Hello, and welcome to the Avianca Group Two 2023 financial performance call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a Q&A session. If you would like to ask a question during this time, simply press the star one on your telephone keypad. If you want to withdraw your question, simply press star one again. I would now like to turn the conference over to Maria Cristina Ricardo, Head of Investor Relations. Please go ahead. Thanks, operator. Good morning, everyone, and thank you for joining us. With me today are Adrian Neuhauser, Avianca Group's Executive of- Chief, Chief Executive Officer, Rohit Philip, our Chief Financial Officer, Gabriel Oliva, Avianca Cargo CEO, and Matt Vincett, LifeMiles CEO. Financial statements for the period ended June 30, 2023, and the presentation that we will show you today, are available at our investor site. Also, today's conference call is being broadcast, and the replay will be available at the same site shortly after the end of the call. Before we begin, I would like to remind you that during the course of this call, management will make statements or remarks that may be forward-looking statements and may include, but are not limited to, financial projections or other statements of the company's plans, objectives, expectations, or intentions. These matters involve certain risks and uncertainties that could cause actual results to differ materially from those projected or suggested. Today, Adrian will kick off our call with an overview of the state of the business, then Rohit will walk you through our Q2 2023 financial performance, and as always, our prepared comments will be followed by a question and answer session. With that, let me now turn the call over to Adrian. Thank you, Maria. Thank you everyone for joining us on this call. If we turn to slide two, I'd like to start the presentation with highlights of the Q2. As many of you know, Avianca seasonality skews towards the back of the year, so Q1 and Q2 are our seasonally most challenging quarters. Q3 and Q4 historically have been our strongest quarters. You obviously need to overlay that on the continued growth that we've got on recovery from the business plan, so there is a growth line that you have to cross over with that seasonality. We're proud to inform you that we delivered an extremely robust Q2 this year in spite of the seasonality. We generated $271 million in EBITDA. That's a 24.3% margin. There is no pro forma or adjustment to that. That is the actual accounting EBITDA. That's $88.7 million ahead of business plan. We generated positive net income in a quarter that historically has been a negative net income, quarter four, so $15.4 million. Our CASK ex-fuel continues to be contained. It was $0.039 during the quarter, versus our previous guidance of $0.038. Obviously, and we'll talk about it a bit, there are some inflationary pressures to that, that in that, that kept us from achieving the $0.038, and we are also therefore increasing guidance for the year. We will continue to reduce CASK versus where it is today, which we believe is an extraordinary achievement, but we will not be able to achieve the $0.034 run rate guidance that we had at the end of the year. We believe we're going to be somewhere between $0.037-$0.038, depending on depending on exchange rate, and where that falls out. We remain laser focused on cost structure, and we believe we have the best-in-class cost structure, and we continue to execute on the business plan. Our cash balance during the quarter increased by about $85 million. We're over $1 billion at the end of the quarter. The, the, the positive results, both on the cash side and on the, on the, on the higher than projected EBITDA, result in lower net debt to EBITDA. We're at 3.2x net debt to EBITDA. LifeMiles continues to be a critical part of the business and is outperforming, increased 11% year-over-year. Our cargo revenues and margins, importantly, are still ahead of business plan. We, we'd like to give a read-only line to answer your questions there. Obviously, it is a, a more challenged business than it was during the peak of last year, but it continues to be ahead of business plan. On ABRA, we will provide fur- further guid- guidance later. We are working extremely close with the team at Gol, both to, to cross-test practices over between the two companies and to achieve synergies, as well as to help them with, with strengthening their balance sheet. If we could turn to slide 3, please. We continue, we continue to be very, very focused on our operating performance, and on, and on our service standards. On-time performance reached 87.5% for the Q2, and we were recognized by Cirium as the world's most punctual global airline in May and June. July will, will not continue with that trend. We had a lot of weather issues in many of our bases, both in Colombia and in the US. We're gonna, we're gonna close slightly around 85. Still much, much better performance on time than we've historically had, and that allows us to drive utilization up, right? Utilization, as you see in the middle, we're up about 1120, and that's driving utilization up very significantly from where we were. The reliability, the schedule reliability allows us to drive more utilization. Finally, as many of you know, densification, the reconfiguration of our fleet, which has been a critical part of the business plan to get our costs in line. It's basically done for the original 104 narrow body aircraft. We've increased capacity by 20% on those 104. We've ensured a standardized product. There are 2 additional aircraft that were not in the original plan that are, one of them is already reconfigured, the other one will be done in a couple weeks. As we incorporate more aircraft and, and we're either capping out the growth that we're having, we will, we will move them to the same configuration. A single configuration for the three twentys and a very similar configuration for the three nineteens, with the same front cabin and, and just less rows in the rear cabin. That's my contribution to this. It's a quarter that we are, we are very, very proud to deliver. The outperformance, and we'll talk about it, is driven by our cost discipline and by our operational capabilities, and by increased demand, mostly rather than by driving up pricing. And we believe that's a more sustainable path towards enhanced profitability in the future than the volatility that we would derive from just moving yields around all over the place. It's again, we think it's a sustainable tracking, and we're very proud to deliver this quarter. With that, let's turn to page four, and I'll hand it over to Rohit. Thank you, and we'll be back, obviously, for our Q&A at the end. Thanks. Thanks, Adrian. Good morning, everyone. On slide four, I'll start with our revenue performance for the quarter. As Adrian mentioned, it's been a strong quarter. Starting with our passenger revenue for ASK, was $0.065 in the quarter, which is significantly ahead of business plan, 27.4% ahead of business plan. Even importantly, just a little bit below a year ago when, as you know, fuel prices were $4 a gallon, we had to raise prices significantly to match the fuel price. Despite the fuel prices from $4 a gallon, being about $2.40 a gallon on average, in Q2 2023, PRAS was still strong at $0.065. If you look on the components of PRAS, yield was $0.08. Just again, just a little bit below last year's yield of $0.0809. Load factors were strong at 8.29%. As you would have seen in the monthly statistics, June was a little higher than April and May, as we sort of ramped up our strategy to do a little bit more advanced sales and length of the booking curve. You saw that sort of happen through the quarter, and so it averaged at 8.29%. The load factor of 8.29% also doesn't include the fact that we have about 4 points of no-show bookings as well. When, when, when passengers no-show on a, on a refundable ticket, on a non-refundable ticket, it sort of effectively is, is, is, is revenue that we recognize, but, but it doesn't show up in the, in the load factor. That's just a, a, a point to note that I've, that I've mentioned a couple of times on the calls before. If we move to the, the next slide, slide five, and, and talk about cost. As Adrian mentioned, we, we, we had a cash ex-fuel of $0.039 in the quarter, just a little bit higher than, than the guidance we had previously given of $0.038. There are several factors that drive both, both sort of the Q2 performance as well as what we're seeing for the H2 of the year, that affect cost. One, is the exchange rate. The Colombian peso has strengthened relative to the US dollar over the last, over the last couple of months, especially. With that, just a quick reminder that for us, on an earnings basis, the peso-dollar fluctuation is, is net neutral. You saw that when the peso devalued significantly, it didn't affect our net earnings, and as the peso is strengthening, it doesn't affect our net earnings. When you look at it on the cash side, it does make our costs a little higher, and then it's offset by higher revenues. There's a peso effect on cash that's going is neutral. The second item that's affecting our costs is inflation, inflation has been, as you all know, very high in, across the regions. In particular, it has made us look at some adjustments in some of our costs, including crew costs. We are, we're making the appropriate adjustments to keep up with inflation. Those are a little bit higher than what we had projected previously, importantly, you should note that this is sort of just cost that everyone sort of has the same sort of inflationary pressure. It doesn't change our sort of competitive position. It's just the reality that we all have to adjust to. The third bucket here is some temporary fleet costs, in particular, we've done a couple wet leases on A330 wide-bodies to operate some markets that we had planned to operate with the 3 additional seven eight sevens that were supposed to enter our fleet in the H2 of this year, that have been delayed to early next year. The, those markets are very profitable markets that add, again, to our earnings and EBITDA. On the cash line, because obviously they're higher cost, they affect us a little bit. There's a, there's an effect there. Again, the earnings is positive, but an effect on cash. Then there's the fourth factor, which is also earnings positive that affects our cash, is in our original sort of assumption, in our budget for the year. We had planned on a bigger mix of domestic, compared to international. As the years gone on, we've been able to allocate more profitable flying from domestic to international, which just has a slightly higher cost mix, especially in terms of airport, airport fees and also a little bit on, on crew expenses because your travel and per diems in, in, on international travel are higher. All of that. With all of that, we're still sort of guiding to 3.7, between 3.7 and 3.8, as our guidance for the Q4 compared to the prior guidance of 3.4. Again, it's very important to note that we still believe this is. None of this is, makes us, changes the fact that we believe we'll have a best-in-class cost structure. Some of these costs is, as, as I mentioned, are temporary, and some of them are just structural that, that, that the whole industry has. We will still continue to have, our focus on costs and maintain our best-in-class cost structure. With that, I'll move to slide 6 and talk about cargo. Cargo revenues, were $690 million for the, for the quarter, much higher than, than, than our business plan. Just a bit higher than, than, than last year with, with the, with the additional sort of belly cargo capacity. Sorry, the, the, sorry, the capacity, the capacity on the left, was a little higher than, than last year, with the additional belly capacity, belly cargo capacity that we added, during the quarter. On the right, top right, you see the, the revenue compared to business plan, 26% higher versus business plan at $159 million, compared to $126 million a year in the business plan. 26% lower than last year, as all of the factors that we've talked about in prior calls have, based on the additional sort of capacity that's come into the cargo market, combined with sort of overall sort of rationalization of the cargo market compared to the peaks we had over the last couple years. Important as the top right bar shows, still ahead of sort of our original business plan projections. If we move to slide 7 on, on LifeMiles, on the, on the left chart, you'll see, we generated cash EBITDA of $28.3 million, which is 11% higher than the $25 million we generated last year. A little bit lower than business plan, and that's, that's, that's, as, as we discussed last quarter, primarily driven by the impact of the Colombian Peso effect on the co-branded card billings. The, the, the assumption in the business plan, in the original business plan, was COP 3,500 peso to US dollar, which, which while it devalued more significantly and has strengthened a little bit, it's still in the COP 4,000-COP 4,200. A little bit lower than business plan assumptions, and that primarily drives the difference between, between the, the quarter results compared to business plan. Still a strong recovery year-over-year, on from the LifeMiles business. The same effect you see that I just mentioned in the third party gross billings, that, that, that, that, that drives the profitability sort of improvement year-over-year and slight underperformance compared to business plan. With that, I'll move to slide eight. On a consolidated basis, as Adrian mentioned, we generated $271 million of EBITDA at a 24.3% margin. $88 million higher than, than the business plan and, and $210 million higher than last year. Very importantly, generated a positive net income in what's usually our seasonally worst quarter, which is the Q2. Usually, the first and Q2s are our weaker quarters, third and Q4s are are stronger quarters as Adrian Neuhauser mentioned. Q2 is usually our weakest quarter, and we generated a a 24.3% EBITDA margin, which we're very proud of. With that, I'll move to slide 9 and cash flow. We generated $85 million of cash in the quarter, reaching just over $1 million of cash at the end of June. The breakdown of that is is pretty straightforward. We had $112 million of of corporate debt payments. If you recall, the semiannual payments on our notes of $76 million is in the Q2 and Q4, so we had that included in the $112 million, with lease payments of $83 million, PBH payments of $34 million, net CapEx of $52 million, and then working capital of $96 million, certainly driven by the lengthening of the booking curve that I mentioned on the when I talked about the revenue side, which allowed us to sort of capture more cash from advance of tickets. That puts us at a very healthy cash balance at over $1 billion at the end of June. With that, I'll move to slide 10 and talk about the balance sheet. Net debt at the end of the Q2 was $3.3 billion, slightly lower than sort of what we had in the business plan. With that, when you look at leverage on a net debt to trailing 12-month EBITDAR, we're now at 3.2x, significantly ahead of our business plan projections in terms of delevering the balance sheet. Also a significant improvement from what we had had at even last quarter. You can see the guidance we had, that we'd be at sort of in the low threes by the H2 of this year, we've achieved in the Q2, which we are very, very pleased with. With that, I think that brings us to the end of the presentation. I'll turn it back to the operator to start the Q&A session. Thank you. If you have a question, again, press the star one on your telephone keypad. If you'd like to remove yourself from queue, again, press the star one. One moment, please, for your first question. Your first question comes from the line of Mike Linenberg of Deutsche Bank. Please go ahead. Rohit, congrats on these numbers. Rohit, just on the, on LifeMiles, the EBITDA of $28.3 million, I, Maybe you said this. What's the underlying margin on that business? What's the EBITDA margin? It's, the EBITDA margin is in the 40, it's about 42%-ish. Matt, do you have the exact number? Yes, it's slightly higher than that, but yeah, it's in the low to mid forties. Okay. Okay, that's helpful. Then, a question to Adrian. One, you know, I saw that there was at least I think there was a report out about the company was potentially reconsidering, at least on some of its narrow body airplanes, to add a business class, or maybe it was just to redeploy wide bodies with a business class into some of the more competitive markets. Can you just touch on that? I think I saw that. I just, I want to dive into that. Yeah. It's, it's, it's a great point, Mike. The answer is yes to both. What we've done is, well, f-first of all, let's, let's, let's clarify the definition of business class. In, in the wide-bodies, in the wide-bodies internationally, or in the wide-bodies in the long haul, we have, we have continued to have a full-on business class, right? We've got those configured, with, with, with, you know, one and a half cabins of, of, of lie flats. Mm-hmm. you know, so 7 by 4, basically. We've continued, in fact, we've without making much much announcement about it yet, we've actually upgraded that service in recent months to make it more competitive. Mm-hmm. On the long haul to Europe, we've continued to commercialize and have a business class. What we've determined in the Americas is a couple of things. One. You're right. On some of the markets, where we're talking about, you know, over five-hour segments, having just a narrow body product is uncompetitive, really for two reasons. One is the inability to drive from cabin revenue. I think more importantly, the belly cargo is a substantial part of that business that we was on. We are deploying more wide-body capacity into the Americas, and that's a piece of it. When you do that, then you do have that cabin and have to figure out what to do with it. Obviously, the more yield we can drive from it, the better, and that's the balance we're looking for. We are increasing the availability of that product as a cabin in the Americas, as we deploy more of those planes into intra-Americas routes. The second piece is the narrow bodies. As you know, the narrow bodies we've got, we do have three rows of, you know, wider and more recline and more comfortable seats- Mm-hmm ... that we have, that we have been selling to date exclusively as a seat upsell and not as a bundled business class or premium economy or whatever you'd like to call it, for, for lack of a better word. What we believe is that that has left room for the competition to sell products that are similar or worse than that, as a business class, with a, with a yield that we are not able to control, right? I think it's less about, about the, the capture of that business than it is about, about setting a, a level for that business, so it doesn't become kind of an uncompeted business for our competitors that they can use to cross-subsidize their rear. We do, we do intend to, to begin commercializing the front cabin again, as, as a class, in addition to, as an available seat upgrade. More to come on that in, in the next, in the next few months as we define-... what the service attached to that, to that commercial change is going to be. Okay. Okay, that's helpful. Just lastly, Adrian, can you just update us on where things have sort of settled with, with the Viva insolvency? Are those gates or slots, are they still available? Have they been reallocated to other competitors? What, what's the makeup on, you know, their, their assets, and where things lie between you and them? Thanks. Thanks for taking my questions. No, that's perfect. Thanks, Mike, and thanks, and thanks for your time. For winter season, this year, Aerocivil has increased, has increased the, the level of operations, that they declared in Bogota up to its historical maximum, in the low 70s per hour. They have also, and they have also reallocated some of the Viva slots. We were granted, we were granted crew operations out of that. We, we are increasing pretty significantly, in, in, in the winter season. We understand LATAM was granted a similar amount. We are, we are in the process of, of, of redefining, and we will publish our schedule for, for winter shortly. Our operations to, to address and, and occupy those slots. The short answer is, you know, we, we, what we see from Aerocivil is that at least the winter season slots, they've started to reallocate. We've received a pretty substantial portion of them. They are good slots, and we, and we intend to fly them. Viva, Viva is in, in, in, in liquidation. It's got a, a government-appointed liquidator, and that chapter seems to be closing, is sort of the summary. We've, we've taken some of Source planes that were previously leased, leased to Viva. Around a dozen planes, from a couple of sources that were previously leased to Viva. Those will enter the operation during the back half of the year, and those are the ones that I alluded to when we talked about reconfiguration, that we, that we need to reconfigure. We believe LATAM also took about 6 aircraft. We are also in the process of hiring about 700 crew members to address those incremental aircraft. We've put out offers to a lot of people, including ex-Viva employees. That's in the process. Thank you. Your next question comes from the line of Neil Glynn of Air Control Tower Research. Please go ahead. Oh, good morning, everybody. If I could ask two questions, please. The first one on the cost side. You've mentioned potentially digging deeper on efficiencies, given the guidance update, on the ex-fuel unit cost side. I'm just interested in your thoughts, having gone through Chapter 11 and obviously changed the business model, how much is there really left to shoot for in terms of further efficiency gains from here? The second question: You've also highlighted, international flying, which is obviously part of the cost picture. Can you give us some kind of a feel for the profitability available to you, international routes versus domestic currently, and how that looks, looks relative to pre-pandemic, if that's possible? Thank you. Let, let me, let me take both of those to start, and then, and then, Rohit, if you don't mind just complimenting or turning it. On the second one, we don't, we don't, for obvious competitive reasons, give, give, give route by route or market, or, or open up our, our market profitability information. What, what I can tell you is that the, the outperformance is broad, so it's both in our domestic markets and our international markets. This is not driven by... I think, I think your question is, is, is a good one, because as, as you see the story from US carriers, right, it's largely a story of, of people flying internationally instead of domestically, et cetera. That's not what we're seeing in our network. What we're seeing in our network is, is pretty solid, or very solid performance, and, and outperformance, usually the business plan across the regions. That's, I think, as much as, as I'm willing to share on that one. On cost, the answer is: There is still a pretty significant chunk. When we, when we designed, when we designed the business plan, you know, there was there was an initial cost reduction, which is what we're going through now over the first few years. It was led by densification and by, and by, it was led by densification and by utilization, and, and kind of a reoptimization of the network, as well as by the, by the renegotiations we were able to do in our Chapter 11, which, which were, you know, in hindsight, very well timed. The, the, the, the plan then included kind of continuous improvement from there, and things that, that are a lot more complex and that we are still, that we are still doing, right? In terms of simplifying systems, renegotiating contracts, changing our, our, our, our distribution model to be much, much more efficient, reducing overhead costs, and, and so on and so forth. Those continue to be in the planning. We continue to hack away at them, and, and, and, and the objective is to, to accelerate them. If you, if you were to do the exercise of, of grabbing our ASK, as, as we break it out, and comparing it to the low-cost operators in the region, you'll see the areas where we believe we still have some wood to chop, and, and, and we're going to work at them. There, there's another, there's another comment that I'd like to make on that, and it, and, and it certainly isn't to excuse what is happening, right? What is happening is, is, is, is not something that, that, that, that we want to have happen, right? We, we, and I think the entire industry, would prefer to have lower costs rather than higher costs. As Rohit said, these inflationary pressures are hitting everything, and, and, and that is certainly not a positive. But to some extent, just to make the argument from a competitive standpoint, what's important is, is relative cost, right? And what is true, and it's important that you're aware of this, is that we did design into our business plan, a pretty significant amount of inflation protection. We, we, we believed, well, we're not gonna say we had a crystal ball, but, but we believe there was a pretty, a pretty high likelihood of inflation going rampant once demand kicked back up post-pandemic. And we, and we negotiated and, and ultimately paid for, some, some pretty significant inflation protection features in, in many of our large contracts. In, in a strange way, as inflation kicks in, competitors that did not lock in supplier agreements that have escalation caps, and, and the like, are much, much more exposed to this. On a relative basis, you know, when, when, when, when the, when the dust all settles, this, this may actually create a bigger gap for us versus, versus the competi- or a bigger, benefit for us versus the competition than, than we had initially. That is obviously something that is not just within our control; it also depends on the actions they take. The things that are within our control, we are going to accelerate. That's, that's the summary. Thanks. Thank you, Adrian. The only thing I'll, I'll, I'll add to Adrian's, Adrian's summary is on the cost side, the one additional sort of item that that will lower our costs is the densification of the wide-bodies, which has been delayed because of sort of borrowing engineering resources. That project will kick off towards the end of this year. In the H2 of 2024, we would expect to see some of that, that benefit. That will be with, with that, that on a weighted average basis, will be roughly about $0.0015 improvement on cash by... with the wide-body densification that has been delayed. Thanks for all the color. Your next question comes from the line of Michael Kaufman of Redwood Capital. Please go ahead. Hey, Adrian. Hey, Rohit. Congratulations on a great quarter, and appreciate your time and color today. I had two quick questions. The first one is, given the outperformance this quarter, generally speaking, do you have any update or further comment on your the full year guidance for EBITDA and cash flow? Rohit, you want to- Yes, sure. Sure. Michael, you know, I don't think we're going to formally update guidance, but I guess what we can say is, based on current trends of fuel and revenue, we would expect to be sort of more in the $1.1 billion-$1.2 billion versus in EBITDA, versus the $1 billion that we had that we had sort of previously guided to. But that's sort of based on the current trends. You know, as you know, the, you know, macroeconomic environment and fuel prices can change, you know, pretty quickly. Based on current trends, that's what, that's what, that's what we would expect, and that would obviously mean, mean a little bit more, you know, corresponding more cash, cash flow as well. Great. Thank you. Does that incorporate any of the synergy benefits from Aubrey yet, or do you think that's more of a 2024 event? Firstly, that doesn't include any synergy benefits. I think we're still working through the planning with our teams. Our teams are, are, are working very well, very well together to define, define that. Yes, I would say we would, we'll probably comment on that a little bit more on the next couple of quarter calls, but probably more of a 2024 issue. I don't know, Adrian, if you want to add any comments on that. Yeah. No, I think it's just something, Rohit, I think, I think you'll see some of the, some of the, kind of, synergy work streams kick in, during, during this quarter and certainly during the fourth. On a run rate basis, you'll. There'll be some of that, you know, adding some, some, some, some incremental value to the, to the year-end numbers. The reality is you'll see a few months of it, right? For it to be substantive, we're gonna need, we're gonna need next year, to play out. Thank you. There are no further questions at this time. I would now like to turn the call back to Adrian for closing remarks. Well, I just again, I, I think I said most of this, but I'll reiterate it. Very, very proud of the quarter we delivered. The team has done, has done an, an amazing job in a seasonally challenging quarter. We're excited about the rest of the year. Wanted to thank all of you for continuing to, to invest in us, to follow us, to, to spend time with us, and, and, and to trust us with, with, with your investments. Thank you, thank you all, and, and we look forward to, to speaking with you again in, in, in a few months. Thanks so much. This concludes today's conference call. You may now disconnect.