Hello everyone, and welcome to Azul's Fourth Quarter 2021 Results Conference Call. My name is Hannon, and I will be your operator for today. This event is being recorded, and all participants will be in a listen-only mode until we conduct a question-and-answer session following the company's presentation. Should any participant need assistance during this call, please press star zero to reach the operator. I would like to turn the presentation over to Thais Haberli, Investor Relations Manager. Please proceed. Thank you Hannon and welcome all to Azul's fourth quarter earnings call. The results that we announced this morning, the order of this call, and the slides that we reference are available on our IR website. Presenting today will be David Neeleman, Azul's founder and Chairman, and John Rodgerson, CEO. Alex Malfitani, our CFO, and Abhi Shah, our Chief Revenue Officer, are also here for the Q&A session. Before I turn the call over to David, I'd like to caution you regarding our forward-looking statements. Any statements discussed today that are not historical facts, particularly comments regarding the company's future plans, objectives, and expected performance constitute forward-looking statements. These statements are based on a range of assumptions that the company believes are reasonable, but are subject to uncertainties and risks that are discussed in detail in our CVM and SEC files. Also, during the course of the call, we will discuss non-IFRS performance measurements, which should not be considered in isolation. With that, I will turn the call over to David. David? Thank you, Thais. Hi everyone. Thank you for joining us for our fourth quarter 2021 earnings call. As always, I would like to start by thanking our incredible crew members. Thanks to their efforts, we delivered in Q4 another industry-leading quarter with record revenues and significant growth in our network and earnings. Our competitive advantage, led by our unique network and diversified fleet, resulted in a record BRL 3.7 billion in net revenue for the fourth quarter, well above 2019 levels. If you can remember back in the fourth quarter of 2019, actually that was our best revenue quarter ever until now. The base was high, and we are proud to be one of the few airlines worldwide to surpass pre-pandemic revenues in 2021. More importantly, we earned over BRL 1 billion in EBITDA during the quarter with the dollar at 5.58 and fuel around $80 a barrel, all with international and corporate travel still recovering. This gives you a clear indication as to the earning strength of our airline and why we are so excited for 2022 and beyond. While we did experience some short-term challenges from Omicron during the first quarter of 2022, that wave now is clearly behind us. In fact, we saw much lower hospitalizations versus previous infection waves, and we had only one crew member hospitalized in January 2022. As you can see on slide four, we experienced a peak of sick calls that were seven times higher than normal. As a result, we adjusted our network for both January and February to maintain our operation. I'm happy to report that the wave which peaked during the middle of January is now, as I said, behind us, and our operation is running normally, and our NPS scores for this month is the highest it's been in the last 12 months. With Omicron behind us and with the full confidence from the fourth quarter of 2021, we are looking ahead. Slide five reminds you that aviation in Brazil has doubled over the past 10 years, and we were responsible for 60% of this growth. As I've been saying since we founded Azul in 2008, Brazil travel is significantly less than countries such as Colombia or Mexico, and we at Azul are doing our part to fix that. We are now flying to almost 150 destinations, a remarkable addition of more than 30 destinations compared to 2019, and there is much more to come. We still have more than a third of our flights flown by our E-ones, so there's a lot of capacity to be replaced by our next-generation aircraft. Here on slide six, we just want to remind you of all the upside from our fleet transformation. We have already reduced fuel consumption per ASK by almost 20% since we started the fleet transformation. We are going to continue, and as we continue replacing the E-ones with next-generation aircraft, we're going to reduce fuel consumption per ASK and continue to significantly reduce our unit cost. With that, I will pass the word over to John, who will give you more details on our outstanding fourth quarter. John? Thanks, David. I would also like to express how proud I am of our crew members, who once again were responsible for delivering great results during the quarter. As David mentioned, in the fourth quarter, our net revenue reached a record BRL 3.7 billion, more than double the fourth quarter of 2020, and an impressive 15% up compared to our pre-pandemic level in 2019. RASK increased 18% compared to 4Q 2019, and 43% compared to 4Q 2020. During our third quarter call, we told you that trends were positive. Our unique network delivered record revenue performance from both leisure and corporate segments. The key drivers were discipline, capacity deployment, and higher fares. In addition, our logistics business, Azul Cargo, also delivered record revenues. On the cost side, as you can see on slide eight, CASK in the quarter reached 33.91 cents, up 33% compared to the fourth quarter 2019, mainly due to a 51% increase in jet fuel prices. The 35% depreciation of the Brazilian real against the dollar and 15% inflation over the last 24 months. Yes, FX and oil remain challenging, and that's why we must remain focused on our productivity gains as we rebuild Azul as a more efficient airline. Moving to slide nine, we're clearly making progress in key efficiency metrics. In fourth quarter, 2021, we generated 24% more domestic ASKs per FTE compared to fourth quarter, 2019. Our fleet transformation strategy is also contributing to our efficiency gains. As David already mentioned to you, we reduced our fuel consumption per ASK by almost 20% since we started our fleet transformation. As we continue replacing those E-ones with next generation aircraft, we're gonna reduce even more our unit costs going forward. The combination of strong revenue performance with the cost initiatives implemented allowed us to achieve positive operating income and EBITDA in the quarter. As you can see on slide 10, our EBITDA was again the highest since the onset of the pandemic. Operating income was BRL 525 million in the quarter, representing a margin of 14.1%, while EBITDA already reached over BRL 1 billion in the quarter, representing an impressive margin of 27.5%. This clearly demonstrates the earnings power and the potential of our business going forward as our annualized EBITDA exit rate is now over BRL 4 billion. Slide 11 shows some of our valuable drivers of profitability going forward. Our business units, Azul Cargo, TudoAzul, and Azul Viagens. These are fast-growing, high-margin businesses that will help us expand our margins. Moving to slide 12, Azul Cargo, our unmatched logistics solution, which now serves more than 4,500 cities and communities across the country, 2,000 of which we can deliver in 48 hours or less. Azul Cargo reached BRL 1.1 billion in net revenue in 2021, surpassing our ambitious target to double cargo revenue compared to 2019, when we generated revenues of BRL 481 million. We recently announced the launch of the world's first Embraer Class F freighter, fully developed in-house, a unique logistics solution that will deliver competitive advantages for our clients. On slide 13, you can see how the new solution, and how it more than doubles our cargo capacity on E-ones. We currently have four E-ones converted into this new configuration. Just as we help transform the Brazilian passenger market, we strongly believe Azul Cargo will do the same in the logistics market. On slide 14, you can see how well TudoAzul performed in the quarter. Our wholly owned loyalty program had a 34% increase in gross billings in the fourth quarter 2021 compared to fourth quarter 2019, with almost 14 million members at the end of the year. We've been surprised by the engagement of our customers throughout the pandemic and even this year. Slide 15 shows how well Azul Viagens performed in the quarter. Our vacations business is another important driver of margin expansion going forward. In 2021, we sold almost 30% more travel packages compared to 2019, mainly by leveraging the uniqueness of our network and the flexibility of our fleet. During weekends, for example, when utilization is normally low for airlines in Brazil, we dedicate 25% of our capacity to fly exclusive leisure nonstop routes, which are ideal for our Azul packaging business. Our diversified fleet allows us to capture leisure demand with the right aircraft type. As you can see on slide 16, the fourth quarter, our operation generated BRL 900 million in cash inflows minus operating expenses. During the quarter, we also made significant payments in leases, debt deferrals, and CapEx. It's important to highlight that we ended the quarter with immediate liquidity of BRL 4.1 billion, up 41% compared to the same period in 2019, and more than BRL 600 million above our guidance, mainly due to the strong revenue performance in the fourth quarter. As a reminder, we ended 2019 with around BRL 2 billion in cash, and we have no significant debt repayments over the next two years. This liquidity position ensures that we can focus on the many opportunities we have ahead of us in this market. Leverage also came in a turn better than our guidance on Azul Day, and we're more confident that we can end 2022 with leverage that starts with a five. Actually, with our annualized exit rate of over BRL 4 billion in EBITDA in the fourth quarter, we already have a five handle and will continue to reduce from here. Moving to slide 17, we know our business is a key driver of sustainable development for Brazil by bringing people, businesses, and communities closer together. ESG has long been a commitment of ours, and most recently, we have been included in the Corporate Sustainability Index of the B3 Stock Exchange. At the same time, we also improved our CDP score to B, highlighting our engagement to environmental initiatives. Finishing with slide 18, our strong fourth quarter results give us confidence in our business model. Our annualized EBITDA exit rate of over BRL 4 billion is 10% above our best EBITDA ever. Yes, FX and oil remain challenging, but even at yesterday's levels, we would have generated more than BRL 1 billion of EBITDA in the quarter. We are sharply focused on executing our business plan for 2022. With the full recovery of corporate and international demand still to come, we see exciting opportunities in our passenger loyalty and logistics business and look forward to sharing those with you throughout the year. With that, David, Alex, and Abhi and I will answer your questions as I turn the call back over to the operator for Q&A. Ladies and gentlemen, thank you. We will now begin the question and answer session. If you have a question, please press the star key followed by the one key on your touch tone phone now. If at any time you would like to remove yourself from the questioning queue, press star two. For those following the call via webcast, you may post your questions on the platform, and they will be either answered during this call or by the Azul investor relations team after the conference is finished. Our first question comes from Savi Syth with Raymond James. Hey, good afternoon. Could you and maybe for Abhi Shah provide a little bit more granularity on, you know, what you saw in the kind of the domestic market in terms of leisure and business, both kind of before Omicron and as David mentioned, like lately, since the kind of the recent recovery following Omicron? Yeah. Hey, it's Abhi. Sure. 4Q was strong in corporate and leisure. Leisure was over 100% recovery, as the demand came back post-second wave. Our corporate recovery was around 70% of 2019 levels, which is good given that 2019 had a very high base at the end of the year. Our small and medium business category was actually over 100% as well. I would say large corporates around 70%, small/medium business over 100%, and then leisure over 100%. The key of course was average fares, and that we were talking about, you know, with you guys, 3Q call as well, and corporate discounts. You know, we were very conservative and, you know, our level of corporate discounts is half right now what it was pre-pandemic. I think the industry overall was disciplined in taking fare increases last year, which helps. Of course, having our network the way it is, we're also able to manage that ourselves and control a little bit our own destiny. I would say it's a pretty conservative playbook, but it worked really well post second wave, you know, demand. That was responsible for the higher RASK. What we're seeing right now is actually quite similar. Our January was messy because of the staffing issues with Omicron. But the last two weeks, for example, we are seeing corporate revenue recover already close to the 70% number. Our corporate fares are actually much higher than 2019, you know, 30%-40% higher than 2019. The industry has made adjustments in response to the fuel prices in terms of capacity. Capacity has come down for March and April, which is very positive, and the industry has pushed up fares as well. I think you know, the industry is doing what's needed to capture the demand and to prepare the market because we are right now in this pre-Carnival period, and we are pretty optimistic about return to work that got pushed off because of Omicron, comes back March seventh and onwards. I think we are doing the right things when it comes to preparing the demand and revenue environment for taking advantage of the post-Omicron bounce. You know, Brazil market is resilient. It rebounded nicely post first wave, rebounded even stronger post-second wave, and we're expecting that for March and April post-Omicron. I think we're setting the stage to take advantage of that. That's really helpful. Thank you. If I might just quickly, I might have missed this, but on the Class F freighters, you have one now. You know, do you have an idea of how many of those type of freighters you wanna add to the fleet? Yeah. We have four right now. Three are flying, one is in conversion, should be ready very shortly. I mean, our goal is to keep adding those as much as we can. You know, we are showcasing them to potential customers. We have, you know, one large customer already flying, and we are entering new markets. In fact, we're flying to cities that we don't even fly with our passenger network, like, you know, in the north, northwest of Brazil. I'll be disappointed if this fleet doesn't grow. I think it has really important advantages in terms of trip costs and really good flexibility in terms of the infrastructure it can access, the secondary cities that it can access. You know, we certainly wanna keep growing that fleet and, you know, we're on the road showing it off. Our next question comes from Alejandro Zamacona with Credit Suisse. Hi. Thank you for taking my questions. Just a quick question on yields. I mean, we saw a strong yield environment in the quarter. What can we expect for 2022? And how easy would you say it is for you as a company to do the pass-through of higher fuel prices to customers? Yeah. Hey, Alejandro. I think, as I said, the industry is working in the right direction. You know, everybody's obviously looking at their results. You know, Azul, we have the competitive advantages of our network, so we are able to recover those yields faster in many ways. Our corporate demand is much more diversified than the larger cities in Brazil. You know, we have much more exposure to different parts of the country, especially small and medium businesses. I'm expecting that post-Carnival that process to continue. As I said, our corporate fares right now are significantly higher than they were during the same period of 2019. I think that the trend should be similar. Obviously, you have to adjust a little bit for seasonality given first quarter and second quarter. I think that we are, you know, laser-focused on making sure we recapture as much of this, you know, in terms of yields, in terms of all our revenue businesses, whether it's cargo, whether it's loyalty, whether it's vacations, and also on the passenger side as well. The recent trends have been encouraging on the yield side, and I expect that to continue as we come back from Carnival, and we have a good corporate month in March. Alejandro, the increase in fuel prices as well will, you know, drive a more disciplined market going forward with capacity across the entire industry. As many of you know, one of our competitors went away in the fourth quarter, went bankrupt, which was ITA. That also has helped to kind of make sure we have a more stable market going forward. I think the industry as a whole is focused on increasing yields and getting to profitability. Okay. Thank you, John and Abhi. A second question, if I may. In terms of labor efficiency, I mean, labor expense is 7% below pre-COVID, with a capacity of 98% of pre-COVID. Considering the inflation for these couple of years, this is a meaningful decrease, right? Do you believe that going forward, fair to assume a normalization at some point? Or do you believe that Azul can emerge more efficient after COVID in terms of labor? Yeah, Alejandro. No, the gains that you see are permanent, right? There's nothing temporary there, but there are certainly more that we're going to pursue. You know, where do the gains come from? A lot of it is the fleet transformation. The upgauging does allow us to be more efficient. We, you know, we can serve more customers with the same number of crew members, so that helps productivity. We're also investing a lot in technology. There's been a change in customer behavior, which we believe is also permanent, right? Customers have learned to buy more online, to check in themselves. You know, the process is becoming more and more streamlined, which also helps us to be more productive on the personnel front. You're actually seeing some additional personnel, you know, in those numbers because we have insourced a lot of maintenance activities, right? If we didn't have those insources, you would actually see, in the salary line, an even bigger reduction, right? It made total sense for us because it's a lot cheaper, more efficient for us to do maintenance in-house. You know, we reduce foreign currency exposure. We reduce the need to fly the aircraft, you know, abroad to do the maintenance events. A lot of good things. A lot of good things coming ahead of us as well. We're gonna continue working on new processes, investing in technology, and looking for every opportunity we have to be a more efficient airline, as we promised, you know, we would be coming out of the pandemic. I just wanna give a shout-out to a few of our team members. Our airports are 30% more efficient. That's pretty remarkable, if you think about it, right? You know, we're, you know, obviously put less flights in, but more ASKs because of the upgauging, but our airports are more efficient. Our call center is more efficient. Our headquarters are more efficient. We have 25% less directors in this company than we had in 2019, and we're producing the same amount of ASKs and actually more revenue, right? We've gone through and have rebuilt this airline for a new environment, which has higher fuel prices and a devalued real. No, absolutely, we cannot get back to the level that we were in 2019 in terms of salaries. You know, the math just doesn't work. Airlines need to be more efficient today, especially in Brazil, from where they were, and that'll be continue to be our focus moving forward. Okay, very successful. Thank you. Our next question comes from Gabriel Rezende with Itaú BBA. Hey, David, John, Alex, and Abhi. Good morning. We have two questions here. First, regarding the recent news flow on Ukraine and its impact on oil prices. It would be very helpful if you could walk us through and remind us what are the assumptions behind your BRL 4 billion EBITDA guidance for 2022. If Omicron impacts in the first quarter as well as these higher oil prices could prevent you from achieving that figure. Our second question regards aircraft leasing payments. You booked BRL 3.8 billion in your lease and amortization schedule for 2022. That figure was at BRL 3.5 billion in the third quarter. Was this increase solely related to new aircraft joining your fleet, or does it reflect potential payment postponement from 2021 as well? Would it be possible to negotiate some kind of deferral for the BRL 3.8 billion figure for 2022? Thanks. There's a lot of questions in there, I think Alex and I'll we'll split it. As we look at, you know, today's events, it's very disappointing that, you know, our team worked really hard in the fourth quarter, and then to wake up this morning and have a war in Eastern Europe is not the way we wanted to have an earnings call today. Obviously, fuel going to $100 a barrel, it's not normal. You know, we don't expect it to last. You know, we saw great movement in the Brazilian real, which, you know, yesterday was 10% stronger than it was on December 31st. We need to put things in perspective, right? Things were getting significantly better in Brazil. Even with, you know, crude prices going up to around $90 a barrel, the Brazilian real was actually traded below five yesterday. You know, we're not going to manage our business based on one day today. What we wanna show you is, you know, Abhi increased our unit revenue by 18% in the fourth quarter without all of his corporate demand back. He was able to do that with about 40% of our international network flying, right? This is the business model that we have that's quite unique and different than any other airline in the world, right? You know, as we look forward, you know, obviously, we don't update our model based on the last two hours, right? You know, we were very confident in our ability to execute. Obviously, Omicron had an impact, you know, in our first quarter results. We pulled some flying down. We had to cancel some flights. I wanna talk about what the normalized Azul going forward, and I think what you saw in the fourth quarter is a normalized Azul. What most likely will happen is the real will probably be a bit stronger than it was in fourth quarter, and WTI will be a bit higher. We wanted to highlight that if you looked at yesterday's WTI and yesterday's exchange rate, we still would have delivered over BRL 1 billion in the fourth quarter. That's before we continue to, you know, go forward with our fleet transformation plans. I'll let Alex kind of talk to the lease payments and where we're at, but I think we've got, you know, very good partners that believe in our business, and we're gonna continue executing upon our plan. Yeah. Hey, Gabriel. Just complimenting on the modeling. You guys know sort of what assumptions we normally use for our forecasting. We use the Bloomberg curve for oil. We use the Central Bank Focus survey for FX. You always have to talk about three things together: fuel, FX, and fares, right? They all go together. You know, you can't have an assumption for one without having an assumption for the other. As we've demonstrated over the last, you know, 14 years and counting, we have the ability to pass through cost increases to fares. You know, it's not immediate, but it is, you know, certainly something that we've been able to count over all these years. You know, like we said, we were more profitable with the real at four than we were with the real at three. We had, you know, record revenues with the real at 5.60, you know, because they are correlated. You always have to think about those assumptions together. We talked about this on the call, right? Even with yesterday's levels for fuel and FX, we would've had over BRL 1 billion of EBITDA in the fourth quarter. You know, these numbers are all related. You know, it's clear that we can generate profitability and high EBITDA even in a challenging fuel and FX environment. Regarding aircraft lease payments, yes, the majority of those lease payments are translated, you know, from dollar to real at an exchange rate of 5.58, right? Much higher than it is even today with the volatility in the Ukraine. The actual number that we're going to pay, you know, it depends, you know, 100% on what the exchange rate is going to be. But one thing that I think we also demonstrated over the last two years of the pandemic is that, like John said, we have great partners, right? The partnership between us and our lessors is a long-term relationship, where it has to be sustainable for both of us, right? We, you know, we have the ability to pay. We have to honor our commitments as we have done over the life of the pandemic and even before. But if we need their support, we know that we can count on them. You know, it's something that has to be sustainable, agreeable to both. One thing that we don't need to worry about is whether we will, you know, have enough cash because we've demonstrated that we have the ability to count on support of our suppliers. We have the ability to count on the capital markets regardless of what conditions are. You know, obviously, we're not going to discuss sort of what our strategy is going to be exactly regarding, you know, future deferrals. You know, it's something that, you know, you can look at the last two years to see that we're going to do what needs to be done and works for us and works for our suppliers and partners. I think we've built enormous credibility over the last two years with our partners, right? We've been very upfront. We've been very transparent, and we'll continue to do that. When we had to access capital in the market, we did that. We communicated that to them. You know, credibility matters, and we continue to manage this business for all of our stakeholders. Okay. Got it. Very clear. Thanks, John and Alex. Our next question comes from Mike Linenberg with Deutsche Bank. Oh, yeah. Hey. Morning everyone. You can hear me, right? Yep. Great. Hey, just following up, I guess, John, on Gabriel's question just a few minutes ago. You did highlight, you know, sort of what your EBITDA was kind of annualized with what you did in the fourth quarter, your exit rate. I noticed in the piece, there was no sort of forecast for what you thought you could do for 2022. I know the EBITDA forecast has sort of been better than what was done in 2019. I think it was BRL 3.6 billion. You know, we've seen sort of the squiggly line, BRL 4 billion. Is it because of, you know, just the events over the last 12 hours or so and, you know, the surge in energy prices and we've had a lot of volatility with FX that you didn't feel comfortable putting a forecast out there? Or, you know, when you think about sort of, you know, the puts and takes and the various levers that you can utilize, that for 2022, that BRL 4 billion is still very much within reach? If you can comment on that. Thank you. Yeah, Mike. I think the events over the last 12 hours kinda, you know, I think in my script, I mentioned BRL 4 billion probably four or five times, right? So that's what we're focused on. Obviously, you know, some of the impact in the first quarter, you know, may make that slightly less. You know what? If Abhi continues to outperform as he's done, maybe we're above it. But, you know, that's our focus. You know, we don't wanna stick it out there at this time just because there's way too much volatility, but that's what we're marching towards. We wanted to show in the fourth quarter without corporate demand fully back, without our international network fully deployed, we produced BRL 1 billion of EBITDA. On the last week of December, we received five aircraft, Mike, and those five aircraft are next generation aircraft. There's two A321s in there that are gonna help us produce more EBITDA in 2022. You know, I just think, you know, putting it out there right now with everything that's going on, you know, we're happy to talk to it. We're right around that number, right? Is it, you know, BRL 100 million less or BRL 100 million more? That's about where we're at right now, and we're focused as a team to getting there. Okay, makes sense. Then just my second question to Alex. You know, look, you had great EBITDA on the quarter. Obviously interest expenses is high. You know, what was it? Over BRL 900 million, but I'm sure FX was a big driver of that. If we think about just to kinda size it with the real versus the dollar, you know, recently trading down to five, it looked like it was actually gonna break through five, and today it's just above five. If we think about maybe five versus 5.6, what would that number be? Would that be something on the order of BRL 600 million? I mean, I'm just looking for a back of the envelope to get a sense of how we think about interest expense for the rest of the year. Thanks. Yeah, no, that's a great question, Mike, and a good thing to highlight because as we pointed out between the end of Q4 and where FX effects were trading yesterday, EBITDA is kind of neutral, you know. Yep. Even for the year. Yep. Cash is much, much better, right? That's one thing that IFRS 16, you know, confuses things a little bit because it's harder for you to see if you're just looking at the P&L. Yeah, real at five or 5.10 is a lot better, you know, and helps us a lot more on cash than the oil at, you know, $90 a barrel or more. So yes, you know, you're talking about something on magnitude of what you said in terms of help towards cash using a lower real for sure. Okay. Thank you. Lower dollar, stronger real. Again, Mike, you're talking about interest expense, but you also get the help significantly on the operating leases as well, right? Yep. You get help on lease, get help on CapEx, you get help on deferred leases. You know, we are exposed to the dollar, as you know. We're essentially an imported service, right? When the real gets stronger, our cost, you know, gets a lot lower and our cash improves a lot. Yeah, no, absolutely. I'll just add, you guys did a fantastic job on the revenue performance. I know that didn't show up in my questions, but that type of, you know, RASK growth on sort of where your capacity base is probably leading among all carriers that we've seen report thus far. Well done. Thank you. Yeah, we're paying for Abhi's Subway sandwich today. Our next question comes from Dan McKenzie with Seaport Global. Oh, hey, good morning guys. It's good afternoon, actually. It's a heck of a data report, honestly, but it's great to have you visible. You know, I echo Mike's sentiment on the revenue performance. Great job. I guess, you know, with respect to the outlook this year, could you just clarify what the growth rate is this year that you're contemplating, at least as of today? And then the CASK ex-fuel that's embedded in that outlook. You know, just given the volatility of the depreciation line item, can you clarify what the full year depreciation ultimately you know is gonna look like? Hey, Dan. In terms of capacity, obviously we're adjusting as the events unfold. Like I said, we have brought down March and April in response to every airline has the best on the route P&L and the worst on the route P&L. As fuel goes up, one good thing a little bit about the higher fuel is you can manage it, right? You can actually adjust capacity. I would say that our focus is gonna be domestic growth. We don't have a full year ASK guidance out there. What I can say is that domestic growth relative to 2019 are similar to what you saw 4Q annualized. If you take the 4Q domestic ASKs and you annualize that, it will come down a little bit because of Omicron in January and February and because of some cuts that we made in March and April due to fuel. Around what you are seeing in 4Q and what you see in the traffic reports in January and February in terms of domestic ASK. Kind of like in the 20s, if you will. Internationally, we're, you know, again, we can adjust that. Our international recovery so far has been very conservative, about 40% recovery, 45% recovery. I don't expect that to change too much. You know, around 50%, it depends on how fuel goes. If it comes back down towards the end of the year, we can bring that up. We're not expecting major changes to international throughout the year. I would say domestic, what you're seeing right now in the 20s versus 2019 and international about 45% recovery versus 2019. Got it. CASK ex-fuel? CASK ex-fuel, you know, should remain kind of where it is. You know, we do as you know, Dan, we don't like to look at CASK ex-fuel. We like to talk about CASK, you know, assuming a certain level of fuel and effects. CASK controlled for fuel and effects, you know, compared to 2019, is actually obviously a lot lower than what we're seeing, and it's gonna depend a lot on what assumptions you have for fuel and FX. What I can tell you is, you know, the additional growth that we're going to have as you annualize our capacity, you know, as we bring in more international capacity, that reduces CASK as well, right? Longer stage lengths and international CASK is lower than domestic CASK. The productivity gains that we're gonna continue to deploy throughout the organization, all that is going to help. One thing that we're discussing here to try to provide more granularity to everyone, there is more than BRL 0.02 of CASK that comes from cargo, right? You know, there's more than BRL 0.035 of RASK that comes from cargo. Cargo is obviously very profitable. When you look at CASK alone, you know, the tremendous growth that we've had in cargo and all the success that we had with that business unit, it does add, you know, almost 7% of CASK, you know, to our number without producing, you know, it adds cost, but it doesn't add ASKs, right? That's something also worth highlighting, that when you compare our current CASK to our 2019 CASK, obviously there's dollar, there's fuel, there's two years of inflation, but there's also a very good, you know, outcome, very good result, which is the growth that we've had in our cargo business. Very helpful. That's terrific. If I could, a second question here, Abhi. If we could go back to 2019 and, you know, just peel apart domestic and international pricing. Not precise, just, you know, if you could help us ballpark it if, or just remind us, if the international flying was lower or higher yielding versus domestic. Looking ahead, as we see international begin to come back, how should we think about the yields netting out, again, as that international flying is restored? Yeah. In general, because of stage length, right? You're talking about a 4,000-mile stage length, at least for us internationally, because we don't have right now any short-haul international. We have one route, basically. You know, we aren't flying to Buenos Aires anytime soon. Because of stage length, the yields are lower. But international pricing has actually been, you know, our international fares, I would say, right now are double what they were in 2019. And it's actually been resilient, at least in the markets that we fly, which is Florida and Portugal, which are big local markets for Brazilians. I do expect sometime in the next month or two, a reduction in the pre-departure testing requirements. You know, France has done that, Italy has done that, the U.K. has done that, and that should help further as well. I think they're gonna be pretty resilient, actually. You know, we only will add the capacity that's warranted, right? If we can get the yields that are similar, or at least in terms of the contribution, you know, to domestic, then we'll add capacity, but we don't have to. We are using our A330s, for example, in March, five times a week to Brussels, for cargo. We actually sacrificed the Orlando route a little bit to ensure we can continue the Brussels route because that was a long-term contract. They're paying in dollars, and we pass the fuel through completely to our customers. We do have options when it comes to our long-haul network, and we will only bring back the capacity to make sure that the margin contributions are similar to what we're seeing domestically. Domestically, as I said, you know, corporate fares right now in last couple of weeks are 30%-40% above 2019 levels, the same week in 2019. I think, you know, we are being very aggressive on the fare side in a good way or conservative. And, you know, obviously our network helps us to do that. I think the industry overall is trying as well. You know, I think the last couple of weeks, the industry is trying to set the stage for a good revenue recovery in March and beyond. I think, you know, overall the right things are being done. That's terrific. Great job, you guys. Thanks. Thanks, Dan. Our next question comes from Felipe Nielsen with Citibank. Hello, everyone. Good morning or afternoon, depends on where everyone is. I have two questions on my side. I'll start with the first one. I wanted to ask regarding price, the tariffs that you're seeing in low-density routes and the mainline routes. If this growth in tariffs is sustainable, is going to keep occurring during 2022 and beyond? How is the difference between low-density routes and mainline routes in terms of tariffs? And if is there any competitor trying to be aggressive in pricing at this time in the market? Yeah. You know, that certainly is our intention, and I think us and the industry have no choice. You know, as John talked about efficiencies, airlines have to be more efficient. I think we have to be more aggressive in terms of fares and lower discounts. Yeah, I think it will continue. You have some seasonality, of course. I think the customer adjusts. You know, the customer adjusted last year, and I think they will adapt as well to the new environment. I think people wanna travel by air. They see the value in it, the convenience of it. I think the customer will adapt. You know, we have a different network than our competitors, and so that allows us to behave differently. We do take fare premiums in our markets. That strategy has not changed and will continue. I think that actually brings discipline overall to the market as well. In terms of competitive nature, I think that everybody realizes what needs to be done and, you know, is gonna be disciplined. We look at the capacity that was reduced in March. You know, in April, I think that the airlines are focusing on their hubs. They're focusing where they are strong, you know, avoiding unnecessary, you know, interactions, you know, with other airlines. I think that's the best way to get the best results, honestly. You know, I'll take Guarulhos as an example. We had 55 departures a day in 2019. Today, we have 20, maybe 18, and we have absolutely no desire to increase that number because we're focused on our network that brings the best results. I think our competitors are focusing on what works for them as well. Okay, great. I have a second question. It's regarding TudoAzul loyalty program. What are the earnings contribution from this loyalty program to the revenues in the coming years? What is the incremental revenue opportunity for that business in terms of revenues? Hey, Felipe. The story with TudoAzul is very similar with all of our sort of high growth, high margin businesses, right? They leverage the network presence that we have and they take advantage of the structure that we already have in place, you know, to fly our passenger network. TudoAzul, Azul Cargo, Azul Viagens, they are all higher margin business than the airline itself. We don't break up the profitability of each individual one, but as the revenue for any one of those businesses grows, you will see margin expansion, right? Cargo certainly, like I said, just from what I said in terms of how much cargo helps RASK and how much it increases CASK, you can kind of see what kind of profitability you get from these additional businesses. They will certainly continue growing and outpacing the growth of the airline because they are all kind of below what their fair market share would be. You know, TudoAzul is very strong, obviously, where we fly, but loyalty in Brazil is primarily still a you know, São Paulo, Rio, Brasília phenomenon. There's no reason why people in Belo Horizonte or Campinas or, you know, Curitiba or Campo Grande don't want to fly for free by using their credit card, right? As they become more and more familiar with those mechanics, we see the growth in TudoAzul. TudoAzul starts, you know, getting closer and closer to its fair share and helps us expand margins as it does so. You know, we also have a lot of new products that we wanna launch in TudoAzul, a lot of products that we launched fairly recently, like our new, you know, co-branded credit card, which is doing tremendously. There are a lot of more products that we want to launch in TudoAzul to take advantage of the relationship that we have with our customers and the network presence that we have in Brazil. Great. Very clear. Thank you very much for the answer. Thank you. Our next question comes from Pablo Monsivais with Barclays. Hi, guys. Thanks for taking my question. I just have a quick one. Can you please share with me your CapEx estimate for 2022 and 2023? Thank you. In terms of CapEx or the recurrent level of CapEx for the airline is similar to what we had in 2019, which is in the neighborhood of, you know, BRL 1.5 billion. A lot of that depends on demand, and a lot of that depends on the US dollar. We have some flexibility to go up or down, you know, to spend, you know, to accelerate maintenance events or to postpone maintenance events, depending on the demand and depending on the US dollar. But you can use sort of that as a recurrent number. You know, that doesn't include sort of the deferrals or any kind of one-time projects. There's also a good portion of that that's financeable as well, right? You're talking about engine overhauls and stuff, and so, you know. I think offline, Allison can kind of walk you through, you know, the possibility to finance some of that CapEx going forward. Yeah. Those are gross numbers, not necessarily net numbers, you know? Yeah, we can certainly provide more detail if that's not clear. Okay. Just a follow-up, trying to understand Abhi's answer about yields. It's incredible how resilient your yields are, and it will be key if we see a higher oil price for this year. It is fair to assume that a higher yield environment for you depends on your ability to expand into different markets? Because Abhi said that, you are also adding new cities, and when you're adding new cities, you're probably testing the water and having a high yield. Is that fair to assume that the higher yield environment depends on you adding to new destinations or it's under the same routes that you already operate in which you have a high market share? Thank you. Yeah, thanks. We are adding new cities, you are correct. Many of those cities are small markets that we're adding with either our ATRs or our Caravan operation. Those do help on the yield side, but primarily we're adding those cities to provide incremental demand to our network. Some of that demand is actually very small right now, but it is how we wanna grow the market in the future by bringing new demand to our market. Yes, every time you add demand to your network, that does give you a little bit of more pricing power that does allow you to grow your yields as well. I would say that is a small part of it. The other part of it is just the connectivity we have in our network and the sort of access to different types of demand we have, whether it's small or medium businesses, whether it's different sectors. I'll give you an example. You know, in 4Q 2021, financial services segment of our demand recovered 50%, but construction recovered over 100%. Oil and gas was 85%. Because our network is so diversified and has access to such different parts of the country, we have ability to access different types of demand, and that's what gives us the resiliency on our yields. Perfect. Thank you very much. Right here. Our next question comes from Nicolas Fabiancic with Jefferies. Hi, guys. Thank you to the Azul team for the clear disclosure. Congrats on the results. Just a comment on the bonds, which are still trading at stressed levels for whatever reason. I think it'd be useful to really emphasize the point around your liquidity. If you could give us some more color there, breakdown of your liquidity position, sources of additional liquidity, and how we should be thinking about some of the near or medium-term maturities like the 2024 bonds or the converts. A follow-up question. You mentioned this BRL 4 billion squiggly line EBITDA, and we talked about the CapEx. Could you walk us through the rest of free cash flow, lease payments, tax, dividends, working capital for this year so we could help dimension the cash burn? Thanks. Sure. Yeah, they all go together, you know, it's good to kinda walk you through the cash, you know, proceeds and use. Yeah, we're gonna have, you have the squiggly line of about BRL 4 billion in EBITDA. For example, if you look, you know, compare our revenue to our cash inflows, which we have on the chart on the presentation, that cash inflow outpaces revenue, right? There's an actual working capital good guy from the fact that we're recovering our network, you know, we still have capacity to add. We're always selling an airline that's slightly bigger than the airline that we're flying. You know, the opposite happens when you shrink the airline, but when you grow the airline, you actually have a good guy on the capital side. That you're gonna be above BRL 4 billion in terms of operating cash generation. We have the rent, which is in the neighborhood of BRL 4 billion. With the operational cash flow, we can pay for rent, we can pay for finance leases, we can pay for interest. That leaves you with essentially CapEx. It leaves you with debt repayment and deferral repayments. The rent four billion is sort of a number that's tied to the exchange rate of 5.58, right? If you're thinking about five, the four billion is gonna be significantly lower and the cash is gonna be dramatically better like we mentioned to Mike earlier. You know, you have to kind of figure out what your FX assumption is, you know, to you know, estimate a lot of these numbers. You know, like John said, for example, CapEx we can finance or we can decide to do or not do depending on the demand environment. If the demand environment is good and I need the aircraft, then probably I can't finance CapEx, right? If I can't finance CapEx, that probably means the demand environment is bad and I don't need the aircraft. They all kind of go together and they're sort of a natural hedge in terms of cash needs, as we kind of bring the capacity back or need to you know, have the resources to fly our network. You know, debts, you know, for example, bank debt is very low. You know, we were able to roll over bank debt when the situation was much more complicated than what it is today, right? Before we had vaccines, before we were flying our network the way we're flying, before we were producing BRL 1 billion in EBITDA, we're very confident that if we need, you know, to roll over bank debt, we can do it. You know, we also have a very strong cash position. We ended the year with BRL 4.1 billion, you know, and as we mentioned on the call, our cash position going into the pandemic was around BRL 2 billion. I can also kind of go back to more normal levels of liquidity as the situation also goes back to normal and use some of that money to pay the obligations that we have. You know, I think it's clear when you saw our what we call the management plan, right, to get through the pandemic. Remember, Azul did not have any help from the Brazilian government as American and European and Canadian airlines had. You know, file for Chapter 11 as you know, multiple airlines in the region did. We had to you know, create our own credit and working capital, and we were able to count on the support of all of our stakeholders. We preserved you know, our bonds obviously, right? Because we want to have access to the capital markets, you know, and our stakeholders want us to have access to the capital markets. You know, I agree that the bonds, you know, if you ask me personally, I do think they are, you know, trading much lower than they should, because, you know, we're gonna obviously continue with the same approach that we had, and we're in a situation that's much better now than when we, for example, issued our 2026 bonds, you know, at essentially 7.5 yield. That's how we're going to continue managing our cash, our cash position. Thanks, guys. Congrats again. Thank you. Thank you. Our next question comes from Victor Mizusaki with Bradesco BBI. Hi, congrats for the 4 Q numbers. Now I have two questions here. The first one, I mean, it's kind of a follow-up on the cargo business. I mean, I'd like to understand what is next for this operation. I mean, a lot of news talking about some M&As happening in this sector, so if you see an opportunity here. The second one, in our recent meetings with ANAC, the regulators said that maybe in the second quarter, they may release new rules for airport slot distribution in Brazil. If it happens, how important is this for Azul? Yeah. Hey, I can take those. Sure, Victor. Regarding Azul Cargo, you know, we've been pretty open that we wanna keep evolving our capabilities in the sector, right? Of course, we have our route network, which carries 80% of our cargo. We have our 737s, but now we have our Embraer E-ones as well. We wanna keep building out our capabilities, and that includes, you know, first mile, middle mile, last mile. We have no intention of, you know, buying trucks or anything like that, but we definitely wanna have deeper relationships with our ground transport providers on all sides of the logistics chain. You know, we are looking at all opportunities. There's nothing to announce, nothing to say. We want to, you know, be the FedEx of Brazil, and that FedEx has done in the U.S., and that means having closer ties with different partners. We already have a network of 300 representatives around the country, and we wanna make those ties even stronger so that we have access to the capacity that we need for pickups and deliveries and in all geographies around the country, whether it's the south, the north, São Paulo, Rio, all those kinds of things. We definitely wanna keep building out our logistics capability, so we can deliver to more cities even faster. That's something that we're gonna keep looking at and we'll do what makes sense. Regarding the slot distribution rules, you are correct. ANAC is reviewing the rule process. Obviously, we are very engaged, as are other interested parties like the other airlines in Brazil. The airport that it impacts the most is Congonhas, because that is an airport that is completely saturated and also closed, right? It's saturated, closed, and concentrated in our opinion. Those were the arguments that we have made. We will make those arguments very similar to what we made when the Avianca Brazil slots were up for grab back in 2019. No major change to our position, we will see what happens. None of that is in our baseline plan. Whatever is a result of that will be in addition to what we are planning for 2022. We have no, you know, expectations, but certainly we are making the arguments for that, similar to what we made in 2019. Really, what we are focused on is Congonhas. Yes. Below. Right. In terms of the overall capacity of the airport, there is room to increase capacity, so we wouldn't be taking from anybody. It would be more capacity, which gives more options to Victor, you know, no secret that Azul has had our eyes on Congonhas for 14 years, right? It's an exciting time for us because we see the highest possible airport for better you know, anything net incremental to Azul will be positive. Sometimes, of course, if we're bringing fantastic route for us. We're really excited about the possibility of any incremental slots being restricted for people more and Okay, thank you. Our next question comes from Isabella Lomas with UBS. Hi, all, and congratulations on the results. I have two questions here. The first one is a follow-up on CASK ex fuel, specifically on the dynamics for this quarter. Because as we saw, ASK increased at 90% quarter-over-quarter. We were expecting this would help with some cost dilution as well. However, we saw an increase in CASK ex fuel quarter-over-quarter, also around that 9%. We were wondering what could be the reason for this deterioration and how it should behave in the next period. I would appreciate if you could give us some color on this matter. The second question is on the extinguishment adjustment regarding the contingency provision at around BRL 620 million. Could you please give us some more detail on what exactly it is about, and if we should consider this as a one-off affecting this? Thank you very much once again. The bad guys in CASK, you know, what's the dynamic in CASK, right? We are certainly more productive now, more efficient now than we were before. What's offsetting that, more than offsetting, unfortunately, is dollar FX and inflation and cargo, like I said, right? Dollar FX, inflation obviously are bad guys, and the whole industry needs to deal with those, and that's a main, you know, one of the drivers, one of the reasons why we are all trying to pass through cost increases to fares. If you control for all of those, you would see CASK going down, for sure. You also have to look at stage length. Again, you know, we mentioned the domestic international mix. You know, if you could look at the core CASK and just see, you know, as it relates to the cost of operating the airline, you certainly would see improvements quarter by quarter as we add capacity back from the reduction that we had during the pandemic. I would like to add, you know, we flew more than 100 flights, you know, Campinas through Brussels in the fourth quarter. You know, no ASKs associated with that. Obviously, that helps our revenue overall, and that's why you see a big gap up between the RASK and the overall RASK. Alex mentioned this, you know, when he was responding to a previous question. That BRL 1.1 billion of revenue that we produced didn't have any ASKs associated with it for our dedicated flights, and that also has a component that impacts our CASK. Correct. Yes. Like I said, you know, we're gonna try to provide, you know, more. You know, cargo has become such an important and relevant business that, you know, it's producing things like the one we mentioned on CASK. We'll see what we can do to help you model that and understand what's actually helping the CASK. Because again, as we mentioned before, our airports are 30% more expensive, right? Our fleet transformation are more efficient. Our fleet transformation dramatically reduces CASK. Again, that's why we don't like to use CASK ex fuel, because one of the big advantages of having a modern next generation fleet like ours is a dramatic reduction in fuel. You know, so you should look at constant fuel prices CASK as opposed to CASK ex-fuel. Otherwise you're not observing and not capturing the dramatic reduction in fuel burn that we've had, you know, since we started the fleet transformation, which was in the neighborhood of 20%, you know, lower fuel burn, you know, with the aircraft that we have today. In terms of the provisions, you know, it's worth highlighting that it was an adjustment for a gain of BRL 104, right? You know, the adjusted numbers were worse than the accounting numbers. The big number there is the reversal of the one impairment. Offsetting that partially, it's all non-cash one-time revisions to provisions and COVID-related expenses. Absolutely, you know, they should be one-off and non-recurrent, and they are all non-cash as well. That's perfect. Guys, thank you. Thank you very much. Ladies and gentlemen, this concludes today's question-and-answer session. I would like to invite John to proceed with his closing statements. Please, sir, go ahead. Thank you for joining us today. If you have any follow-up questions, feel free to reach out to our investor relations team. We'd be happy to answer any questions you may have. Thank you. Ladies and gentlemen, that does conclude the Azul's audio conference for today. Thank you very much for your participation, and have a good day.