Gol Linhas Aereas Inteligentes SA (GOL) 2022 Q1 法說會逐字稿

Welcome to the GOL Airlines First Quarter 2022 Results Conference Call. This morning, the company made its numbers available, along with 3 videos with the results presentation, financial review and preliminary Q&A. GOL hopes everyone connected has watched them. After the company's brief remarks, we will initiate the Q&A session when further instructions will be provided.

This event is also being broadcast live via webcast and may be accessed 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 management during this call or by the GOL Investor Relations' team after the conference is finished.

Before proceeding, let me mention that forward-looking statements are based on the beliefs and assumptions of the company's management and on the information currently available to GOL. They involve risks and uncertainties because they are related to future events, and therefore, depend on circumstances that may or may not occur. Investors and analysts should understand that events related to macroeconomic conditions, industry and other factors could also cause results to differ materially from those expressed in such forward-looking statements.

At this time, I will hand you over to Mr. Paulo Kakinoff, CEO. Please begin.

Good morning, everyone. I would like to start by ratifying our most important results for the period, which were made possible by the trust we obtained from our customers, investors, suppliers and especially our team of Eagles. Our employees were responsible for getting us through the challenges of the quarter without disruptions in our operations.

Net revenue from passenger transportation grew significantly due to the consistent recovery in sales. Sales levels in January and February increased 10% and 30% respectively, compared to the same period in 2019. While in March, we expected 60% due to the increase in sales to the corporate segment. In January, we reached 38.5% domestic market share and 99.7% flight completion above the industry average. This position was achieved by the diligent capacity management in the previous months.

Compared to fourth quarter of 2021, we increased our capacity by 15%, with a more assiduous recovery at the country's main airports such as Congonhas in Sao Paulo, a significant hub for corporate passengers essential for strengthening profitability.

Our occupancy rates and aircraft utilization continued to improve and flight frequencies expanded by 48% when compared to the first quarter of 2021.

The increase in demand and the number of passengers transported was followed by an important growth in our NPS. During the quarter, this service quality indicator increased by 7 points and reached 45, GOL's highest score-to-date, reflecting the consistent efforts towards the improvement of our customer experience.

In April, we signed a landmark cargo and logistics service agreement between our logistics business unit, GOLLOG and Mercado Livre. This partnership contemplates a dedicated Friday fleet of 6 Boeing 737-800 BCF, which is expected to begin operations in the second half of 2022, and it can be increased to up to 12 aircraft in 2025. Part of these aircraft will be converted at GOL Aerotech, and its personalization is anticipated to generate fleet optimization savings of approximately BRL 25 million in 2022 and another BRL 75 million in 2023.

As such, we plan to increase GOLLOG's range of services and tonnage capacity by 80% during 2023 to generate additional incremental revenue of approximately BRL 100 million in 2022 and more than BRL 1 billion over the next 5 years.

I will give the floor to Richard Lark, our CFO, who will present some financial highlights.

Thank you, Kaki.

Our results reflect the social capital we have accumulated over 2 decades of collaboration with our clients, employees, suppliers and investors. I would like to start today highlighting the important results we had in the quarter.

We registered an EBIT margin of 5.6% and an EBITDA margin of 16.8%. Our detailed financial analysis for the quarter was shared in the press release and video presentation released this morning. We believe that you all had a chance to access them.

Regarding our capital structure, our available liquidity remains stable at BRL 3.3 billion, with short-term debt of BRL 721 million at the end of the quarter. We have no significant debt amortizations within the next 12 months, and sufficient long-term financing credit lines for the acquisition of new 737-MAX aircraft, a key part of the fleet transformation plan.

On April 13, the exclusive codeshare agreement between GOL and American Airlines was finalized, including an equity investment by American in the amount of $200 million. American now has a 5.3% participation in GOL's share capital and was granted the right to appoint a member to the company's Board of Directors for the term of the exclusivity provided in the transaction.

This quarter, we received 8 Boeing 737-MAX 8 aircraft. The transformation of our fleet to a new and more efficient technology plays a key role in our strategy for the coming years based on increased productivity, lower unit costs and lower carbon emissions. Among the 8 737-MAX received in the quarter, 3 aircraft are under finance leases. We anticipate that in the coming years, around 50% to 60% of new aircraft received will be under finance leases. And despite the increase in our leverage partially as a result of the acceleration in the fleet transition, we are optimistic that the improvement in EBITDA generated by this initiative will lead us to a net debt-to-EBITDA ratio of around 8x by the end of 2022.

I now return the floor to Kakinoff.

Thank you, Rich. I want to close by acknowledging the commitment and dedication of our collaborators, the team of Eagles. They are the ones who put us in a solid position to continue to expand operation in a sustainable way. Our goal is emerging stronger and more resilient as demand normalizes. We are even more confident now with the solid recovery of the corporate segment in March.

Operator, you may initiate the Q&A session.

(Operator Instructions) The first question comes from Dan McKenzie with Seaport Global.

Focusing on cargo, BRL 1 billion over the next 5 years. So a couple of questions here. How is the logistics team just following the win with Mercado Livre, thinking about other growth opportunities from here? And then given the growth, how should we -- what do you want us to know about this business? How do we model 2023 growth margins versus the core airline? Anything you can share would be great.

Thank you very much for the question. Actually, this is -- this new business is giving to us another set of opportunities in such relevant sales towards business, which is the air cargo transportation. We are now assuming 6 cargo aircraft in our fleet, so they are all 737-800 BCFs converted directly by Boeing, supported by the [logistics].

Once we will bridge such type of aircraft exclusively to the Mercado Livre, certainly, we could consider to expand this kind of operation towards additional routes being solely operated by us, serving different market segments. This is just to share with you one of the possibilities.

At the moment, we are totally dedicated in delivering the best customer experience we can to Mercado Livre, which is our problem area at the moment. And certainly, this business alone, we will change dramatically the figures of our cargo unit. We have shared with you already this BRL 1 billion potential additional revenue around the next 5 years. But also, we mentioned that this operation only could add up to 80% of our current cargo revenue.

So we are very excited here envisioning other opportunities, alternatives. But at the moment, we are overly concentrated in Mercado Livre operations only. Certainly, we will have another set of information being shared with you from the next earnings results conference on because now, we have another business segment being operated by Mercado. But for the moment, those are the information we would like to share.

I see. Okay.

Second question here, GDP has been revised upwards in Brazil. The revenue outlook for this year remains unchanged. I'm just wondering if you can speak to the pace of oil recapture throughout the quarter, where we're at today? And how Smiles is helping to drive improvement and helping to, I guess, to stabilize your yield versus '19?

Dan, the best answer to this question is given by the first quarter results itself because we are still facing a pretty volatile market in Brazil. There are several uncertainties. There are those political instabilities in front of us. But even though we are -- even though we are producing superior results in comparison to everyone's expectation. And this is driven by the set of different drivers.

Certainly, one of them is Smiles performance. The company is in its best shape, breaking records and already offering to the whole structure, I mean, the GOL corporation, the benefits of the Smiles, speaking, not only those -- the tax benefits, I mean, that the -- mainly the -- our capability to proper price the miles and the points in the market much more directly correlated to our revenue management [looking] always in place here for GOL.

So we are making the most out of this extremely valuable asset developed by the Group around The U.S.

So Smiles is directly responsible, and it's one of the drivers, as I said, for the results we have delivered. And also for this positive outlook we are sharing with you with regards to the market overall. The core bookings curve is promising and it does apply the same effect to the Smiles customers too.

Yes. Thanks Kaki. And I guess what I really meant to get at is just the pace of the corporate recovery since it's the larger corporate...

(inaudible) I'll continue with that. Can you hear me okay or no?

Yes. Yes. It's a little bit same, but I can hear.

The other part is we've been having trouble with the -- some of the offices that we're using. We have some -- it's not very clear. But let me just maybe complement to what Kaki said on a couple of things.

The -- where we are right now, we've been able to adjust our -- to our yield management, adjust our infrastructure to deliver towards the probable (inaudible) the oil prices are pretty much since the beginning of March (inaudible) we had in Brazil a certified delay, given how jet fuel was priced, for example, so the jet fuel price we're going to have in May is based on the average price of a basket of international oil prices in April for the whole month, just the average, and then the average currency.

And so we can anticipate, if we have the demand ability to do it, and that kind of go into your question. But just wanted to really give some historical context here on where we're coming from, and why things were the way they were. We only started to get a recovery of corporate demand. (inaudible) the longest of last year? It was coming off of a very (inaudible). It recovered maybe to kind of 60% by the end of -- 60% of 2019 by the end of December. If you had January, February, these are usual high season.

But during that same period since November of last year, we've been dealing with the combination of higher oil prices and a weak Brazilian currency. And then came into February, I believe (inaudible) to be exact, when one of the travel restrictions, just restrictions in general came off, COVID-19 restrictions. That also stimulated the final pieces that we did not have back yet on large corporate demand to come back pretty quickly, right, at the end of February, which also coincided with the beginning of the work, February (inaudible) exact. It's February the same day almost.

And so with the return of that final piece of the very large corporate demand for our business, this is a very large (inaudible) in corporate, which our network is organized to serve. Since that moment in time into February, we were able to work through yield management and get the 100% recapture on what was happening with oil, with a couple of nuances.

WPI at the end of the Q1 was 32% up versus the beginning, $75 versus $100, and 76% of overall reviewing the same period in 2019, $57 versus $100. But the exchange rate for Brazilian currency appreciated 15% from the beginning of the year to the end of the Q1, from 5.6% to 4.75%. And so the effect on jet fuel for us, from the beginning of year to the end of March was a 15% increase. Not these massive increases you're seeing affected U.S. Airlines. And 40% that would affect April and May, 30%. Not the 70%, the 50%, 70% we have been seeing in other countries that you look at. It's also a much lower number to have to deal with on the fare side.

Now the exchange we've appreciated 15%, which also favors other costs that we have, denominated dollar maintenance, leasing, revenue systems and dollars. And as you saw, we have a good increase in the Q1 of more than 30%. And that's how we started the Q2 period, which is normally the down quarter. So it's in a normal situation from a different perspective that, given the return of the corporate demand at the end of February, coinciding with the pushing of the Brazilian real and these other factors, we were able to not just recapture the variations, but also have an increase in margins.

And then what actually I was saying that this is important, because this affects GOL separately from what might be affecting the sector as a whole. A year ago and -- at the end of June, we reincorporated Smiles. And right around at the end of the third quarter of last year, we had -- we integrated the yield management teams in the sense of the work together. The teams were kept separate, but they're working together, maximizing the profitability on the same inventory, which is produced out of the GOL factory, which is the [feed] inventory.

And at the end of June, at the end of Q1, we're expecting to already have generated synergies which are equal to 100% payback on what we paid for the Smiles to take them. It's more than half of these synergies coming from -- coming in operations. And given (inaudible) Smiles have cost, you might not see a significant cost, it all comes out of revenues in the yield. And so we've been able to also increase substantially the quality of the profitability yield through what we've been able to do in terms of eliminating a lot of the problems we have in the inventory management when the companies will separate.

And that also goes in there, because Smiles was an important increase -- important driver in increasing the yield into Q1. And as you saw (inaudible), the gross sales of Smiles were 100% higher than Q1 of this year versus Q1 of last year. That's yield, and that comes out of the integration of new management processes, and that also obviously a decline of Smiles (inaudible) as a quarter.

So all that is also in there driving what you're seeing in terms of our yields or horizons et cetera. So just to kind of complement to what Kaki said, but I'm sorry to interrupt you, as you're going to do a follow-up on your question as you said.

Thanks, Rich. That's really helpful. Oil price is manageable.

I guess just one last housecleaning question. Given the volatility in oil, what's the spot jet rate you're paying at the pump?

The fuel price?

Just at the pump today. Just a housecleaning question.

At the moment, I believe -- it's BRL 560 at this moment. Remembering that there is a 45 days delay in comparison to the international prices. So at the moment, we are filling our aircraft with the prices compared to international quotation of 45 days ago.

Understood. And I hear you loud and clear, Rich, on the recapture here. Good job.

Yes. Dan, just on that, we have the number for the Q1, our price for Q1, and we also have in our very detailed guidance, you have our assumptions for the full year, right? And so -- that's really what matters in terms of (inaudible).

Understood.

The next question comes from Mike Linenberg with Deutsche Bank.

Nice job. Nice to see the recovery really starting to take hold.

The American codeshare which, as you said, Kaki and Rich, I guess, effective just about a week or 2 ago. A couple of things. What -- what's the potential revenue pickup? Like what are you assuming maybe in year 1? And as sort of a part 2 to that question, do you plan to seek antitrust immunity with the regulators to offer maybe a more comprehensive type arrangement, maybe on par with some of the other agreements in the region?

So we do not have the -- actually, we do not have any new requests to be submitted to the antitrust authorities considering the network we have designed, which is pretty much comprehensive. I would say, mainly with regards to the North American market and the whole American Airlines network.

What's important to highlight is the current market performance on those routes produced by the codeshare in comparison to the overall demand. You know that the international routes and international markets didn't recover as fast as the domestic in Brazil post-pandemic period. This is something to be changed in the near future. We are now also perceiving the higher demand and the higher forward bookings for the international routes. And even considering this, the market size is more than we had pre-pandemic in the -- for the international travelers. The partnership between GOL and American Airlines is already today 2x bigger than we had with our previous partner. And it demonstrates how much stronger with American Airlines network (inaudible) to fly with American Airlines in Brazil and in the region.

So at this moment, we are experimenting the higher-than-expected demand in comparison to the overall market, and this has been produced basically by the attractiveness deployment in this partnership, GOL and American Airlines. But for the moment, this is what we have to share. We have already the antitrust approval for the network we have deployed today, and the one which is supporting the forward bookings until the end of this year.

Kaki, when you say 2x bigger than your next biggest partner, are you referring to, like, say, a current partner like Air France KLM or are you talking about -- versus Delta? Versus what you have?

It's that in comparison to the older North American partner -- our prior North American partner, Delta. So -- and this is explained by the network side, by the capacity deployed by American Airlines in the region, so it's a much bigger company for the South American markets and mainly in Brazil.

Just to give you another reference on that subject, the American Airlines' credit card in Brazil has its second largest customers platform right after The United States, so the brand is really powerful here. The company is making customers at the top of mind share. So therefore, we are just, say -- therefore we can say that we are just in the beginning of this -- of capturing the high value of this partnership. We are reaching the huge potential right now and more to come. I'm pretty sure.

That's great, Kaki.

And then I -- just turning to the slides, Page 4, where you break out your corporate. And kudos to the team. This is -- we haven't seen anything like this from any other carrier. You guys have been very transparent with corporate. And to break it down into, I don't know, it looks like 10 different groups. This is fantastic data, and you can see that big -- it's almost as if somebody turned on a light switch back in February with corporate.

So I see there's a line there for corporate and there's a line there for consolidator, which is green, but there's 3 other lines there. What are those lines? Are they leisure? Are they VFR? Is it cargo? What -- can you -- I'm just curious.

You're right. We have the other subsegments, mainly leisure (inaudible) this is just to show you the contrast between the recovery speed of those 2 different segments. We have been positively surprised by the large corporate demand overcoming the most optimistic forecast we have shared before. GOL all along the pandemic capped its [optimists] related to how strong would be the quarter demand recovery. Also in contrast with some of the most pessimistic processes shared by -- especially saying that the big companies wouldn't return to their pre-pandemic travel habits. We never brought it as it was presented, even considering that some structural changes would come and they did.

I mean, we did see less and less passengers taking the plane for one day only and flying back overnight. But at the same time, there are much more companies willing to visit customers in person or combining the business trips with leisure. So even starting from our own point of view, which was always very optimistic, we are fortunately being surprised by a much stronger demand at this moment.

And this is what we have tried to demonstrate in such chart and such slide, by making -- offering you a comparison on how much faster has been the coverage, demand recovery in comparison to the leisure which is, by the way, also pretty strong.

Okay. And then just -- that's super helpful. If I can just squeeze in last one.

Just on the slide, Page 5, and it shows you how closely I look at these. You talk about markets that you've reopened and you highlighted some of the international markets. And you have Orlando there, which I know you're going back into. But you have -- instead of Orlando City code, you have Miami City code, and so I'm not sure if that's a slip up or not. But I would think that with the American agreement, when I think about secondary Brazil to help out the American hub, GOL would be with the right cost structure and the right airplane size flying, say, a 737-8 MAX from, say, Belem or Recife or Salvador or Manaus to Miami, that would make sense. That would make a lot of sense.

So I don't know if that was unintentional or not, but maybe it's giving us a look into your future plans.

Well, Mike (inaudible). Miami was always sort of the MAX operation. Even people who (inaudible) doing flights from Northeast Brazil and Central Brazil to Miami, that was only (inaudible) one of the strategies even prior to our exclusive contract with American. And now with exclusive contract with American and America's dominant market share in Miami, there is a significant narrow-body operation that we can develop if -- in partnership with American, out of Miami with American, focused on the (inaudible) to the longer distances in Southeast Brazil and [Central Brazil]. And Kaki, you can talk about it.

Yes, Mike. I mean, the maximum information I can share at the moment is that we are taking careful notes of your very interesting suggestions, okay? But we can imagine that we're doing (inaudible) possibilities and opportunities coming out of our partnership with American Airlines.

But you're right, 737-MAX, it's a fantastic machine. And we are really not only excited, but we are more than satisfied with the forward bookings (inaudible) flights to Florida, those are about to be resumed, this did not. I think that there is a clear potential for additional routes in market, and they are supposedly about to come. Okay.

Very good response, gentlemen, and a nice quarter again.

The next question comes from Savi Syth with Raymond James.

If I might ask the business recovery question a slightly different way. I was wondering if you could say because -- the forward sales is super helpful. But I was kind of curious where your business revenue is today versus kind of this time in 2019? And generally, in your 2022 revenue outlook, what are you expecting that to recover too?

Savi. The comparison figures, those could be better explained due to the current situations that we are, at the moment. Comparing second quarters 2019 and 2022, we are transporting a smaller number of business travelers than we were at the time that's producing a much higher revenue. And this is related to those 2 effects I have previously mentioned.

The pipe or the reason for the business travels have -- has changed slightly. So they are not more just one day trips, and they have been replaced by longer journeys and materially higher number of times. Those travelers are bringing their families along, so extending their business trips and producing what we have internally named the leisure travel. So that's -- therefore, we had higher yields, longer stays to their destinations and therefore, producing higher revenues.

So those are the main figures to compare.

I just probably want Savi, just a couple. In terms of view you've estimated, Q2 for us is going to be a transition back to what you kind of more saw as a normal mix of traveling passengers pre-pandemic. So by the second half, what looks likely than our full year guidance would be approaching kind of the mix that we had with kind of pre-pandemic, which would be roughly 70% of our inventory being formed for business purposes, 30% will be from leisure. And then within that mix, in terms of overall, about 30% coming from the high-yield and large corporates.

That will probably be -- it will be end of June, July that we'll achieve that pre-pandemic mix. Q2 is still going to be a transition.

That's really helpful. And if I might -- sure.

I'm sorry, Savi. I just like to add another item to this business traveler analysis that we have just shared. One thing I really would like to highlight is our capability to adapt the network and the flight schedule to these new business travelers' profile. I mean, we have identified this trend by the end of last year, and then we are now in the second quarter already offering a totally redesigned network in terms of, as I said, schedule and routes in order to cope with the new customer profile. So that's one of the benefits, one of our main assets due to those business model. I mean, (inaudible) expected we can really (inaudible) other sites to the new market demand and profiles.

So -- but please go on, I didn't mean to interrupt you.

That was a good point, I'm glad you interrupted.

If I might just ask on the fleet plan, like the MAX deliveries outlined in the suite panel, a little bit different than the kind of the MAX, I think the firm orders or the MAX deliveries in the 20-F. I was just kind of curious what the difference was if you're -- if you've kind of reworked the delivery schedule since then, or you're building in some conservatism on the MAX deliveries?

Not going to...

Go ahead, Kaki.

Thanks, Rich. Actually, they are not deviating that much from what we have shared and demonstrated previously. And it happens, because you know, as previously mentioned, we have combined our own delivery schedules with some opportunistic movements whenever we find attractive offers in the market. So we have somewhat blended our own order with another -- other opportunities that we can take.

By the end of the day -- sorry, by the end of the year, I think that we will be pretty close to the final figure we have already shared. But it's more related to how we are building this year end scenario related to the fleet than dramatically changing the numbers that we have already shared with you.

But Richard, I think that we'd like to...

I was going to say to Savi that what you're comparing there that yes, the order book is less than the total MAX because we're sourcing from the secondary market, the whitetail market, et cetera, aircraft that were produced for other clients that we're bringing in addition to MAX order book, per se. And part of the objective on that is to be a catch-up versus the -- now, it's almost 4 years we've had where we had the MAX running and pandemic, and so -- and then during the pandemic, we reduced our total order book to reduce risk. And so we're trying to do a big catch-up outside of our order book working in the market. And so feel free to -- if you find any extra MAXes out there, let us know.

Well. And I suppose I'm looking at just 22 matches up with the 20-F, but like 23, 24, 25, it looks like the 20-F has like 59, 79, 96. That's why I was kind of curious as to -- the 20F seems to have a higher number, and that was where the question came from.

Okay. I'll follow up with you off-line on that.

Sure. Sounds great. And then just one last question on just the capacity restoration. As you kind of exit the year, where do you expect kind of domestic and international to be, understanding that things can change and you're being kind of very responsive to demand?

Sorry, Savi, I'm not sure that I fully understood your question, but if I'm not wrong, you were asking when we will have the 2 different markets delivering pre-pandemic numbers with regards to the capacity, right?

And something along those lines. Or where you expect to be at the end of the year versus 2019 in domestic versus international?

The domestic, we will be definitely the same pre-pandemic level, even slightly above. And international, I still believe it is going to be below 2019 levels. So we might be surprised that the current volatility in the exchange rate and also the macroeconomic environment combined with a different pace of COVID-19 restrictions, relaxation in the different markets might postpone the international market recover. As we would like to have, the domestic, definitely will be, by the end of the year, at the same level we were pre-pandemic.

The next question comes from Duane Pfennigwerth with Evercore ISI.

Firstly, nice job getting your results out more quickly. I wanted to commend you on that. Just a couple of questions for me. I'm not going to ask 5 or 6 to dazzle everybody with my resilient knowledge, but just a couple out of respect for the other people on the phone.

Look, yields look great now. And I wonder if you could comment more broadly on supply demand? A goal has been very disciplined not just in this crisis, but in past crises as well, but you continue to be a share donor. By our rough math, you're going to be down about 4% in domestic in the second quarter, the second calendar quarter. Azul is up 9 points relative to 2019. So can you just comment broadly on how you see supply/demand, and at what point is GOL kind of no longer willing to be a share donor in Brazil domestic?

That gives me a very, I mean, high valuable opportunity to once more emphasize how important capacity discipline in demand is.

You have correctly mentioned that we had defended this concept already for many, many years, and hopefully, you have seen that we have (inaudible) to that concept in a very disciplined way. And this is, from our perspective, this is more important than ever. Therefore, even throughout the market in the first quarter, as you have already seen in a quite comparable manner with the 2019 levels, we are clearly demonstrating to the market that we will not fly, I'd say, let me find the right word. We will not fly just to produce market share. We don't care if it's going to result in market share results. If we will be able to continuously sustain and protect as much as we can, this yields recovery towards that we have been able to deliver.

So that's a very, very important message we would like to deliver here because that's the basic, the fundamental pillar of our strategy. And the way we have driven our business, the results are speaking for themselves.

And another aspect related to the market share is that we have seen some of our other -- some competitors, not only in domestic market but also international, offering a higher inventory than you really fly. So I wouldn't take for granted this market share gaps that you have mentioned based on the first quarter experience we do have. I still believe that the industry is and will continue to behave in a more rational way than we did before pandemic, and it does include every player in the market as we have been able to observe. So that independently of the inventory availability that we are seeing right now, I can tell you from the growth perspective that we will continue to protect and defend the proper balance between capacity and demand.

Extensive answer. And then just for my one follow-up and a follow-up to some of Mike's earlier questioning. Just very simply, not this quarter or next quarter, but can you just remind us what the international strategy is? And what are the milestones that you're -- you're waiting for? Maybe it's sort of the U.S. testing requirements to go away, but how are you thinking about international? How are you thinking about The U.S.? And how has that changed with the American partnership here?

Talking more broadly on our international network. You have probably seen that on average, we are resuming international destination since August last year. And this gradually track us to resume international flight. It is always -- it is also proving to be the most effective one because we are facing the still meaningful volatility all over those markets with regards to the regulatory constraints. There are some countries ahead on COVID-19 restrictions relaxation. Some others is still more conservative, but we are producing very attractive risks on all of those routes already announced and in operations.

So the next one will be the North American market, flights from Brasilia to Florida. These operations are about to begin this month in -- of May, and we are now considering to keep this -- the same pace for -- along the next months. So they have more international destinations to come, but we will keep our quite conservative strategy of only deploying new routes in case that we are sure that those routes will produce attractive (inaudible). Otherwise, we would rather keep the planes out of operation.

The next question comes from Stephen Trent with Citi.

Most of mine have been answered, but just a quick question for you on the maintenance side. I haven't heard you guys mention GOL Aerotech for a while, and could you just maybe give me a little bit of color with respect to how you see potential third-party business developing with that? And to what extent you're running any of your engine maintenance through GOL Aerotech?

At this very moment, we are discussing, analyzing exactly those alternatives. One fact I'd like to share is that the demand for the MROs worldwide is pretty high at the moment. This produce -- sorry, this give us an interesting set of opportunities to grow (inaudible) itself in order to increase revenues serving other airlines or other companies, but also those represent a challenge, considering our own fleet maintenance schedule.

So we are reviewing our strategies, the alternatives in order to design the best allocation. We can, at the same time, that we take the higher possible -- the highest possible number of customers being served by the GOL Aerotech structure. So I think that we will be able to give you more precise information on this strategy in a few weeks.

Thanks so much, Kaki. And super quick dumb questions, last follow-up. You're still doing some of your engine maintenance through Atlanta, or is that kind of all phased out?

Sorry, couldn't hear -- We -- I didn't understand it. And said when you said we are..

Yes. We still have -- in our diversified engine overhaul portfolio of service providers, we still have stuff with (inaudible) yes.

That's perfect. Let me leave it there.

(Operator Instructions) The next question comes from Alejandro Zamacona from Credit Suisse.

A couple of questions here. I'm wondering if you can share any thoughts on how -- on GOL's ability to do the pass-through of higher fuel prices to find our customers? And any expectations for yields for the remaining year, also considering the potential recovery of the business segment that you have been discussing during the call?

Yes. Yes. No, we -- as we're -- I apologize. The audio is not the best today in the setup, and we haven't been able to correct it during the call.

But in one of the previous questions, when we were kind of walking through what you call a pass-through, we call the recapture, which has depended on the traveler mix. And so when we had the strong recovery in the large corporates at the end of February, we've been able to recapture 100% of the variation in fuel prices on our cost structure.

We were -- we had been struggling to do that from November of last year until the end of February when -- November last year is really when fuel increased -- oil prices increased significantly for us because it was simultaneous with a very weak Brazilian real. And the other phenomenon that's happened also this year, and you saw in the first quarter was an appreciation of the Brazilian real by about 15%, and so that has compensated a large portion not just of the increase in oil prices as our jet fuel prices in Brazil are effectively priced in U.S. dollars, but also it helped us -- has helped reduce the cost of other dollar-denominated expenses such as B standards, maintenance costs and things like that.

And so yes, we entered the second quarter with a significantly higher level of yields as you saw on our first quarter results this morning, as we have been explaining on the call.

And then just on the second part of your question, could you just repeat it again, please?

Yes. If you expect a higher yield from the business recovery segment.

I think your question was just kind of in general going forward. I think Q2, we are at this yield level that we kind of shared with you in the presentation today. We showed some interesting data on the corporate recovery. And I ratify what Michael was referring to, the inflection was between week 9 and week 11 of the year, so we continue to operate at that level.

As you know, the second half, we expect to have normalization of demand, second quarter was a transition. And actually normalization of demand, the normalized mix, 70% business traveler with about 30% of the mix being in large corporates. And the second half also represents the majority of our revenues for the year. July is always a good month, and so we do expect to have continued buoyancy, continued improvement in the yield environment.

We've been super disciplined. There's been a lot of questions on capacity. I think the discipline and the ability to have high-quality yields is directly correlated with discipline on capacity management. And we continue to do that. As Kaki was saying, we don't have as a target that's directly focused on market share, that we focus on other metrics. During the pandemic, we were focused on cash management, not margin management, and also emerging from the pandemic with a unit cost lower than we came into the pandemic. And we were able to achieve both of those, and so now we're pivoting back to margin management, which will be focused on in the second half of the year. And so our yield management will be an important component of that as we'll continue to be capacity management.

As Kaki was saying, we don't have -- it was a question on market share, which tends to be kind of U.S. market focused question. But we -- that's not a metric for us. We're focused on -- and this will pivot back to it in the second half of the year, profitability management and balance sheet management. And we've been the most disciplined on capacity in that respect, and that tends to result in less flight cancellations versus our competitors.

There was a data mentioned in one of the previous questions about somebody's forward inputs into the system. Those aren't necessarily what ends up being flown. There's been much less volatility in our inputted schedule and the actual schedule that we've flown versus our competitors, so I put a higher number of flights in the system and then end up canceling a much higher number of flights. And so be careful about using those to project results in the future in terms of yields. Obviously, that is a big determinant capacity, but we continue to be a leader in the most disciplined and most conservative on capacity.

The reason I'm saying all these points is that those -- all the factors that I mentioned will tend to support, for us, at GOL, a solid -- we expect a solid yield environment for the next couple of quarters.

This concludes today's question-and-answer session. I would like to invite Mr. Kakinoff to proceed with his closing remarks. Please go ahead, sir.

I just would like to thank you all very much, and wish you a very nice day. Thank you.

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