Hello, everyone, and welcome all to Azul's Second Quarter 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 listen-only mode until we conduct a Q&A session following the company's presentation. If you have a question, 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 your microphone on and 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, Thais, proceed. Thank you, Zach, and welcome all to Azul's second quarter 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 John Rodgerson, CEO, David Neeleman, Azul's founder and chairman, Abhi Shah, President of Azul, and Alex Malfitani, our CFO. Before I turn the call over to John, I'd 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 subject to uncertainties and risks that are discussed in detail in our CVM and SEC filings. Also, 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 John. Thanks, Thais. Welcome, everyone, and thanks for joining us for our Second Quarter Earnings Call. First, I would like to express our solidarity with the families, loved ones, and the crew members affected by the aviation tragedy that occurred in Brazil on Friday. Aviation safety is number one in everything that we do, and as an industry, we always come together in times of need. We offer them our condolences and support and our prayers during this very difficult time. I would also like to thank our crew members for all their hard work during the second quarter. Our strong culture was essential as we successfully navigated a challenging combination of seasonality, fleet, high fuel, and currency devaluation, combined with the devastating floods in the south of Brazil, all of which made this an especially difficult quarter. I'm incredibly proud of our entire team for how quickly we adapted to the changing conditions, implemented initiatives, and delivered what I think is an industry-leading result. On slide 3, we summarize the results for the quarter. Our revenue was BRL 4.2 billion, with a RASK of 38.22 cents. Unit costs reduced 1.8%, even with fuel prices up compared to last year, and the devaluation of the Brazilian real against the dollar. Most importantly, our EBITDA was BRL 1.1 billion, and our EBIT was BRL 441 million, representing a margin of 25.2% and 10.6% respectively. As I look around the world, even with all the challenges we face, this is a strong result. The key was our ability to adapt, and this is something we will talk a lot more about in this presentation. Moving to slide 4, I wanted to provide an update and context on what happened in Rio Grande do Sul and how it impacted our results. As we mentioned on our last call, the state of Rio Grande do Sul was impacted in early May by severe flooding. We were deeply saddened by the loss of lives, displacement of people, and widespread destruction in the region. Once again, our crew members and our clients stepped up, contributing over 3,000 tons in donations, which we delivered quickly to those who needed them most. The main airport in Porto Alegre remains closed. The good news, however, is that it will now partially reopen on October 21st. Last Friday, we opened sales to that airport, and we will be the largest airline again, with 60 daily operations, almost 80% of our capacity pre-floods. For those who don't know, Rio Grande do Sul is the fourth-largest state in Brazil in terms of economic activity and represented over 10% of our total capacity. The relevance to us is equivalent to the relevance of Los Angeles for a major U.S. airline. As a result, we estimate that the reduction in our capacity in that region negatively impacted our second quarter results by at least BRL 200 million, and had an even bigger impact to cash when including the impact to ATL and the loss of forward bookings. On Slide 5, you can see the rapid devaluation of the Brazilian Real in 2024. End-of-period exchange rate in the second quarter devalued 12% versus the first quarter, while at the same time, fuel prices increased 2.4%. The combination of these negative effects required us to rapidly adapt during the quarter. For example, we quickly redeployed the capacity from Porto Alegre to other cities in our network. While we were forced to sell this capacity quickly at a lower quality than we would have liked, we still were able to mitigate part of the EBITDA impact. Turning to slide six, our business units were very instrumental in our ability to adapt. We are extremely proud of the performance of our business units, which accounted for more than 20% of our RASK and over 30% of our EBITDA. Azul Fidelidade, our loyalty program, delivered strong results with all-time records in members, gross billings, and active credit card sales, highlighting our customers' preference in Azul. Azul Viagens, our vacations packaging business, grew 63% in gross bookings in the second quarter versus second quarter 2023. Our logistics business grew 12% quarter-over-quarter. In total, Azul's revenue was 60% above 2019 levels on an airline that is roughly 35% larger. Looking ahead to the rest of the year, we are very encouraged by the normalization of demand and capacity and the favorable seasonality, with positive bookings and average fares. ... plus additional revenue initiatives we are putting in place. To give you further details, I will now turn it over to Abhi. Thanks, John. Let me start by talking about recent trends in bookings, because as we all know, good bookings will always lead to good flow and revenue. As you can see on slide 7, we are seeing significantly improved average fares since the beginning of the quarter, and even better since the bottom in mid-May. The closure of Porto Alegre had three major impacts to our revenue. First, a demand shock, where 10% was immediately lost, not just to the routes to and from Porto Alegre, but also the network contribution from the largest city in the fourth-largest state in Brazil. We also believe that the damage caused by the floods affected demand throughout the system, further deepening the weak seasonality in 2Q. Finally, we had to rapidly reallocate this capacity in the months of May and June to other parts of our network and sell this capacity quickly with little advance notice. As John already mentioned, this resulted in lower quality revenue, but still mitigated a good part of the EBITDA impact. On Slide 8, you can see the tangible positive results from the improving fare and demand environment. Comparing 2Q RASK to what we just flew in July, RASK has improved a very strong 15%. On a year-over-year basis, while 2Q was down 5% in RASK, July was actually up 5% versus last year. This clearly indicates that the demand environment is improving faster than seasonality, and the market is showing signs of strength. The July trend continues in August and beyond, as we see stronger booking curves for the rest of the year. These booking curves are supported by the strong economic indicators here in Brazil. Contrary to what some are seeing in the U.S., where there are some signs of reduced consumer demand, Brazil indicators like GDP, unemployment, are strong, and this gives us further confidence as we look to demand for the second half of the year. Moving to Slide 9, I want to talk about our international network and the challenges we faced during the quarter. As we migrated from the exit of the A350s earlier this year, our plan was to add six A330 aircraft as replacements. This transition resulted in a temporary reduction in our 2Q network. Due to the global fleet challenges, aircraft we had planned to enter into service in 2Q were moved to 3Q. As a result, we had to significantly cancel down almost half, as you can see, our international long-haul flights. This created a large volume of customers we had to re-accommodate on our own flights, blocking those seats for sale. This had a big impact on our bookings and our flow unit revenue, as we were not able to sell those closer in higher yielding fares. The very good news is that we are now beyond those effects, and looking ahead, we see a 50% growth in our international long-haul capacity. This will have a very significant positive impact in bookings and fares. Finally, on Slide 10, I wanted to show a longer-term view that demonstrates the resiliency in our business and our ability to recapture cost increases from unfavorable macro drivers. As David will explain later on, this is all because we are true to our model as we have grown over the years. A good part of our expenses and financing is dollar-denominated, and that creates some uncertainty when the Brazilian real devalues. Given our financial structure, a 5% increase in the dollar requires only a 3% increase in fares to offset the impact on expenses and cash. But looking all the way back to 2018, while the dollar has increased about 5% a year, our average fares have increased much more than the required 3%. They grew at a CAGR of 8%, and this has happened even as Azul has doubled in capacity. The point here is to show that 100% of our revenue can be thought of in dollars, because we have the ability to overcome the effects of currency. It does take some time to realize the effects of this revenue recapture, and during that time, you will see some negative impact. But over the long term, we are able to expand our margins, continue to grow, and offset these effects. As John mentioned in his opening, the key to this quarter and our long-term success has been our ability to adapt. The recent challenges have encouraged us to do so again, and so now I would like to turn it over to David, who can talk about his vision on how Azul continues its growth trajectory. David? Thank you, Abhi. First, as someone who's been in the industry for 40 years and part of six airlines, I'm deeply saddened by the tragic events of Friday. My heart and prayers go to the families and crew members, and of course, we will do everything we can to provide support during this difficult time. As we went through the quarter and realized that the new exchange rate, the realities of the new exchange rate, it became clear to me that Azul once again had to adapt, something we have done incredibly well as we have navigated the last 15 years. Slide 10 gives you a summary of just how much the environment has changed throughout the years, yet how consistent our growth in revenue and earnings have been. We launched Azul 15 years ago with a single fleet type, aiming to serve regional destinations in Brazil. We soon realized that the opportunity was much larger, and we expanded that strategy via fleet diversification, a merger and our expansion into international travel. At the same time, we diversified our business with high growth and high yield, high margin business units like loyalty, vacations, and logistics. Most recently, our response to the pandemic and our capital optimization plan was another clear example of our ability to evolve and adapt. From BRL 1.67 to the U.S. dollar, to almost BRL 6 to the U.S. dollar. From a fuel price of BRL 2 per liter to BRL 5 per liter, and we can count at least six major evolutions in our business, and the bottom line is, through it all, we have continued to grow and to be more profitable. Turning to slide 12, you can see the core elements of our resiliency and growth. Our network is the foundation of our structural and long-term competitive advantages. We continue to be the only carrier in 84% of our routes. This is a direct result of our fleet flexibility, where we put the right aircraft on the right market at the right time. We have more than doubled in size over the past several years, always staying true to our business model. Our business units, as I mentioned, have played a critical role in powering our growth, while our team has done an incredible job of maintaining the special culture and passion amongst our more than 15,000 crew members. Our history shows a clear and key trend of evolution and improvement. Building upon the successful completion of our capital optimization plan last year, the team was able to turn focus 100% back to the business. To maintain this, once we realized the external factors affecting Q2, I challenged the team to an annual target of more than $1 billion in incremental value. As we show on slide 13, the team developed and started implementing a plan which we named Elevate. With multiple opportunities across revenue, cost, fleet, and financing, that once again allows us all to continue to adapt and thrive for many years to come. With that, I want to turn the call over to Alex to give more details on our Elevate plan. Thanks, David. As David said, the Elevate plan we are announcing today is a natural extension of the work we did last year to optimize our capital structure. As we said then, we're now able to focus 100% on our business, and the Elevate plan galvanizes that focus across the entire company. I'm really excited about this opportunity and at the early results we are seeing. Slide 14 illustrates some of the multiple opportunities we are already working on the revenue side. A main one, of course, is the code share with GOL. We're now jointly selling about 150 origins and destinations that connect the two networks. These connections provide increased options and convenience to all of our customers. We started selling the codeshare in July, so are only in the beginning, but we're very happy with the early results, and I want to thank our partners, GOL. Ancillary revenues are another area of growth and focus. For the month of July, we hit a record in ancillary revenues, with a 17% increase in revenue per passenger versus July 2023. I especially want to thank our airport crew members who are selling double what they sold a year ago. Our business units continue to be a key driver of revenue expansion. On the loyalty side, direct point sales to our customers, enabled by our credit card, our club, and our buy points product, are now our largest source of revenue, providing dependable, recurring cash flows. On the vacation side, we are creatively using idle capacity available off-peak, not only on weekends, but also on weekdays, to provide expanded customer choice and flexibility. This was one of the reasons that our vacation business grew more than 60% in a quarter. Finally, as Abhi mentioned, the recovery and growth in our international network is a key driver of earnings and cash generation going forward. On slide 15, turning to the cost side, we see some really exciting opportunities in fleet, utilization, efficiency, productivity, and purchasing. These will all allow us to reduce costs, utilize our resources more effectively, and generate more cash. Let me share some examples in the next slides. On slide 16, I want to highlight one of the key initiatives to further expand margins this year, our aircraft utilization. We were already increasing utilization across the operation, but in late June, we decided to make a structural change by implementing a reduction in ground times across our network. Such reduction of between 5 and 15 minutes for every aircraft turn allows aircraft to be in the air longer, generating more capacity, and therefore improving earnings. The team immediately jumped to the task and developed a series of operational process changes that allowed us to safely implement this ground time reduction, and most importantly, maintain the quality of our operation. This new network is already operating, and I want to really thank the entire Azul team for their incredible work. So far this month, we have a 99.2 completion factor with an on-time performance of 87.2%, the best in Brazil. On slide 17, you can see another great example of opportunities on the fleet side, which is our move from E1s into E2s. Now, we ended 2Q with approximately 83% of our capacity coming from next generation aircraft, considerably higher than any competitor in the region. This is extremely beneficial, as the E2 is a much more profitable aircraft that flies more hours per day with much lower seat costs. In July, for example, our E2s flew an average of almost 12 hours per day.... Plus, the E2 has 18 more seats and delivers 18% lower fuel burn in total than the E1, leading to a 26% reduction in cost per seat. As we expect to receive another 15 E2s over the next 18 months, this difference in utilization and seat costs will significantly drive earnings growth. But we want to further expand this advantage, and we have made the decision to reduce utilization of the E1s and increase utilization of E2s, by prioritizing the E2 as the scheduled aircraft type and use E1s as a spare, leveraging the commonalities across the two models, but increasing profitability and also reducing CapEx, significantly improving cash. I also want to show how our focus on efficiency and productivity has yielded significant results already. On slide 18, you can see that just within a period of four months, we are 17% more efficient at airports, and the company overall is generating 16% more ASK per FTE. These levels of productivity will improve further as we continue our growth into the seasonally stronger Q3 and Q4. Summarizing these actions on slide 19, compared to 2Q 2023, CASK ex-fuel reduced almost 3%, mainly driven by our cost reduction initiatives and productivity gains. We made a promise to you that we would emerge from the pandemic as a more efficient airline, and that is exactly what we're doing. These are just some examples. As part of our Elevate Plan, we have a list of over 40 initiatives spread across the entire airline, and this plan will be our number one priority for the entire company as we move forward. Putting all this together, on slide 20, you can see how throughout the years, our EBITDA trajectory has exhibited strong and consistent growth, obviously excluding the pandemic. For 2024, we expect an EBITDA of over BRL 6 billion, a 17% increase from 2023, and once again, an all-time record for the airline. To wrap up, on slide 21, I couldn't be prouder of being a part of Azul. We're running an incredible, incredible operation. Our customers love to fly us, and our crew members love to work for us. As David noted, we have adapted and evolved many times over the years, but have remained true to our essence. Everything we do is to build a stronger Azul and to expand our competitive advantages, benefiting all of our multiple stakeholders. Our Elevate Plan is another step in this direction. We're truly excited by the opportunities ahead of us. With that, we're all available to answer your questions, so I'll 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, click on the Q&A icon at the bottom of the 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 nine to join the queue and six to accept the audio when requested. Let's then move on to our first question. Our first question comes from Fernanda Recchia, Sell-Side Analyst, BTG. Fernanda, we will open your audio so that you can ask your question. Please proceed. Thank you, and good morning, everyone. Thank you for taking my questions. Two from our side. The first, I would like to get an update on the debt conversion terms. If I'm not mistaken, the lock-up period for the debt conversion expires now in Q3, so maybe if you could comment a little bit, how are you thinking to tackle the 3 million shares that are expected to be vested by the lessors? We know that there is a difference between the strike price and the current price that the stock is. So maybe, guys, if you could comment what are the alternatives that you're thinking of, or if you're thinking on using cash to close this gap? This is my first one. And the second, regarding the supply chain issues that led for the guidance downward revision in terms of ASM, could you update us on the latest fleet plan that you have for this year and the next? If I'm not mistaken, you were expecting to finish to receive around 12 E2 and around two Airbus A320. What is the latest? And if you could comment on next year, how are you thinking on the aircraft deliveries? That's it from my side. Thank you. Thanks, Fernanda. This is Alex. I'll talk about the, what we call the lessor equity structure. You know, just to remind everyone, first on the call, what that is, right? So this is essentially COVID deferrals that our lessors agreed to transform into essentially what's, you know, interest-free debt, where Azul has the option of, you know, paying in cash or equity, right? And then, if there are shifting conditions that, you know, it may not be a good idea to pay in cash or equity, we always have the ability to talk to our lessors and negotiate new terms, right? And that's essentially what we're doing. We're in bilateral conversations with our lessors. You know, and, you know, we always like to remind everyone also of, you know, the relationship that we have with our lessors, right? Lessors are partners who have a very long-term relationship with the airline, and they look at a very long-term horizon. And for them to maximize their economic value, obviously, you know, they need a thriving business, right? So we always are able to kind of come up with a construct that works for us, but also works for them. Obviously, they have their own constraints as well, but, you know, they were able to—we were able to count on their support last year, and we know that we can count on their support going forward as well. So we are in these bilateral conversations with our lessors, and as we reach, you know, new terms with them, we'll update you all. But as you've seen, we have not issued shares, and so we are having these conversations, and we'll update you over time. And again, as Alex said, they're partners, they're partners in this business, and they've seen what's happened. I don't think anybody expected the exchange rate to devalue 12% inside of a quarter. I've been here for 15 years, we've never seen that. And so as all partners do, you sit down at the table, and we work through it and figure out what's the best path forward. As for the fleet projections and the OEM delays, I'll pass it over to Abhi. Thanks, John. Yeah, hi, Fernanda. So I'll start with the A320s. We've already received the A320s we were going to for the year, so Airbus has delivered for this year. On the wide-bodies, as we said, our plan was six A330s. Two are already in the fleet. We expect two more in September, and then we expect the final two between December and January, in that timeframe. As you said, the focus is on the E2s for this year and for the next couple of years, actually. We are working very, very closely with Embraer. The number is moving around a little bit. For example, in September, we have two deliveries, and then down the road every month, August and beyond. So, I would say we're working with them. It is moving around a little bit to the right as well. This is one of the impacts for this year. You will see some deliveries in December, for example, which will help us next year. So overall, I would say around 15-18 between now and the end of next year. I think it's also important, a lot of the OEM deliveries are back and loaded, you know, so that actually impacts leverage at the end of the year, as well as kind of what's happening with the exchange rate. But, on average, they've been shifting 30-45 days to the right. Perfect. Thank you very much for your answers. Thank you. The next question now comes from Savi Syth, Raymond James, from Raymond James. Savi, we're gonna open your audio so that you can ask your question. Please proceed. All right. Thank you. Good morning, everyone. I was curious for my first question on the flooding and the BRL 200 million impact in the second quarter. Was that net of redirecting of capacity? What I'm trying to do is to understand what kind of drag we should be modeling here, until it kind of opens back up in the fourth quarter. Yeah, Savi, that was net, and also, it doesn't really include the fact that we had to sell the other capacities so quickly, which contributed to the reduction in year-over-year RASK as well. So certainly, as we move forward, now that we have a little bit more time, you can already see how much July improved. August, September, and October, when the capacity comes back, we certainly expect to be back to normalized RASKs, and actually, I expect positive year-over-year RASKs, in 3Q as well. So we're certainly getting back to normal, but it was just something we had to sell very, very quickly, so we were able to use our assets, so the back half of May and the month of June. We actually believe operating at Porto Alegre and being the largest airline will be a benefit to us going forward, as there's enormous amount of economic activity projected in the city to rebuild it. And so, you know, right now, there's about seven flights a day into a military base in Porto Alegre, when previously there was 120 flights a day at the airport. So there's just not people traveling in that region right now. That's super helpful. And if I might, on the just to follow up on the previous kind of fleet question, is there no kind of A320 deliveries next year? And just along the lines of fleet, I think that was kind of an agreement with BNDES on financing. I was curious, you know, how that financing looks, and I'm guessing that's for the E2s. Yeah, so we're not planning A320 deliveries next year. They've been pushed off for 2026 and beyond. And actually now it's mostly A321s, to be honest, which we're very excited about that aircraft. Not the LR, XLR, just the domestic ones, which are doing very well. But the next two years, really the focus is gonna be on the E2s, where the back half of this year and the next 18 months, the focus is gonna be on the E2s. Yeah, and the BNDES financing is, kind of, standard ECA financing, right? That's available to, Embraer customers. This is... The terms are set by the, Aircraft Sector Understanding, so they're, you know, pretty standard. And, we have, approval for up to 10 aircraft, and we've decided to take two for now. The majority of the E2s that we expect to take delivery of should be operating leases and will not, you know, provide additional cash outflows. And these two, also the reason why we took them is because we were able to structure in a way that also didn't provide, cash outflows, even though they are, financial leases as opposed to operating leases. But all of these deliveries between now and end of 2025, you know, you don't have to expect any cash outflows for the deliveries. Helpful. Thank you. Thank you. The next question comes now from Alberto Valerio, Sell-Side Analyst, UBS. Alberto, we will open your microphone so that you can ask your question. Please proceed. Hi, Alex, John, thank you for taking my questions. I'm interested to know about the five deliveries that you have this quarter, whether you have any intention to make the sales leaseback on this aircraft. So I think it was two A320neos and two A330s and one Embraer. And also about the announcement of the government last week, that would provide a financing from BNDES to the airlines. I think they made a condition to own Embraers, and I know you guys already own. My only question is if you have to order further more E2s from Embraer, and when this finance would arrive to you guys? Thank you. So the deliveries, they're operating leases, right? So no sale lease-backs would apply here. And the BNDES financing, like I said, is kind of a financing for the order that we already have. Yeah, buft what you're referencing is the FNAC financing that was already approved by the Senate. Expectation is it gets approved by the House, and so, Mercadante, who's the president of BNDES, has referenced that, you know, this is something that, you know, we expect to be approved in the third quarter and probably dispersed in the fourth quarter. So this is, this is exciting, so this should be less expensive debt that the government is providing. There will be some things that we need to do. We need to add growth. Obviously, they're very anxious for Embraer, but we already have enough Embraer aircraft in our backlog to kind of make up for those conditions. I think you're gonna hear a lot more about the FNAC financing in the next couple of weeks, which is a very positive thing for the sector overall. Perfect. Thank you very much, Alex and John. Thank you. The next question now comes from, Gabriel Rezende, Sell-Side Analyst from, Itaú. Gabriel, we will open your microphone so that you can ask your question. Please proceed. Hello, can you guys hear me? Yes. Yes. Perfect. Good morning, David, John, Alex, Abi, and Thais. Two questions on our side as well. Just to confirm the chart you showed on slide seven, on the tariffs increasing week by week. Can you confirm that the increase we have seen so far, that you just showed us, is enough to deliver your current guidance, or are you considering that you need to make additional increases? I mean, obviously, considering the seasonality that we're seeing in the fourth quarter, but should this trend continue in order for you to deliver the guidance, or could it be stable again, just by the seasonality for you to be able to deliver? So that's the first question. And the second question, we saw a much lower maintenance expense booked in the quarter. You mentioned some insourcing and some cost-cutting initiatives, and we did see a higher personal expense in the quarter, but I would just like to understand what is the additional upside that we could have on this maintenance line looking forward to put into our model? Thank you. Yeah. Hi, Gabriel. Look, on the demand and fare side, we're pretty happy with the trends that we're seeing right now. The key is to maintain that as we go through the quarter and the second half of the year. Seasonality is going to help. It is a period of better corporate demand. It is a period of better close-in demand. And so it's the situation is pretty good in terms of the level of the fares. What is key now is that you have to maintain this level so that you can continue to build the booking curves every single month as we go forward. What was difficult in the second quarter, especially after Porto Alegre, and the chart shows that, is the dip that happened in May, and then we had to take time to recover from that dip. There should be no reason for that to happen now in the second half of the year, given strong seasonality, given the strong economic indicators. So the fare levels where they are are good fare levels. The key is for the industry overall to maintain those levels as we go through the second half of the year. So if we're able to do that, then I do believe we can produce a very good unit revenues overall. And I just want to add, you know, code share exists in the third quarter, it didn't exist in the second quarter. The ancillary revenue that, that Alex was talking about being up 17%, you know, year-over-year, that exists in the third quarter, wasn't there in the second quarter. And the story around Elevate as a company is, it's really a cost story, right? As Alex kind of walked through increased utilization, being more efficient as an airline, kind of going through all of the initiatives that we have. So, I think one thing that's being lost in the second quarter, it was a great cost quarter. You know, as we focused ourselves on the business, negotiating with the OEMs, negotiating with our suppliers across the board, and really driving better cost results. Abhi needs to do his job, and Alex needs to continue to take costs out of the business on a go-forward basis. Yeah, and on the maintenance side, you know, also to remind everyone, we have a maintenance line, as part of operating expenses. That's mainly line maintenance. So some of that obviously is driven by our own internal work, where the initiatives that John mentioned can really, you know, provide a positive impact. And some of it is driven by capacity, right? So, because this is mainly line maintenance, there is a correlation between this line and the capacity. Right? But on the CapEx side, I think that's where you can see really big numbers, because, you know, then we're talking about numbers that are in the BRL 1 billion plus a year in terms of maintenance CapEx. Where a lot of our initiatives that we mentioned in terms of, you know, utilizing aircraft more efficiently or using the next generation aircraft more than the ones, that's where you can see a lot of the benefit coming from the Elevate plan. That's very clear. Thank you. Okay, moving on to the next question, comes from Guilherme Mendes, Sell-Side Analyst from JP Morgan. Guilherme, we will open your microphone so that you can ask your question. Please go ahead. Hey, good morning, everyone, John, David, Abhi, Alex, and Thais. Thanks for taking my question. I have first a follow-up on the fares discussion. So pretty impressive how the industry has been able to increase fares, and Abhi, you mentioned about you expect to maintain such levels. But back to the exercise of a 5% depreciation leading to a 3% price increase, how do you guys see elasticity going forward? Meaning how much more you think you can increase prices without necessarily impacting demand? And the second question, it's a follow-up on the Elevate plan. If you can help us quantify the potential benefits of it into 2024 or into 2025, or in other words, if something's included on the BRL 6 billion guidance for this year. Thank you. Yeah, thanks. So, you know, like I said, we saw July year-over-year RASK already positive, year over year, and that was really just the first month of kind of getting back to normal booking levels post-Porto Alegre. You know, our job is to continue to test the market. We think that, the fares that the industry has now, we probably would not have anticipated sort of pre-pandemic, but as we showed on the slide, in dollar terms, our fares have actually gone up about 8% every single year. So it's, it's a matter of testing the market. I feel pretty good about overall industry discipline. I'm seeing the industry disciplined in terms of, actions, in terms of network actions. And, and so I don't see any reason why there's a limitation. We're gonna keep testing it, and I think the strong economic activity in Brazil, the second half seasonality, are gonna be very supportive of us maintaining these fare levels. Yeah, as for the Elevate plan, I just want to remind you, you know, we had a 12% devaluation of our currency and 10% of our network knocked offline. And so we have less ASKs in the plan, but yet we're still gonna deliver above BRL 6 billion of EBITDA. So Elevate helps us get there, but we... You know, as you go forward into 2025, that's when you should get an incremental BRL 1 billion of EBITDA, and that's making the assumption that the exchange rate remains devalued. But these structural changes we're making to the business will be permanent. The things like we're doing on the revenue side with ancillary, code share, all of the- they will be permanent changes. On the cost side, they will be permanent changes as well. And so we're shifting and adapting, but it's, it's part of the Elevate is in the BRL 6 billion, but there's a lot more as we roll forward into 2025. Yeah, and think about the ramp-up, right? You know, we, Some of these initiatives were things that we were talking about, we were looking at, but we decided to accelerate. Some of them are brand new, but overall, all of the initiatives are gonna have much less than a full year's worth of contribution to 2024, but then they should have a full year's worth of contribution for 2025, right? And so the BRL 6 billion kind of includes, the ramp-up that we're gonna do this year. We haven't provided guidance on, on 2025 yet, but in terms of what the initiatives should contribute, you should have a full, you know, BRL 1 billion of, of contribution from the initiatives being, available to us for a full year. Super clear. Thank you, all. Okay, moving on to the next question. Next questions come from Victor Mizusaki, Sell-Side Analyst, Bradesco. Victor, we will open your microphone so that you can ask your question. Please proceed. Hi, two questions here. The first one, if you look at slide nine, you basically show the kind of a guidance for international traffic growth in the second half. So, my question here is, if you can comment how these international traffic will impact the demand for domestic travel, given your hub-and-spoke model? And, the second one, if you can give an update on the negotiations with Abra. Thank you. Yeah, Victor, on the international, the truth is it actually helps our domestic, because it allows us to sell seats that we didn't have. So the second quarter, if somebody wanted to go from Curitiba to Fort Lauderdale, chances are they would not find a seat on Azul, and now we're starting to see that availability come up. Recife and Belo Horizonte, we actually went to zero flights to the U.S. for about a six-week period, and that affects the demand domestically in those regions, in the Northeast and the Belo Horizonte region. So, and having Porto Alegre back in October, it's a big driver of international demand as well. So actually, international was blocking demand on the domestic side as well. So having those seats available, given the strength of our network, it's gonna help in international, and it also helps domestic. ... John? As we've stated, as has Abra, yes, we are in active discussions. I think you'll get news about that in the not-too-distant future. We have to respect the process that GOL has today in their bankruptcy, but, we'll, we'll update the market, at the appropriate time. Thank you for that. Okay, moving on to the next question, comes from João Frizo, Sell-Side Analyst at Goldman Sachs. João, we will open your microphone so that you can ask your question. Please go ahead. Hey, good morning, everyone. Thanks for taking my question. I have two quick ones. The first one is on CapEx. You guys mentioned that you expect over BRL 1 billion in CapEx for maintenance only, so I just wanted to get a sense on the CapEx on the back end of this year, if we should expect the same run rates as we saw in the first half? And for 2025, how should we think about it? And then following on cash generation, how should we also think about this on the second half of the year, right? It's a seasonally stronger semester, so just wanted to get your view on this as well. Thank you very much. Thanks, João. Now, just to clarify, you know, what I mean is, you know, within CapEx, you're talking about orders of magnitude of, you know, billions of BRL on spend per year. We did not provide guidance on, you know, what the maintenance CapEx is going to be or what the impact of Elevate on maintenance CapEx is, is going to be, right? But that is where the opportunity is, right? There is some maintenance that flows through the operating expense, but as you see, you know, it, it was kind of less than 200 million BRL this quarter. When you're talking about maintenance CapEx, then you're talking about a bigger number, and that's, I think, where we think Elevate can really provide help. Because our line maintenance is not gonna reduce dramatically. Always we could always be more productive, more efficient, right, work more, more intelligently. But when you decide to fly E2s more often, right, which are newer aircraft, and you decide to reduce the utilization on E1s, that is primarily going to help maintenance CapEx as opposed to maintenance OpEx. On the maintenance CapEx or CapEx as a whole, if you remember, we also had announced a while ago that we now have access to a maintenance CapEx line from you know, kind of guaranteed by sovereign risk. We have not drawn upon that facility yet, right? That is about $200 million of capital that's available to us. This year, when you look at the CapEx that happened in the beginning of the year, there was no benefit from this line yet, but that benefit should be available to us going forward. It'll reduce the cash CapEx in the third and the fourth quarter? Exactly. And yes, you know, when you think about... You know, if you take a look at Bloomberg consensus, that breaks it down quarterly, what the market expects us to generate in the first half and what the market expects us to generate in the second half, there's a big difference, right? And so that translates to a better cash performance also accordingly, because, well, you know, a lot of the cash generation comes from the EBITDA production. Thank you very much, guys. Super clear. Thank you. The next question now comes from Michael Linenberg, Sell-Side Analyst from Deutsche Bank. Michael, we will open your microphone so that you may ask your question. Please go ahead. Oh, yeah. Hey, good morning, guys. You can hear me, right? Yeah. Oh, great. Hey, just a question here on your immediate liquidity of BRL 2.5 billion. One, does that include that guaranteed maintenance CapEx line? And as we sort of think through the year, what is the target liquidity level for you, you know, as we go into 2025? And as I think about Elevate, how that's gonna contribute on the EBITDA side, is that BRL 1 billion of EBITDA? You know, I know that that's a P&L impact, but should we think of that as also a cash impact as well? Is it one-to-one, or are there other elements of that? And then I have a follow-up. Sure. So, so the immediate liquidity does not include that line, right? Right. That is just essentially cash plus receivables, as we normally provide. The main part of that is that the majority of the receivables are credit card receivables, which have not any cardholder risk, right, and are very easy to advance and transform into cash. It does not include that guaranteed maintenance line that's available to us. In terms of target liquidity, you know, we as we grow, right, we expect to want to increase our liquidity. We like to have something between 10% and 20% of last 12 months revenues in cash. You know, where we're gonna end between that 10 and 20, some of it depends on seasonality, some of it depends on the cost of capital, right? But we can kind of comfortably operate within those ranges. Okay. Then- Then in terms of Elevate, the $1 billion, Mike, sorry- Sorry. So, there are a lot of initiatives in Elevate that provide a benefit beyond the P&L, right? Okay. They're not gonna include it in the $1 billion. The $1 billion, I think, is more on a recurrent basis, what you can expect once these initiatives are all ramped up, what they incrementally contribute to what Azul kind of steady state would be. But we are, you know, some of the initiatives in Elevate also include some cash benefit, especially in 2024. Hey, Mike, I just wanna highlight one other thing, too, before you go on to your next question. Mm-hmm. Obviously, when 10% of the network is offline, impacts ATL, when international is offline, impacts ATL as well. Those are two things that come back to us in the third and into the fourth quarter. Yeah. You know, where we will have those sales going forward from both those two major events. I mean, it's not often that an airline is impacted so severely by, you know, those two big impacts. Yeah. No, good point. Thanks, John. And then, you know, can you just, you know, sort of remind us about what sort of stake, if any, in TAP? I, I'm only bringing it up because it now seems like that there is gonna be something that happens there, maybe sooner rather than later, and I know there was some restructuring around that. But I, as I recall, I still thought you had some claim there, some value there. Can you just remind us, what, what you have left, with respect to TAP Air Portugal? Yeah, thanks, Mike. They owe us, I think currently, you know, around EUR 150 million-EUR 165 million, right? Right. Where they are today is, it's widely reported that they're in a privatization process. Mm-hmm. - and our expectation is that that privatization process can't really go forward until we settle this issue. And so there are discussions happening as we speak, and our expectation is that that could be a source of liquidity for us, this year. Great. Oh, no, that's, that's good to hear. John, can I squeeze in just one more as it relates- Sure. - to the codeshare? You know, the fact that a few weeks back, maybe it was three, four weeks ago, we did get the headline from the regulators, the competition authorities, that they were going to examine or look into, is that just... that's a formality, right? That's a perfunctory process, they have to do it, we shouldn't read into that, or whatever you can say to that process, would be great. Thanks for taking my questions. Yeah. Yeah, Mike, yeah, look, we are in constant communication with the regulator about the codeshare. We're talking to them about how we're phasing in the markets. Mm-hmm. So yes, I mean, given the scale of the codeshare, it's absolutely expected, and not a surprise, that they ask some questions, do some analysis. And we're constantly in communication with them. No, no restrictions, you know, we're selling it, and, we're... we continue to be in our plans. So yes, it's part of their analysis, but, you know, it's just part of the process, if you will. Hey, Mike, what they're specifically looking at is, should there have been a pre-notification to the antitrust authority before the codeshare went into place? Mm-hmm. Out of respect, went there jointly and told them, but we didn't do an exact filing, nor did we do that when we were with LATAM in a codeshare, a similar codeshare. And so this is part of the process. We respect, you know, their process. We responded to it, I believe roughly ten days ago, and so we hope to get resolution on that, in the next couple of days. Great. Thanks, everyone. Thank you. Thank you. The next question now will come from Jan Schneider, Sell-Side Analyst from JP Morgan. Jan, we're gonna open your microphone so that you can ask your question. Please proceed. Great. Thanks a lot, and thanks for taking my question. In our perspective, I think, you know, maintaining good liquidity is very important to Azul, given, you know, the cash needs in the next two years, and the environment that we're in. Can you help us better understand the main drivers of the working capital build we saw this quarter? What were you able to accomplish in this quarter regarding working capital that helped with the build and offset any sort of impact that would have resulted in a cash burn? And then what can we expect for the second half of this year, including any progress on working capital initiatives you're working on? Hey, Jan. Yeah, so we agree, right? Liquidity is very important, and, but as we've demonstrated, we will always have the necessary liquidity, because it's essentially a good business, right? What you made reference to in terms of the build for this quarter, a lot of that is seasonality, that we start, you know, selling the higher capacity and the higher demand in the second half of the year, but that mainly happened in July, right? But as we demonstrated in the past also, the operation generates a lot of cash, right? It's a good business, and it only becomes stronger and stronger. The question is, where does that cash go? And that cash goes essentially to our partners, right? It goes to lessors, it goes to suppliers, and it goes mainly to interest on our debt, as we don't have any relevant, you know, debt amortizations, you know, over the next few years. So, the question of how to manage liquidity, you know, goes back to what we talked about, the partnership, right? Since all of that cash that we're generating goes to our partners, some of the liquidity management that we did last year, for example, was with the support and with bilateral amicable conversations with our partners. So, you know, that is always going to be some, you know, back and forth and some ebb and flow in those numbers. But the important part is kind of going forward, you know, in terms of seasonality, the majority of that help-... which again goes to the split between the, EBITDA generation in first half versus the EBITDA generation in the second half. You know, you see a lot of positive trends from seasonality, from higher capacity, from new aircraft coming in, and then the elimination of all those headwinds that we saw, especially in 2Q, right? Like the lack of ability to sell Porto Alegre, the lower capacity in international. I think that's the major, I think, shift that you can see in liquidity and working capital will come from there. I, I just wanna highlight a couple of other things, right? You know, Mike, Michael Linenberg mentioned the TAP bond source of liquidity. I mentioned FNAC has already passed the Senate, should pass the House this week. You know, that's, you know, anywhere from $200 million-$300 million of incremental liquidity that can come into the business. We mentioned the GE line that we haven't tapped into yet. We have an unencumbered cargo business, right? So these are access to capital, right? But again, as Alex said, the core business needs to continue to operate well. And I think you can see that even in the extremely challenging second quarter that we just got through, you know, we had pretty good numbers overall. You know, when 10% of your network is knocked offline, you're not selling international in a 12% devaluation of the currency. So the core business of Azul is strong, and even with that, we still have access to other sources of capital. Great, thanks. And if I could ask one more follow-up, and I do tend to agree on, you know, liquidity being better than I expected, given the unforeseen circumstances of the quarter, as well as the seasonality. But you touched on, we already touched on the National Aviation Fund, as well as the lessor equity instrument, what you're trying to do with bilateral negotiations. Can you touch a little bit about the cargo business, what you think you could do there, where you would potentially look to raise financing, and where that could be pledged if you ultimately look to go that route? Sure. You know, that was part of our capital optimization plan. You know, you always need to demonstrate, I think that gives a lot of comfort to all of our stakeholders, that we have the ability to access capital if we need to, right? Because obviously, you know, when we did the capital optimization plan last year, you know, we couldn't go to our lessors and our suppliers and say, "Hey, give me enough working capital and deferrals so I can face a 10% knockout of my capacity," right? That would never fly with them. So they provided the support that we all combined, you know, jointly expected was needed and sufficient at that time. But obviously, we weren't working with an exchange rate of 5.60. We weren't working with, you know, some of these kind of events that occurred. And so, you know, we wanted to have a rainy-day fund, and so we were deliberate in creating that rainy-day fund by kind of preparing the structure to potentially use our Azul Cargo business as collateral, the same way that we used our, essentially our loyalty and vacation business. So it's a very similar structure that we already set up. That collateral is available. You know, we have used it for kind of short-term things, very small things that in an eventual capital raise would go away. But, you know, at the time, I think we talked about a debt capacity in the hundreds of millions of dollars, you know, that was available to us. Now, that's not what we would need to raise, but that's what, you know, would be available to us. I think we kind of, when you look at the documentation of that facility, it allows us to raise first debt capacity of $800 million. So, obviously, we wouldn't need anywhere near that amount, but it's always good to have that capacity out there, 'cause it provides comfort to everybody that is providing credit to Azul. And then, like, on top of that, as you mentioned, there are these other potential sources of liquidity that we all talked about already. Great, thank you. That's it for me. Appreciate the answers. Thank you. Moving on to the next question then. Next question will come from Gabriel Fleury, Sell-Side Analyst from Bank of America. Gabriel, we will open your microphone so that you may ask your question. Please go ahead. Good morning, gentlemen. Thanks for the opportunity. I have a question on the equity instrument lessors. Apart from the FX translation, we noticed a BRL 287 million increase in these accounts in a line that you call the transfers. Could you kindly give us some idea on what was this increase related to? It should be FX, basically, right? There's no interest accrual on the facility. And it's essentially a debt. In terms of accounting, it is recognized as debt, so it should be FX. If you're not kind of able to reconcile it, you know, we can take this question offline. Okay. Thanks, Alex. Okay, moving on to the next question, coming from Dan McKenzie, Sell-Side Analyst, Seaport Global. Dan, we will open your microphone so that you may ask your question. Please go ahead. You're on mute, Dan. Okay, there we go. Hopefully you can hear me okay. Hey, just a couple questions here. Thanks for the time. You know, just given the change in the macro, how is that impacting your outlook for 2025 growth at this point, and potentially also its composition? You know, I guess I hear you on improved utilization. I'm just trying to reconcile longer-term growth with macro instability and, of course, Elevate the self-help initiatives that you guys are implementing. Hey, Dan, you know, on a percentage basis, the number moves around because this year we're flying less than what we actually would have liked to. So in some sense, that pushes up the percentage for next year. But obviously, what's important is kind of the absolute level of flying that we want. We still want the E2s. As Alex said, they really work very well for us, given the fuel burn economics, given the fact that we're able to fly much higher utilizations on the E2s than—and we're going to reduce utilization on the E1. So that we'll have to really sit down with Embraer and see what's possible for next year. The international is just coming full circle of what we're gonna finish this year. Two additional wide bodies will have an impact next year, so you can kind of model that as well. So on a percentage basis, a lot of it is gonna be influenced by kind of the impacts from Porto Alegre of this year and from the international reduction of this year. But our focus is on the E2s for next year, reducing E1 utilization, increasing E2s, and again, 84% of our routes have no nonstop competition, and that's as we have grown over the years. David mentioned this, so we continue to be very true to our network. Even as we grow, that's not gonna change, and we focus on where we're strong. You know, Dan, I think everybody's focused on the exchange rate, but if you look at the other macro indicators in Brazil, unemployment's going down, GDP's going up, and I think what's a testament to that is that Azul was able to have increased RASK in July, year-over-year, 5%, with Porto Alegre still offline, right? And so, you know, that's a big indicator that the Brazilian economy is actually in a different direction than what you're seeing in the U.S. right now. Mm-hmm. Yeah, given that economic growth, can you elaborate a little bit on how that's rippling through to the corporate side of the story, just in terms of either accounts or share of the wallet that you're getting domestically? Yeah, no, we feel pretty good about the corporate market, Dan. If you look at the latest results from Abracorp, which is the association of Brazilian corporate travel agencies, we have about a 33% revenue market share from corporate overall, which is much higher than our fair market share if you look at our capacity in the domestic market. So we are overachieving in the corporate market. One reason is our expanded presence in Congonhas since last year, where we doubled our network, and one reason is where we're strong in the Midwest and the agro market of Brazil, which is doing very well right now, given exports and things like that. So you can go online and check out the Abracorp information. It's public. We have about a 33% revenue share, which is well above our fair share in the market. Hmm. Great. If I could squeeze one last one in here, just given the conversations with Abra, I wonder if you could just help us understand the flexibility with United and that international code share, if you know, things potentially move around here or the potential to add a stronger US partner at some point. We think United is a great, strong U.S. partner. But what you're talking about is something much bigger, and I think the U.S. carriers pale in comparison to what combining two Brazilian networks and the strength of that could do, Dan, and so I think that that's a phase two and not a phase one in the discussions. Understood. But just technically speaking, there's no exclusivity in place anymore. Mm-hmm. Yeah. Thanks for the time, you guys. Thank you. Thank you. This now closes the Q&A session for today. I'd like, I would like to turn the floor to John for our final considerations. Great. Thanks, everybody, and we'll be available to talk to you on an individual basis over the coming days, and we appreciate your support, and we look forward to talking to you.