wanna highlight a couple things. You know, we just removed the masks last week, okay? You think about, you know, where's the demand potential going? You know, Brazil we just got over Carnival. Mask finally came off last week. I think there's a lot of runway. Unemployment in Brazil is at a multi-year low. We're seeing good economic activity overall. You know, I think we feel good about the macro environment here the first time in quite a few years.
Gabriel Rezende (Sell-side Analyst)
That's very clear, guys. Thank you.
Operator (participant)
Okay, thank you. The next question now comes from Stephen Trent, sell-side analyst from Citi. Stephen, we're going to open your audio so that you can ask your question. Please proceed.
Stephen Trent (Sell-side Analyst)
Oh, great. Good morning, everybody, thank you very much for taking my question. I was curious, I would just on a long-term basis, love to, you know, get your view on a high-level basis on, you know, how you might be thinking about long-term consolidation in Brazil. You know, not only the back of the solid results this morning, but of this, you know, this great deal that you've reached with the lessors. Thank you.
John Rodgerson (CEO)
You know, Steve, I always think it's a possibility. That's something that we've talked about, but this is about focusing on Azul, and I think that that's what we're very excited about. When you look at our BRL 20 billion of revenue this year, the EBITDA performance, the cash gap closing, the cash flows going into 2024 and beyond, that assumes no cooperation, consolidation, anything along those lines. We'll study it if there's an opportunity there. You know what? We believe so much in the core business that we've built. We've got 13,500 passionate crew members that are kind of delivering on a daily basis to deliver an unbelievable great experience. As I said earlier, we're one of the most profitable airlines in the world. We just had an overhang because of COVID and the devaluation of our currency.
We've addressed that, and we've addressed that in a big way. As Alex said, it's not a stopgap, it's not a band-aid. We've addressed it once and for all, and we're ready to move forward.
Stephen Trent (Sell-side Analyst)
Really appreciate that, John. If I could just follow up real quickly on one item. You know, I spent most of the last two months hearing from your US-based counterparts about kind of challenges trying to find pilots. You know, how are you guys seeing it down there in terms of your pilot supply? Thank you.
Abhi Shah (President)
Hey, Steve. You know, Brazil has a really rich history of aviation. We have a great pipeline of flight schools that we partner with. We actually use even our caravan operation as a mini flight school inside of Azul to prepare our pilots to enter into our fleet. You know, we're not seeing any constraints when it comes to pilots or even staffing overall. We're actually more efficient right now in terms of our overall staffing, but no limitations in terms of pilot hiring.
Stephen Trent (Sell-side Analyst)
Okay, very clear. Thanks. I'll leave it there.
John Rodgerson (CEO)
Thanks, Stephen.
Operator (participant)
Okay, thank you. The next question comes from Stephen Suttmeier, Sell-side Analyst, Bank of America. Stephen, we're gonna open your audio so that you can ask your question. Please proceed.
Stephen Suttmeier (Sell-side Analyst)
Hi, this is Stephen Suttmeier with Bank of America. Thanks for taking my questions today. I wanted to ask on the new 2030 notes, will these be secured or unsecured? Can you provide any other details on the terms like size, interest rate, potential call schedule, things like that? My other question is on the capital plan slide. It seems to imply that there's something coming up with bondholders and potentially a new money component as well. Can you expand on what options you're seeing here as well as potential timing? Thank you.
John Rodgerson (CEO)
Thanks, Stephen, Stephen. The 2030 notes are unsecured. We'll, like, you know, we talked about, we're very excited to share more details and as we normally do, right? I think you know us, for our transparency. We just wanna be really finalized with all of our lessors before we do that. We'll provide that information in due time. I mean, obviously, I think similarly to the valuation that we're talking about to the equity, the coupon, you know, and the debt, you know, the cost of debt on this instrument is nowhere near the levels that you're seeing on the screen because, again, they do not reflect the health of the restructured company.
You know, the interest that we will pay will be reflective of the improved cash generation, the stronger balance sheet, and the reduced credit risk. Like I said, we'll provide that as soon as we can. Yeah, as it looks towards our 2024 bonds or 2026 bonds, you know, I think that that's a conversation we plan to have and, you know, we'll have that with the bondholders, right? I think that you can see how we treat our stakeholders, and the bondholders are part of our stakeholder group. As you look to new money and the unencumbered assets that we have, no one wants to bring in new capital to Azul to pay for COVID deferrals, right?
The new capital that comes into Azul is to fund our growth going forward, strengthen the balance sheet, you know, have us continue to take E2s and A320neos, and that's the intention. You really can't go to the capital markets using Azul or other unencumbered assets that you have to raise new capital just to pay back old stuff, right? This is a true reset. This is a true fix, a permanent fix of the balance sheet that works for our crew members, it works for our lessors, it works for our bondholders, it works for everybody. Yeah, that is the idea. I think the fact that we got through 2020 and 2021 with $5 billion of unencumbered assets, you know, the...
I think the potential is limitless for what we have to do going forward.
Stephen Suttmeier (Sell-side Analyst)
Thank you.
Operator (participant)
Okay, thank you. The next question now comes from Daniel McKenzie, sell-side analyst from Seaport Global. Daniel, we're going to open your audio so that you can ask your question. Okay, please proceed.
John Rodgerson (CEO)
I think you're on mute, Dan.
Alex Malfitani (CFO)
Dan? I think we're gonna move on to the next one. If Dan can try again.
Daniel McKenzie (Sell-side Analyst)
Yeah. Can you hear me okay?
Alex Malfitani (CFO)
Oh, yeah, you got it, Dan. Yeah.
Daniel McKenzie (Sell-side Analyst)
Yeah. I'm so sorry about that. Couple questions here. One is just on the pace of a potential pre-tax earnings recovery. You know, just a question for Abhi here. Revenue's strong. Growth looks like it's going to be double-digits into the weakest quarters of the year, you know, the question is, you know, can Azul reach a quarterly pre-tax profit in any of the quarters this year?
Alex Malfitani (CFO)
I think the main key there, Dan, as you know, the main volatility that comes on the net income line comes from FX, right? I think assuming, you know, stable FX, or even some tailwinds coming from that, yes, that is a possibility. You know, we don't give guidance on a net income basis. You know, I think all of you that have modeled us for the, you know, last few years, you know that's probably the hardest line to model. In terms of business fundamentals, you know, strength of demand, you know, unit cost, unit revenue, size, and especially with a restructured balance sheet, right?
Because the operation is strong, generates a lot of profit, a lot of cash, you know, and now with a balance sheet and an interest expense that fits within the company, and is consistent with the profitability of the company, you know, that's certainly a possibility depending on what happens with the exchange rate.
Daniel McKenzie (Sell-side Analyst)
Yeah, that's exactly my question. With the restructured debt, reduced interest expense, it would seem like it'd be a lower hurdle for you guys to get there. You know, is the plan to encumber, you know, or was Tudo Azul or the cargo business encumbered? It doesn't look like it was. I guess if it was not, you know, what was the thought process around not encumbering those? Because at least outside looking in, it seems like it might have been an opportunity to lower the cost of borrowing. If you can just elaborate a little bit more on kind of how you approached the restructuring.
John Rodgerson (CEO)
Yeah. You know, Dan, when we look, you know, we were able to borrow unsecured in 2021 at seven and three-eighths, right? You know, the market was open to us at that time. I think it's a blessing that we got through the pandemic without encumbering our assets, right? I think that now we're gonna play from a position of strength. We fixed the balance sheet with the lessors, which again, as Alex showed, is 80% of the problem. The fact that we have the security, you know, associated with our cargo business, associated with Tudo Azul, I think that provides the opportunity as we move forward, right? We wanna make sure that we use that, you know, for the best interest of Azul's long-term plan, not just a band-aid during COVID.
Now we have an opportunity to do something with those assets.
Alex Malfitani (CFO)
Yeah, exactly. That's how we see it, right? Having those unencumbered assets, it's a good thing. Look, you know, when the markets were open, there was no need to encumber the assets. You know, we could accept a reasonable cost of debt without encumbering the assets and save those for a rainy day. You know, when the bond is trading at the levels that we were seeing over the last few weeks that, you know, did not really reflect the fundamentals of the business or the strength of the support that we knew we could count on, it didn't make sense for us to issue, you know, any kind of security, even if it was collateralized, because it would be anchored on these rates, right?
There's a logic here to the sequencing because once everybody realizes that there's no risk to this company, that the company's gonna continue producing above average or industry leading profits and growing, you know, we should see a cost of equity and a cost of debt that is more in line with the company. Then, you know, providing some additional collateral to reduce that cost of debt even further, that's the right time to utilize the asset.
Daniel McKenzie (Sell-side Analyst)
Understood. Thanks for the time, you guys.
John Rodgerson (CEO)
Thanks, Dan.
Operator (participant)
Okay, thank you. The next question comes from Victor Mizusaki, sell-side analyst from Bradesco BBI. Victor, we will open your audio so that you can ask your question. Please proceed.
Victor Mizusaki (Sell-side Analyst)
Thank you. Congrats for the restructure and the 4Q results. We have two questions here. The first one, I mean, according to our numbers, LATAM had a kind of aggressive capacity expansion plan for the 2Q. How do you expect LATAM to react that's Azul and GOL restructuring the balance sheet? Do you expect LATAM to pull back some capacity and then we are talk about, let's say, even though we are talk about the low season, we are talk about higher yields and the higher margins? The second question is regarding to the slides number 21, when you mention about the OEMs and CapEx.
My question is if, here we are talking about kind of a permanent reduction, and if it is only for 2023?
Alex Malfitani (CFO)
Can we say that maybe you are also changing maybe the fleet plan in order, I mean, if you think about the deliveries and maybe you could get additional discounts?
Abhi Shah (President)
Hi, Victor. You know, regarding industry capacity, obviously I cannot speak to LATAM directly, you know, we've looked at the guidance that they've put out. GOL has also put out capacity guidance, overall we think the industry domestically is gonna grow about 8%-10% this year versus 2019. I actually don't think that that's that bad, to be honest with you. I think it's pretty disciplined overall. I think we're gonna be about 6%-8%, you know, domestically, the industry overall about 8%-10%, I think everybody's being pretty disciplined. You know, I think all airlines wanna recover the profitability that we lost over the last couple of years. I think, as I said before, the customer is willing to pay the prices that are out there.
We're not seeing, you know, drops in demand. In fact, we think demand is stronger than ever. I think airlines will adjust based on the load factors and the demand that they are seeing. Looking at overall industry capacity, I think it's gonna be about 8-10% above 2019 levels, which I think is pretty decent overall, given the level of demand that we're seeing.
John Rodgerson (CEO)
You know, Victor, I just wanna highlight another thing too. You know, I just wanna remind everybody that our capacity, 75% of it now and 80% of it going forward, is on next gen aircraft, A320neos and E2s, right? I think that's an important distinction. The other thing that you highlighted, Azul's not going anywhere, GOL's not going anywhere, LATAM's not going anywhere, right? It makes sense for us to all act rationally in the market and price according to the cost structure that exists in Brazil today, and I think that's the big message, right? Again, we have more ASKs on next gen aircraft by a wide margin compared to our competitors, right? When you talk about kind of the cost structure in Brazil, you know, we have the lowest cost in Brazil, you know, flying A320neos.
We have the lowest cost in Brazil flying E2s. I think we're very well-positioned, and I think the market will be very disciplined, and the exit financing of our competitors is a high cost of capital, right? Everybody needs to earn a return to pay for that cost of capital.
Alex Malfitani (CFO)
Yeah. On the OEMs, Victor, very similar concept to the lessors. We started with the lessors, right? Because the lessors, as we mentioned, represent almost 80% of our cash commitments. We started talking to the OEMs about two weeks after the lessor. The, you know, OEMs are maybe kind of two weeks behind on the sequencing. Similarly to what we mentioned on the lessors, once we are done with the negotiations with the OEMs, we'll be happy to provide additional information. The concept, you can, you know, already rest assured that it's the same 2030 note, you know, same, you know, calculation for the dilution, very similar concept, we'll provide that detail, you know, in due time.
John Rodgerson (CEO)
Hey, Victor, one other thing I wanna highlight is, you know, the OEMs are our partners. You know, specifically Embraer here in Brazil, as well as GE, where we overhaul all of our engines in Brazil. Had we decided to overhaul our engines outside of Brazil, we'd have EXIM financing. One of the big things that we're pushing jointly with our OEM partners is, if I'm gonna overhaul engines in Brazil, I should get access to financing of that, right? That's something that we're working jointly with the new government on. We're working with our partners at GE and Embraer, and I think that that's good for everybody. You know, the OEM relationship is a little different than the lessors, right?
It's a little bit more complex because of the different negotiations we have ongoing with Embraer and GE and Pratt & Whitney and Airbus and ATR, but they've been very constructive and very supportive. Why? Because we have a fantastic business, and they see that.
Victor Mizusaki (Sell-side Analyst)
Great. Thank you.
John Rodgerson (CEO)
Thanks, Victor.
Operator (participant)
Okay. The next question comes now from Michael Linenberg, sell-side analyst from Deutsche Bank. Michael, we will open your audio so that you can ask your question. Please proceed.
Michael Linenberg (Sell-side Analyst)
Okay. Hey, can you guys hear me okay?
John Rodgerson (CEO)
Yeah, we can hear you good from Deutsche Bank.
Michael Linenberg (Sell-side Analyst)
That darn auto-spell or auto-populate. Hey, congrats on the news obviously. Just a couple questions here as, you know, as best as you can sort of give us on some of the numbers. Maybe Alex, when we think about, you know, your interest expense this last year it was BRL 4.6 billion. When I look forward at least with the charts that you've provided, does that, as a result of these restructured deals, does that come down? Like, what's the appropriate interest expense that we should think about going forward?
Alex Malfitani (CFO)
Yeah, absolutely. It comes down, Mike, if you remember, the BRL 4.6 billion number, right? It's a big number. For those of us that, you know, long for the days before IFRS 16, you know, most of that number is the rent, right?
Michael Linenberg (Sell-side Analyst)
Mm-hmm
Alex Malfitani (CFO)
on a cash basis, right? The way we kind of talk about our cash gap or our free cash flow, you know, if you include the total rent payments, that, most of that interest comes from that rent payment is already included in that rent payment. Since that rent payment is gonna go down, that interest expense should go down as well. You know, there's going to be an additional. We have a little bit of non-operating lease debt. You know, that will remain. You know, that interest should stay roughly the same. The 2030 note will have an interest component right?
Michael Linenberg (Sell-side Analyst)
Mm-hmm.
Alex Malfitani (CFO)
Happy to provide that detail, once we have it, once we're all done with this part the net result should be a reduction in the interest expense.
Michael Linenberg (Sell-side Analyst)
Okay, that's helpful. In the release you do highlight or state that going forward we should see a measurable reduction in CapEx in 2023 and beyond. The way I think about it is this last year you saw your lease liabilities go up by $1.8 billion. As I sort of tie that to CapEx, going forward, what is that number going to look like? Rather than giving me a CapEx number, what should we anticipate that lease liabilities would grow based on new airplanes coming in maybe 2023, 2024? Rough numbers would be great.
Alex Malfitani (CFO)
Yeah, that's an important question, Mike. I always like to highlight that the CapEx that we're talking about does not include any new aircraft CapEx. For the next couple of years all of the aircraft that will be joining the fleet come from lessor orders.
Michael Linenberg (Sell-side Analyst)
Mm-hmm
Alex Malfitani (CFO)
There's no CapEx related to new aircraft. The whole CapEx that you were seeing in our cash flow projections were for maintenance, and they also had a big component of COVID deferrals, right?
Michael Linenberg (Sell-side Analyst)
Mm-hmm.
Alex Malfitani (CFO)
You know, and our stakeholders, our OEMs also provided us with credit to get through the pandemic. They're providing us with additional credit, they are exchanging, you know, past dues for the equity and that structure that we mentioned. The big reduction will come from the elimination of the COVID deferrals, you know, and then an additional reduction in the resulting or remaining maintenance CapEx through additional credit from the OEMs. As John mentioned, the credit lines that we are developing together, Azul and the OEMs, to make sure that this, you know, big part of our financing need is financed, right? Because, you know, other airlines in the world that, you know, maintain their engines, which is the majority of the CapEx here is engines on our E195-E1.
As they maintain their engines, they get financing, and we've been paying cash for all of our maintenance events.
John Rodgerson (CEO)
Mike, it makes no sense to have the Brazilian Development Bank, financing subsidized U.S. carriers, right?
Michael Linenberg (Sell-side Analyst)
I hear you. I hear you.
John Rodgerson (CEO)
If you think about all we do for Brazil, the jobs we create, we buy the aircraft that's made here in Brazil. I think that, you know, I think we got a great case to, you know, together with GE and Embraer, to ensure that there's more financing lines available with BNDES.
Michael Linenberg (Sell-side Analyst)
John, you're basically the only one. You are the only Brazilian airline-
John Rodgerson (CEO)
Yeah
Michael Linenberg (Sell-side Analyst)
... flying Brazil.
John Rodgerson (CEO)
Yeah.
Michael Linenberg (Sell-side Analyst)
I mean, hey, just a few more because this is obviously, you know, important call. Again, I appreciate that, you know, you're, you still haven't finalized everything, but I, again, I'm trying to get a sense of some of the impact here. If I look at your leases on your balance sheet at year-end, short-term, long-term, I get to a number about $14.5 billion. How much? Like, can you give me just a rough number like what percent? Is it half? Is it 40% that will tie to this 2030 note and the equity piece? Is it some portion, or are you gonna tell me all that is affected?
I'm trying to get a feel for how much of the cap structure actually changes. There is a de-leveraging moment here too.
John Rodgerson (CEO)
Hey, Mike, if we think about it in the following way, you need to take our COVID deferrals, right?
Michael Linenberg (Sell-side Analyst)
Mm-hmm.
John Rodgerson (CEO)
That's 60/40 split. You need to take a look at all of our aircraft and say, "Hey, how much was Azul paying for an Embraer versus current market," and that difference. You know, it varies, right?
Michael Linenberg (Sell-side Analyst)
Yeah.
John Rodgerson (CEO)
In some aircraft it's, you know, as much as, you know, 50% reduction in the rent, in some it's.
Michael Linenberg (Sell-side Analyst)
Mm-hmm
John Rodgerson (CEO)
... you know, zero reduction in the rent, right? You know, if you take a look at it and, you know... The big component is the COVID deferrals, and then we did the market to market with the lessors. You know-
Michael Linenberg (Sell-side Analyst)
Okay
John Rodgerson (CEO)
Alex said 90% were there right now. The other 10% we're negotiating with, and we believe we're gonna get there. Of that debt that you're seeing on the balance sheet, you know, all of it will be touched in some form, right? It doesn't necessarily-
Michael Linenberg (Sell-side Analyst)
Yeah
John Rodgerson (CEO)
... mean that it goes away, but it, you know, it'll turn into, you know, 2030 notes, some of it in equity, and some of it's gonna remain, you know, where.
Michael Linenberg (Sell-side Analyst)
Yeah
John Rodgerson (CEO)
... it is. you know, everybody's participating, everybody's supporting the plan, and I think that's the, that's the most important kind of message that we wanna have today. I know everybody's dying for more details and, you know, this is a phenomenal accomplishment that Alex and his team have done in a 45-day period, right? you know.
Michael Linenberg (Sell-side Analyst)
Yeah
John Rodgerson (CEO)
... why aren't we not at 100% yet? Well, you know, quite honestly, we're gonna get there, and we're probably gonna get there in the next couple of weeks, right? you know.
Michael Linenberg (Sell-side Analyst)
Yeah
John Rodgerson (CEO)
... this is, I've never seen anybody restructure their balance sheet in the speed at which Azul's done it, and they've done it out of court, and they've done it on an amicable way. Why? Because we have a fantastic business, and we have great partners that believe in us.
Michael Linenberg (Sell-side Analyst)
Yeah. Well, John, if I came back, I mean, I know in the public domain you have said, at least as of the last count, I thought the deferrals at least pre-COVID were somewhere around BRL 3 billion, and then there's this market to market piece. Is that?
John Rodgerson (CEO)
Yep.
Michael Linenberg (Sell-side Analyst)
Okay.
John Rodgerson (CEO)
You got it.
Alex Malfitani (CFO)
It's exactly right.
Michael Linenberg (Sell-side Analyst)
Okay. I can back in. Okay. The last piece, and I feel like that this is the most important piece at, from a dilutive perspective. You showed up the chart, you said, "We're trading at 4.2x. If we were at five, the stock would be at triple." I think is what you said, maybe if I heard you. Then you threw up a bunch of charts and talked about 7x-8x, and you sort of talked about, you know, the long-term, you know, sort of where this company has traded. If I think about where ultimately, the equity is struck, it's not gonna be struck at 4x, I think you've been pretty clear about that.
John Rodgerson (CEO)
Yeah.
Michael Linenberg (Sell-side Analyst)
We kind of know the high end. It's somewhere in between, but it's clearly a lot higher from a, from a multiple. Is that the right way to think about it?
John Rodgerson (CEO)
Yeah, you're getting close, Mike.
Michael Linenberg (Sell-side Analyst)
Okay.
John Rodgerson (CEO)
I mean, as we said earlier, we'll, we will give the details at the appropriate time, and I think that-
Michael Linenberg (Sell-side Analyst)
Yep
John Rodgerson (CEO)
I think that's important. It's something that's great for our partners, it minimizes our dilution, it's great for our equity holders, right? I think.
Michael Linenberg (Sell-side Analyst)
Yep
John Rodgerson (CEO)
that's the message today, right? We looked at all stakeholders, everybody wins.
Michael Linenberg (Sell-side Analyst)
Yeah
John Rodgerson (CEO)
That's what's most important here.
Alex Malfitani (CFO)
Yeah, as we think about why, right, we talked about why we're trading at four. You know, it's either because, you know, the market doesn't believe our profitability, or the market is seeing something, you know, different than us on a multiple basis. It's not the profitability, right? We do think our number is higher than consensus, but even if you just use consensus, which is around $5 billion, right? Just adding one turn, which is $5 billion.
Michael Linenberg (Sell-side Analyst)
Oh, yeah.
Alex Malfitani (CFO)
... you add that to, you know, to the equity value that we had, you know, not today, but Friday, right? To make the math... That's almost another 2X, right? You take the 1X...
Michael Linenberg (Sell-side Analyst)
Yeah
Alex Malfitani (CFO)
... that you're starting from, you add $5 billion on top of that's a 3x. That's stopping at 5x, which, for a company that is one of the most profitable in the world, has cash flow generation, has lower leverage, why would we be trading at 5x when our average since we went public...
Michael Linenberg (Sell-side Analyst)
Yeah. No, I think the market seems to be agreeing to some extent with your stock up over 60% right now. Very good. Congratulations again. Thanks for taking my questions, gentlemen.
Operator (participant)
Okay, thank you. The following question comes from Hugo Araujo, sell-side analyst from Genial Investimentos. Hugo, we're gonna open your audio so that you can ask your question. Please proceed.
Hugo Araujo (Sell-side Analyst)
Hi, guys. Thank you for taking my question. Congratulations on the agreement with lessors. Just a quick follow-up on the previous question. Last year you talk about a reduction of around 20% of the leasing costs from A1 to A2 aircraft, right? What I would like to understand is, do we continue with this assumption, or does the new agreement change that level of cost reductions? I understand I don't need the exact number, but it will probably be less than that, right?
John Rodgerson (CEO)
Yeah. Just kinda highlighting what you talked about, you know, there's several E1s that we're paying, you know, north of $300,000 a month on, right?
Hugo Araujo (Sell-side Analyst)
Right.
John Rodgerson (CEO)
This new agreement obviously reduces those to what the current market rate is. The E2s were coming in at 20% below what we were paying. Obviously, the gap now changes as we've kind of reset to market rates kind of across the board. You know, we are as excited as ever about the E2s. The E2s are an extremely profitable aircraft for us going forward, and so the ownership is lower than our historical, you know, average for E1s, and it produces, you know, 18 more seats. On a, on a cost, you know, per seat basis, it's down 25%.
Hugo Araujo (Sell-side Analyst)
Yeah. Yeah. It was very clear. Thank you. Thank you very much.
Alex Malfitani (CFO)
Thank you.
John Rodgerson (CEO)
Thank you.
Operator (participant)
Okay, the following question now comes from Rogério Araújo, sell-side analyst from Bank of America. Rogério, we're going to open your audio so that you can ask your question. Please proceed.
Rogério Araújo (Sell-side Analyst)
Hi, gentlemen. Can you hear me well?
Alex Malfitani (CFO)
Mm-hmm.
John Rodgerson (CEO)
Yep.
Rogério Araújo (Sell-side Analyst)
Okay, great. Congratulations for today's announcements. I have actually a follow-up on this restructuring. I know you guys are gonna provide more details when it's concluded, but only a direction on the expected impact on the balance sheet. I understand there may be a reduction of lease liabilities, but also some incremental debt instruments, so any expected balance sheet gains on that.
In terms of operating lease payments, I understand that the deferrals has not been paid so far. In terms of the level of payments that we see in current results and what is expected on the market to market on this repricing on rental rates going to market levels, if there if the direction is downwards, and if it's going to be relevant somehow. Lastly, if I may.
Alex Malfitani (CFO)
Mm-hmm
Rogério Araújo (Sell-side Analyst)
... there is some negotiations going on with the government in Brazil on taxes on jet fuel. Is there any update here on timing and likelihood? Thank you very much.
Alex Malfitani (CFO)
Sure. Let me start with the expected impact on the balance sheet. Let me talk about it directionally, Rogério. First, you know, we see a lot of people using the balance sheet information, a lot of people using seven times rent, and I think there's even a segment of investors that are taking the balance sheet and kind of trying to calculate an average discount rate, using an average discount rate to figure it out, right? Let me talk about sort of the balance sheet impact if you are using IFRS 16 and then the seven times rent impact. Net debt, gross debt, or even leverage was not really the problem, right?
The reason why the market has been so nervous and there's been such uncertainty and volatility on our paper, was never a leverage and was never the level of debt that we have, right? We were able to issue debt, you know, at seven and three-eighths, like John mentioned, when our leverage was in the double digits. Now that we are starting with a five, heading to start with a four, even before the restructuring, the market's a lot more nervous. It was nervous because of the cash burn or the cash gap that we had in 2023, that we had projected for 2023, not because of the debt, not because of the leverage.
Having said that, you should see a small reduction in net debt, if you're using IFRS 16. You know, a lot of that depends on where our incremental cost of borrow will be by the time we finalize all this. For those of you that maybe are not too familiar with IFRS 16, I have to use my incremental cost of borrow to calculate the present value of the leases. I don't have an option, right? Whatever that cost of borrow is at the time, when we, you know, renegotiated our leases originally during the beginning of the pandemic, it was kind of in the 20%, right?
We'll see where it is once we are done here, and that will determine a lot of what the present value on our balance sheet will be, depending on what that number is. All right? We believe, you know, with our estimates on what makes sense, you should see a small reduction in net debt if you're using IFRS 16. Now, if you're using seven times rent, you should see a significant reduction in leverage, right? You know, even if you were doing it right and you were not including the deferrals in your calculation, right? If you were taking the recurrent rent, you're taking sort of the total rent payment, subtracting what was deferral related, and leaving only the current rent, and multiplying that by seven times.
The rents are going to be reset to market values, you should see a significant reduction in the lease liability. It's going to be 40% offset by a 2030 note, but the net result should be a reduction in net debt.
Abhi Shah (President)
Yeah. Regarding the fuel tax discussion, we already assumed any potential changes in our EBITDA number for this year. It's already in our model and, you know, we're already planning for potential changes. It does not impact the BRL 5 billion+ EBITDA guidance that we're giving today.
Alex Malfitani (CFO)
No, but that's, you know, with what we know so far, right? I mean, the way we always talk about sort of government help, there's always a lot of talk. I think it makes sense for the government to, you know, stimulate travel in Brazil. This is a continentally sized country, you know, where aviation can provide a lot of social benefits, can generate economic growth, it can create jobs. Potentially there is something that's coming, but we never include that potential upside in any of our guidance, in any of our planning, right? If it comes, it will be additional upside. We're only including what is, you know, known and that we can count on in our guidance.
Rogério Araújo (Sell-side Analyst)
Fair enough. Very clear. Thanks very much.
Alex Malfitani (CFO)
Thanks, Araújo .
Abhi Shah (President)
Thank you.
Operator (participant)
Okay. That brings our Q&A session to a close. I would like now to invite John Rodgerson for closing remarks. Please, John.
John Rodgerson (CEO)
I'd like to thank everybody for joining the call today, and feel free to reach out to us if you have any questions. We're really excited about what we were able to accomplish in such a short amount of time, and there's a lot more work to be done. You know, we look forward to updating you in the market over the course of the next two months. Thanks everybody for joining us.
Operator (participant)
Okay. Thank you. This concludes the Azul's audio conference call for today. Thank you very much for your participation, and have a good day.