Gol Linhas Aereas Inteligentes SA (GOL) 2022 Q4 法說會逐字稿

Good day, everyone, and welcome to GOL Airlines Fourth 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 broadcasted live via webcast and may be accessed through the company website at www.voegol.com.br/ir and the MZiQ platform at www.mziq.com. Those following the presentation via webcast may post their questions on the platform, and their questions will be either answered by the management during this call or by GOL's Investor Relations team after the conference is finished. (Operator Instructions)

Before proceeding, we emphasize that forward-looking statements are based on the beliefs and assumptions of the company's management and on 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 consider 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 your call over to Mr. Celso Ferrer. Please go ahead.

Hi, everyone, and thank you all for your participation in this conference call. This morning, we posted our Q4 2022 earnings release and a slide presentation on GOL's IR website. So we will make some brief comments and shoot straight through to your questions.

I would like to start by highlighting our most important results of the period, which were made possible by the trust from our customers, investors, suppliers, partners and specialists from our Team of Eagles. GOL delivered strong performance in Q4, a quarter with similar supply to the pre-pandemic period. We achieved a new record for revenues of BRL 4.7 billion and increase our recurring EBITDA to BRL 1.2 billion, the highest level since before the pandemic.

Let me share how we got there. 2022 was characterized by the rebound of demand for air travel in all segments, and this peaked in the fourth quarter. We served more than 200 markets and transported approximately 8 million passengers, 19% above fourth quarter last year. We operated more than 700 flights a day in December as post-holiday bookings and the recovery of business demand led to strong ticket sales. Our supply measure in ASKs grew by 29% during the quarter. In part, this is due to the resumption in corporate demand as workers returned to the office and the strong and resilient demand of the leisure passenger.

In line with this recovery, our flight frequencies increased by 26% when comparing to the fourth quarter of 2021 and reactivated frequencies in corporate markets predominantly in the downtown airports of Congonhas and Santos Dumont. At the same time, our aircraft utilization continued to improve, and we maintain a load factor around 80% during the quarter, reflecting our focus on improving our operation fleet productivity as we expand our network. We are still observing a rational price environment among industry players and the resumption of strong load factors, which in the GOL case were followed by an incremental combined offer of seats and profitability.

GOL has the lowest unit cost in the industry and plans to reduce it even further to generate a faster recovery of its operating margin and increased efficiency. In the fourth quarter, in order to partially offset the effects of the jet fuel price increase, our recurring unit cost ex fuel decreased by 17% when compared to last year to (inaudible) 4:59 $0.036. By acting assertively and managing capacity, controlling costs and improving productivity, we maintain growth of our revenues and our operating results during this period, recording the highest quarterly revenue figures in the GOL's history, 62% and 24% above fourth quarter 2021 and fourth quarter '19 figures, respectively. It is also important to note the 25% growth in yield and 25% expansion in unit revenue, PRASK.

This yield is more than 45% higher than the pre-pandemic figures. In the fourth quarter GOL's ability to efficiently meet the increase in demand stems from the company's key differentiator, our strong and disciplined capacity management with a continuous focus on preserving profitability and liquidity. We are highly committed to running an efficient operation. And as our results show today, our productivity standards are getting better and better. By generating higher revenues and reducing costs, we are making significant progress on improving our balance sheet. By 2023, we expect that our ability to drive operational efficiencies will be our main competitive advantage.

This will be critical and continue to win the business of our customers and growing market share in the current economic scenario. (inaudible) 6:43 to growing profitable market share is expanding our offer in both domestic and international markets. In the case of the former, we expand our presence in the regional markets during the quarter. The company has increased its offer to Rio de Janeiro by over 40% during the high season, in addition to achieving a record level of seats available at Congonhas Airport.

In November, we announced the expansion of our operations in the Midwest, connecting capitals in the region on direct flights to the South and the Northeast regions during the high season. In the international markets, we have added more frequencies on the Brasilia to Orlando route, and we have inaugurated new flights from -- airport to Rio De Janeiro to Montevideo. We also -- we have also returned the cities of Cordoba and Rosario, which represents the return of 100% of pre-pandemic destinations in Argentina. I also want to highlight the beginning of our operations between Manaus and Miami connecting the north of Brazil to the United States.

We have simultaneously invested in the customer experience at every stage of the travel journey, from the continued refreshment of our reach with next-generation and far more fuel efficient aircraft to technology investments that are providing our employees better tubes and our customers a more seamless experience. This quarter, we took delivery of one new Boeing 737 MAX 8, ending the year with 38 aircraft of this model, approximately 26% of our total fleet. Our goal is to achieve 50% of our fleet composed of the Boeing 737 MAX aircraft by 2025. The GOL brand was recognized as top of mind by Folha de Sao Paulo for the fifth time in a row. This recognizes our commitment to customers and strengthen our presence in all segments.

Turning to our loyalty program. The SMILES customer base reached approximately 21 million and revenues were BRL 1.1 billion in the quarter, almost 35% higher when compared to fourth quarter '21. The customer base at Clube Smiles has evolved continuously demonstrating its potential in a scenario of increased volumes of GOL's operations. Synergies were generating from tax management and fixed inventory, important levers that optimize those working capital and liquidity.

I would like to conclude by highlighting the results produced by our Team of Eagles and that we were projecting also next year in 2023. The actions we have taken in the recent years have put us in a position of strength and enable us to have a competitive position to extract maximum value creation for 2023. I now turn the floor over to Richard, who will present some other highlights. Richard?

Doing our call today from our hub in Brasilia, which is one of GOL's big hubs. It's also where we have direct flights on MAXs from Brasilia to Miami and Brasilia to Orlando. And just a point of curiosity that the flight we're doing on the Brasilia Orlando flight is the longest flight done to date on a 737. And I'm here in Sao Paulo at GOL'S headquarters with Mario, who will be participating with us in the Q&A.

GOL's detailed analysis for the quarter you have in the earnings release and the presentation that are made available on GOL's Investor Relations website and also on this webcast platform. So please access those. There's some additional information as well in the presentation. Revenue in the quarter was higher in the fourth quarter of '22 was higher than any fourth in GOL's history. As Celso mentioned, the domestic and short-haul international markets continue to lead the way as GOL judiciously added back additional capacity into these markets and routes.

The management of working capital, together with the increase in accounts receivable and advanced sales of both tickets and miles has enabled GOL to maintain and finance the pace of growth necessary, a very challenging market environment and enabled operations in the high season with a reduction in unit costs, while at the same time, maintaining fair levels. The transformation of the GOL fleet to the (inaudible) 24:17 which is in part, guided by enhanced productivity and reduced unit costs. Yield and RASK in the quarter showed increases of 25% over the same period of '21, reaching BRL 48.2 and BRL 41.6 respectively. We increased average fares, demonstrating our experiencing and managing variations in both fuel prices as well as the exchange rate.

GOL's recurring EBIT and EBITDA margins reached 15% and 25%, respectively. Our recurring EBITDA totaled BRL 2.8 billion in the full year of '22. As we plan to maintain these new levels of yields and unit costs, together with the resumption of capacity back to pre-pandemic levels, we are maintaining our financial projections for 2023, which incorporate a more robust nominal EBITDA generation.

In the fourth quarter of '22, we achieved approximately a 12% reduction in GOL's recurring CASK, excluding fuel, measured in dollars compared to the fourth quarter of '21 will continue to be impacted by high oil prices that showed a range increase of around 7% compared to the fourth quarter of '21, which along with higher costs associated with the oil supply chain and logistics and refining have represented an increase of approximately 44% in the average jet fuel price denominated in Real paid by GOL here in Brazil in the same period, i.e., a 44% increase in goals average jet fuel price Q4 of '22 compared to Q4 of '21.

As for cash flow, as for GOL's cash flow in the quarter, GOL had generated BRL 5.3 billion of operating inflows. This resulted in a positive operating cash flow of BRL 2 billion, excluding interest expense despite the impact of higher jet fuel prices. In the fourth quarter of '22, we concluded the issuance of senior secured amortizing notes in the amount of $200 million, which allowed the extension of financial obligations with lessors, mainly due to leasing deferrals and improved GOL's expected cash flow for 2023. These secured amortizing notes have a collateral of unencumbered receivables and represented an average cost of capital to GOL of 4.3% per year and also added a new innovative initiative to the company's liability management toolbox. And this was done even in the midst of a capital market environment, which was not conducive to new issuances.

At the end of Q4, GOL's total liquidity had increased by 13% to a little over BRL 4 billion. And then pro forma for the issuance of senior secured notes due 2028, which was finalized on March 3 in Q1 pro forma for that GOL's total liquidity would have been BRL 6.2 billion, and you have some more detail on that on Page 18 of the presentation put on the website and the webcast platform. Leverage, as measured by the ratio of net debt using the 7x annual lease payment convention and excluding the perps, divided by recurring LTM EBITDA was 9.5x on December 31, 2022.

This is about 0.2x lower than the leverage at the end of 2021, and that includes the issuance of the $200 million of senior secured amortizing notes that happened in the Q4, so a slight reduction in leverage, but a substantial reprofiling of the maturity profile. Excluding payments made during the fourth quarter for deferred lease obligations, the leverage ratio was around 9x. And if you use -- if you calculate aircraft debt under the IFRS 16 convention, GOL's leverage was a little over 6x at the end of 2022.

In the first quarter of '23, GOL completed one of the largest liability management and refinancing operations in the history of the company and the airline industry through the issuance of $1.4 billion of senior secured notes due 2028 in a private placement to AVO Group Limited goals controlling shareholder. These notes bear a total interest rate of 18%, of which 4.5% is paid in cash and 13.5% will be payment in kind with that pick feature, giving substantial cash flow relief to GOL.

And these notes are guaranteed by the IP and brand of SMILES, GOL's market-leading loyalty program and also a (inaudible) 30:16 on the IP, brand and spare parts of GOL. This issuance included $451 million in cash for specific uses at GOL, subject to certain conditions and approvals and the contribution and retirement of approximately $1.1 billion in face value of GOL's (inaudible) 30:46 bonds, which was comprised of 83% on percent of the bonds maturing in '25, 61% of the bonds maturing in 2026 and 10% of the perps. These bonds that were contributed and retired have been canceled, which represents a discount to par of $313 million for GOL.

Pro forma for this transaction, the net debt of GOL will be reduced by over $100 million and will result in over $30 million of annual interest savings for GOL. As I said, this transaction represented one of the largest completed liability management and comprehensive refinancing transactions in both the airline industry and in the emerging markets. It also represents the 10th liability management or capital raising transaction that GOL has completed since the onset of the COVID-19 pandemic.

On Page 14 of the presentation, you have a summary of that. GOL did 3 transactions in 2020, 5 in 2021, the senior amortizing notes in '22 and senior secured '28 notes now in in '23. And so with that, we've completed all of our liability and capital management transactions as it relates to what we need to do during the pandemic. As a result of this liability management operation, GOL obtained a series of important benefits in capital structure and a significant improvement in its credit profile by increasing the average maturity of its bonds from 2.5 to 4.4 years.

Also the access of up to $451 million in cash resources and the significant reduction in annual interest payments with a cash pay rate reduction on GOL's bonds on average from 7% to 8% per year to a level of approximately 4%. And we'll continue to work on both debt reduction opportunities and investments in the business while continuing to meet appropriate target liquidity levels. Of course, GOL's successful liability management during the pandemic, positions us with the lowest short-term debt among our competitors. And as we mentioned, we've updated our financial outlook for 2023, and we've also included our Q1 '23 projections, which take into account the increase in jet fuel prices and are also based on the preliminary results for the first 2 months of the current year. For the first quarter of '23, we expect an EBITDA margin of 22% on net revenues of BRL 4.8 billion. Back over to you, Celso.

Thank you, Rich. Demand remains strong as passenger return to the skies, while some supply constraints continue. As the industry leader with a proven strategy and strong execution track record, GOL is well positioned to build on our momentum in 2023. We are confident in our ability to deliver significant improvement in earned and free cash flow going forward. I would like to thank our Team of Eagles for their outstanding work in delivering these quarterly results and serving our customers during our very busy holiday travel season. They are the reason our brand and our customer loyal is at the top of the industry.

I'm incredibly proud of our team for rebuilding the region's best performing airline. And importantly, we are not just building back we are continuing to improve and extend our competitive advantage.

Operator, you may initiate the Q&A section.

Thank you. The conference call is now open for questions. (Operator Instructions) Our first question today comes from Michael Linenberg from Deutsche Bank.

Just a question here on the guidance for 2023. You pulled down the capacity a little bit and you sort of point to the supply chain issues, which I think everybody is dealing with that. But then you sort of -- there was another sort of part of the sentence that talks about in view of expectations of recovery in corporate demand. And I'm just trying to interpret is it that the recovery is more gradual or more moderate than maybe what you were anticipating? And so that's part of it. Just if you can clarify what is meant by that statement.

So as you just said, I mean we are, of course, facing supply issues all over the chain, not only with OEMs, but also in the whole supply chain, I mean in terms of parts and maintenance, and that's why we are reducing a little bit the guidance. It's a slight movement down. We are also -- like you know us, we manage the capacity on a very detailed way. So we -- in the first quarter of this year, for example, we are flying 33% less in February compared to January. So we do this short-term adjustments based on the seasonality, but also what is happening on the industry as a whole.

So we -- this is the best picture we have from now and what we expect for the corporate, it's not related to this capacity itself because the capacity for corporate, the main routes in the corporate market, we have just returned in the fourth quarter, especially from Congonhas and Santos Dumont, we rebuilt the strong network we have with many frequencies between the -- all the most important shuttles and those will stay. And we are following close how the corporate demand is coming. It's coming in a pace that was slower than we thought, but we are compensating this with other segments.

Like I said, the leisure demand and also VFR and VFR is super strong in those routes, they are very resilient. So we are managing in a way that we are able to keep yields at this level, even though the corporate -- and when I say corporate, I'm talking about the large corporate because PMEs and other segments are already there. It's just large corporates that is still like growing in a slow pace. I hope that now after Carnival, and we are starting to see now beginning of March, we are starting to see a strong demand coming from corporate, but we are not assuming that we will stay for the whole year. So we -- you know us, I mean, we are taking this as a cautiously approach.

Okay. Good. And then just, I guess, Rich, when we look at the aggregate principal amount of the senior secured -- the secured senior notes due 2028 up to $1.4 billion. So presumably, where it is today is before you've incorporated the 13.5% pick per annum. Is that the way to think about it?

No, no, Mike. It's -- the bond buyback portion was $1.1 billion. And the cash portion is the $450 million. So that's roughly the -- this is the market value the bonds. There's some other components in there that were disclosed, OID and so on. But that's at the beginning.

So the $1.1 billion and then going to the -- it's going to grow 13.5% per annum over the next 5 years. That's the way to think about it. That sort of $1.1 billion is the base.

If it stays outstanding for 5 years, yes. I mean that was designed to I think the focus should be on the 4.5% cash pay, which is not something that GOL or frankly, any airline would have been able to achieve on its own. And that gives GOL a lot of flexibility to conserve cash, then that overall cost there is also -- if you put the PIC component is significantly lower than GOL would have been able to do on its own. But it's important to mention that ultimately, this will be a chance for maybe convert, as you saw at the ESS, the exchangeable, very similar to the structure that GOL did back in 2018 with its first exchangeable.

We did not want to issue the exchangeable from GOL in a distressed state. And so the using of the debt mechanism at the beginning allows us to remove the distressed component from GOL security prices and eliminate any concerns over the growing concern issue, allow the market to price and the information about what the impacts are on of this financing transaction before issuing an equity-linked security. But the ultimate destination on this will be -- it will be transformed into an equity-linked security, which we described in the public announcements.

And so it's unlike the SSN, if you will, the notes would be outstanding for the 5 years, still have a much shorter life. And that ultimately, the idea is that this will be an equity-linked transaction. The cash pay component will not change. And when that's done at the appropriate time, when it's done, when all the dust settles on this and everything is stabilized and properly priced and trading in the market. It's mandatory in Brazil that we offer preemptive rights to our PN shareholders.

And of course, we historically have always offered that, including to the ADR shareholders. And so everybody will have a bite at the apple when that rights offering happens at some point in the future. We don't know when exactly we'll do that. But would likely be in the near future. And all of GOL's shareholders would have the right to participate that. That's also a way of issuing equity at a premium to the market because if more were to just do a straight equity offering and it's distressed state, where the market cap is and with the size of this capital raising, it would have had to come at a significant discount to the existing market valuation.

So the way we're doing this in a sequenced and well thought about way will allow when the equity-linked offering happens, you've done at a premium to a more correctly priced equity price. And so that's the -- that's part of the reasons for the more complex structure that you guys all saw in the announcements, and so it's being done sequentially so that it wouldn't have any negative impacts on an equity-linked issuance on the market perception of the company and it's in a distressed state. And so we're -- we'll see where the market ends up on this and how the market price all these effects in over the next couple of months.

Effectively well, balance sheet and so all that stress should hopefully gradually come out growing concern emphasis concerns will go away and the market will price in this initiative into ultimately what should be a more proper price for the equity. And how long it's going to take your guess is good as mine that's a couple of weeks or a couple of months, but we'll see.

We've seen some movement in asset prices, so that's a good thing. Just my last thing, and Rich or Celso, we now have ABRA and we have the foundation for the holding company, we have a better sense of the structure. What about the potential upside when we think about -- in the past, Rich, you've talked about the IAG holding company structure, and there's a lot of goodness in that type of structure. And when you think about cross-utilization and joint procurement and synergies and I think about if I fly BA, I get preferential treatment on, say, Iberia or Aer Lingus and access to the clubs, -- when do we start rolling out that because I feel like that, that's an exciting part of the story, and it would be sort of the first of its kind in Latin America.

We, yes, there are a lot of synergies across the group's structure, starting with GOL and Avianca. Avianca will be rolled up under the platform company by the end of April. But a lot of the groundwork on that has been laid where possible. We already have all of the approvals we need to start working together and do that. Yes, I know a lot of people will potentially use IAG as an example. We have a lot of differences in how we're doing it here in the South America market. And what we've created effectively is a platform company that has its own reason for being, that's going to be doing a lot of work to generate a variety of different types of synergies from the members of the platform in terms of its focus on being an even lower cost, higher efficiency group, which is obviously the main tenant because we believe that low cost always wins and all the members of the ABA platform have that in their business models.

As you know, Avianca did transformation of its business model during its restructuring process and is in the process of finalizing its full transformation to an LLC and then also delivering above-market revenue growth, which is going to be through better utilization of the massive networks that we all have that can work together. They ultimately also going to benefit customers with new city pairs and new ways to get benefits from the loyalty programs. The combination of loyalty programs is -- it's one of the largest in the world.

And when you go into the overall fleet size, we'll have significant scale across the board to do things. But obviously, that's something we'll spend more time as we have developed on that. And obviously, the point that is to help people understand GOL's fourth quarter results and where we are in the -- GOL business in the short term.

Our next question comes from Stephen Trent from Citi.

Thank you very much, operator, and I appreciate the time. Just 2 quick things for me, if I may. I know that the Brazilian government is studying the idea of potentially making some adjustments and fuel taxation. And if we cross that bridge, would you anticipate revisiting your fuel hedging strategy? Or do you think that's something that's going to stay in place regardless of what happens?

Thanks for the question, Steve. As I said, I have Mario here with us on the call today, I'll take -- hand it over to Mario to respond.

Sorry, Steve, can you just repeat your last point on question. Sorry.

Yes. No, no worries, Mario. So presuming that the Brazilian government does move forward with some kind of adjustment on fuel taxation, would that possibly lead GOL to revisit its long-term fuel hedging strategy?

Yes. So we -- first of all, what have we seen in terms of the last trend in terms of the (inaudible) 49:53 field has been very correlated to the market what's been happening so far. So we have been trying to avoid to spend a lot of cash. And of course, we are reserving right now the de cashed to other priorities. But we have been so far active on the market to do some hedges, especially for the next months when we build some good protection, also using some instruments that is related to the (inaudible) 50:40 there is a commercial hedge using some fixed prices.

So at this point in time, we still don't -- impacts that (inaudible) 50:53 can provide on that. So we -- the most effective tool that we're using of natural hedge has been our capacity management using our instrument. So there's nothing concrete in terms of the discussions with the government right now just changing that side right now.

Yes, Steve. No, we're not -- I mean GOL's -- I mean, GOL's hedging strategies for fuel FX is the same. I mean we basically try to have something between 25% and 50% 12 months out. And then beyond 12 months, kind of months 12, 24, will gradually build so that when we get into 12 months out, we're roughly 25% hedge. We've obviously been strapped on cash. And so we've had to be creative with instruments that we've been using to wrap around that. But nothing the government is doing alters our -- the way we're doing hedge as we continue to kind of -- and we've always generated a lot of value by getting ahead of the curve and doing it that way as opposed to reacting. So I hope that answers the question.

Yes. No, very helpful guys. Appreciate that. And just one more very quick one for me. I recall before the pandemic that GOL used to seasonally sublease some of its planes, overseas Transavia or names like that during Brazil's low season. And now that the world is kind of edged out of the pandemic, do you anticipate maybe more potential operations like that going forward?

Steve, this is Celso. That's a good question. And it was kind of a part of our business model, pre-pandemic. As I said to Mike, we have been managing capacity and Brazil became a very highly seasonality market. I mean, if you compare the traffic that we had in December and even in January now to the low season, we should be managing the fleet in that way. As a synergy of ABRA, one thing that we may do in the future is the sublease. But until they are, we -- of course, we have the same partners, KLM and Transavia, I mean they are really close to us. And we are, I mean, starting to continue this type of operation as soon as possible. If not this summer, probably the next one.

Our next question comes from Savi Syth from Raymond James.

Just on the capacity, could you talk a little bit about how you see that capacity kind of growth between domestic versus international, you did open back up some international markets as well recently?

We are going to -- I mean on the domestic side, we are just growing to this slightly above to the levels we had pre-pandemic. So if you look at the fourth quarter, we are still below. But as we go through this year, we are ramping up the capacity in the domestic market, very cautiously to maintain the unit revenues that became very crucial for us. And international markets, most of the growth was already implemented at this point by the end of the year. Like I said, we launched the more frequencies to Orlando, more destinations to -- from Brazil to Miami. And then what you're going to see is the full year effect of the international markets that we just resumed.

So it's going to be a significant growth in international. And some markets we have already operated before pandemic. We are approaching very cautiously to understand what will be the best time to restart those markets like Santiago and Lima, we normally fly as utilization flights, we fly red eyes. So we may open during the year as we see those markets becoming healthier.

That makes sense. That's helpful. And if I might, on the ticket tax, like is there an assumption -- does the guidance reflect kind of the ticket tax break? And does that assume any kind of continuation here?

No. We are not assuming nothing from the tax. And also, we are not assuming anything on the -- of the fuel pricing.

That's the upside Perfect.

It's going to be an upside, yes.

Let me just -- operator, let me just insert because we have questions from the platform that people submit on the platform. And let me just read 1 or 2 of them in before we go back to the queue on the people that are on live. We have a question here from Chris Reddy (inaudible) 56:41, which asks, can you provide how forward bookings are looking, talk about VFR and corporate passenger traffic and fares, Celso?

Yes. So bookings are performing very well at the beginning of this year, like better than what we had in the fourth quarter as corporate is growing. We have now achieved more than 100% of the revenues that we used to have in the corporate segment, but not the same number of passengers. So we are still around 70% to 75% depending on the month, depending on the week. On the 70% to 75% level in numbers of passengers and the corporate segment. As we grow those passengers, the yields -- there is a room to improve the yields as those passengers, they book on a short apiece.

So VFR demand and leisure demand stayed very resilient. That was kind of uncertainty. During the pandemic, those segments were the most important one. And the good news is that those segments stay. Even in flights like in the shuttles that we used to have less leisure or less VFR, we have now a significant portion of those flights with health fares. So it's a legacy from the pandemic that we will stay. So the combination of this legacy with the rebound on the corporate, it's going to be very healthy. And we are not assuming the whole upside. We are taking a cautious little step when we announced our guidance here.

Another question that we got on the platform. I'll just read it here, and I think I'll send it to Mario to answer. Despite a reduction in capacity growth, nonfuel cash guidance of $0.036 is retained for 2023. The question is, has GOL found savings to compensate the capacity decline? Or is there another factor preventing cash guidance rising with lower capacity?

Yes. Thank you. This is a very good question because it speaks how we are managing this company in terms of cost perspective. So since 3Q '22, the company already achieved that level of $0.036 and has been maintaining now in this fourth quarter, just coming down from high 4s in terms of CASK assuming a dollar in 2021 and low 4s in 2022. So not only related to potential capacity dilution as we preserve capacity. And in this year, in terms of our guidance, we are expecting to recover most of the SKs that has been preserved since 2019. But there's also some important drivers that has been leading to that cost reduction.

So there's main 3 items that are more important to highlight that first is our discipline in terms of controlling the workforce. So the number of the total employees where we are achieving with the same -- almost the same 2019 SKs right now in the fourth quarter, but we've -- so just coming from almost 16,000 to 14,000 right now. So we have been able to reduce the payroll cost and compensate more than the effect or the impact of the accumulated inflation that's impacting the line.

So -- and second, as you know, we have been preferring to provide a better visibility to the market, especially in terms of the maintenance cost that is going to be impacted through the fleet transformation. So we recorded that in 2021 results, almost BRL 1.6 billion of provisions for maintenance that help those maintenance lines to be outperforming now in the P&L. So that can keep this line much more visible and below what has been the historical trend. And also, as we were still operating some of the aircraft that's still in the storage, and we are preserving that liquidity by not deciding to increase capacity or just focus on capacity.

The third item is related to depreciation because since we are doing a lower capitalized maintenance that has been translated also into a lower depreciation. And those are the 3 main items that is the company is managing are to keep that cash (inaudible) 62:14 and as we were probably the only airline that was any or is still preserving that capacity. And as long as towards the second half of the year, most of the capacity for 2023, we're going to be expected to be linked to the high seasonality of the second half of the year that can provide -- potentially represent a better efficiency and productivity in terms of our cost control.

Okay, operator, you can go back to the queue, please.

Our next question comes from Pablo Monsivais from Barclays.

My question is a bit on the medium-term outlook for you. Since you have a pretty good cost advantage and yields are high, and we expect those yields to be high for the next foreseeable future. How would you -- what's your game plan in a year from now, do you think you're going to be more aggressive in terms of capacity or pricing to take advantage of your -- of high yields and low cost that you have to outcompete your peers domestically or how -- what's on your thoughts or how to compete in the medium term?

Yes. Pablo, thank you for your question. And as you said, we have the cost competitive advantage and this is the reason why GOL became the most important low cost in the region. And this is what we want to resume. So we want to preserve the revenue environment as much as we can, especially on the domestic market, which is still very volatile. And we want to expand our growth through the international markets, especially next year and all. So with the synergies we will have and with the extra range with -- on the 737 MAX, we expect to grow next year more on the international routes with long sectors that will dilute even further our cost.

So we are -- of course, we have potential to grow. We have more planes. We have the cost advantage, as you said, but it's really, really important for us to keep the capacity discipline that we have been keeping since the beginning of the prices actually. And we want to maintain and make sure that our domestic is going to be growing as the market grow -- so we still see room for health growth in the Brazilian market, but we also want to explore even for the international markets. And as you know, low cost always win.

Our next question comes from Nic Frank from Jefferies.

This is Nicolas Fabiancic from Jefferies. Congrats on the results and transformative liability management transaction. Just had 2 follow-ups. There was one point that was not clear in Michael's question at the beginning. So on the capital structure pro forma, the buyback was $1.1 billion. I think it's actually $1.077 billion of notional of '24, '25, '26 and perps and the new SSNs is $1.4 billion today, right? It's not up 2. It's just -- right now, it's $1.4 billion of SSNs, which are wholly owned by ABRA. Is that correct? I just wanted to confirm that point.

That's correct. Yes. That's correct, yes.

Okay. And then on the -- looking forward, right, for GOL, and I'm sure we're all looking forward to ask questions and to get to know the ABRA story. But when we look at the remaining GOL bonds, most of which are unsecured except for the '26s, can you give us a little color how we should think about those -- the stubs, kind of different options or how the company is thinking about addressing the remaining '24, '25 and eventually the '26. And in particular, I ask because of the springing maturity of the new '28. So just wanted to clarify there, how we should think about those remaining GOL bonds?

Yes. On the July '24 maturity, which is what is that about 16 months or now, is about $75 million left over. And of the mid-'25 maturity, it was about $340 or-so-million leftover. So that $400 million of $24 million, $25 million maturities, the $75 million that matures in July of 2024. Is that what you're worried about or maybe I don't understand the question.

I mean, very much not worried about it because the amount is small and the liquidity position is significantly improved. But just mechanically, right, because the understanding is that any repurchases today are capped at a certain price? I think it's $0.50.

No, I'm sorry, to interrupt. No, I think you're referring to the I understand what you're saying. But no, there's no -- I mean all the GOL will just continue to pursue what GOL has done in the past, I mean, we've done bond buybacks. We've done different types of liability management operations, GOL has a lot of different tools on its balance sheet in terms of capital markets insurance. Obviously, you have to have market access, which is not something that has been available to the company since the war started at the end of February last year. But the company will just continue to manage around those maturities and with the available tools that it has. Perfect.

That's great. And I'm sure that will continue to be well received after the company has extended runway here and --

Let me, okay. Sorry, you cut out there.

Just said that's great, and I'm sure those will continue to be well received as the company has extended runway and bolstered liquidity. The last one was just on the equity. The listing of ABRA versus a potential delisting of GOL in the future, kind of how should we think about that for the perspective of the minority equity that is not owned by ABRA?

We're not -- this is not the subject of this call. Nick, okay. We'll talk about that in the future.

Let me just insert it here. We only got a couple more minutes here. Let me just insert a couple of quick questions, make sure we get to everybody that asked on the webcast. Just a couple of quick questions here. One was how do secured amortizing notes that were issued to leasing companies at the end of last year will affect cash flow.

A quick answer there. We mentioned that these notes have a very low cost of capital for GOL and also have a grace period of 12 months, which has a big impact on cash flows in '23. And GOL already had the lowest lease debt among competitors, and that transaction gave additional relief for GOL, but also the lessors that participate in that were secured by our secured by top-tier collateral.

Another quick question. I'll just read the question. The fleet transformation program is being affected by the bottleneck at OEMs. Will these delays force the company to review its plan?

Okay. Well, we had previously planned to end last year with 44 -- I mean, December of '22 with 44 B737 MAX in the fleet. We finished with 38. And so obviously, we -- GOL is being affected by the OEM bottlenecks, which are not just affecting Boeing operators, they're also affecting Airbus operators. That's mainly due to logistics problems all the manufacturers that are delivering aircraft. And so that's why we're forecasting a lower number of MAXs than previously for 2023, which would reach 53 by this December.

And so we're still playing catch-up given the pandemic and given the MAX grounding going all the way back to 2019 and those other issues that -- we're playing catch up on that. Boeing has been working very closely with us in order to mitigate this, and we're confident that our long-term partnership with them will continue to work as we work together as partners on that.

And then just one final, just to make sure we fit them all in by the top of the hour here. I'll maybe extend for another couple of minutes here. Just one last question which I'll send to Mario, which is from Gabriel (inaudible) 72:42. He says you mentioned about increasing corporate traffic. -- Maybe I'll send this to Celso. What's the main explanation on yield expansion quarter-over-quarter? How is corporate traffic comparing with pre-COVID-19 levels. Regarding yields, do you see risk on achieving the additional yield increase implied by your guidance, how these yield increases should happen on '23?

And maybe I'll just chime in there before you speak Celso. There is no yield increases in the guidance. What you guys have to do when you look at -- you have to be careful with the year-over-year comparisons. We mentioned this in the last call. We did when we had our -- we didn't change our '23 full year guidance. We just provided some Q1 numbers. We just reaffirmed it, if you will. And we provided that in our last call, and we made a point to explain that when the war started at the end of February, there was a massive increase in oil prices in March, April and we did a -- we affected a significant shift in yields up in the second quarter. And so you need to strip out the Q1 of '21 -- sorry, yes, 22% from your comparisons and the year-over-year, otherwise, you won't be able to do the comparison.

And if you take the yield progression going forward, if you would kind of go Q2, Q3, Q4 and compare that to our -- look at the data that we provided in the releases and compare that to our '23 guidance stripping out the Q1 of last year, you'll see reductions. I mean, for example, I think if you take the 9-month comparison, last 9 months versus of last year versus this year, it was like an 8% reduction in yield. If you just look at the second half, it's around a 10% reduction. And if we look at the Q4 comparison, it's like a 12% reduction. And so that is not correct.

And to your question on, do you see some risk in achieving the additional yield increase in planned by your guidance? That's not a correct question. There's yield reductions in there, which are also necessary to stimulate demand. And so maybe I -- looks like I answered the question, Celso. Okay. So we can skip that.

Let me just check here real quick. Let me just make sure we got everybody's questions. So I think we were able to get through everybody's questions. And if there were any questions unanswered, please shoot us an e-mail to the GOL IR department, and we'll give you -- we'll get back to you on that. So we -- we can wrap up the call, and I don't know if you have any closing comments, Celso.

Yes. Thank you. Thank you all, and I hope you enjoyed today's webcast. And like Richard said, our Investor Relations and Communications team are available to speak with you as needed. Thank you. Thank you very much.

Ladies and gentlemen, this concludes GOL Airlines conference call for today. Thank you very much for your participation, and have a nice day.