Gol Linhas Aéreas Inteligentes [GOL] Conference call transcript for 2022 q1
2022-04-28 15:22:02
Fiscal: 2022 q1
Operator: Welcome to the Gol Airlines, First Quarter 2022 Results conference call. This morning, the company made its numbers available, along with three videos with the results presentation, financial review, and preliminary Q&A. GOL hopes everyone connected has watched them. After the company's brief remarks, we will initiate the Q&A session, when further instructions will be provided. This event is also being broadcast live via webcast and may be accessed through the company website at www. voegol.com. br / ir and MZiQ platform at www. mziq.com. Those following the presentation via the webcast may post their questions on the platform and their questions will either be answered by management during this call or by the GOL Investor Relations team after the conference is finished. Before proceeding, let me mention that forward-looking statements are based on the beliefs and assumptions of the company's management and on the information currently available to GOL. They involve risks and uncertainties because they are related to future events and therefore depend on circumstances that may or may not occur. Investors and analysts should understand that events related to macroeconomic conditions, industry, and other factors could also cause results to differ materially from those expressed in such forward-looking statements. At this time, I will hand you over to Mr. Paulo Kakinoff, CEO. Please begin.
Paulo Kakinoff: Good morning, everyone. I would like to start by ratifying our most important results for the period which were made possible by the tours to your butane from our customers, investors, suppliers, and specialty, our team of feeders. Our employees were responsible for getting us through the challenges of the quarter without disruption in our operations. That revenue from passenger transportation grew significantly due to the consistent recovery in sales. Sales levels in January and February increased 10, 30% respectively, compared to the same periods in two February 19 while in March, they expanded 60% due to the increase in sales to the corporate segment. In January, we reached the 38.5% domestic market share and 99.7% flight completion above the industry average. This position was attributed by the dealership and capacity management in the previous months. Compared to fourth quarter of 2021, we increased our capacity by 15%. We feel more as CEOs, recovery at the country's main airports, such as Congonhas, Sao Paulo. A significant hub for corporate passengers essential for a strengthening profitability. Our occupancy rates and aircraft utilization continue to improve and flight frequencies expanded by 48% when compared to the first quarter of 2021. The increase in demand and the number of passengers transported was followed by an important growth in our NPS. During the quarter, this service quality indicator increasing by seven points and reached 45, GOL's highest score to date, reflecting the consistent force towards the improvement of our customer experience. In April, we signed a landmark cargo and logistics service agreement between our logistics business, Gollog. This partnership contemplates a dedicated freighter fleet of six Boeing 767-800 Bcf, which is expected to begin operations in the second half of 2022. And it can be increased to up to 12 aircraft until 2025. Part of these aircraft will be converted at GOL Aerotech, and it's super is anticipated to generate fleet optimization savings of approximately BRL25 million in 2022 and another BRL75 million in 2023. As such, we plan to increase GOL's range of services and tonnage capacity by 80% during 2023 to generate additional incremental revenue of approximately BRL100 million in 2022, and more than BRL1 billion over the next five years. I will give the floor to Richard Lark, our CFO, who will present some financial highlights.
Richard Lark: Thank you. Kaki. Our results reflect the social capital we have accumulated over two decades of collaboration with our clients, employees, suppliers, and investors. I would like to start today highlighting the important results we had in the quarter. We registered an EBITDA margin of 5.6% and an EBITDA margin of 16.8%. Our detailed financial analysis for the quarter was shared in the press release and video presentation released this morning. We believe that you all had a chance to access them. Regarding our capital structure, our available liquidity remains stable at 3.3 billion reals, with short-term debt of $721 million at the end of the quarter. We have no significant debt amortizations within the next 12 months and sufficient long-term financing credit lines for the acquisition of new 737 MAX aircraft, a key part of the fleet transformation plan. On April 13th, the exclusive code share agreement between GOL and American Airlines was finalized, including an equity investment by American in the amount of $200 million. American now has a 5.3% participation in GOL share capital and was granted the right to appoint a member to the company's board of directors for the term of the exclusivity provided in the transaction. This quarter, we received eight Boeing 737 MAX 8 aircraft. The transformation of our fleet to newer and more efficient technology plays a key role in our strategy for the coming years. Based on increased productivity, lower unit costs, and lower carbon emissions. Monday 8th, 737-Max received in the quarter, three aircraft are under finance leases. We anticipate that in the coming years, around 50% to 60% of new aircraft received will be under finance leases. And despite the increase in our leverage, partially as a result of the acceleration in the fleet transition, we are optimistic that the improvement in EBITDA generated by this initiative will lead us to a net debt EBITDA ratio of around eight times by the end of 2022. I now return the floor to Kakinoff.
Paulo Kakinoff: Thank you, Richard. I want to close by acknowledging the commitment and dedication offer collaborators, between our figures. They are the ones who put us in a solid position to continue to expand operations in a sustainable way. Have ago is emerging stronger and more resilient as demand normalized. We are even more confident now with the solid recovery of the corporate segment in March. Operator, you may initiate the Q&A session.
Operator: Thank you. The conference call is now open for questions. . If at any point your question-and-answers, you may remove yourself from the queue by pressing star and then two. we asked that when you ask your question, speak closely to the receiver of the device, so that everyone can hear you clearly. Participants can also send questions via the webcast platform. We need to quick the question mark in the upper left corner then type in your question. Please hold while we poll for questions. The first question comes from Daniel McKenzie with Seaport Global, please go ahead.
Daniel McKenzie: Hey, good morning, guys, thanks. Focusing on cargo BRL1 billion over the next five years, a couple of questions here. How is the logistics team just following the wind with MercadoLibre, thinking about other growth opportunities from here? And then given the growth, how should we -- what do you want us to know about this business? How do we model 2023 growth margins versus the core airline? Anything you could share would be great.
Paulo Kakinoff: Hey Dan. Good morning. Thank you very much for the question. Actually this is -- this new business is leading towards another set of opportunities in such relevant, and first to our business, which is the air cargo transportation. We are now assuming six cargo aircraft in our fleet. They are all 737-800 BCFs converted directly by Boeing, supported by the. Once we will operate such kind of aircraft exclusively, to make that a reality, certainly, we could consider to expand this kind of operation towards additional routes being solely operated by different market segments. This is just to share with you one of the possibilities. At the moment, we are totally dedicated in delivering the best customer experience we can to make that a reality, which is our primary at the moment. And secondly, this business alone can really change dramatically the few days, units and I've shared with you already there's $1 billion potential additional revenue around the next five years. Also we mentioned that this operation only could add up to 80% of our current revenue. So we are pretty excited here. Regionally, other opportunities, those going into this. But at the moment, we are overly concentrated at operations only. Certainly we will have another set of information being shared with you from the next earnings result conference call, because now we have another business segment driven by the kinds a bit. For the moment those are the information that we would like to share.
Daniel McKenzie : I see, okay. Second question here, GDP has been revised upwards in Brazil. The revenue outlook for this year remains unchanged. I'm just wondering if you can speak to the pace of oil recapture throughout the quarter where we're at today, and how Smiles is helping to drive improvement in, helping to stabilize your yield versus 19.
Paulo Kakinoff: The best answer to this question is given by the first-quarter results itself, because we are still facing a fully volatile market and there are several uncertainties. There are those instabilities that even though we even if we are producing superior results in comparison to everyone's expectation of business driven by a set of decent comments. The company is in shape, breaking records, and are ready or offerings into the whole structure. I mean, the GOL it could variation the benefits of these mines the team. Only those effects balance sheet that mainly they are capability to miles and decline the market much more directly correlated to our revenue management scheme always in place here for GOL. So we are making the most out of this extremely valuable asset developed by along the years, so is directly responsible and it's one of the drivers, as I said, for the results we have delivered, and also for this positive outlook we are sharing with you with regards to the market overall. The forward bookings curve is strongest thing if we just apply the same effect to this customer too.
Daniel McKenzie : Yes, thanks, Kaki. And I guess what I really meant to get at is just the pace of the corporate recoveries since the larger corporate --
Paulo Kakinoff: Daniel McKenzie : Yes, yes, it's a little bit faint but I can hear.
Richard Lark: having trouble with the. We have some -- It's not very clear, but let me just recap on what Kaki said on a couple of things. right now, we've been able to adjust our -- yield management just like our structure delivered to where the current level of oil prices is pretty much since the beginning of March rather than we have here in Brazil, a price delay, given how jet-fuel is priced. For example the jet fuel price we're going to have in May is based on the average price of a basket of international oil prices in April for the, just the average and then the average currency. And so you can anticipate if you have the demand ability to do it. And that's going into your question, but just really want to give some historical context here on where we were coming from and why things were the way they were. We only start if you get a recovery of corporate demand. Well, let me the longest did last year, but it's coming off of a very timid base. It recovered maybe to 60% by the end of -- 60% of 2019, by the end of December. January, February, these are our usual high season. But during that same period since November of last year, we've been dealing with the combination of higher oil prices and a weak presenting currency. I think end of February, February 24th to be exact, when one of the travel restrictions -- just restrictions in general came-off, COVID-19 restrictions, that also stimulated the final pieces that we did not have back yet on large corporate demand to come back pretty quickly, right at the end of February, which also coincided with the beginning of the war, February 24th to be exact. It's literally the same day almost. And so with the return of that final piece of the very large corporate demand for our business and even the very large visiting corporates, which our network is organized to serve. Since that moment in time until February, we were able to work through yield management and get 100% recapture on what is happening with oil, but with a couple of nuances. WPI at the end of the Q1 was 32% up, you get 75 bucks versus 100 bucks, and 76% off overall in the same period in 2019, 57 bucks versus 100 bucks. But the exchange rate, the Brazilian currency, appreciated 15% from the beginning of the year to the end of the Q1 from 5.6 to 4.75. And so the effect on jet fuel oil for us, if we may be looking at the margin 15% increase. That is margin increases you are seeing affected U.S. Airlines and 40% that affect April and May, 40%. Not the 70%, the 50%, 70% that you've been seeing in other countries that you look. It's at a much lower number to have to deal with on the payer side. Now the exchange rate appreciated 15%, which also favors other costs that we have denominated dollars news mix, leasing, revenue systems and dollars. As you saw, we have a net increase in the Q1 of 130% and that's how we started the Q2 period which is longer than the desired quarter. It's been a long way situation from a different perspective that given the return of the corporate demand at the end of February, coinciding with the efficient of the Brazilian real, we have the fact that we were able to not just recapture the variations, but also have an increase in margins. And then was saying that this is important because this affects grow separately from what might be affecting, the sector as a whole. You were going and at the end of June, we reincorporated files and right around the end of the third quarter last year, we integrated the yield management teams in the center of the work together. The teams were kept separate but they're looking together, maximizing the profitability of inventory, which is produced out of ago factor, which is between inventory, and at the end of June, at the end of Q1, we're expecting to already have generated synergies which will equal 100% payback what we paid for the Smiles is more than half of the synergies coming from -- coming and operations and Smiles site like coiffed outcomes, kind of revenues, yields. And so we've been able to also increase substantially in the quality of the profitability of yield through what we have to do in terms of eliminating a lot of the problems we to have managed care companies were separate. And that also goes in there because Smiles was an important increase or important in driver in the increase in yields in the Q1. And as you saw their limits, the gross sales in Smiles got 100% higher in Q1 of this year versus the Q1 of last year. That's yield -- and that comes out of the integration of your management process fees. And that also can see a decline of Smiles corporate to all that is also in there driving what you've seeing in terms of our yields allows them to just kind of comparable with what that but starting you’re going to do a follow-up on your question on Pizza Hut.
Daniel McKenzie : Thanks Rich. That's really helpful. Oil prices, manageable. I guess just one last house cleaning question. Given the volatility in oil, what's the spot jet rate you're paying at the pump?
Richard Lark: Fuel price?
Daniel McKenzie : Just at the at the pump today, just a house cleaning questions.
Paulo Kakinoff: Richard Lark: Paulo Kakinoff: It's 60 at these moments. Remembering that a 45 days delay in comparison to the international prices. So at the moment we're filling our aircrafts with the prices compared to international quotation of 45 days ago.
Daniel McKenzie : Understood. And I hear you loud and clear, rich on the recapture here. Good job.
Richard Lark: Yes. We have a number of for the Q1, our press release for the Q1. And you also happened up in our very detailed guidance. You have our assumptions for the full year up until - that's really what matters. Thanks guys. Okay. Thanks, next question.
Daniel McKenzie : Understood
Operator: The next question comes from Michael Linenberg with Deutsche Bank. Please go ahead.
Michael Linenberg : Good morning, everyone. Nice job. Nice to see the recovery really starting to take hold. The American codeshare, which as you said, Kaki and Rich, I guess, effective just about a week or two ago, couple of things. What's the potential revenue pickup? What are you assuming maybe in year 1? And as a part two to that question, do you plan to seek anti-trust immunity with the regulators to offer maybe a more comprehensive type arrangement, maybe on par with some of the other agreements in the region?
Paulo Kakinoff: We do not have -- good morning. Actually, we do not have any new requests to be submitted to the anti-trust authorities considering the network we have designed, which is pretty much comprehensive, I would say, mainly with regards to the North American market and the whole American Alliance network. What's important to highlight is the current market performance on those routes produced by the codeshare in comparison to the overall demand. We know that the international routes and the international markets didn't recuperate as fast as domestic in review, of course, pandemic period and this is something to be changed in the near future. We are now also perceiving the higher demand and higher forward bookings for the international routes and are even considering the market size, it's more than we had pre -pandemic, for international travelers, the partnership between Gol and America and Alliance, is already today, two times bigger than we have our previous partner, and it demonstrate, how much stronger American Alliance network, brand. and the customer units to fly American Airlines in Brazil and in the region. At this moment, we are experiencing higher than expected demand in comparison to the overall market. And this year has been produced, it basically by the effectiveness, deploy edge in this partnership. Go in America the max, but for the moment, this is what we have too sure. We have already antitrust approval for the network. We have deployed today and the run, which is supporting the forward bookings to the end of this year.
Michael Linenberg : Kaki, when you say times bigger than your next biggest partner. Are you referring to like say, a current partner like Air France, KLM or are you talking about versus Delta? Versus what you have with Versus Delta, yeah.
Paulo Kakinoff: Is that in comparison to our North American partner. Our prior North American partner is Delta. So I explained by the network size, by the capacity deployed by American Alliance in the region. So it's a much bigger company for the South American markets and mainly in Brazil. The -- just to give you another reference on that subject, the American Airlines credit card in Brazil has second largest customers platform right after the United States. So the brand is really powerful here. The company is in the customers top of minds here. Therefore, we just say -- therefore, we can say that we are just in the beginning of capturing, the high value of this partnership, we are reaching the huge potential right now and more to come.
Michael Linenberg : That's great. Kaki, thanks, and then just turning to this slides, page 4, where you break out your corporate, and kudos to the team. This is -- we haven't seen anything like this from any other carrier. You guys have been very transparent with corporate and to break it down into, I don't know, it looks like 10 different groups. This is fantastic data and you can see that big -- almost as if somebody turned on a light switch back in February with corporate. I see there's a line there for corporate and there's a line up for consolidator which is green. But there's three other lines there. What are those lines? Are they leisure, are they VFR, is it cargo? What -- can you -- I'm just curious.
Paulo Kakinoff: You're right. we have the all-area sub segments, mainly leisure. That's why businesses to show you the contrast between the recovery speeds of those two different segments. We have been positively surprised by the large corporate demands overcoming the most optimistic forecast, we have shared before GOL along with pandemic kept it’s related to how strong would be the cause of the. Also, in contracts with some of the most of growth exceeds shared by some, especially saying that the big companies wouldn't return to there to travel habit. We know the Broadridge, as it was presented. Even considering that the structural changes would come and they did. I mean, we do see less and less passengers taking the planes there in one day meeting only and flying back overnight. But at the same time they have much more companies. We really need to visit customers in person or combining the business trips with leisure. Even starting from our own point of view, which was always very optimistic, we are fortunately being surprised by much stronger demand at this moment, and this is what we have tried to demonstrate in said chart, such as by making -- offering you a comparison on how much faster has been the corporate demand recovery in comparison to the leisure which is, by the way, also pretty strong.
Michael Linenberg : That's super helpful. If I can just squeeze in a last one just on the slide, page 5, and it shows you how closely I look at these. You talk about markets that you've reopened, then you highlight some of the international markets, and you have Orlando there, which I know you're going back into, but you have instead of Orlando City code, you have Miami city code, and so I'm not sure if that's a slip up or not, but I would think that with the American agreement, when I think about secondary Brazil, to help out the American hub, GOL would be with the right cost structure and the right airplane size flying say a 7378 Max from, say, Belem or Recife or Salvador Manau to Miami that would make sense, that would make a lot of sense, I don't know if that was unintentional or not, but maybe it's giving us a look into your future plans.
Richard Lark: What my goal is small, but the addbacks, operations and our people medical regaining flights for mortgage. strategy even prior to our exclusive codeshare with American and now with exclusive codeshare with American Americans in abdominal wall feature in Miami and significant Nalavadi operation that we can develop in partnership with American, Miami with American focus on the wide-body for longer distances in itself infill drilling southern Brazil.
Paulo Kakinoff: Yeah, Mike. The maximum information I can share at the moment is that we are taking careful notes of your very interesting suggestions, okay. You're doing an amazing job. abilities, and could thinking out of partnerships with American alliance that you write 7% of max gives you a fantastic machine. And we really not only excited, we are more than satisfied. The forward bookings coming out, the IDA slides to flow that though we about to be using this not excellent Gogo can with potential for additional routes, markets and we are supposedly about to come.
Michael Linenberg : Very good response, gentlemen and nice quarter again. Thank you.
Operator: The next question comes from Savanthi Syth with Raymond James. Please go ahead.
Savanthi Syth : Thanks. Good morning. If I might ask the business recovery question a slightly different way, I was wondering if you can say because the forward sales are super-helpful, but I was kind of curious where your business revenue is today versus kind of this time in 2019 and generally in your 2022 revenue outlook. What are you expecting that to recover to?
Paulo Kakinoff: Compared to few years, those could do better explain the current familiar to durations that we are at the moment comparing second quarters to 2019 and to 2022. We are transporting the smaller number of business travelers than we were but producing the much higher revenue. The NBCs related to those two effects they have previously mentioned. The type or the reason for the business travels have has changed slightly. So they're not more, just run the trips and they been replaced with longer journeys higher number of times. Those travelers are bringing their families along so extending their business trips, ready have internally name it, several. That's therefore it has higher yields, longer stays in their destinations, and therefore producing higher revenues. So those are the main figures to compare.
Richard Lark: in terms of estimated, Q2 process is going to be transition back to what your kind of more saw are normal mix of traveling passengers, 3-5 don't make it's about the second half for those reflected in our full-year guidance would be approaching kind of the mix that we had with kind of pre -pandemic, which would be roughly 70% of our inventory being formed. But for business purposes, you study percent VFR and leisure. And then within that mix in terms of overall about 30% coming from the high-yielding large corporate. That will probably be a little be end of June, July that we really achieve that pre -pandemic mix. Q2 is still a little bit of a transition
Savanthi Syth : That's super helpful. Thank you. Sure
Paulo Kakinoff: Sorry, I just like to add another item to this analysis that we have -- that just shared. One thing I really would like to highlight is our capability to adapt to the network and the flight schedule to this new business service profile. I mean, we have identified this trend by the end of the year, and then we are now in the second quarter are already offering a totally redesigned network in terms of, as I said, scalable and routes in order to cope with the new. So that's one of the benefits, one of our main assets due to those business model coming faster than expected to adapt ourselves to the new market demands and profile. Please go on to new.
Savanthi Syth : That was a good point, I am glad you interrupted. If I might just ask on the fleet plan, like the max deliveries outlined in the fleet pan out a little bit different than the kind of the max, I think the firm orders or the max delivery in that 20 and I was just kind of curious what the difference was if you've kind of reworked the delivery schedule since then, are you're building in some conservatism on the MAX deliveries.
Richard Lark: Module two We’re going to
Paulo Kakinoff: Actually be
Richard Lark: Paulo Kakinoff: But thanks, Richard. Actually, they're not deviating that much from what we have shared and demonstrated previously. And it happened because, as we have just mentioned, we have combined our -- all the we schedule with some opportunistic movements whenever we'd find attractive offers in the market. We have some work blended. Our order with other opportunities that we can take. By the end of the day -- by the end of the year I think we will be pretty close to the final figure we have already shared with more related to how we're building this year-end scenario to the then dramatically changing the numbers that we have already shared with you, but Richard, I think whether you like to --.
Richard Lark: there yes. The order book is less than the total max because we're sourcing from the secondary markets, the light-field market, et cetera, aircraft that were produced for other clients that we're bringing in addition to max or max our order book, per se. That importantly objective on that is to be. Now, it's almost four years, we've had the max running in the pandemic. And so -- and then during the pandemic, we reduced our total order books. To reduce risk until we're trying to be a big catch-up outside of our order book. We're working in the market until they were pretty. If you find any extra maxes out there, let us know.
Savanthi Syth : Well, I suppose I'm looking at just to add 22 matches up with the 20 aspects. Twenty-three, 24, 25, it looks like the 20th head like 59, 79, 96. That's why I was curious as to. Well the 20th seemed to have a high a number. And that was where the question came from.
Richard Lark: Okay. I'll follow-up with you offline on that.
Savanthi Syth : Sounds great. And just one last question on just capacity restoration. As you kind of exit the year, where do you expect that kind of domestic and international to be understanding that things can change and you're being very responsive to demand.
Paulo Kakinoff: Sorry, Savi I am not sure that I - for the year and the studio questions that we can have grown, you were asking land, we will have the two different markets. rein, pre -pandemic numbers with regards to be capacity, right?
Savanthi Syth : I was something along those -- where you expect to be at the end of the year versus 2019, domestic versus international.
Paulo Kakinoff: Domestically, we will be on route, the same pre -pandemic level, even utilize both, and international I still believe this is going to be below 2019 levels. We might be surprised, but the current volatility exchange rate and also the back macroeconomic environment combine it with different. Please COVID-19 restrictions, relaxation in the different markets might postpone the international markets recorded. As we would like to have the domestic, definitely we will be beginning of the year at the same level, we were pre -pandemic.
Operator: Thank you, your next question comes from Duane Pfennigwerth with Evercore ISI. Please go ahead.
Duane Pfennigwerth: Hey, thanks. Firstly, nice job getting your results out more quickly, I wanted to commend you on that. Just a couple questions for me, I'm not going to ask five or six to dazzle everybody with my Brazilian knowledge, but just a couple out of respect for the other people on the phone. Yields look great now, and I wonder if you could comment more broadly on supply demand. GOL has been very disciplined, not just in this crisis but in past crisis as well, but you continue to be a share donor. By our rough math, you're going to be down about 4% in domestic in the second quarter, the second calendar quarter, Azul is up 9 Points relative to 2019. So can you just comment broadly on how you see supply demand and at what point is GOL kind of no longer willing to be a share donor in Brazil domestic?
Paulo Kakinoff: Thank you very much for your question that that gives me a very -- I mean, an incredible opportunity to once more emphasize how important capacity supply and demand is. You have mentioned that we had sounded the cost that's ready for many, many years and hopefully you have seen that we have to that concept in a very disciplined way. And this is, from our perspective, this is more important than ever, therefore, even had led the market in the first quarter as you have already seen, in a quite comparable manner with the 2019 levels, we are clearly demonstrating to the market that will you not fly, I'd say -- let me try and get the right words. You will not fly just to produce market share. We don't care if it's going to result in market share result if we will be able to continuously sustain and protect as much as you can this year to recovery thoughts that we have been able to dilute it. That's a very, very important message we would like to believe it here because that's the basic, the fundamental pillar of our strategy and the way we have the reason of our business. The results are speaking for themselves and another aspect is related to the market share is that we have seen some not going with the market, but also international offering a higher incentive than the fly. So you either take for granted this market share gaps that we have mentioned based on the first quarterly experience, we do have. I still believe that the industry is and to behave in a more rational way than it did the pre -pandemic, and this include every player in the market as we have been able to observe. So that independently of the inventors, the availability that we're seeing right now, I can tell you from the dose perspective that we will continue to protect and defend the proper balance between capacity and demand.
Duane Pfennigwerth: Thank you for that extensive answer and then just for my one follow-up and a follow-up to some of Mike's earlier questioning. Just very simply not this quarter or next quarter, but can you just remind us what the international strategy is? And what are the milestones that you're waiting for? Maybe it's sort of the US testing requirements to go away. But how are you thinking about international? How are you thinking about the U.S. And how has that changed with the American partnership here? Thank you for taking the questions.
Paulo Kakinoff: Looking more broadly on the international network. We have already seen that on average we are assuming we own international destination since August last year, and just gradually to resume international flight is also proving to be the most effective one, because we are facing still meaningful volatility all over those markets with regards to the regulatory constraints. There are some countries ahead on COVID-19 restrictions relaxation, some orders still more conservative but we are producing very attractive risks on all of those routes already announced and in operation. So the next one will be the North American market, flight trend to Florida. Those operations are about to be resumed in the month of May, and we now considering to keep this the same pace for along the next month. So there are more international destinations to come that you keep our quite conservative strategy of only declining new routes in case that we sure that there's much to produce. Attractive risks. Otherwise, we would you rather keep the planes out of the pressure.
Duane Pfennigwerth: Thank you.
Paulo Kakinoff: Thank you.
Operator: The next question comes from Stephen Trent with Citi. Please go ahead.
Stephen Trent: Good morning, gentlemen. And thanks very much for taking my question. Most of mine have been answered, but just a quick question for you on the maintenance side, I haven't heard you guys mentioned GOL AeroTech for a while. Could you just maybe give me a little bit of color with respect to how you see potential third-party business developing with that and to what extent you're running any of your engine maintenance through GOL AeroTech. Thank you.
Paulo Kakinoff: Thank you very much for the question. At this very long end we are discussing analyzing exactly those alternatives. One fact that I would like to share is that the demand for the MROS worldwide is pretty high at the moment. This is an interesting set of opportunities to go in order to increase revenues serving other airlines and their companies, but also, it does represent the challenge considering our own fleet, maintaining. So we're reviewing our strategies, the alternatives, in order to design the best allocation we can at the same time that the higher possible -- to the highest possible number of customers being served by GOL. So I think that we will be able to view more precise information on this strategy in a few weeks.
Stephen Trent: Thanks so much. Kaki and super quick, dumb question slash, follow-up. You're still doing some of your engine maintenance through Atlanta or is that kind of phased out?
Paulo Kakinoff: Sorry. Could you please we would see that again in December and said when you said, yeah
Richard Lark: We still have in our diversified the engine overhaul portfolio service providers, we still have stuff with up the tech ops. Correct, yes.
Stephen Trent: Oh, that's perfect. Let me leave it there. Thanks again, guys.
Paulo Kakinoff: Thank you.
Operator: As a reminder, if you would like to ask a question, please press star then one on your phone to engine the question queue. The next question comes from Alejandro Zamacona from Credit Suisse. Please go ahead.
Alejandro Zamacona: Hi, Kaki and Richard. A couple of questions here. I'm wondering if you can share any thoughts on GOL are to move it passed through. It's how your fuel prices to final customers. On the any expectations for yields for the remaining year. Also, considering the potential recovery of the business segment that you have been discussing during the call.
Richard Lark: As you know we -- I apologize because the audio is not the best today, and the setup and we haven't been able to correct it during the call, but in one of the previous questions we were kind of walking through what you call the pass-through, we call the recapture, which has depended on the travel events, and so when we had the strong recovery in the large corporates at the end of February, we've been able to recapture 100% of the variation in fuel prices on our cost structure. We were -- we had been struggling to do that from November of last year until the end of February when -- November last year is really when fuel increased, oil prices increased significantly for us because it was simultaneous with a very weak Brazilian real. And the other phenomenon that's happened also this year, when you said, in the first quarter, was an appreciation of the Brazilian real by about 15%, and so that has compensated a large portion not just of the increase in oil prices as our jet fuel prices in Brazil are effectively priced in U.S. dollars, but also has helped us reduce the costs of other dollar denominated expenses such as lease payments, maintenance costs, and things like that. And so, yes, we've entered the second quarter with significantly higher level of yields, as you saw on our first quarter results this morning as we have been explaining on the call. On the second part of your question, could you just repeat it against, please?
Alejandro Zamacona: Yeah. If you expect a higher yield from either the business regarding segment.
Richard Lark: Yes, I think your question was kind of in general one for I think Q2. We are at this yield level that we shared with you in the presentation today. We shared some interesting data on the corporate recoveries and a graph that Michael was referring to the inflection well, it's between the week nine and week 11 of the year. So we continue to operate at that level. As you know, the second half we expect to have normalization of demand. Second quarter is a transition and when I say normalization of demand, it's normalized mix of 70% business traveler with about 30% of the mix being the large corporates. And the second half will also represent the majority of our revenues for the year. July is always a good month, and so we do expect to have continued buoyancy, continuing improvement in the yield environment. We've been super disciplined, there's been a lot of questions on capacity, I think the discipline, and the ability to have high-quality yields is directly correlated with discipline on capacity management. We continue to do that. As Kaki was saying, we don't have as a target, as directed focus on market share. We focused on other metrics. During the pandemic we were focused on, cash management, not margin management, and also emerging from the pandemic with the unit costs lower than we came into the pipe. But we were able to achieve both of those. And so now we're pivoting back to margin management, which will be focused on in the second half of the year. And so you'll manage it will be an important component of that edge will continue to be capacity management. In respect to you were saying, we don't have -- it was a question on market share which tends to be kind of a U.S. market focused question that we though that kind of metric for us. We're focused on an initial pivot back to it in the second half of the year, profitability management and balance sheet management. We did the most discipline on capacity in that respect, and that tends to result in less flight cancellations versus our competitors. There was a data mentioned in one of the previous questions about somebody's for inputs into the system. Those aren't necessarily what ends up being flown. There's been much less volatility in our inputted schedule, and the actual schedule that we've flown versus our competitors who have put a higher number of flights in the system and then end up canceling a much higher number of flights. And so be careful about using those to project results in the future in terms of yields. Obviously, that is a big determinant of capacity, but we continue to be a leader in the most disciplined and most conservative on capacity. The reason I'm saying all these points as it goes, all the factors that I mentioned will tend to support for us to grow a solid -- we expect a solid yields environment for the next couple of quarters.
Alejandro Zamacona: Okay, Richard. Thank you.
Operator: This concludes today's Q&A session. I would like to invite Mr. Kakinoff to proceed with his closing remarks. Please go ahead, sir.
A - Paulo Kakinoff: I'd just like to thank you all very much and we wish you a very nice day. Thank you.
Operator: This concludes the GOL Airlines conference call for today. Thank you very much for your participation and have a nice day.
