Gol Linhas Aéreas Inteligentes [GOL] Conference call transcript for 2022 q2
2022-07-28 19:05:22
Fiscal: 2022 q2
Operator: Welcome to the GOL Airlines Second Quarter 2022 Results Conference Call. This morning the company made available its results. After GOL's presentation we will initiate the Q&A session for analysts and investors, when further instructions will be provided. This event is also being broadcast live via webcast and may be accessed to 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 the management during this call or by the GOLâs Investor Relations' team after the conference is finished. Before proceeding, we emphasize 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, given that 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. Celso Ferrer, CEO. Please begin
Celso Ferrer: Good day, everyone. Thank you for joining us today. I took the role as CEO this quarter with the commitment to focus on three main pillars: growth, consistency and proximity and look forward to sharing more with you about this over the coming quarters. GOL trends has always been its commitment to serving the customer and being the best for all and that will continue to be the guiding light as a company. It is an exciting and dynamic time for the airline industry, as new demand trends are emerging in the post-pandemic recovery. And with the help of our team of VOEGOLâs, I'm confident in leading the goal to even greater heights. Turning now to the results for the quarter. We recognized two very important achievements, especially considering the seasonality of the period, historically the weakest of the year. We grew our revenues and improve our operating results. Notably, we recorded one of the highest levels of quarterly revenues in the GOL's history. The second quarter represents a milestone in the recovery of the demand for air travel. We had resumption of the corporate travel, stimulated by new forms of hybrid working in companies and stability in the leisure market. The combination of the high percentage of the Brazilian population vaccinated and our future booking curves make us believe that demand will continue to increase in the coming months in a consistent and sustainable way. Once again, GOL's ability through efficient management, this increasing traffic derives from the company's main differential, strong and disciplined capacity management with a continuous focus on preserving profitability and liquidity. I want to draw particular attention to the 66% increase in yields and 51% increase in PRASK. This yield was 35% higher than pre-pandemic numbers in second quarter of 2019. And our yields are growing faster than our competitors. Our capacity measured in ASK more than double and we surpassed not only second Q 2021 sales but also those of second Q 2019. These numbers are significant to us as it implies that our growth is now returning to the track that was prior to the pandemic. Our unit cost ex-fuel decreased by around 45%, an important metric that demonstrates how GOL increased its productivity and efficiency during pandemic. We had an average of 500 daily flights in the quarter, reaching more than 200 markets and carrying approximately 6 million passengers more than the double the number of passengers carried in the second quarter 2021. The GOL network is evolving to account for a rebound of the corporate demand, which provides the best margins for our company. According to ABRACORP, GOL continues to maintain its leadership in this segment. We expanded our presence in regional markets with four new basis; Ribeirão Preto and São José do Rio Preto in the state of Sao Paulo and Passo Fundo and Uruguaiana in the state of Rio Grande do Sul. The connectivity of these routes in Guarulhos Airport, places us in a privileged position to serve these passengers and improve our customer services. In the international market, we resumed flights to Miami, Orlando and Buenos Aires using the efficiency of our Boeing 737 MAX aircraft for a longer flight and greater fuel savings. In addition, we also resumed our operations to Paraguay and Bolivia departing from Guarulhos. The year-over-year comparison, we double our capacity our demand and our daily average flights. As a result, our unit revenue grew by 41% leading us to achieve one of the highest quarters for the revenue in the GOL's history. Time-after-time our business model and the lowest cost structure in the region, proven to be highly efficient in challenging operating environment and that, put us, in an advantageous position to capture the demand rebound on the Brazilian market. We are keeping the pace of our fleet modernization plan due to the combination of cost advantages and greater sustainability from a reduction in the carbon emissions. This quarter, we took delivery of three new 737 MAX aircraft and returned one 737 NG. By the end of 2022, we expect to have 44 737 MAX aircraft, representing around one-third of the total fleet. Our target is to have 50% of our fleet comprised by 737 MAX in 2025. The aircraft return explained for the following quarters will preserve GOL liquidities using the maintenance deposits accumulated to offset the aircraft return costs. Three aircraft, previously scheduled to be returned will be converted to dedicated freighter models for the partnership with Mercado Livre which will generate approximately BRL100 million of potential incremental revenue to GOLLOG. The first aircraft is beginning operation in the next month. Turning on our lowest program, the Smiles Customers base surpassed 20 million markets. And the level of sales achieved BRL1 billion in the quarter. Synergies were generating from tax and set inventory management, important levers that optimize GOL's working capital and liquidity. The acquisition of the minority interest in Smiles had a payback period of one year. And we will still expect at least BRL3 billion in additional synergies in the following years. Now, I would like to make a couple of comments about our 2022 guidance, detailed in our earnings release. Adjustments in our CapEx for the rest of the year reflect the industry dynamics, due to a more challenging scenario in terms of fuel and exchange rate variations, partially compensated by a strong revenue environment. Thus, we expect lower margins and leverage to remain at around eight times adjusted net debt over recurring EBITDA. I would like to conclude, by thank you again, our Team of Eagles, in addition to our customers, investors and suppliers who continually demonstrate confidence in the company business model and management. Now, we will comment on our financial highlights. Richard?
Richard Lark: GOL'S ASK and RASK more than doubled, compared to the second quarter of 2021 achieving approximately 80% of 2019 levels of the pre-pandemic year. GOL's Yield and RASK presented an increase of 66% and 41% respectively in the same period heating BRL43.36. As a result, GOL had a record in terms of revenue for our second quarter of BRL3.2 billion which was around 3% superior to the second quarter of 2019 revenue and more than three times 2Q 2021 revenue. Ancillary revenues represented approximately 8% of total net revenue, mostly driven by Smiles and GOLLOG. GOL's recurring EBIT and EBITDA margins were 1.6% and 13.5% respectively, being the third consecutive quarter of positive recurring results. GOL had the fifth consecutive quarter of increase in the company sales more than doubling the level of sales registered in the second quarter of 2021 and approximately 20% higher than pre-pandemic second quarter 2019 sales numbers. GOL's already at a higher level of average daily sales compared to the pre-pandemic level, with more potential for further growth when ASKs increased to match a higher demand expected for the second half of this year. Further, GOL realized a substantial improvement in the company's average ticket sold, which demonstrates our considerable experience in managing oil price and exchange rate volatility. We had a decrease of approximately 14% in our recurring CASK measured in dollars, compared to the second quarter of 2021. And in Brazilian reals, we achieved a 20% reduction in the recurring CASK, because of our capacity rebound and lower levels of fleet idleness. Like all airlines, we were impacted by the surge in oil prices, which have increased 64% compared to the second quarter of 2021. Brazilian jet fuel prices increased 81% over the same period and our fuel unit costs increased by 72% consequently. And you'll note the difference there. The increase in fuel costs was partially offset by an increase in our fleet efficiency, which presented a reduction of 8% in fuel consumption per flight hour. As mentioned, we're continuing with our fleet renewal, which brings considerable fuel cost savings from the introduction of more 737 MAXs into the fleet. Nonetheless, the recurring net result for this quarter was negative by BRL0.5 billion, driven by the increase in the jet fuel price and lower impact of exchange rate variations compared to the second quarter of 2021, partially offset by BRL2.2 billion of additional operating income. Regarding cash flow we had BRL4.3 billion in operating revenues that, although, impacted by the increase in the fuel cost, generated a positive operating cash flow of BRL 1.6 billion. As part of our investment in capitalized maintenance, spare parts and inventory, we had an investment cash flow of BRL0.5 billion. Financial cash flow was a positive BRL0.4 billion, including BRL0.7 billion in aircraft lease payments. As a result, we obtained an increase of approximately BRL0.7 billion in liquidity at the end of the second quarter of 2022, mainly due to the increase of 14% in accounts receivable when compared to the last quarter. We maintained continued discipline in the management of the company's liabilities. We paid more than BRL5.5 billion in amortization and BRL1.6 billion in interest and other financial expenses since the beginning of 2020. Funds raised during the pandemic period were cautiously used to reduce the company's cost of capital and to invest in assets with a high return such as the acquisition of the minority interest of Smiles. We have significantly lower future commitments than our competitors, which benefits our focus on productivity. The company's successful liability management throughout the benefit period has put us in a leading position with the lowest levels of short-term debt among our competitors. In addition, the recovery of our adjusted EBITDA margin will gradually reduce leverage towards pre-pandemic levels. Celso?
Celso Ferrer: I want to conclude our remarks today by emphasize that we are committed to increase productivity and aircraft utilization, which will improve our competitive advantages during the high season in the second half of the year. Also, I want to invite you to consult our annual sustainability report with a comprehensive ESG data and initiatives available in the GOL's IR website. Furthermore, I would like to thank each one of more than 14,000 employees in our Team of Eagles and acknowledge that everyone's commitment to improving our results, in addition to build a closer relationship with our customers. Through their dedication, I am convinced that we are prepared to overcome the current market challenges and size the opportunity to lead the airline industry in the next phase of growth. Operator, you may initiate the Q&A session.
Operator: Thank you. The conference call is now open for questions. The first question comes from Dan McKenzie from Seaport Global. Please go ahead.
Dan McKenzie: Hey. Thanks. Good morning, guys. Rich, I'd like to put a finer point on this morning's outlook. So the one thing that stands out to me, we've got an improved revenue outlook and an unchanged guide for a flat full year pre-tax margin despite the first half losses. So that implies you've got line of sight on meaningful profitability in the back half of the year. And I'm just wondering if you can flesh that out a little bit more for us. Is the thought behind that that just given increased corporate travel spend we should see a better supply-demand dynamic as we move forward?
Richard Lark: Yes, Dan, thanks for that question. Yes, a couple of things. One is at the industry level the second half of the year is more significant in terms of results from our business with Q3 generally being the strongest quarter and Q4 also being strong in terms of the beginning of the holiday travel season number one. Number two, as you know -- since the end of February, we've made some significant adjustments in our fare structure which we do expect to maintain going forward. Number three, the Q3 I would say kind of Q2, but into Q3 we'll kind of mark the end of the full transition back of corporate travel in our business here in Brazil, which is significant in terms of ability to increase fares continue to improve average ticket and increase yields. And at the same time, as you know we're being very disciplined on capacity given what's going on with costs, and particularly, fuel costs and so that does tend to crowd out a bit VFR leisure in our mix. And so the combination of those factors as we go into the high season part of the year will give us some good tailwinds as we go into the back half of the year this year. Against that, as you saw is some slight increases in our ex-fuel unit cost because our initial target when we started this year was to get back to full peak gold productivity, which is roughly 12 hours a day per aircraft across the entire fleet by the Q4 of this year given what's going on in capacity where we're being -- and this applies to the market as a whole rationally cutting capacity to help compensate the increase in fuel costs. For us, for GOL that peak productivity will be pushed to the Q1 of next year. And so all of those are kind of what you're seeing going on there. But obviously a big driver is the increase in revenues and we're managing the cost side of the equation through a combination of fares but also through the capacity dynamics. And so let me just pause there see if I respond your question.
Dan McKenzie: Yes. Understood and I appreciate that. And, I guess, my second question here and I'll just let others sort of dig in as well. But to put a finer point on plans for reducing leverage and strengthening the balance sheet from here the PowerPoint presentation this morning and the earnings release it seems pretty clear that that's the direction goal is going to go. So I'd just like to put another finer point on this. It looks like GOL should see yet another cash build in the third quarter, and then again in the fourth quarter. And I'm just wondering if that's a fair conclusion just given the positive movements we're seeing in air traffic liability -- lease returns that are financed and maturities that seem pretty de minimis from here?
Richard Lark: Yes. I mean we put it in the context of leverage, I mean, obviously our target from a WAC optimization policy perspective as you know is three times leverage. And that's a process that's going to take 24 months to achieve. The yields today which are over 50% higher than 2019 levels resulting in these higher revenues is where it needs to be. The fleet efficiency component needs to catch up and that's what we're dealing with here. As you know through the pandemic, we were able to manage our relationships with the aircraft suppliers, so that we kept the aircraft we're going to need on the other side of this pandemic and that is met inefficiency during the majority of the pandemic including up until now. But when fleet efficiency goes back to our 2019 US dollar cash levels, on a proforma basis EBITDA would surpass the 2019 EBITDA of BRL 4.1 billion. The question is when that's going to happen? As I was saying previously, originally, we thought on a run rate basis, we would be hitting that into Q4 of this year, that's looking more like it's going to be in the Q1. It's taking longer on the cost side. But we also have further room to improve in terms of cost dilution, given the scenario and we're still in relative better performance for Q3 and Q4 this year, still carrying idles which we're going to be carrying until probably until January, February of next year. And so, when fleet efficiency is corrected and CASK is normalized with the normal run rate capacity, we'll be hitting those numbers. And so, that's really what just to complement what you said. I mean those projections that you're talking about for Q3 and Q4 is, how we're managing the business. The other component that hopefully everybody appreciates is, we're still not back to margin management at this company. We're still doing cash flow management. And so even though we're providing guidance on margins and you have the margins in our financial statements those are accounting conventions that come out of how we're managing the business, which is not yet back to be focused on margin management. We're still focused on matching assets liabilities, matching inflows with outflows that's just how we're managing it. And it's probably not going to be until we hit the Q4 this year that we're going to be back to that component. I will pause here. I think Celso wanted to compliment on that point there.
Celso Ferrer: Yes. On your point Dan, on your first question, I just want to raise some points here about how we are doing the yield management. And we have a very strong increase in oil prices concentrated in the second quarter this year. And once you are there, I mean you already sold partially your inventory by lower fares and then you need to somehow to compensate that. And we step that curve. We step the pricing curve so much and the industry follow because now it's really time to be rational. But what we expect is that yield management will come back in the sense that we will force to have a parallel curve on the pricing side, instead of a so steep curve like we had in the second quarter that will drive inventory management and create more value for the company.
Dan McKenzie: Terrific. Thanks for the time, guys.
Operator: The next question comes from Mike Linenberg from Deutsche Bank. Please go ahead.
Mike Linenberg: Hey, good morning, everyone. Can you guys hear me?
Richard Lark: Yes, little fuzzy, but we can hear you.
Mike Linenberg: Let me pickup my speaker. So, a couple of questions here. I guess number one, Celso congratulations on your new role, well deserved. Now obviously you've been in the C-suite for some time and you've had a lot of opportunities to watch the company develop and grow normally with the change of leadership sort of bringing in maybe a slightly different perspective. And I'm just curious as you think about GOL over the next five years, I sort of think of GOL historically as just a low-cost carrier with a very strong Brazilian position. And yet today news out, I guess recently with GOL looking to fly all cargo 737s and maybe you can touch on that? Now you own 100% of your Smiles business. There's this opportunity with ABRA. I see stepping stones to kind of take it to the next level. And the propitious is timing. I mean the timing is propitious with you moving into the leadership position with all these things on the horizon. Can you talk about, maybe GOL moving to that next level? And maybe any things that you may do differently than your predecessor or may be the same if you could give us some perspective on how you're thinking about leading the company and seizing some of these opportunities I just mentioned?
Celso Ferrer: Okay. Thank you, Mike. Thank you for your kind words. We are coming from the worst two years that the airline faced ever. So, we need to change. I mean we need to change. At the beginning of the pandemic, we sat down here, I was with Becky , and Richard and everybody here and we decided we don't need to change our business model. Let's treat the pandemic as a transition to a new market. In this new market will deserve, will require a company like growth, which simplicity, adaptability and a strong business model. So, we don't expect to change the business model of the company, quite the contrary. I want to really focus on cost and productivity. I mean the main pillar right now I mean we came in back through the pandemic. The business model is there. But like Richard just mentioned, we need to recover and we need to bring back the planes to fly more than 12 hours per day. We need to turn planes in a faster way that of course, we increased turnaround times during the pandemic and now it's time to bring it back to what we should be. And we want to really transform the digital platform of the company. We changed our PSS system from migration to the Sabre last year. We faced some problems with our customers. But now, it's time to really leverage this to the digital transformation where it's going to be really my focus going forward to reduce to costs and also have more productivity in the airport and also in all the customer base environment in the company. Like you just mentioned, Smiles is a priority. I mean, we are generating a lot of synergies together. We have now all the customers' areas that grow in the same structure as Smiles. So what we really want is to -- customer will look for Smiles and GOL as one company and we want to leverage that position. So this is one of my first focus and incremental e-commerce and also new revenue that we can access through Smiles platform. There are also automation looking for new revenue opportunities on the cargo business. This partnership with Mali we are facing this as a new airline that we are going to launch. We're talking to the employees here. We are saying that we start to go with six aircraft and we are starting the cargo GOLLOG operation with Mercado Livre also with six aircraft. This is the way we are facing this. It's a tremendous opportunity for us, also to have more synergies on the productivity side. It's the same pilots that we apply, same aircraft, same maintenance. We will convert -- we're going to start to convert cargo for the cargo planes in our facility here in , so many things to do on the cargo side as well. And you mentioned ABRA. I think, the way we see the market now is a tough market. I mean it's a tough scenario that we have in front of us. Fuel costs are at the highest level. FX is super high in Brazil. The combination of the two is putting us in a very tough position at this point. So, consolidation, new forms of alliances, joint ventures and also ABRA, which is a new kind of airline alliance organization, a new way of thinking is where we are putting a lot of our efforts now to make sure we are going to leverage all the synergies on the cost side and also develop a strong network to cover Latin America. So, these are -- I mean, the key items in my agenda right now.
Mike Linenberg : That's a great rundown. Just on Abra a finer point on that. I had hoped that we would be hearing something maybe by now. Maybe there may be some regulatory hurdles. Can you just update us on when are we going to hear -- because it sounds like there's a rollout coming. You go to the website it seems like it's only one or two pages deep. Presumably there's going to be a lot more behind that when you have something to announce. Is that end of our summer? When should we expect them to hear something that goes in a lot more detail on that structure?
Richard Lark : Yes, in the near term, I mean, obviously, we've planned it very carefully and it has to go through the proper regulatory approvals before we can all sit down at that table. And but yes, it's definitely inside of the third quarter here at, Mike, and perhaps soon. But it's basically just in the -- our expected regulatory approval process that's happening in the various domiciles.
Mike Linenberg : Rich, if I could just squeeze in one more. You may have said this and I apologize if you said it. But on your waterfall on your cash flow super helpful. I know you were guiding to BRL 3.6 billion at quarter end. You came in at BRL 4 billion. You have a lot of different buckets here on Page 13. Now where did that additional -- where did the BRL 400 million that's what it looks like. It looks like you came in BRL 400 million better maybe my math is wrong, but it sounded like -- it looked like you came in what you were guiding to from your last guidance.
Richard Lark : Yes, it's basically higher than expected sales, which reduced higher than expected accounts receivable. But we'll access those receivables and the accounts receivable or in the liquidity calculations. And then also there was also a slight increase in the value of our deposits of about BRL 100 million due to FX changes.
Mike Linenberg : Okay. So thatâ¦.
Richard Lark : And we use those deposits to cost out aircraft-related activities be it maintenance or engine maintenance overhauls or aircraft redeliveries. And so those deposits, we include in our liquidity because we use them to offset cash outflows in the estimate.
Mike Linenberg : That's right. That increase in the receivables though is very supportive of your pretty meaningful upward revision in revenue for the year. So that makes sense. Thanks. Thanks. Good quarter. Appreciate it.
Richard Lark : Thank you, Mike.
Operator: The next question comes from Stephen Trent from Citi. Please go ahead.
Stephen Trent: Good morning gentlemen. Thanks very much for taking my questions. I just had two quick ones. And first off your comments were very helpful on focusing on cash flow management versus margin management. But when we think about 2023 sort of any high-level view to what extent will still be dealing with fleet are on the expenses when we think about EBITDA versus adjusted EBITDA?
Richard Lark : Hi, Steve. Thanks for asking the question about 2023. As I was saying, when we began this year, our operating plan, our network plan, our fleet plan were all calibrated to get back to what we call a normalized operation into Q4. As you know we've been carrying aircraft that we need to serve demand on the other side of the pandemic, because of what's been going on since the end of February with fuel in the Q2, we recalibrated our capacity plan for lower capacity through roughly December of this year and that's reflected in what you guys see in terms of the schedules. And it's also what the overall industry is doing as well. And at the same time, we are trying to accelerate our fleet modernization from NG to MAXs. But the short of it is that getting back to that goal peak operating efficiency of 12 hours a day per aircraft across the entire fleet, we no longer are planning on doing that in the Q4. That's going to get pushed out into the Q1 of next year. And so we do expect to have full normalized operating efficiency by the Q1 of 2023. And the difference in the question that you're asking, the results going forward are not including idleness anymore, there's either no adjustment, or a very low adjustment. And the difference is not idleness, it's the transformation costs related to the transition from NG to MAX aircraft that is in that non-recurring number going forward. And we'll continue to separate that out. Those will continue throughout the rest of this year. But by the Q1 of next year that should also for the most part be behind us, because we'll be approaching â in the first half of next year, we would be approaching around 50 MAXs in the fleet, and really kind of be on the other side of this acceleration of the fleet transformation that started in the Q4 of last year. And this acceleration component will end probably into Q4 of this year, we'll be back to a more normalized fleet replacement next year. I think Celso is going to want to complement a point on that.
Celso Ferrer: Yeah. And Steve, we also expect our health environment on the revenue side next year. We not only the customers that will now understand better what price level the market should be running and this year, it has been a big transformation for the customer perspective, and they see the fares we are practice right now. I think next year is going to be more naturally the way â these repairs. We're going to also plan new â we're going to have the results of these SMILES and also the cargo activity in our top line revenues as well. So, we expect a strong year in 2023.
Richard Lark: Yeah. And operator, I'm going to just weave in to the comments from â the questions from the sell side, some of the questions we have from the buy side on the webcast platform. And so the question here is from Asset Management. Can you provide more information on how much leases you're expecting to pay during 2022? Are you working on any types of deferrals for this year? According to our guidance, we have the $3.2 billion of adjusted lease debt that implies BRL2.4 billion of annual lease payments. So you have that in our guidance. Some quarters can have a different cutoff on payments that can shift from one quarter to the other. As we have negotiated terms across our lease portfolio, which includes almost 30 individual operating lease, lessors, and there's different agreements in place across that portfolio. And we manage our payments that we can do in the current month based on the concept of matching assets liabilities inflows and outflows. The BRL2.4 billion is approximately $40 million of monthly lease payments, which is very similar to our pre-pandemic levels. And we've been refinancing some of our deferrals by including supplemental rents for new upcoming MAX deliveries. And before going to the next question from the sell side, I have one other question that I'll squeeze in here from the platform from Lucas Barbosa, Santander. How is demand responding to fare increases in your view? Is there still room for fare expansion in the second half of this year? How do you expect the competition to behave regarding capacity? Celso?
Celso Ferrer: Yeah. I will take that, Richard. We grew a lot of our revenues during this quarter. And like I said before â the curve was pretty steeply at this point, because we need to somehow compensate the revenue and make the results that we were expecting for the network. And at a certain point, at certain segments, we may achieve probably a cap on this. But we are going to add to the fuel cost and we will adjust capacity accordingly. So, like you can see in our guidance right now, we are reducing our capacity going forward. We are doing this inside the quarter as well from August and September, we cut capacity by more than 10% right now as the other competitors also follow. And we think there's going to be even more rationality going forward. So, the other thing that is important is that the air tract liability for the next half of the year grew by more than 50%. So, the good news on the second half of the year is that we had been prepared to face higher fuel costs. So, we started to work in the long advanced purchase customers much prior to the quarter. So we are entering in this quarter with 50% more revenue on this segment and we are going to continue actually to fuel on the remaining passengers, but they will be responding accordingly because they already are in the second quarter right now. So, corporate demand and frequent flyer, we expect also a faster catch-up. We saw at the beginning of the year 70% of the corporate customers back then we had a peak in April of almost 90% then it's now flat between 60%, 65% during the May and June. In June, we also had some increase of COVID cases that hit a little bit of our load factor in June. So, we don't expect the COVID hitting us in the third and the fourth quarter going forward.
Operator: The next question comes from Savi Syth from Raymond James. Please go ahead.
Savi Syth: Hey good morning. Can I ask on the MAX and capacity side both Southwest and Ryanair have talked about delivery delays. I'm just kind of wondering what you're seeing in terms of kind of Boeing being able to deliver the MAXs? And taking that into account, what you think kind of 2023 capacity can be kind of the kind of the low end and the high end?
Celso Ferrer: Hi Savi. We are not facing significant delays and any delay has impacted our plans so far. We have received in the first quarter of this year eight new Boeing 737 MAX-8 and now three in the second quarter. And we are facing a 20, 25 days delay, but we have been able to accommodate those delays. And most of the planes we took delivered on the last 12 months there were plans that were already built and they were like set down in Seattle and they are just doing all the pre-delivery package and all the activities to deliver the aircraft for us. We are going to start to take deliveries of the production line by beginning of 2023. That's our own configuration, our own order. And but we don't have a red flag on both. So, we expect to continuously and to deliver the plan that we have of 44 this year and growing the place accordingly to our fleet plan.
Savi Syth: Great. Just any color on that 2023 capacity like what we could expect -- especially it sounds like you're thinking of returning to full utilization by the first quarter. So, it should be kind of full fleet flying. But kind of curious what the likely capacity growth could be in 2023?
Celso Ferrer: Yes. It's -- the way we are seeing the last quarter of this year, we are going to achieve the 2019 levels. And then we are planning 2023 according to our view of 2023 right now, which is slightly growth for the domestic market. Especially, if we compare the first half of this year where we face Omicron at the beginning of the year. And now the hike on the fuel price, the war and everything and all the global concerns about interest rates. So we expect the first half of next year to be -- to represent significant growth compared to the first half of this year. And the second half of next year, is where we think that we can sustain this level of productivity. And our fleet plan now represents what we think -- our view of 2023. So we are ending the fleet next year, of this more or less the same size. So we are now -- the total aircraft this year for us, is 136 and next year 139 aircraft. So it's a small growth in terms of aircraft. We need to return the NGs. We are returning NGs. You remember, how many NGs we have returned during the pandemic 18, and we are keeping that based going forward. So we are going to have the fleet slightly bigger, but we are going to have the productivity of this fleet in terms of the utilization growing at least 10% comparing to what we have this year.
Savi Syth: Thatâs super helpful. And if I might just get a clarification on a comment on kind of the corporate back in here in the second half. I was kind of curious, if that corporate demand back in terms of volume or revenue? I'm just wondering, if there might be kind of more upside here as well as we get into 2023.
Celso Ferrer: Yes. Like I said, it's 70% in the first quarter. Then we had a peak in April, May and June were like kind of a plateau, July was also a plateau in terms of business travelers. And what we expect from August and September, is a little increase in number of tickets comparing to what we had in June and July. But from October on, when we have more clarity also on the elections and everything, we expect more business travelers to come. What we have as a year recovery plan for the corporate segment, is around 65% in terms of passengers, and more than 100% in terms of revenue. So we also see an upside with more than 55%, as years come to our system.
Savi Syth: Super helpful. Thank you
Richard Lark: Iâm just going to -- Before we go to the next sell-side analyst question I'm going to, answer the question for the platform from one on the buy side from that is this C. Berlin his question is what is the remaining cost of fleet transformation this year and how will that be funded? There's about BRL100 million per quarter of pro-rated costs, which goes according to the number of hours and cycles that did incurred every quarter. Because remember the accounting rules acquire us to always have fully provisioned, the expected return costs of the entire fleet. And then we'll adjust those up or down, based on revisions to the either the lease return conditions or the redelivery plan. And deposits will be utilized and self-financed by new credit lines related to MAX deliveries. Right now, most of the provisions are noncash and the cost of the return to fleet are fully provisioned and how is that financed through a combination of credit mechanisms, that we use on new MAX deliveries combined with use of our deposits, which we include in our liquidity. Operator, you can take the next question.
Operator: The next question comes from Pablo Monsivais from Barclays. Please go ahead.
Pablo Monsivais: Hi. Thanks for taking my question and I know you already talked a lot about yields and capacity. But if I can just, ask a little bit more on the competitive environment. How are you seeing your competitors, following your efforts on raising first and lower capacity? Have you seen competitors moving with you, or they are not following these efforts? Thank you.
Celso Ferrer: Hi, Pablo. I mean, we had a spike on the fuel price. So the entire industry was forced to be rational and especially in the beginning of second quarter. And what we are seeing in the market is really a rational behave in terms of fares during the second quarter and also now in July. What we see is that we are leading the capacity adjustments. Actually if you look at our view when we start the year, we start this year not loading all the capacity we can fly. We have been cautiously introducing step-by-step increase in our schedules when we are loading the system, while we saw the competition loading much more spike than us at the beginning of the year. This behavior is changing to a more rational scenario right now also on the capacity side. What we saw for September and October was a cut and I can say it was an industry cut, because we also put 10%. We saw also competition cutting 10% to sustain all the fare activity that we are required to do in this very high cost environment. So we have been more cautious since the beginning, but now we see competition also being cautiously and trying to preserve as much as we can do pricing power that we need to deal with these circumstances.
Pablo Monsivais: Perfect. Thank you very much.
Operator: The next question comes from Alejandro Zamacona from Credit Suisse. Please go ahead.
Alejandro Zamacona: Thank you. Hi, Celso thanks for the call. Thank you for taking my questions. In terms of the yields and fuel prices, how much of the higher fuel prices would you say it is already reflected in the current yields, or in other words to what extent you have been able to do the pass-through of higher cost to find more customers?
Richard Lark: Let me just -- the connection is a little bit bad. Your question is how we're managing the increase in fuel prices? Was that the question?
Alejandro Zamacona: Yeah. I mean, how much of the higher fuel prices is already reflected in the current yields?
Richard Lark: Okay. I got the question. Since February 24th, when the -- this new scenario began, up until now we've been able to recapture around 100% of the impact on our costs from increased fuel prices. Remember in Brazil you also have the exchange rate effect in addition to the oil price effect. And in Q1 it was -- we had much less of an increase in our local fuel price than let's say US Airlines, which has predominantly carry the tumor of the market. And in the Q2, it was a little bit different. And the numbers we're providing you for our view on how we're going to be managing the business for the second half of this year. In our planning, we assume roughly a 70% recapture. That's generally how we've managed our business normally, roughly a 70% recapture up or down, meaning if fuel prices go down, we'll only retain 70% of the benefit. And if fuel prices go up, we'll be able to recapture 70% of the increment on to fares. That's just generally how we did the planning. Q1 and Q2 was abnormal in terms of being able to get the roughly 100% recapture, which was combined in our case here in Brazil. And, obviously, in different markets there's different effect. You have to be careful about like comparing the US market or European market with Brazil. But in Brazil starting in the last week of February, up until now we have the accelerated return of the corporate traveler. And so that was the main element that allowed us to achieve that here in our business at GOL specifically. Having said that, you've seen that same phenomenon coincidentally in majority of markets at least that we follow in the Western Hemisphere. You saw a very similar phenomenon, which probably most likely just has to do with the return of demand as COVID restrictions, travel restrictions both domestic and internationally have fallen off. I don't know if you want to comment that?
Celso Ferrer : Yeah. Alejandro, it's exactly what Richard mentioned. I mean, we are going to -- we need to deal with this. We are adjusting the whole pricing structure to be able to capture as much as we can. And we expect also the competitive environment to support I mean, the pass-through rate that we need going forward.
Richard Lark: Okay. So I'm just going. So go ahead, Alejandro.
Alejandro Zamacona: Yeah. Thank you. So just another question in terms of the ABRA, it's a follow-up. So according to the former announcement, there were a commitment of $350 million in ABRA. So how much of these resources could we expect this being considered for GOL? Thank you.
Richard Lark: Yeah. Alejandro, the announcement was made in May is all the information that's being provided at this point. Once we get to the closing of that transaction after the appropriate approvals, we'll have more information on that.
Alejandro Zamacona: Okay. Perfect. Thank you.
Richard Lark: And just to finish, I have one other question from the platform that I'll answer. I didn't forget you from MetLife. What are the main sources of liquidity available at present? Well, as you've seen how we've been managing the business, it is also pre-pandemic there's nothing new that's been -- the more of a focus on this during the pandemic. The main source is working capital management in terms of how we match asset liabilities and manage that. Hopefully, there's no doubts on how we do that in terms of the information and transparency that we provide on how we do it. That has generated more than BRL 1 billion to our cash flow and we continue to count on that on a relative basis to the overall size of the business. As you saw in the Q2, the receivables increase is going to be the main source of working capital as we normalize from now to Q4 and then through Q1. We're still missing a piece of current assets through accounts receivable. But we do expect that accounts receivable balance relative to the size of the business to be normalized by the end of this year. And so you can kind of make those comparisons in terms of how the balance sheet was at the end of 2019 from a current asset, current liability perspective matching that's where we expect to be Q4 Q1 of this year. We continue to do sales of SMILES, tickets and points to banks and partners with SMILES. So we continue to do that consistently. And that I think is something also that many have kind of glossed over or perhaps not included in how they look at our business. As Celso mentioned, we reacquired the minority interest a little over a year ago, we closed and we paid that transaction in June of last year. The cash component of that including the recycled dividend was about BRL 1.3 billion. We've already achieved the 1-year payback on that cash payback on that. And then the loyalty program is increasing its volumes and its value also increases to customer. And so that continues to be a very solid and consistent and growing source of liquidity, which is fully incorporated in how we do our working capital management here. Those are all the main sources. All of those are kind of in our working capital management, and those are highly liquid sources, obviously, requires management, very precise and agile management. In addition to that, which our asset of working capital, you have the data on our -- how we use our deposits both aircraft deposits and maintenance deposits, as it relates to the fleet renewal process, where we're able to offset a large portion of those cash outflows with those assets. And then finally, as you know, we have a significant amount of unencumbered assets that can be levered either through our existing programs that are already created that have generated financing on our unencumbered assets as well as other assets which are uncovered such as related to the loyalty program. And I guess just finally, we just got one final question, which I'll slip. I think we could do another five minutes here. The question is just -- can you talk about your fuel hedging program and activities? We continue to execute the same set of programs across oil FX that we've had always built into GOL's management since 2003. In terms of fuel hedging, which is specifically the question -- our hedge position is roughly 25% for the second half of this year and 25% for 2023 via instruments that do not have any downside risk but provide protection in the mid to high 90s breaks. And that's important as you do comparative analysis of how different companies are doing hedging. We have opted since the Q2 of 2020 to allocate budget, basically through paying premiums for call options roughly, so not using costless collar or swap strategies, which can produce some significant downside risk and margin requirements. And that's on the oil side of the equation. So roughly 25% second half of this year and 2023. On the FX side of the equation, we're also around 25% hedged for the second half of this year and 0% for next year. I think that we run through the majority of the questions, and our time is almost up. So, I'll flip back over to you operator.
Operator: All right. So, this concludes today's question-and-answer session. I would like to invite Mr. Celso to proceed with his closing remarks. Please go ahead, sir.
Celso Ferrer: We appreciate your time and interest in our company. I hope you found our presentation and Q&A session helpful. And our Investor Relation's team is available to speak with you as needed. Thank you very much.
Operator: This concludes GOL Airlines conference call for today. Thank you very much for your participation and have a nice day.
