Hello, everyone, welcome all to Azul's Q1 Earnings Call. My name is Zach, 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 the Q&A session following our company's presentation. If you have questions, click on the Q&A icon at the bottom of your screen and write your name and company. When your name is announced, please turn on your microphone, and then proceed. For those who are listening to the conference on the phone, press nine to join the queue and six to accept the audio when requested. I would like to turn the presentation over to Thais Haberli, Head of Investor Relations. Please proceed. Thank you, Zach. Welcome all to Azul's Q1 Earnings Call. The results that we announced this morning, the audio 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 Chair, John Rodgerson, CEO, and Alex Malfitani, our CFO. Abhi Shah, the President of Azul, is also here for the Q&A session. Before I turn the call over to David, I would like to caution you regarding our forward-looking statements. Any matters 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 subjected to uncertainties and risks that are discussed in detail in our CVM and SEC files. During the course of the call, we will discuss non-IFRS performance measures, which should not be considered in isolation. With that, I will turn the call over to David. David? Thanks, Thais. Welcome everyone, thanks for joining us for our Q1 2003 Earnings Call. First of all, let me thank our crew members as usual for their incredible experience they delivered every day. In March, we were once again the most on-time airline in the world, following our recognition as the world's most on-time airline in 2022. We are flying more than ever. Our NPS scores are high, all of this with an airline that is more productive and more efficient than ever. 15% more than last year, to be exact. It is truly remarkable what our crew members have achieved, I could not be prouder. On slide four, you will see that our business model is stronger than ever. We serve 158 destinations. We have a leadership position in 93% of our routes, and we have the most fuel-efficient fleet in the region. We combine all of this into several fast-growing, high-margin businesses. One recent milestone has been the start of expanded Congonhas service, where we more than doubled our slots to 98 daily flights. We can now fly from São Paulo's downtown airport to the largest corporate markets in Brazil. In addition, we just launched our nonstop service to Paris, the only nonstop from South America to convenient Orly Airport. Excitingly, our data shows that more than 30% of our customers flying us in these new markets are first-time Azul customers. That means we have an incredible opportunity to bring them the Azul universe and showcase all that we have to offer. On slide five, you can see how our business units performed this quarter. TudoAzul, our loyalty program, more than doubled its gross billings since 2019, and is benefiting significantly from our expanded presence in Congonhas. My personal favorite, Azul Viagens, continues its remarkable expansion, growing an impressive 4 times in gross billings versus the pre-pandemic level. Azul Viagens is now firmly the second-largest vacations agency in Brazil and the largest seller of Disney tickets in Latin America. Our logistics business, Azul Cargo, almost tripled since 2019 and continues to be the largest air logistics provider in Brazil with an impressive 33% market share. I'm excited to announce that we just launched our newest business unit, Azul TecOps. With a rich 15-year history in supporting Azul's operation and a world-class facility, we're in a unique position to be able to handle all of the region's heavy maintenance needs. Azul TecOps is now ready to bring this expertise to our customers, and we know how challenging the MRO capacity is around the world, so this is a perfect time to launch this new venture. Before I turn this time over to John, let me share my thoughts on the restructuring process that we have been working on this year. We set out with a goal to protect our shareholders and make our business partners whole. I am amazed at the progress this team made, and I am excited about the opportunities that this new optimized Azul creates. As John and Alex will share in their presentation, the results of this process are transformational to our business. As we said before, these are permanent structural solutions that significantly improve our cash flow, leverage, and capital structure. I want to thank our team for their hard work. I also want to thank our partners who have supported us during this process. This is a unique plan that is strengthening Azul's capital structure and the cash generation, matching it to our superior business model and profitability. With that, I'll turn this time over to John to give you more details on the first quarter results. John? Thanks, David. I would also like to start out by thanking our crew members for taking care of each other and our customers every single day. I recently spotted on the World of Statistics Twitter account, a listing of the world's most punctual airlines. Azul was first on the list. That was really cool. We have a lot to show you today, including important updates on our restructuring plan. Before that, though, let me describe our first quarter results. As you can see on slide six, we had a strong quarter. Revenue was an all-time record BRL 4.5 billion with an EBITDA of more than BRL 1 billion, an increase of 74% versus last year, even with a 24% increase in fuel prices. EBITDA margin for the quarter was 23%. The operating result was BRL 460 million, with an operating margin of 10.3%. On slide seven, you could see the strength of the revenue performance with a record first quarter RASK of $0.4147. PRASK increased a strong 23% year-over-year, even with a 120% increase in our long-haul wide-body capacity. Looking at just the domestic market, PRASK increased 28% year-over-year, highlighting the advantages of our network and our disciplined capacity. Turning to slide eight, you can see that we generated more than $1 billion of EBITDA, 42% higher than first quarter 2019. This is even more impressive considering that fuel more than doubled since 2019. This clearly shows that our structural competitive advantages and fleet transformation program allow us to grow and, at the same time, recapture the effects of higher costs with higher revenues. One incredible example of this is that departures in 2023 versus 2019 will increase only 5%. Departures up 5%, while total ASKs will increase 25%, all on next gen aircraft. This is truly sustainable, profitable growth. On slide 9, you can see our EBITDA trajectory and how we consistently grew profitability since we launched. COVID was a temporary setback and now we're firmly back on our margin expansion for 2023 and beyond. We expect 2023 EBITDA of BRL 5.5 billion, by far, the highest in our history. On slides 10 and 11, we wanna show you the combination of the tailwinds that we're seeing this year. On slide 10, you could see the effect of a significant reduction in jet fuel prices. The second half of the year is currently showing 29% lower fuel price in reais per liter versus the first quarter. This is a result of the reduction in global fuel prices, as well as the strengthening of the Brazilian real versus the US dollar. Combine this with slide 11, which shows our expectation for RASK performance this year. We expect similar overall RASK performance oscillating just with seasonality. On the capacity side, we expect to grow 14% overall versus 2022, but only 6% in the domestic market. Once again, strongly reaffirming our commitment to capacity discipline. The best part is that 100% of the capacity increase is from upgauging and transforming our fleet into extremely fuel-efficient aircraft. Trip cost actually goes down while revenue opportunities increase. The natural Brazilian market stronger second half seasonality combines really well with the expected fuel curve for the remainder of the year. Slide 12 illustrates the combination of lower fuel with stable RASK in our expected EBITDA per quarter for the year. You can see how the fuel price reductions by themselves contribute to BRL 1.1 billion of EBITDA over what we generated in the first quarter alone. Therefore, the first quarter results annualized together with lower fuel and seasonality gives us a high level of confidence to deliver on the guidance of BRL 5.5 billion EBITDA for the full year. To summarize, we had a strong first quarter results. Revenue performance is robust, fuel prices are coming down, and the best seasonality is still ahead of us. Transitioning now from earnings to our restructuring plan, we're really excited to give you new details on the progress we have made. If you remember on our last call, we described a comprehensive and permanent plan to address our capital structure and significantly improve our cash flow and financial leverage. This plan has been implemented amicably, ensuring a fair treatment and full recovery to all of our partners. Today, we're excited to share with you new and important details about these commercial agreements and how they will positively impact our capital structure and cash flow going forward. Let me turn it over to Alex, so he can give you the details on this plan. Thanks, John. Today we're proud to provide you additional details about the commercial agreements we announced during our last call in March. First, let me remind everyone of the general terms of that plan. Our agreements with lessors and OEMs contemplate the elimination of lease payments that were deferred during the pandemic. They also provide a permanent reduction in our lease payments going forward from the original contractual lease rates to agreed upon current market rates. We have also agreed to defer certain additional lease and OEM payments in 2023, as well as improved end of lease compensation and aircraft return conditions, the elimination of future maintenance reserve payments, and the negotiated early termination of certain aircraft leases. In exchange, lessors and OEMs have generally agreed to receive an unsecured tradable note maturing in 2030 with a coupon of 7.5% per year and an equity instrument convertible into preferred shares valued at BRL 36 per share. On slide 13, we show you exactly how these agreements reduce our lease payments each year. As you can see, we're reducing our annual payments in the neighborhood of BRL 1 billion and even more in 2023 and 2024. As you recall, almost 80% of our nominal debt comes from operating leases. This significantly reduces our debt burden and improves our cash flow. We now expect to be cash flow breakeven in 2023 and generate positive free cash flow in 2024. More importantly is that Azul has more than 70% of our ASKs already coming from next generation fuel-efficient aircraft. We now have the most efficient fleet with also the most competitive lease rates. This is a permanent solution that enables us to convert our strong operational profitability to positive free cash flow. On slide 14, you can see the aggregate results of these lease reductions. Our nominal lease payments are dropping by BRL 5.4 billion in total, a 21% reduction. On a present value basis, assuming constant discount rates, this is a reduction of over BRL 4.1 billion in our balance sheet debt and an even bigger reduction for those who use seven times rent to capitalize our leases. In the first quarter, leverage organically decreased 0.5 turns to 5.2 as we paid down debt and increased our last 12-month EBITDA. With a reduction in lease liabilities from our agreements, our deleveraging process is accelerating. On slide 15, you can see that our 1Q23 leverage would reduce another 0.6 to 4.6. This already includes the 2030 notes that lessors and OEMs will receive in exchange for their contribution to the plan. If you recall, we originally expected to end leverage in 2023, starting with a four. With these agreements, we now expect to end 2023 with a leverage of 3.5 and 2024 around three, in line with our pre-pandemic levels. I would just like to remind everyone that we're returning our leverage to three in 2024 without any government support, without using bankruptcy or other judicial restructuring process, and without imposing a haircut on our creditors as other airlines around the world did. On slide 16, we give you the details on the equity portion of our commercial agreements. You all saw the material fact we released this morning, just to provide you with a little bit more detail. Lessors and OEMs are also receiving an equity instrument in exchange for their contribution to the plan. This instrument converts part of their contributions into preferred shares valued at BRL 36 per share. The equity instrument is limited in its upside and downside, aiming to minimize dilution to our shareholders and at the same time, to provide full recovery to our partners. The instrument has a lockup provision until the second half of 2024. After that, it vests over 14 quarterly installments, taking it all the way to the second half of 2027. The amount that will vest per quarter ranges from 3.2 million-7.5 million shares. Just to give you a reference point, our preferred shares and ADRs trade almost 28 million shares per day, so the vesting profile of the equity instrument should not create any noticeable selling pressure. With a conversion price of 36 reais per share, we estimate the dilution from the equity instrument at 17.5%. Throughout the vesting period, between the second half of 2024 and the second half of 2027, if at the time of measurement, Azul's market price is higher at certain thresholds, the number of shares issuable via the equity instrument will be reduced, and dilution will therefore be lower. If the market price is lower than 36, we'll compensate our partners, and we may do so with additional shares or with cash or with the issuance of new debt instruments acceptable to our partners. Our comprehensive solution and its corresponding reduction of our net debt, combined with our EBITDA growth, give us strong confidence that we're creating all of the necessary elements for Azul's equity value to reflect our strong fundamentals, as John will explain on slide 17. Thanks, Alex. I'm extremely proud to see the evolution of our comprehensive plan and everything that you and your amazing team are doing for Azul. Since Azul's IPO, we've historically traded at about 8 times EBITDA, and we're currently trading at four times. We know the cost of capital around the world has increased since COVID, but our comprehensive plan was designed to optimize our capital structure and increase our cash generation going forward. Reason why we estimate a significant upside in our stock price, even at a reduced multiple. Considering our net debt estimated after reflecting the new capital structure and the equity investment and new shares to be issued, as well as a multiple of 6.5, lower than our historical average, our stock should be trading almost 3 times the current market price. This is the reason we're so excited about this plan and all the upside to come. As you can see on slide 18, our fundamentals are strong, our business model is unique, I'm very excited to see all the great things Azul will deliver in the coming years. I also want to thank all of our incredible and passionate crew members, and I'm confident that Azul will deliver better than expected results as we move forward. With that, David, Alex, and Avi and I will answer your questions, as I turn the call over to the operator for Q&A. Ladies and gentlemen, thank you. We will now begin the Q&A session. Remembering that if you have a question, then click on the Q&A icon at the bottom of your screen and write your name and company. When your name is announced, please activate your microphone and proceed. For those who are listening to the conference on the phone, press 9 to join the queue and 6 to accept the audio when requested. Let's go to the first question from Gabriel Rezende, sell side analyst, Itaú BBA. We're going to open your microphone so that you can ask your question. Please proceed. Hi, David, John, and Alex. Good morning, and thanks for providing the valuable details on the restructuring. Actually, my first question is on that theme. I would just like to confirm with you guys the understanding that we had on the details you shared. You mentioned in the material fact that what happens in case Azul shares do not reach 36 highs between second half 2024 and second half 2027, and it seems like you have three options here: to issue additional shares, issue a new note, or pay it in cash. I would just like to understand who can decide on this, whether it is Azul, the lessors, or you expect some kind of negotiations in that scenario? The second point here on a different subject, you just released your guidance for 2023, mentioning a 14% increase in this case for the year, and also saying that international traffic should grow above that. Can you explore that a little bit more? I mean, will this expansion on international traffic be sustained by Azul increasing its on the same routes you operate right now, or maybe creating new routes such as the one you just announced, connecting São Paulo and Paris? That's it. Thanks. Thanks, Gabriel. We have the option to do it in shares. Obviously, lessors, if we choose to do it in cash, they also accept that. We also have the option to do it in debt, but, you know, the terms of that debt would be negotiated and agreed by the lessor, right. In a way, the option is ours, but the terms of the debt needs to be agreed by the lessor. I think it's really important to reinforce how much cash savings come as a result of this deal. You know, when you're talking about not getting to 36 AIs, it would be an enormous disappointment. We'd need to continue trading at, you know, four times this year, I think 3 times next year, and, you know, to not move the stock from where it is today. You know, there's a significant improvement in our cash flow generation because of this deal. With that, we'll kind of pass Avi pass over to Avi to talk about the ASK growth. Yeah. Hi, Gabriel. Overall,.we're looking at 14% ASK growth. That's total. In the domestic market, as John mentioned in his remarks, we're growing only about 6%. Very disciplined overall, and especially disciplined in the domestic market. Internationally, it's basically the network that we have right now. I do not see any major new markets or destinations for the remainder of the year. We are selling the capacity, we are selling the network that leads to that number. Nothing new. We do have some new stuff to fly, which is Recife to the U.S., as well as Confins to the U.S. Everything is already selling 14% overall and 6% domestic. Okay. Thank you, guys. That's very clear. You know, I just wanna highlight one other thing too, is that as we go through between now and 2027, as the stock rises, there can actually be less shares issued as well, right? I think that, you know, I think you're looking at the downside scenario, but there's actually an upside scenario to it as well. You know, I wanna remind everybody that we were trading in these ranges two, three years ago, and now we're at EBITDA numbers that this business has never seen, cash flow generation that this business has never seen, and, you know, an improved capital structure as our leverage is, you know, down to three in 2024. Thanks, John. The next question comes from Josh Milberg, sell-side Analyst, Morgan Stanley. We will open your audio so that you can ask your question. Josh, please proceed. Hey, everyone. Can you guys hear me? Yes. Hey, Josh. Great. Good morning, and good to connect with you guys. Thank you for the call. My first question was if you could give some additional detail around the near BRL 300 million of non-recurring items that you recognized in the period. I think the biggest piece of that were fleet adjustments related to your re-restructuring, but you also had advisor fees and a one-time adjustment that you mentioned could reverse. If you could just give some more color around that, it would be great. Sure. Yeah, the biggest part of the BRL 300, more than half of it, is that adjustment on the engine powered by the hour agreement. You know, right now the agreement is being renegotiated. The agreement doesn't really exist, we're confident that we're gonna have another agreement in place before the end of the year, right? Those amounts that have been deposited towards future engine maintenance within the sort of the first life of the agreement should be restored once we have another agreement, right? That, you know, we expect that amount, which represents more than half of the non-recurrent adjustment for this quarter, to be reversed, right? The rest, the next biggest item are advisory fees and legal fees related to the all of the negotiations that we're doing with the multiple stakeholders, right? Lessors, OEMs, bondholders, you know, we're going to raise additional capital as well. All of those fees related to restructuring, then would be sort of the next biggest item there. You have some just adjustment you know, as part of that restructuring as well. As we mentioned, some of the, we had some lease terminations as part of our agreement, some restructurings in the fleet, and that is sort of the third largest item in the non-recurrent adjustment that we mentioned. I think, Josh, what's really important is majority of that will be reverted back, and we'll call it out as one time when it comes back in as well. Perfect. Thanks for that, John and Alex. my second question is just on the prospective lessors agreement. you know, from our understanding, both the note component and equity instrument components are, that you're now contemplating are somewhat lower than what you had anticipated earlier in the year. I think that the rent payment reductions are fairly in line, so I was just hoping you could reconcile those two items. I also wanted to hear a little bit more about what hurdles remain to close a definitive agreement and, you know, and to what extent a definitive agreement is linked to a, you know, an agreement with your bondholders. Sure. You know, we didn't provide, you know, we're only now kind of close to the, you know, the formalization of all of these agreements, so only now we're providing the details. I think last earnings call, we provided some general views, right? Not the full amount. I think the reconciliation is essentially, you know, a, the fine-tuning of the agreements as we continue to transform sort of the high level term sheets that we had negotiated to a final document with all the details that go into a new kind of leasing agreement, you know, until the end of the leasing term, right? All the details that goes along with that. In the meantime, you also saw the Real strengthening throughout, you know, these last few weeks, so maybe there's a little bit of that as part of the reconciliation as well. Josh, we were a little conservative, initially as well, I think that was, that was part of our plan. You know, as we talk about the next step, which is the bondholders, we're in active discussions with the bondholders, right? The bondholders have organized around the 2024s and the 2026s. They have about 75% are in one unit, and those conversations are ongoing, I think you're gonna see something over the next couple of weeks with those bondholders. We're excited that, you know, we're sequencing the plan exactly the way we said we would, I think getting this information out to you was really important today. I think the bondholders are excited about all the work we've done as well, right? You know, there's discussions with the bondholders around, you know, hey, how far out are we gonna roll? What's the interest rate gonna be? Can they provide new money capital? There's robust discussions with the 24s and the 26s, and it's part of our plan. As we told you earlier, we hope to have all this wrapped up, you know, prior to the start of the 3rd quarter. Yeah. We get that question a lot on whether the lessor agreements are conditional on the bondholder agreements, and that's not really how we think about this and how we structure this, right? The plan, as we said in the beginning, encompasses all stakeholders and benefits all stakeholders. You know, I think we were able to come up with something fairly unique that you haven't really seen on any other airline restructurings. It's also fairly unique in terms of other deals that you see in other industries, right? Where, you know, the agreement of one group of stakeholders actually benefits the other, right? It's very synergistic. It's, you know, it's something that, you know, by resolving the issue with our lessors, which are 80% of our nominal debt, that's buying us the confidence, giving us the confidence on reaching an agreement with the bondholders. The bondholders love what we saw with the lessors, because really what they want is recovery, right? Every other airline out there that didn't get government help applied a haircut to bondholders, either through Chapter 11 or through an exchange offer, right? It's not that, you know, we think we need the bondholders to, you know, solidify the lessors. It's really the support that we got from the lessors that's giving us this tailwind to be able to reach an agreement with the bondholders as well. It all starts, Josh, with a company that's gonna produce over $1 billion of EBITDA this year. A company now that previously all of our EBITDA was eaten up by aircraft rent payments. As you can see, as you move forward into 2024, 2025, and beyond, our aircraft rent is significantly lower. Significantly lower. That's where the cash generation goes going forward. That's great for our lessors, for the long-term viability of our company. It's great for our bondholders. It's great for our shareholders as well. That was super clear. Thank you guys for all the color. Have a great day. Thanks, Josh. The next question comes from Lucas Barbosa, sell-side analyst from Santander. We will open your audio so that you can ask your question. Lucas, please proceed. We're not hearing you, Lucas. Lucas? Lucas's question is, good morning, and thank you for taking my question. I have two questions. Can you provide me more details on how the conditions on the convertible debt issued to lessors vary according to Azul's stock price? Second question: With the development on the agreement with lessors, how does Azul's fleet commitment plan look like for the next several years? Let me answer the second part, then Alex will answer the first part. You know, I think what's really important about this is this doesn't change Azul's growth, right? The lessors believe in Azul. That's why they did this plan. That's why we did it amicably. The number of aircraft we were expecting to take previously is the same number of aircraft we will continue to take over the next few years. There's some delivery delays because of the OEMs, but our fleet plan does not change. As Alex highlighted, we are well ahead of all Latin American peers in terms of having next generation aircraft in our fleet, right? You take a look at how many A320neo we have, how many A321neo we have, how many E2s we have. Over the next couple of years, we'll continue to finalize that fleet transformation to have an all next gen fleet. You know, that's already reflected in our forecast, and it's already reflected in our leverage assumptions as well. When Alex talks about getting leveraged out to 3.5 this year, 3.1 into 2024, you know, that is the reflection of additional fleet coming in over the next couple of years. Yeah, just continuing on the fleet, right? I think we've indicated to you sort of the way we think about managing the fleet growth going forward, right? I think we've created a lot of optionality throughout the pandemic, because right now what we're thinking is if the markets don't grow significantly, right, if Brazil grows only, you know, 1% a year GDP or less, right? We're going to keep our fleet fairly stable, right? With, you know, just a, you know, low single digit fleet growth in terms of aircraft count. We're going to grow our capacity significantly because, you know, as we move into next generation aircraft, we get a lot of incremental seats at a negative cost, right? We can stimulate the demand on Azul markets. We don't need to steal customers from other airlines. We can essentially just stimulate demand within our own markets with these costs, with these seats that are coming in at a negative cost. If Brazil grows more than we expect, right, more than our conservative assumption, we have the ability of accelerating aircraft deliveries, especially from Embraer, you know, provided that these short-term supply chain issues are resolved, which we know they will be, right. That gives us the optionality to grow safely, right, at a low risk with the fleet transformation, but also be able to grow on an absolute basis if the demand is there, maintaining the capacity discipline that we've demonstrated throughout all these years, right. On the detail of the equity instrument, right, it's not a convertible debt. You know, it is equity that we're going to issue to the lessors, which will have an adjustment, you know, on the number of shares that are issued in case the shares trade better than we expect or worse than we expect. Now, you know, obviously the price per share should be an output of everyone's model, right, and not an input, right? When we do our valuation like we had on the slide on our presentation, when you look at the EBITDA guidance that we've provided, the new level of debt that we have achieved with the negotiation with our lessors and OEMs, you know, if you use the historical multiple of eight, we would be way beyond the 36, right? Potentially, you know, we might be talking about why we settled on BRL 36 when the fundamental value of the shares of Azul are much higher than that, right? Assuming a conservative multiple, even at 6.5x, you get to BRL 36 with 2023 EBITDA, right? Not even 2024. As we indicated, we need the shares to sort of be around that BRL 36 level between the end of 2024 and the end of 2027, right? At the end of 2027 you're gonna be looking at 2028 EBITDA, right? You know, I don't know what your EBITDA for 2028 for Azul is, but it's significantly higher than BRL 5.5. The share price is significantly higher than BRL 36, right? As you calculate the fundamental value of Azul shares, if you get to more than BRL 36, you know, you don't have to worry about incremental dilution. The dilution will be the 90 million shares that we indicated. If you start getting to something higher than BRL 36, you know, potentially that dilution could be even lower. Okay. The next question will come from Alberto Valerio, from sell side analyst from UBS. We will open your audio so that you can ask your question. Alberto, please proceed. Hi, John, Alex, Abhi. Thank you for taking my question. The first one, I would like to know if there is a percentage of lessors that already agreed with these new conditions, and how much would be that? The second one, on the same subject, it's about the leasing payments that look more expensive for next year and then decrease. Why we have this dynamic for the future leases? Change subject on the guidance. Going a little bit over the follow-up on Josh's question. You mentioned that the maintenance cancellation fee that you pay in this quarter might be reversed when you make a new agreement for the maintenance, how it works, and how much on your EBITDA guidance will you have on non-recurring items? That's my question. Thank you very much. Yeah, let me just address that. There wasn't a cancellation fee. It was just that we've already paid money into the Trent 1000, the total care agreement with Rolls-Royce, okay? The contract is temporarily suspended as we negotiate a new contract. The money has already been deposited there, and we're negotiating with them. What we wanted to do from a guidance perspective is neutralize that. It'll be a one-time bad guy in the first quarter, most likely a good guy in the second or third quarter. That has nothing to do with the BRL 5.5 billion that we have in there. It's neutral to that overall. Right. You know, on the percentage of the story, these are new agreements, right? These are essentially we're just detailing the agreements that we announced back in early March, right? The agreements are exactly the same. We're just refining them. We've been refining the language in the documentation that we're signing, and we're now providing to you the details on those agreements, right? The table that we provided with the lease payments is essentially aimed at updating you for note 19.1 of our financial statements. When you look at our financial statements, note 19.1 shows all of the lease payments that we are contractually obligated to make throughout the following years. That is what gets calculated on a present value basis to get to the value of our lease liability on our balance sheet. Now we're providing you with that updated 19.1 note on a pro forma basis, you know, based on the agreements that we are finalizing, right? We had more than 90% of lessors in March, when we announced these agreements originally. Now we're closer to 95%, and we're talking again to every lessor that hasn't committed to the commercial agreement yet. We still believe that it is possible for us to reach 100%. Now, for your, you know, cash flow estimates in terms of rent payments going forward, you know, obviously we're going to get more aircraft as we go forward, and so the rent payment will not be as low as what's indicated on note 19.1, right? It won't grow, it won't grow significantly. I think you can take 2024 as a starting point, and then, like I said, the fleet is not going to grow significantly unless there is significant demand in the Brazilian market. You know, so with that kind of low single-digit growth in aircraft count, you can calculate how the lease payments would go forward from 2024 and beyond. Just to kind of highlight your question, why is it a larger reduction in 23 versus 24? It's just a negotiation with the lessors, right? You know, we know that we're going to have more cash generation going into 24, and so we asked for more relief upfront, and so it's just a small timing issue there. Yeah. In terms of sort of annualized rent payment, I think you could look at 2024 as a representative year and then move forward from there. Make total sense. Thank you, John and Alex. Just a follow-up. Taking these new numbers in consideration, we might find a cash gap or now we had a positive cash for the year close to BRL 300 million-BRL 400 million. Is that correct? This year? This year, we're expecting breakeven for 2023. Okay. Fantastic. Thank you very much. Positive 2024 and beyond. Makes sense. Thank you very much. The next question comes from Bruno Amorim, from sell-side analyst from, Goldman Sachs. Bruno, we're gonna open your audio so that you can ask your question. Please proceed. Yes, thank you. Good morning, everybody. The first question is on the transaction with the lessors and suppliers. You mentioned the transaction as it is reduces the debt of the company by BRL 1.8 billion, excluding the equity instruments. Can you just give us an idea of, you know, what would be the additional liability if eventually the equity instrument, you know, is not actually converted into shares? The second question is on the fleet plan you have commented to some extent on. I just wanted to understand what's the level of flexibility that you have around the base case and also, you know, what's the implied ASK growth in the base case for the next couple of years. And finally, one last question. You know, if you deliver on the $5.5 billion EBITDA, as you showed, you seem to be on track. This would mean, you know, going back to margin similar to 30% roughly, which is similar to pre-pandemic levels. Is it fair to say that from 2024 onwards, EBITDA should be primarily driven by revenue growth as opposed to margin expansion, or do you see it otherwise? Thank you very much. I'll take the first and the third, and I'll let Alex Malfitani, you know, talk about the ASK. Again, the shares will be issued, right? You know, we believe that the market will trade based on our fundamentals. If you calculate the value of Azul shares, you know, as the market has always calculated, right, using the EBITDA, which we will deliver, and using a more conservative multiple than we've always had, you know, the shares will be converted and no additional shares need to be issued, right? There isn't a chance that the, you know, that this becomes shares and additional debt, right? You know, we're essentially committing to making our lessors whole. One way or another, through debt, through a combination of debt plus cash, through the combination of, you know, equity plus cash plus debt, they're going to get, you know, $1.00 on the dollar, roughly. If you assume that they don't get the equity, they're going to get, you know, debt or cash, but then you don't get the dilution, right? When you're calculating your share price, you can include the debt as it was originally. Whatever the lessors gave up, they're gonna be made whole. The number of share count that we're using, which is north of 500 million in our kind of pro forma calculation, would be a lot lower than that. You're going to get. It's kind of a circular reference. If you do it either way, using it as fully as debt or using it fully as equity, you're gonna get to a share price over BRL 30 one way or another, as long as you don't double count, which I know you're not going to, right? Just to kinda highlight that if you don't consider this equity and you consider it as debt, right? You're going to have a reduced equity value for Azul, but you're also gonna have a lower number of outstanding shares, and you're essentially gonna get to the same number of shares, which is why we're confident that this goes back to BRL 36 per share, and we pay our lessors in full using the shares. Bruno, remember, this is through 2027, a few million shares per quarter, and to the extent that the stock doesn't hit that, you know, let's say it comes up, oh, the stock is R$30 as opposed to R$36. Big disappointment, obviously, for our equity holders. You're talking about a very minimal adjustment there overall. Yeah. As we showed you, right? The first kind of vesting period is about 3 million shares. If we're short by BRL six, we're talking about BRL 18 million, you know, out of a company that at that point is gonna be, you know, north of BRL 20 billion in revenue, right? You know, probably not a material number. The fact that this has been distributed over 14 quarterly installments gives us a lot of confidence. By the time you get to 2027, right? You're probably having the opposite problem, where, you know, with the EBITDA that we're going to generate in those years, you know, you will see a share price much higher than BRL 36, and then you're gonna compensate for whatever shortfall you have in the beginning, if you have any shortfall, right? You know, the assumption that we would pay more than what we always, if the shares never trade based on fundamentals for the next four and a half years, right? Which is very unlikely, right? It's not impossible. Let me talk about on the margin and then turn it over to Abhi. Yeah, you're right. I mean, we're gonna be in the kinda high twenties in terms of EBITDA margin. Our best year was 2019 with 31.6% EBITDA margin. You know, we believe that we will get back to those margin levels, but we believe that we should do better, and the whole industry should do better. When you talk about cash flow generation, when you calculate the amount of cash that we generated in 2019, and just to remind everyone, we were free cash flow positive in 2019. To come, you know, to generate the same amount of cash with the real at 3.90, which was where it was in 2019, you need higher margins to generate the same amount of cash with the real at 4.90, where it is today, right? Hopefully, the whole industry is thinking that way, that it's not enough to just go back to the pre-COVID margins. The real is weaker, we also need higher margins, right? When we do our five-year kind of plan and our valuation based on discounted cash flow, yes, we get back to that margin and we get above that margin. You know, I'm not gonna say we're gonna get to a 40% margin, but once we get there, obviously, we're not gonna kind of rest on our laurels and give up. The first order of business is to get back to that pre-COVID margin and then to continue expanding beyond that. Bruno, just to remind you, the entire Azul business is 76% larger than it was in 2019. TudoAzul is two times as big. You know, our packaging business, four times as big. Our cargo business, two and a half times as big. We also have Congonhas that we didn't have previously. We also have more next-gen aircraft in our fleet as we move forward over the next couple of years as well. Margin expansion should come through those highly profitable business units, adding our new Azul TecOps business unit, as well as the next-gen aircraft kind of taking place. You know, we still fly 50 E1s in our fleet today, right? You know, think about what that looks like when those 50 E1s come out and are replaced with 50 E2s in the coming years. Yeah. Bruno, just a final point. In terms of 2024 capacity and beyond, you can consider something around high single digits, you know, 8%-10% capacity growth kind of, 2024 and beyond. The philosophy on unit revenue is similar to what we have right now, which is, stable, steady unit revenues. You know, the industry overall is at a new level compared to pre-pandemic, 35% plus. It's maintained very steady the last four quarters. I expect that to continue this year, apart from seasonality. As an industry, we're not giving that back. We should not be giving that back. Our philosophy certainly is not to give that back and, use the efficiencies that John mentioned to increase earnings and increase margins. The capacity growth that Abhi mentioned is consistent with what I mentioned in terms of the fleet growth, right? The fleet is almost not growing at all, maybe, you know, couple of aircraft here and there per year. Because we are shedding smaller aircraft and bringing in next-gen aircraft with higher seat count, you know, which is what we call the upgauging, right? That's where the ASK growth comes from. It's very low-risk growth because these seats are coming in at a negative cost, and we are deploying those seats in Azul markets, right? Not using that to steal share from other competitors. If we grow more than the other competitors, obviously our market share will grow, but that's just a mathematical construct, right? You need to distribute 100% of market share across all players. If we grow more than, the other guys that, you know, we will increase market share. We, you know, the plan here is to grow in Azul markets, stimulate Azul markets using our fleet transformation. Thank you. Can you just clarify, Abhi, please, you know, the 8%-10%, especially in 2024, is it evenly split between domestic and international, or is international still growing more, kind of recovering from, you know, the pandemic still? Starting in 2024, international will be more stable. The reason it's growing so much more now in 2023 is because we are recovering our international network. We'll actually be larger by the end of this year. You have a little bit of full year effect in 2024. From that point on, it'll be more stable. Thank you very much. Just one final follow-up. Sorry for so many questions. Alex, on your initial remarks, you commented on several scenarios, but, you know, is it possible to, you know, to let us know roughly what would be the amount of debt or cash needed to settle the liability if shares are not issued? Just for reference. I agree this is maybe, you know, a too pessimistic scenario, but just so we have the scenarios in mind. I mean, you have the vesting, you know, the number of shares that vest every quarter, and that's the calculation, right? The number of shares times the, you know, the surplus or the deficit against the 36. Okay. Thank you. The next question comes from Michael Linenberg, sell-side analyst from Deutsche Bank. We will open your audio so that you can ask a question. Michael, please proceed. Yeah. Can you guys hear me? Yeah. Hi. Hey, guys. Just a couple here. By the way, you know, congrats on getting through this process here. Just in the release that you put out, the separate release that has the notes, BRL 2.3 billion. I know it was a 40-60 split, and maybe it's a rounding error, but it looks like that it maybe is more like 43, 57 just based on that number there. That could be rounding. It looks like it's a little bit more debt than what we thought and a little bit less equity, which is, which is fine. Yeah. I think the way is, you know, some of this depends on kind of how you're calculating the present value of the lease payments, right? Because essentially The lessors weren't gonna get all of the, you know, 5 billion reais plus today, right? They would get that across, you know, up to 12 years, right? So what they are giving up, what they're contributing to the plan has been calculated back using a PV. Then, you know, that has been given back to them on a note and equity. You know, the equity has a floor and a cap, so that kind of all plays into it. We did calculate using 40-60, but when you calculate the way you do it, Mike, it may end up slightly different just because of the present value calculation. Yeah. It's small. As we think about, you know, the next phase, you know, I think Alex and John, you both sort of said, you know, we get the sense it's the next few weeks, maybe by mid-June we're actually done. What? From an equity holder perspective, should we anticipate additional dilution or? You know, I know you've talked about, you know, some of your assets and your collateral and maybe that's the equity component that ties to this next round of negotiations. Yeah. You know, Mike, I think it's really important the dilution has happened via the lessor deal, right? That's the way that our shareholders have contributed here. Just to remind you, we have TudoAzul, we have Azul Viagens, our packaging business, we have our cargo business. Those are all kind of unencumbered assets. The idea is, once complete, we will raise some new debt using TudoAzul, right? That new debt, and it's important to sequence it, right? Get the lessors done, get the bondholders done, and then kind of raise the new capital to strengthen the balance sheet even further. There's no, especially given these equity prices, Mike, there's no intent to issue equity at these levels because we think we're a third of where we should be trading at a 6.5x multiple, right? I think as we migrate up, as you go into 2024 and beyond, you know, the stock should be significantly better than where it is today. I think we did this the right way. We got through the pandemic with those assets, you know, at our disposal to be able to use, to raise, to raise debt at the right price levels. You know, obviously getting the lessors was very important. Kind of rolling the 24s and the 26s is the next step that we'll be doing, then bringing in the new cash. Then we're off to the races, right? I think that, you know, we're feeling very good about where we are today and about the progress because it's been a good, healthy process that's been amicable across the board, right. All lessors working with us, bondholders giving us their feedback and what they think is appropriate, right. Also kind of looking at these great assets that we have still at our disposal to use to raise cash. Okay. Good. Very good. Then just two non-restructuring questions. Did I see that you guys renewed your deal with United? Maybe I did see that. What were the changes, if any, in the term of the deal, et cetera? Yeah. Yeah. Hey, Mike, I know, we just put out a note, saying we expanded the codeshare. Our commercial agreements continue with United, we expanded the codeshare to include more cities that they fly, from Orlando and from Fort Lauderdale. That was the note that went out. Yeah. Okay. Okay, that's good. Just Abhi, since I have you, just one other. The new Congonhas service, the ramp up, presumably it's RASK accretive. How is it on a margin basis? Is it margin accretive? I know you're ramping up, you added a bunch of new service, you know, historically those tend to be some of the higher yield markets out there. Any color that you could give on that? Thanks for taking my question. Yeah. Thanks, Mike. We expect them to be margin accretive once ramped up, and especially once we begin the second half seasonality. Okay. We're still in April with Easter, had a bunch of holidays. Yeah, Yep. Our expectation and, you know, from what we know of the other markets we find Congonhas and Congonhas demographics in general, is that this is definitely margin accretive, and we expect that to happen through the year. Again, just having so many new people fly the services is great because they're signing up for the credit card, our loyalty program and flying internationally with us as well. But just by itself, yes, margin accretive. Very good. Thanks, everyone. Thanks, Mike. Moving on to the next question. Will come from, Victor Mizusaki from Bradesco BBI. We will open your audio so that you can ask your question. Victor, can you please proceed? Hi, congrats on the restructuring. I have two questions here. The first one, John, you just mentioned to me about the bonds and, I mean, in this case, we can see that you closed a deal with the lessors and this new bond you pay 7.5% per year. Is there any kind of collateral that you need to grant to these lessors? Can you say that basically you are anchoring the negotiations with the bondholders for the 2024 and the 2026? My second question, thinking about the guidance for this year, what are you assuming for the first? I mean, do assume that these tax benefit will be approved in the... will pass in the Congress, or basically you determine it in May? Thank you. Victor, just quickly, the 7.5% is unsecured to the lessors, right? We still have that collateral out there. The 24s and the 26s, there is some security we're in discussions with them on, right? I think that that's a positive thing to help get the rate down overall. As far as the 2023 guidance of BRL 5.5 billion, we're very confident that the fiscal fees tax will pass, but it's not in our current guidance. It was only for the first 5 months of this year. However, we may have positive news in that regard in the next 10 days, you know, which could be very beneficial as well. Okay. Thank you. Moving on to the next question. It will come from Daniel McKenzie, sell-side analyst, Seaport Global. We will open your audio so that you can ask your question, Daniel. Please proceed. We can't hear you, Dan. Okay. Let's move on to the next question. The next question will come from Stephen Trent, sell-side analyst from Citi. Jay, we're going to ask your question. We're gonna open your line so that you can ask a question. Can you please proceed? Sounds good. Yeah. My first question is regarding the most recent upgrade of your agreement with United. Do you see any possibility to adjust these agreements further with others such as JetBlue? As a follow-up, can you tell us a little bit more about how your demand patterns compare with 2019, and if they're different in how you view these adjustments as temporary or structural? Thanks again. Yeah. Hi. Thanks so much for the question, Jay. Currently, together with United and JetBlue, we've been slowly expanding our network into the United States. Actually, we have a really broad network with these two partners. In total, via our gateways in Orlando and Fort Lauderdale, we now can connect to 27 destinations in the U.S. and additional eight in the Caribbean. That, obviously with all the major cities, US domestic, with a mix of JetBlue and United, via Orlando and Fort Lauderdale. We serve those cities in multiple origins here in Brazil, our hub in São Paulo, Recife, Belo Horizonte, Manaus and Belém as well. A really broad network into the U.S. and then 35 destinations with our partners in the U.S. .In addition, we also connect to 24 European cities via our partnership with TAP in Lisbon. We're really able to provide great connectivity with our partners. In terms of demand patterns, overall, average fares are higher, you know, as we've seen in the unit revenue performance. This is not just pent-up demand, as was, you know, initially thought in the initial pandemic or even the post Omicron recovery. The last Q1, we've seen RAS basically between BRL 0.41 and BRL 0.42. That shows very consistent unit revenue performance. Corporate revenue is above 2019 levels, between 30%-35% above. Large corporates, a little bit below, but one demand pattern that's changed that's very interesting is groups revenue. Groups, meetings, conventions revenue is more than double what we've seen before. Small and medium businesses are up very strong as well. From a customer behavior, we are seeing average, let's say, purchase size increasing. People are taking one extra person with them on their trips, sort of a little bit of a mix of business and leisure, personal. In general, we are 76% larger in terms of revenue right now than we were in the 1st quarter of 2019. I looked across many airlines across the world, and I couldn't find anybody else that was 76% larger. This is really robust, sustained revenue performance. Thanks so much. Yeah. We will open the audio so that Daniel McKenzie, Sell-Side Analyst from Seaport Global, can ask his question. Please, Daniel, proceed. Yeah. Hey, can you guys hear me this time? Yes. Hey, Dan. Oh, yeah. Okay, great. Sorry about that. You know, my question was, you know, you did talk about unsecured assets. That was my initial question, you know, big picture, what's the collective value of those unsecured assets? Just on TudoAzul, what% of EBITDA was TudoAzul in 2022, and how much capital would you like to raise ultimately here? Hey, Dan. We mentioned at our last call, we had our unencumbered assets appraised, TudoAzul, Azul Viagens, Azul Cargo, and our brand. Collectively, they were valued at about R$25 billion, right? A little over $5 billion. You know, we're working with advisors to try to structure this. We want to use some of those unencumbered assets to renegotiate our convertible debenture and to raise new money and also to get some additional time on the 2024 and 2026 senior notes, right? It's essentially extending them. Also keep some of our assets unencumbered too for a rainy day, right? We don't wanna encumber everything because I think the main objective here is just to de-risk the company. You know, as we've been mentioning on this call, the business is doing great, right? We are focused on, you know, generating cash going forward and de-risking, right? The idea is to not encumber everything. We'll provide that detail over time as we, as we get there. The idea is to not encumber everything, and we want to use the assets that we do encumber to, you know, cover all of what I mentioned, right? The new capital that we want to raise with a secured note, no equity, renegotiate our convertible debentures and extend our 2024 and 2026 notes. Okay. That's terrific. Alex, you know, you talked about the current revenue environment. You know, pricing today is pretty strong. For those of us that track pricing, if the Brazilian real continues to strengthen, should we expect fares to fall somewhat? Usually there has been, or at least historically, there's been a link, you know, between the, you know, the Brazilian real and pricing. Yeah. Hey, Dan. You know, I think that that link is more a second-order effect. I don't see the industry, you know, doing it just 'cause. I think that it's more linked to capacity. If I look at capacity in the system for the Brazilian industry today, it's pretty well disciplined. I don't see a lot of new capacity coming in. You know, we've given our number today around 6% domestic growth. You know, Gol Latam have their guidance out as well. You can do the math, and the industry overall domestically is growing about 4%-5% versus 2019. We're talking 4 years ago, right? The capacities environment, I think, is actually very constructive for the industry to maintain these unit revenues. I think that as currency, you know, strengthens or fuel continues to come down, as long as the capacity situation remains disciplined, which from what I can see today will continue to be disciplined, that should not affect unit revenue. You know, Dan, one other thing too is if you take a look at the industry in Brazil and our competitors, everybody's cost of capital is significantly higher today than it was in 2019. Everybody needs high fares, right? We have two of our closest competitors that need to get listed in New York over the next coming years, and I think it's gonna be important for them to show positive results, and I think that's good overall for industry discipline across the board. Yeah. That's terrific. Thanks so much, you guys. Thanks, Dan. The next question comes from Chris Stathoulopoulos, sell side analyst, TD Cowen. We will open your audio so that you can ask your question, Chris. Please proceed. Yeah, good morning, guys. Thanks. I just wonder if you could give me a little bit of insight into the forward-looking competition and capacity on the various routes you serve. And the rest of my question has been answered. Thank you very much. Yeah. Hi, Chris. We continue to have a very different network. We haven't seen significant changes in market overlap over time. In fact, they've actually reduced, which I think is a sign of a healthy industry dynamic overall. I think airlines are focusing where they are strong and what makes them strong. Our network by nature is different. you know, we are alone in 80% of routes that we serve, a leadership position in over 90% of the routes that we serve. Again, I think that discipline is good overall and the industry realizes that. I don't envision, I don't see, I haven't seen, frankly, any major changes to the market overlap or to the industry dynamic from a capacity. I don't see anybody trying to attack somebody else or enter into a hub or anything like that. I think airlines are focusing where they are strong. Great. Thank you very much. Appreciate it. The next question comes from Rogério Araújo, sell side analyst, Bank of America. We will open your audio so that you can ask your question, Rogério. Please proceed. Yeah. Hi, gentlemen. Thanks a lot for the opportunity. I have a few follow-ups on the restructuring. One is, you talked about a liability that is gonna be recognized. I think this is linked to the equity instrument. My question is, how is this gonna be calculated? Is there gonna be a market-to-market effect on that every quarter? Is there a starting point of how much this is gonna be recognized in the next quarter or so when the deal is concluded? Then another one on the BRL 36 per share conversion price. Is there any adjustment rate to it into 2027, or this is a fixed BRL 36 per share? Lastly, on a confirmation, you talked about several conditions on this restructuring. One of them is new capital raise. This can be a debt, correct? I think you talked about Azul as a collateral on raising new debt. This is a new debt already fulfills this new capital raise condition? Thank you very much. Yeah. Yeah. Rogério, under IFRS, unless, you know, the amount of shares is completely fixed, and predetermined, you need to recognize the whole structure as a liability, right? It'll be easy for you to look at the amount. You know, it will be essentially what the lessors have given up on the equity side, so essentially the 60%. If you include that as a debt, again, you don't include the 90 million shares that are going to be issued. You know, the way we see it is, if you do the calculation, you know, not including that debt and including the 90 million shares in your total shares outstanding, you're gonna get something higher than 36. Therefore, you know, there is no adjustment and the equity instrument will be equity as designed, right? It will be either equity or debt. In the balance sheet, until that amount is determined, it will show up as one specific line on the balance sheet. Kind of similar to the convertible debenture that we have maturing in 2025, right? If you include that as debt, then you don't include it in the number of outstanding shares. If you do include it in the number of outstanding shares, then you disregard the debt component on the balance sheet, right? The 36 on the floor, there's no adjustment going forward. You're right on the new money. As we mentioned, it will be a secured note, essentially based on TudoAzul as collateral with no equity component. Very clear, Alex. Thanks very much. Have a great one. Thank you. Thanks, Rogério. This ends our Q&A session. We will now have our final remarks. Thank you for joining us today. Obviously a lot to digest, a lot of information. We'll be available to take any of your questions offline. We're excited about what we have. This significantly improves our cash flow over the coming years and, you know, Azul is back to the races. Thanks, everybody. Thank you. This concludes Azul's audio conference call for today. Thank you very much for your participation. Have a great day.