LATAM Airlines Group SA (LTM) 2009 Q3 法說會逐字稿

Good morning, ladies and gentlemen. And thank you for waiting. At this time, we would like to welcome everyone to TAM's third quarter 2009 earnings conference call. We would like to inform you that this calls and the slides are being broadcast on the internet at the Company's website, www.tam.com/ri, and that a presentation is available to download at the investor information section.

Also, this event is being recorded. And all participants will be in a listen-only mode during the Company's presentation. After the Company's remarks are completed, there will be a question and answer session. At that time, further instructions will be given.

(Operator Instructions)

Before proceeding, let me mention that forward-looking statements are based on the beliefs and assumptions of TAM management and on information currently available to the Company. They involve risks, uncertainties, and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future.

Investors should understand that general economic conditions, industry conditions, and other operating factors could also affect the future results of TAM and could cause results to differ materially from those expressed in such forward-looking statements. Now I'll turn the conference over to Mr. Libano Miranda Barroso, CEO, CFO, and Investor Relations Director. Mr. Miranda, you may begin your conference.

Good morning. I would like to thank you all for your presence on our third quarter of 2009 results presentation. Let's begin the presentation now and skipping to page number three, please. On slide number three, we present our most recent highlights. We begin mentioning our operational efficiency, where we reached a punctuality index of almost 91% during the third quarter. It means 1.4 percentage points above the market average.

Regarding the aircraft utilization, we presented a daily average of 11.6 hours, 8% below the 12.6 hours from the third quarter of 2008 and in line with the second quarter this year. As disclosed at the end of last year, we decided not to change our fleet plans for 2009 as we believe that the market growth would recover by the end of the year.

Due to this decision, we decided to control our supply by reducing the flow numbers. If we realize that the market demand remains strong, as we have seen in the past few months, we may increase the flow numbers and dilute even more our fixed costs, helping on our [cost] reduction.

If we only consider the active fleet, operational fleet, excluding reserved aircraft and those in maintenance, our utilization for the quarter was 12.1 hours, also an 8% decrease when compared to the previous year. The demand volume measured in RPKs increased 8% in an annual comparison and 10% against the second quarter.

Our average load factor for the quarter was 69.7%, representing a 2.5 percentage point decrease compared to the third quarter of 2008 but representing an increase of 5 percentage points compared to the second quarter this year.

On October 9, 2009, Captail David Barioni Neto, our CEO at the time, resigned the position by his own decision. I, Libano Miranda Barroso, was nominated to assume the position accumulated with the CFO as CFO.

Complementing our strategy to import our working capital, increase liquidity, and to guarantee our credit position, we issued $300 million in senior guaranteed bonds maturing 2020. The bond will pay coupons semiannually at the rate of 9.5% per year. Previously, we have already announced our debenture issuance of BRL600 million on the local market.

On slide number four, now mentioning our companies of similar revenue sort, we have retained two new important certifications for the maintenance business unit, our MRO. The first certification was from FAA, the American aviation authority. Now we are able to perform maintenance repairs in aircraft registered in the United States, increasing our potential client portfolio.

The other certification we received was from [ANAKI], the Brazilian authority, which allows us to perform the full repair on Boeing 767 aircraft. It is important to remember that already have other certifications, such as EASA, which is the European aviation authority. With this certification, we are able to provide maintenance service in aircraft registered in any of the companies from the European Union.

We have already announced previously a long-term contract with [a long group]. And we will maintain our commercial reports in order to announce new contracts and clients in the near future.

On slide number five, continuing the development of the Multiplus Fidelidade, we announced our first partners. Ipiranga Gas Station, it's loyalty program has more than 1.5 million clients operating throughout the entire national territory through the accumulation of kilometers in purchase of goods and services sold at their stations that operate under the Ipiranga and Texaco brands as well as on the AM/PM and Jet Oil stores. Ipiranga has over 5,000 stations. And it is the largest private Brazilian company in the fuel distribution sector.

Wal-Mart Brazil with its loyalty program, all the 4.3 million members may accrue points buying goods at their stores. It has a strong presence in all states within the Northeast as well as in the South region of Brazil.

On Monday, we announced the newest member of Multiplus Fidelidade, the book store Livraria Cultura. Clients will be able to exchange points for any products sold at the book store network, including over 2.5 million book titles as well as CDs, DVDs, and magazines. Livraria Cultura's loyalty program already counts with over 1.6 million clients.

In addition, we launched the online catalog, where Multiplus clients may exchange their points for several products and receive them at home. The coalition will begin in the upcoming weeks. And the clients will be able to redeem points in any one of the partners. Soon, we will announce more news on our relationship network, which is becoming a big success.

On slide number six, now mentioning our financial performance during the third quarter of 2009, we would like to remind you that the following figures presented are according with the Brazilian accounting principles. We registered a 16% decrease in our gross revenue when compared to 2008. But we may observe a 5% improvement sequentially. For the domestic passenger market represented 22% decrease in our revenue when compared to the previous year, but a 2% increase quarterly. Passenger volume increased. However, yield decreased, which will be mentioned on the next slide.

In the international markets, revenues decreased 18% versus 2008, however, increased 14% quarterly. Passenger volume represented 12% and 10% growth, respectively. Our cargo revenue decreased 9% compared to the third quarter of 2008 but has demonstrated a recovery tendency versus the second quarter of 2009, increasing 11%. For our other revenue, we had 16% increase year over year but a 2% decrease quarter on quarter.

In slide number seven, our total RASK decreased 25% year over year but increased 3% sequentially. The scheduled domestic yield decreased 27% combined with a 1 percentage point reduction on the load factor, resulted in a 28% decrease and on the scheduled domestic RASK compared to the third quarter of 2008. Sequentially, the domestic RASK remains most stable, representing a 1% reduction due to an increase of roughly 5 percentage points in the load factor combined with a 7% decrease in the yield, mainly because of the competitive dynamics of the market, mostly in the month of September.

In the international market, the scheduled yield also presented a decrease of 27%. And our load factor is 5.5 percentage points decrease, mainly due to the comparison period. During most of the third quarter of 2008 was within a pre-crisis period, where the real was appreciated and international demand was quite accumulated. Sequentially, we may observe a recovery in load factor as well in pricing, analyzing that the international market is recovering strongly.

On slide number eight, our CASK presented a 24% decrease year over year and 5% decrease sequentially. When we analyze our CASK, excluding fuel, we may observe a 10% decrease versus 2008 and an 11% decrease compared to the previous quarter. The reduction in our CASK is a result of our cost reduction program. And we are still focused on cost savings and performance improving.

On slide number nine, the real appreciation against the dollar dynamics, which was at BRL1.95 at the end of the second quarter 2009 and came down to BRL1.78 at the end of the third quarter, generates a net position impact in our financial results with no effect on our cash of roughly BRL500 million, mainly due to a reduction in our future lease payments.

This quarter, market to market of our future hedging positions did not impact significantly our financial results as there were no considerable change of the WTI figures in the period. On slide number ten, in accordance with the Brazilian accounting standards, our net income was BRL348 million, representing a 4% margin. Our EBIT was BRL101 million, a 4% margin. And our EBITDAR represented a 16% net revenue margin. In accordance with international accounting standards, the IFRS, our net income margin was 9%. And the EBIT and EBITDAR were 3% and 15%, respectively.

On slide number 11, we present the main difference between the Brazilian GAAP and IFRS. Under IFRS, the revenue from the loyalty program related to points awarded to participate and not redeem are deferred. Under Brazilian GAAP for the points acquired by clients that fly with them, we recognized liability and an expense related to the cost incurred in order to release these points. Revenues from points sold to partners are only recognized when participants issue these points.

With regard to aircraft revaluation, under IFRS, they are with value. Finally, with quarterly adjustments, under Brazilian GAAP, the aircraft is recognized based on the historical value. Number 12, it is part of our strategy to keep a high level of liquidity. With the $300 million bond issuance, our cash position reached roughly BRL2 billion, representing 20% of our annualized revenue. Our total debt includes both debenture issuance, both bond issuance as well as the capital lease for 66 aircraft on our balance sheet. Of this total, 83% is dollar denominated. We can observe that we don't have high concentration of debt maturing in short term.

When we multiple by seven times the annual value of the other 67 operating lease that are not in our balance sheet and add this amount to our debt, we get the total adjusted debt. If we subtract from this figure the BRL2 billion in cash and divide the result by annualized EBITDAR, we will have a ratio of 6.1 times. We understand that we are leveraged, although it's important to remember that we almost doubled our fleet in the past few years. And we are expecting to start getting the return from these investments in upcoming years at the same time that we are not bringing 2 million (inaudible) in the future.

Slide number 13, as mentioned before and at the beginning of the year, we renegotiated our hedge positions in order to defer the cash outflow, which would be concentrated in the first half of 2009 and aiming to liquidate most of the operations during a period with lower volatility and with WTI prices closer to our operational strength. The renegotiated impact so far was a cash outflow cutback of $117 million between January and September of 2009.

On slide number 14, we present a sensitivity analysis for future disbursement with our hedge positions up to the first quarter of 2011 simulating the average WTI price of $50, $70, and $90. We may observe that the disbursements are reducing significantly throughout the future quarter since according to what was presented on the previous slide, most of the cash outflow volume was concentrated in the first half of this year.

Slide number 15, with regard to our expectations for 2009, the domestic market has presented high growth rates. And most likely the year average will surpass our expectations, considering that up to October, market grew 13.5%. And our projections show a strong growth for the end of the year. We are maintaining our leadership, both in the domestic and international markets, with 46% and 87% market share, respectively.

In the domestic market, we increased our capacity in 10%, while we increased in the international in 22%. Our total load factor is in 68%. And we believe that it will maintain this level until the end of the year. Due to capital discipline and in order to preserve the cash disbursement in this challenging year, we decided not to initiate the new international route since there are set up costs relating to launching new destinations.

And finally, on slide number 16, as for the fleet, we have a single fleet in the domestic market where only -- where we have just prepped on the Airbus A320 family always seeking for the cost reduction. Our total fleet has an average age of only six years. We intend to finish 2009 with a total of 132 aircraft and aircraft that we receive next year already have precommitment for financing. Thank you. Now let's go to the Q&A session.

Ladies and gentlemen, we will now initiate the question and answer session.

(Operator Instructions)

Your first question comes from the line of Duane Pfennigwerth of Raymond James. Please proceed.

Hi. Good morning, Libano.

Good morning. How are you?

Good. I'm wondering if you could comment on if the market has become rational again, fully rational, and how long you think it would take yield to recover, given the incidence of the discount in the third quarter.

Well, really to the point, Duane, what happened on the third quarter, especially in September, we had a fuel discounting scheme across the board in local markets because of the outcome for that was a strong growth of the market, we had third quarter year over year growing domestically speaking 26%. October now, despite we have an easy comp, but 42% year over year is a strong -- very aggressive figure. And loads are up.

Because of this market -- excessive market stimulation -- we had a load factor in October reaching on the domestic market for us some 72% compared with year-to-date October 65%. And on the international, it's not the case. We don't have -- we did not have any problem in terms of discounting on international. But just for the sake of comparison, we post 78% load factor in October compared with year-to-date October with 72%.

This is a lot as a domestic market now. We have been able to increase price. If you look to our website or just via travel agent, you see that walk-up fares and plane fares with restrictions are almost up now on average closer to 20%. But they reflect on yield -- you know that's a difference, the price and yield. They reflect on yield. We believe for the fourth quarter compared with the third quarter on the domestic market, we believe yields will be up on average closer to 5%. So it's 4% to 5%. And while these do not translate immediately, the 20% increase on fares to that, because we have many of the forward-looking books sold. And we have a mix of leisure beyond the second half of December.

So we believe fourth quarter has a reflect of roughly 20% increase on fares, yields up 5% on the domestic market. Beyond first quarter of 2010, we believe yields maintaining this level of 20% fares up, we believe yields will be able to increase closer to 10%, which is good. And we believe that rationality will prevail in markets, medium -- we believe short, medium, and frankly long term, because now what we have -- our idea -- what's happened in market was a reflect of doubt on prices, the potential impact on price on this domestic demand, too much stimulation from the players of the market. And now we have a more clear reading for the Brazilian economy. And all the players are confident that it's time to increase fares. And all the players are increasing fares at this moment. So we covered the domestic market.

Internationally speaking, this is a rational market per seat. We didn't face any kind of discounting. The reduction on yields were more linked to the dynamics of load factor in Europe and North America. Now we have good and sound load factor in both in North America and in Europe. Both markets -- and in South America also, both markets are increasing loads and increasing yields. We believe this quarter, fourth quarter compared with third quarter in dollar terms will face a 10% to 15% increase in dollars for the international side. So we are very confident in both markets. And answering directly, we believe rationality is in place now.

Okay. Thank you, Libano.

Thank you, Duane.

Our next question is coming from Jim Parker of Raymond James. Please proceed.

Libano, good morning. Duane and I work together. But we're in different locations. I just wanted to ask you -- I may have missed the first part of your call. But did you mention TAM's intentions with regards to its loyalty program spinning it off or doing measures to enhance shareholder value through spinning off, selling the loyalty program?

Hi, Jim. We have been -- in late 2007, if you remember exactly, it was (inaudible) November 2007. We announced our long-term plan to unlock value in different fronts of the Company, the loyalty program, the maintenance repair and overhaul, and the two operators that we have. The loyalty program, what we did instead of remove it from a standard, a regular standard, of the airline selling points to credit card and banks.

And while we are some steps further and we created Multiplus to deliver, which is a coalition program, coalition of loyalty program. It's a B2B company aiming to interlink several loyalty programs from retailers, grocers to airlines, gas stations, and others. We have now -- we more than doubled this size of the program because some airlines did loyalty programs from the airlines from Fidelidade, have 6 million clients. With the adding up Ipiranga, Wal-Mart, Livraria Cultura, and other players, we have been able to more than double the number of clients.

The idea now, Jim, is to continue that. We are investing in people, software, and marketing. And the idea is we are running this pursuit as a business unit for more than a year with separate people target P&L capital allocation. Probably near future, you'll see that we will show more improvements aligned with the possibility to have this business unity gaining more and more independence. And we will show in future more figures for this business unity exactly to eliminate the value because this is a completely different business from the airline but totally linked with higher multiples, with lower risks, strong cash generation, low capital needs.

And the idea is to show quarterly the improvements for the investors. So we are very confident. The same with the maintenance, repair, and overhaul; the same with our (inaudible) items for your question the opportunity for your question to announce -- and we did that at the Portuguese call, but now on the English call -- all the things that we are doing is exactly how to sell more tickets to people that are -- they went to finance people that are not flying because they -- it's not affordable for them to pay cash for the tickets and people that want to explain properly long term their expenses.

We announced today -- and we will press release this soon -- we closed an agreement with Banco do Brasil. Banco do Brasil, as you know, cover the entire country. They have more than 30 million clients, individuals. They have within -- out of these 30 million clients -- more than 15 million. They have free established credit lines with credit available. And what we are doing beyond next week, we are interlinking Banco do Brasil to come B2C inventories. The client -- Banco do Brasil customers, clients will be able to buy tickets with us electronically. We will be routing to Banco do Brasil inventory, financing there. And in seconds, we will receive cash the client -- Banco do Brasil clients. We can (inaudible) clients. We'll be able to finance installments in three years, 36 installments.

The same fashion we will be able to announce for other banks and other partners in near future. And we are confident to increase even more our B2C. On the third quarter, we increased the direct sales in the Company to a level of 25%, moving 5 percentage points from the level of the second quarter. With this kind of agreement, Banco do Brasil in order that we will announce sequentially, we are very confident to increase -- to raise the bar to a level of closer to 30% for the next year B2C speaking.

Libano, my question, though, is when are you going to establish it as a separate entity that realizes value through your shareholders, either through a spinoff or selling it to someone. When will you do that?

Jim, you know that we have been working hard on this direction. So far, what I can tell you is we don't have effect to disclose. But we are working hard on the direction to create value, to eliminate value, and to show for the investors that we have available assets embedded in our consolidated figures. And it's a matter of time. We will not commit with you with a timeline. But we can assure that we have been working hard for two years. And we are getting there but without any commitment in terms of timeline.

All right. That's fine. Thank you.

Our next question is coming from Nick Sebrell with Morgan Stanley.

Hi, Libano. Let's start out with utilization. How high do you think you can get in terms of block hours per day per jet? And what kind of percentage increase if you wanted to could you do from what we saw in the third quarter?

And the second question has to do with cost. Third quarter costs were a lot lower than we saw before. How much of that is sustainable? How much of that will carry forward, assuming that you keep your block hours constant? And then a third part if you don't mind -- when -- actually, it's simple. When do you think you might release 2010 guidance?

Hi, Nick. First of all, we believe we are -- we have ability to increase one hour per daily aircraft utilization on top of the 11.6. In fact, 30 minutes we will increase by late November and on December, the 30 minutes, which is for a better reading of demand and supply balance. We have been using this as a kind of cushion exactly to -- not to put too much capacity on the market and to be able to maintain founding load factor and use. But one hour is totally feasible maintaining high level of punctuality regularity and service quality. You mentioned -- the second question -- ?

The second question was about cost if we look at the cash. And assuming you were to keep your block hours constant, would that -- would we see a similar CASK next year? Is it sustainable is the question.

Nick, we believe, assuming like for like maintaining utilization, we'll be able to reduce around 5% CASK steady state sequentially for the future year, 2% to 5% more, 5% we are very confident with that. This quarter specifically, specially, we had non-current event of BRL30 million in other expenses related to less provisions. And that -- in a steady state, you can consider 3% to 5% for some years in the future. We are very confident to do that.

And there are various related -- the third question relates to guidance. We believe that by year end, as soon as we have our budget cycle completed our internally. We will be able to release our guidance for the next year. So December -- after December, we'll be able to release them.

Great, Libano. Very helpful.

Thank you.

Our next question is coming from Caio Dias with Santander.

Good morning, everyone. I have a follow-up question on CASK. You think that TAM will be able to reduce around 5% the CASK? Can you give more details? This is 2010 over 2009 or already in the fourth quarter. And my second question is on the impact of elimination of the bottom limits for international tickets. Have you -- are we about to conclude the process of eliminating these bottom limits? Have you perceived any impact over international views? How are your competitors behaving now that we are about to eliminate all these limits?

Caio, hi, Caio. First of all, we believe that the fourth quarter is the important CASK reduction once again. But by a combination of cost initiatives and the 30 minutes on top of aircraft utilization. This would be quite high -- more -- even higher than the 5%. If you have it in mind that there will be a kind of ease comparison with the fourth quarter last year because we had strong dollar last year and now we have a strong real. So just for that, we will say there is strong impact in CASK.

But steady state, looking ahead, like for like, yearly speaking, we believe we'll be able to reduce CASK by 5% 2009 over -- 2010 over 2009 and 2011 over 2010. This is our view on that. And this is based on our cost-cutting plans, efficiency plans. It's based on maintaining a young fleet, improving the operational standards even more. The Company, we are at worldwide best practice and standards. But we believe we are able to increase even more. As I mentioned to you, we are reducing the commercial cost, selling expenses.

We are now -- this is very important for us this weekend. We are cutting over the old platform, the commercial platform in the Company, and changing to the [Amidas] platform. This changing will represent for us the replacement of one-third of our legacy system software because -- and we are adopting now the cutting-edge technology in terms of systems, exactly preparing ourselves for the Star Alliance entrance. That will take place in -- at the end of the first quarter 2010.

Just for this, this will represent an important cost cutting for us because all -- by June, mid of the next year, we'll be able to replace almost two-thirds of this legacy system. And we'll be in better condition than majority of the airlines all over the world in terms of technology. And this represents sustained -- reduction in sustained cost for our systems, reduction in overhead costs, less people dedicated to these legacy systems, and many other things that came together with that.

So your final question regarding this flexibility of the service band on international flights -- as of now, this is 80% completed. We manage 20% will take place in April. But the outcome is we didn't face any impact of that. The same that happened in South America was a year ago happened with long-haul flights. All the companies are charging price quite over above the minimum price.

So in -- on average, if you compare the minimum price and what the price has been practiced in the market, we are more than 50% (inaudible) more than 50% above the minimum. So the impact was nothing.

Okay. Thank you.

Thank you.

Our next question is coming from Jamie Baker of J.P. Morgan.

Good morning. This is [Joseph Aboot] on behalf of Jamie Baker. Just a quick follow-up question that we had regarding the reduction of provisions that you were discussing incorporated in other expenses -- could you provide just a little bit more detail on what exactly drove that reduction? And you were saying that it was going to be a 3% to 5% increase I think going forward. Is that a run rate that we should consider?

And just one second question would be regarding the recent fare increase that we noticed this week. Do you guys believe that those fares will be sustainable going forward? Or do Brazilian domestic customers become sort of familiar with I would say the lower-cost fares?

Hi. First of all, the provisions, reduction of BRL30 million was a nonrecurrent one-off. They are related especially to fees, international fees, especially for [extract] control flights internationally in other bases, where we made provisions. But now we are more assured for them. And for the content, we are reverting them, especially this. That's why this is one-off item. They are related to internationals. And I mentioned that not an increase of 3% to 5%, a decrease. The idea is our vision is yearly. Looking ahead, we'll be able to decrease -- reduce minimum around 5% CASK year over year.

On the increase of fares, you are quite familiar with that. The walk-up fare is another, as you saw on the system, IT system, [GTS] B2C. Probably you saw that the companies increased at around 20%, the market as a whole, more than 20% on fares, walk-up and plane fares in the market.

But the impact of this 20% on yields on the fourth quarter sequentially compared quarter to quarter with the third quarter will be 5% increase on the domestic market because we have many -- the major part of the inventory already sold at promotional fares.

But beyond first quarter, we believe that this 20% increase in fares will represent the kind of 10% increase in yields. And we believe this is sustainable because as we have load factors higher than 65%, exactly we had in October, we had 72% on the domestic. And the trend is to have this level of load factor even higher for the end of the year and for the first quarter. We frankly believe that it's sustainable.

And to sustain that, that's why we are bringing more people to system and people that are not able to buy these tickets in cash. We are financing the tickets now but not bearing the credit risk. We are interlinking electronically banks and finance institutions to finance the tickets in 36 installments for the clients to fly. And we will receive cash. So we believe this is sustainable. And the market now is rational, was too stimulated in September and third quarter but now we are in a sound environment.

Just a quick follow up on that, if I may. You were saying that there's a few customers that perhaps couldn't afford fares previously. Did you notice an uptick at all, given the reduction of fares that you had in September and October? And do you feel that that would be at risk now with the fare increase, regardless of the credit related situation?

We believe that probably the price sensitive people that are -- can suffer a little bit the reductions the other idea is instead of what we had in market was a kind of silly thing because all the companies started discounting across the board, as you have written in you report talking about walk-up fares. What -- and when we have discounting across the board, this is totally jeopardized yield management.

Now with more rationality, we are able to sell to maintain these price sensitive people flying in off-peak flights. We are able to maintain lower price in off-peak price, off-peak flights, stimulate them to buy with financing and saving the peak flights for the business travelers and putting conditions for the off-peak flights. They are -- they must reserve with more than 7, 14, or 21 days to stay at destination one or two days and to avoid exactly the revenue displacement on peak flights.

So with technology, knowledge, and intelligence, we believe the system is able to maintain the price sensitive people and stimulate them to fly directionally on certain flights and maintaining [this] to charge more for the less elastic with the clients that have lower elastic to price, which are the business travelers.

All right, very helpful, gentlemen. Thank you.

Our final question is coming from [Paren Sylvestry] of Credit Suisse.

Actually this is Natalia. My question relates to the provisions. I just wanted to check that one-off effect on third quarter results. I wanted to know how much was it, the revision of provisions in other expenses. And then just to check the 5% reduction in CASK year over year, that is 2010 versus 2009, right?

Hi, Natalia. You are right. On the provision, the figure is BRL30 million one-off nonrecurrent. And you are right, 5% yearly '10 to '09, '11 to '10.

The BRL30 million was a positive impact, right? So it was a revision but not an expense.

Exactly.

Okay. Thank you.

Thank you/

Our next question comes from the line of Eleanor Price of Insight Investment Management.

Hi, Libano. Just a couple of questions -- I wondered if you could comment on your ongoing search for a new CEO. Where is that in the process? And when might we expect to hear some sort of announcement on that? And also, I'd like to have an update in the context of these recent results and obviously your increased leverage post the deal that we invested in, how your deleveraging plans are progressing. And what do you think might most benefit them and detract from deleveraging going into 2010?

Hi, Eleanor. How are you?

Fine. Thank you.

Fine. First of all, regarding the CEO, we believe that this will be sorted by maximum the end of the year, likely to be soon. I believe probably in a month this will be decided. In terms of leverage, in terms of -- as I mentioned to you during the road show for the bonds, we are on a deleveraging basis looking. We believe this 6.1 times net debt to EBITDAR, we'll be able to reduce this to more closer the level that we are more comfortable.

Remember three to five times, four to five times. Beyond three years with more assurance, three to four years, we'll be able to reduce the level of the Company. And this will be a combination of, first of all, as we -- the rate of growth in number of assets, as you see foresee for future, it's quite lower than we faced in the past. We are marginally adding three express on the domestic market plus two wide bodies long haul per year instead of 83 aircraft that we brought in four years.

So we are now flying to the key destinations, whereas Brazilians -- especially Brazilians -- are flying with a good mix of business and leisure travelers. That's why we'll not open too many new gates anymore. The idea is exactly to harvest and to put all the ramp up cost behind us, increasing cash generation for the Company and on a deleveraged basis because the outstanding investment that we are increasing by new excess is quite lower than the payments, the regular payment that we are doing for the existing fleet.

So do we have the deleverage by adding on a net basis less indebtedness, more cash generation in terms of the EBITDAR by maturing the existing routes, and even more without adding more the cost-cutting plans by reducing CASK by 5% per year. This will be another important impact on profitability. And finally, we have plans to monetize partially this side business, the other business that we have, our loyalty program, our maintenance repair and overhaul, our two operator.

We don't have a timeline defined for them. But probably in future, they are candidates to have investors on a private fashion or on a public fashion. We don't have things defined for that. And this will be another important source of deleverage by bringing cash for the Company. And we are confident to accomplish. It really is a matter of time and market conditions to do everything.

And how much do you think might you achieve from a partial sale of the tour operator or the loyalty program?

Eleanor, we don't have a figure to give that. If I were to you just to -- instead of committing with a figure a kind of good benchmark for us for our loyalty program. For instance, in the Canadian [tire] plant, they have, if I'm not wrong, $2.5 billion market GAAP. Our program seems to be equivalent to roughly 50% of them. I am not telling you that this is -- [we value] half of them because it's totally different markets, different growth perspectives, different maturities. So -- but we will announce on a quarterly base. We'll give more information regarding that.

Great. Thank you.

This concludes the question and answer section. At this time, I would like to turn the floor back to Mr. Miranda for any closing remarks.

Thank you so much for being with us on this quarter result release. See you next time with the year-end results. Thank you. Bye.

Thank you. This concludes today's presentation. You may now disconnect your line at this time. And have a nice day.