Gol Linhas Aéreas Inteligentes S.A. (NYSE:GOL) Q3 2022 Earnings Conference Call October 27, 2022 10:00 AM ET
Company Participants
Celso Ferrer – CEO
Richard Lark – EVP, CFO & IR Officer
Conference Call Participants
Dan McKenzie – Seaport Global
Alejandro Zamacona – Credit Suisse
Hillary Cacanando – Deutsche Bank
Pablo Monsivais – Barclays
Operator
Good day and welcome to the GOL Airlines Third Quarter 2022 Results Conference Call. This morning the company made available its results. After GOL’s presentation, we will initiate the Q&A session for analysts and investors, when further instructions will be provided. This event is also being broadcast live via webcast and may be accessed to the company website at www.voegol.com.br/ir and MZiQ platform at www.mziq.com.
Those following the presentation via the webcast may post their questions on the platform and their questions will either be answered by the management during this call or by the GOL’s Investor Relations’ team after the conference is finished. [Operator Instructions]
Before proceeding, we emphasize that forward-looking statements are based on the beliefs and assumptions of the company’s management and on the information currently available to GOL. They involve risks and uncertainties, given that they are related to future events and therefore depend on circumstances that may or may not occur.
Investors and analysts should incur — should consider that events related to macroeconomic conditions, industry, and other factors could also cause results to differ materially from those expressed in such forward-looking statements.
And at this time, I will hand you over to Mr. Celso Ferrer, CEO. Please begin sir.
Celso Ferrer
Good morning everyone and thank you for participation in thus conference call. I would like to start by highlighting our most important results of the period, which were made possible by the trust we obtained from our customers, investors, suppliers, inspection from our team of VOEGOL’s.
The third quarter was characterized the impact of the highest jet fuel price per liter in the history of the aviation industry. This resulted from the combined effects of increases in oil prices and devaluation of the Brazilian real.
On the revenue side, we had a rational price environment among industry players, and the resumption of a strong load factor practice after the slowdown of service in the end of second quarter.
By acting assertively and managing capacity and improving productivity, we maintained the growth of our revenues and our operating results during this period, recording the highest quarterly revenue figures in the Gol’s history, reaching BRL4 billion in third quarter, 109% and 80% above of 3Q 2021 and 3Q 2019 figures respectively.
As we continue to see recovering demand, we subsequently resumed more flights and expand our network. We served more than 200 markets and transported 6.9 million passengers in the quarter, 39% above last year and still 29% [ph] below the volume of third quarter 2019 — last year.
Our supply measured by ASK grew by 41% year-over-year. In part this is due to the resumption in corporate demand as workers returned to the office, less restrictions in international markets, and strong BFR and demand.
It is also important to note the 51% growth in yield and 6.6% expansion in RASK. This yield is more than 42% higher than the pre-pandemic figures in Q3 2019. Our unit revenues grew 48% followed by an increase in forward bookings by 58%.
Once again, Gol’s ability to efficiently meet the increasing demand stems from the company key differentiators, our strong and discipline and capacity management with a continuous focus on preserving profitability and liquidity.
By 2023, we expect that our efficiency will be our main competitive advantage. This will be critical to winning the business of our customers and reduce our tax even further consolidating our cost advantage.
In order to partially offset the effects of the jet fuel price increase, our recurring unit cost ex-fuel decreased by 24% when compared to 3Q 2021. When converted into U.S. dollars resulted in 3.6 times or 4.5% lower than the same quarter in 2018, even considering a supply that was 23% lower than that period.
The capacity was preserved over the first nine months of 2022 and we will be added in a balanced way in fourth quarter, our highest season. This figure is clear demonstrates how Gol is resuming its productivity and efficiency and will further reduce the already lowest unit cost –. Its main competitive advantage to generate a faster recover of its operating margins and adapt the company to the best efficiency indicators by the beginning of 2023.
Our load factors and aircraft utilization continue to improve and flight frequency increases by 40% when compared to the third quarter last year. We extended our presence in regional markets, notably for the implementation of applied distribution centering by year which should reach 50 daily domestic flights by 2023.
We will have connections abroad through our international partners and the launching of routes connecting [Indiscernible] to the main tourism destinations in the States. In the national market, we strengthened our operations from Brazil to Florida. We also launched two new routes to Miami that we will be operated as of December from Manaus and for tourism.
We also inaugurated our regular cargo networks, which is operated with Boeing 737 freighter in partnership with [Indiscernible]. We started with routes between [Indiscernible] and Fortaleza and we will extend the network to six new series that have been [Indiscernible] Brasilia and Portalegre.
The partnership between Gol and [Indiscernible] provides an increase in units revenue and lowest cost associated with our press return CPR press operated by Gol in regular passengers transport are converting to freighters and will generate approximately BRL100 million potential incremental revenue for Gol.
We maintain the pace of our program to accelerate the transformation of the fleet to a new, more efficient equipment aligned with the company carbon neutrality goals. This quarter Gol took delivery of three 737 MAX aircraft, and we returned to 737NGs. By the end of the year, we expect to have 44 737 MAX aircraft, representing about 30% of the total fleet. And our goal is to have 50% of the total fleet composed by 737 MAX by 2025.
Turning to our loyalty program with Smiles Customers base surpassing the 20 million mark in revenues reach BRL1.2 billion this quarter, 26% higher than the previous quarter and practically double when compared to third quarter 2019. The customer at Smiles records consecutive increase demonstrating its potential while Gol expand its operations. Synergies were generated from tax management and seat inventory, important levers that optimize Gol’s working capital and liquidity.
We also record a year-over-year improvement of five percentage points in our NPS, Net Promoter Score, alongside important advances to improve the customer experience and strengthening our presence in the high added value corporate segment.
I’m now turn the floor over Richard who will present some financial highlights.
Operator
Perhaps you’re muted Mr. Lark
Richard Lark
You are correct. Apologize for that. The — good morning, everyone. Thanks Celso. Our detailed financial analysis for the quarter was shared in the earnings release and in the presentation made available on the webcast platform as well as on the Gol IR website. I’ll go through some of the highlights here after which will turn over for a Q&A session.
Our liquidity main remained relatively stable at BRL3.7 billion with BRL869 million of short-term debt at the end of the quarter. The management of our working capital, together with the increase in accounts receivable and advanced sales of miles and event sales of tickets has enabled us to maintain a pace of growth necessary to operate our high season with a greater dilution of unit costs at the same time, with a maintenance of very healthy fair levels.
As Celso mentioned, the transformation of the Gol fleet to the Boeing MAX has a fundamental role in our operating strategy, which is in part guided by increased and enhanced productivity and reduced unit costs.
We estimate that in the next few years about 50% — 50% to 60% of the new aircraft delivered to Gol will be financed under finance lease formats. Our ASK and RPK in the quarter increased compared to the third quarter of 2021 and reached around 77% of 2019 pre-pandemic year levels. Yield in RASK showed increases of 51% and 48% respectively over the same period, reaching BRL0.45 and BRL0.39 respectively.
Our recurring EBIT and EBITDA margins reached 6.5% and 17.3%, respectively, and our EBITDA totaled BRL1.7 billion in the first nine months of the year. We obtained an increase in the average fare sold, demonstrating our ability and experience in managing variations in fuel prices and the foreign exchange rates.
We achieved approximately 6% growth in our recurring CASK measured in dollars compared to the third quarter of 2021. We continue to be impacted by higher oil prices, which increase in the range of 30% compared to the third quarter of 2021 and — which drove consequently an increase of 91.3% in the Brazilian price of jet fuel over the same — growth over the same period.
Regarding our cash flow, in the quarter, we have BRL4.8 billion of operational inflows, which although impacted by the fuel price increase, generated and operating cash flow of BRL1.1 billion excluding interest expense.
Company’s successful liability management during the pandemic, as we’ve highlighted to you, throughout the pandemic, has put us in a leading position with the lowest short-term debt ratios among our peers.
We’ve updated our financial outlook for the year 2022 to take you through the end of the year, taking into account the increases in jet fuel, and also the results of the first nine months of the year.
Celso, back over to you.
Celso Ferrer
I would like to conclude by again, thanking our team of VOEGOL’s as well as our customers, investors, and suppliers, who continuously show confidence in the company’s business model and management.
For your sport, we are convinced that we not only have the champion business model, but also that we are prepared to overcome the market challenge and continue to play a leading role in the recovery of the airline industry in the next phase of growth.
Operator, you may initiate the Q&A session.
Question-and-Answer Session
Operator
Thank you. The conference is now open for questions. [Operator Instructions]
The first question will come from Dan McKenzie with Seaport Global. Please go ahead.
Dan McKenzie
Hey, good morning, guys. Thanks. Congrats on the revenue generation this morning. So, I’d like to put — on the slide this morning, I thought there’s some interesting slides in there. I just would like to put a finer point on them. Slides 11 and 12 profitability resumption and underpinning that is better utilization. So, it looks like 11 hours today versus 12, six and in the third quarter of 2019. Can you get back to 2019 utilization levels, say in the fourth quarter, the first quarter? And does that imply profitability? Or maybe what does the path back to full profitability look like? And if I’m reading the guide correctly this morning, it looks like you might be expecting a small profit here in the fourth quarter?
We still have some things on the ground and we consider this idle capacity. And we want to address this over the next month next year. But what we call the operating lease, we’ll be flying at 12-plus hours per day, as we always did in the Gol’s history. We are bringing back the fleet and bringing back utilization as we are confident that we are going to be continue to improve also the unit’s revenue.
We don’t want to dilute the unit revenue so we postpone our growth to the fourth quarter when we see demand — strong demand from all the segments, not only VFR, but also corporate demand for fourth quarter and first quarter next year.
Also in the international markets where we fly longest [Indiscernible] with the MAX, for example to Florida and other cities here in South America. So, with that, we are going to achieve even for CASK ex-fuel reductions, and we’ll be benefited by increase our margins.
Dan McKenzie
Yes, very good Celso. Second question here, slides 15 and 16, Richard, looks to me like a liquidity roadmap as we think about 2023. And as the message this morning that there’s enough cash coming in from, say, advance ticket sales, Smiles, to bridge the working capital needs through next year. And I’m just — I just wonder if you can elaborate a little bit more on that, are there any operating outputs or that were you about — that were you over the coming six months, whether it be I don’t know, CapEx, maintenance, returns, purchase deposits, anything like that, I’m just wondering if you can elaborate a little bit more on that?
Richard Lark
Sure Dan. The working capital management and the CapEx management is going to continue to be the same as you’ve been seeing, not just throughout the pandemic, but pre-pandemic, where — the way we describe it to you is matching, assets and liabilities matching inflows and outflows and that will continue.
The couple of points of difference in complementing a little bit with Celso responding to your first question, one of the key differences, a lot of you guys kind of look at the comparisons of pre-pandemic 2019, but in our company, at Gol is a significant structural differences that during the pandemic, we completed to take into the minority interest of the loyalty program, Smiles. And that makes a — so there’s a significant increase in the retention of earnings and cash flow that’s generated by that business, if you were to kind of compare it on a 2019 basis.
Down at the bottom-line, it’s around BRL500 million of additional cash flow. If you have kind of max that into a EBITDA margin equivalent, it’s about 400 to 500 basis points on that. And so when you’re comparing margins, cash flow generation or EBITDA margins, profitability and cash flow, today, where Gol is going forward to 2019, you need to account for that. So, it’s a much more robust EBITDA.
The other, the other component that I want to highlight there that I think is often missed, especially when looking at a company like Gol, which has very low fixed costs is the leverage component. And so as we recover to high productivity, which for us is 12 hours of aircraft utilization a day across the entire fleet, which we expect to get, gradually evolved back to in the coming quarters, the benefit of the operating leverage really kicks in.
And when you combine that with the work that we’ve done on the yield management side of the equation to deal with the variations in oil prices, it puts us in a good position to generate incremental as you’re saying earnings, but more importantly, incremental cash flow and that’s gradual. We’ve taken a very conservative posture with respect to capacity management as you’re now keeping it at the low end of the, of the possible to conserve cash. And so we continue to be in that mode, meaning for more conservative capacity, as opposed to more — for more cash conservation, as opposed to more when you translate into liquidity.
And to liquidity, which is part of your question, you’ve seen whether the structural liquidity of Gol is kind of settled in this number of BRL3.6 billion BRL3.7 billion, which is how we’re going to be managed — continue to be managing the business going forward. And if there’s any adjustments we need to make, it’s going to be on the capacity side in terms of how things are balancing out. And so for the next couple of quarters, I think you’re going to see more of the same in terms of working capital management.
We do need to reduce our day’s payable to something more sustainable. We got a very large amount of support during the pandemic across our entire value chain. If you sum it all together over the course of the roughly 30 months of the pandemic, we generated about $3 billion of additional cash resources that came in from everything from the very top part of the balance sheet with suppliers all the way down to the very bottom part with shareholders across the board. So, all of — and we didn’t get any significant government support, likely you saw in the U.S.
And so that BRL3 billion helped us get to where we’ve gotten now in the pandemic. And over the next couple of quarters, we need to reduce day’s payable to something more sustainable, that will be matched. When I say something more sustainable, our normal if you’re going to pre-pandemic working capital management, we were roughly 50 to 60 day’s receivable, 50 to 60 day’s payable. And so on the payable side that needs to come down on the receivable side, as we continue recovering the corporate demand, as well as overall recovery to pre-pandemic levels, that accounts receivable level will come up, and those will match out there.
I don’t know on the investment side, on the CapEx side, as you know, we’ve been able to do a pretty good job of pretty much 100% financing all of our CapEx needs, the most important of which is MAX aircraft, and we have the appropriate mechanisms lined up to 100% finance any needs that we have on the new aircraft side of the equation.
And then on the on the maintenance side of the equation, which continues to be a challenge, we caliber — we’re calibrating the returns of the NGs with our ability to get financing for such. So, for example, the deal you saw — you guys saw recently on the spare engines that we were acquiring, that was a way of effectively of financing — keeping the NGs flying longer, such that we can also preserve cash as it relates to future returns of NGs, which the main cash outflow relates to the engine overhauls.
And so we’re going to continue to match that. Definitionally, that’s going to have to be pretty close to 100% LTV on all the new assets coming in, which is going to create long-term equity value with the new MAXs coming in. But we have to avoid short-term cash outflows.
But just to kind of finalize, because it’s kind of part of your question, just given where the markets are right now, the company really doesn’t have a currency today for any new external capital raising. And so we’re going to have to continue levering heavily on our working capital management, and our ability to finance the transition of the fleet from NGs to MAXs. So, hopefully that gives you a little bit broader context of how we’re going to be managing the business going forward.
Dan McKenzie
Yes, that’s perfect. Thanks for the time, you guys.
Operator
The next question will come from Savi Syth with Raymond James. Please go ahead.
Unidentified Analyst
Hey, good morning. This is actually Matt on first Savi. Rich I have a question about [Indiscernible] as we look forward to when that is approved. What are some of the key steps involved in Gol needs to do to implement a partnership in order to drive the value there? Is there anything that we should be mindful of in the next year, the timing of that?
Richard Lark
Say — maybe you could — I’m not sure if I understand your question. — is to focus on — is to focus on Gol and Gol earnings. Sorry, but can you rephrase your question?
Unidentified Analyst
So basically, I’m the guy that — when the partnership is put in place, are there any investments that Gol needs to make in-house or costs related to that? Such as integrating systems, what that could entail? Or are there things associated with aligning loyalty programs, et cetera, something along those lines?
Richard Lark
Sorry, I didn’t — sorry, I didn’t catch your name, I got you work with Savi.
Unidentified Analyst
Matt.
Richard Lark
Matt, sorry. Yes. If you want, you can call us up later. And we can — I mean we’re not — this call is not about that today. So, appreciate if you could stick the Gol.
Unidentified Analyst
Okay, certainly, um, maybe I’ll switch over on the aircraft deliveries, if you could talk maybe about your comfort level there on your — just the timing, with Boeing referred some industry commentary that there are concerns about the order book. So, maybe your thoughts there.
And I think in the last question, you said 100% financing which was in place for all those deliveries are coming in in a year, did I misunderstand that?
Richard Lark
Yes, I’ll make a comment and Celso you can complement on there. Obviously, Boeing continues to have production which is much below the pre-pandemic levels. We’ve been able to, for the most part, meet our targets on the transition from NGs to MAXs as was described, we’re still targeting to finish this year with 44 MAX in the fleet.
Of course, all this is within the context of what has happened over the last three or four years. Because if you take the last three or four years, from a capacity perspective, we had some pretty significant impairment events on that plan.
One was the grounding of the MAX globally, as well as our actions taken in Brazil. Second was the Avianca Brazil exit from the market, which put a lot of strains on capacity. And then in our particular case, and Gol was to problem we had with the NGs towards the end of 2019. All that was pre pandemic. And sometimes all the focus tends to be on what’s happening in the world kind of this is the world began in March 2020.
But when the pandemic hit, obviously, we had to pivot to a different type of management, where it probably became a little bit of an advantage. The situation that we entered the pandemic, which was a fleet, primarily — almost — we only had eight MAXs in the fleet at the time, all operating leases, because we had monetized all of our own NGs. And that combined with the compensation agreement that we negotiated with Boeing and other things were able to do became a huge asset for us kind of managing through the pandemic.
As we’ve been highlighting last couple quarters, we’ve been accelerating and pivoting our transition to the to the MAX. Obviously, part of that will come off the order book with Boeing and then another part will come from aircrafts that are available in the whitetail market.
And we’re having success. I mean, we’re getting what we need. And we’re also able to represent finance that as we said, as you know, we’ve lined up, obviously, if it’s a sale, leaseback, there’s 100%, financing there with the upfront test generated. And we’ve, since the end of 2021, we lined up some other mechanisms to be able to do finance leases, with pretty much the same economics, meaning a generation of upfront cash, based on our purchase prices versus what we can finance.
In fact, you look at the mechanisms, we’ve lined up to do finance leases, and we did four in the first quarter of this year. And we’re going to do another six over the next two quarters with the six maxes that are coming in. We have 100%, LTVs, and a finance lease format, which also generates the upfront cash that we need to pay for the engine overhauls to return the NGs.
Having said, we have, as you’ve seen, if you compare our consecutive revisions to the fleet plan, over the last couple of years, we have consistently and gradually revised down the portion of the fleet for the next couple of years that will be a MAXs and so we are keeping the NGs, if you’re a roll back all the way back to say 2017, 2018 was our fleet plan with the MAX, we would have had, a little over 60 MAXs in the fleet at the end of this year and we’re targeting 44. And all that, roughly, almost say, 16 to 20 MAXs is the difference in the effect that happened, because of those items that I mentioned over the last couple of years.
Having said that, that obviously been useful in the context of managing capacity to the low end in the context of the pandemic, and the increased massive increase in oil prices this year, and those other things. And so that turned out to be, I think, a hidden asset for us. And so we’ve seen on that, as we’ve always been gradually revising down the for delivery schedule of MAXs, based on all these factors kind of rolled in. Having said that, over the next couple of years, we do expect to catch up.
And obviously, we’re going to do it on economic state makes sense. For us, it’s important for maintaining the competitive cost advantage. It’s also I don’t know, if you want to compliment anything?
Celso Ferrer
Rich your answer was completed. I just want to highlight that we are receiving the aircrafts at a lower price than we were expecting. But the whitetails that needs the aircraft already produce it are the main two for us to have access to the capacity on the new technology we need. So that’s why we’re going to take another six until the end of the year now. And this is, for us was a way to accelerate, re-accelerate the fleet. While other manufacturers in the whole aviation industry is facing hurdles in the deliveries of the planes, we were successful being reached. We are successfully reaching now, the regional fleet plan that we had even pre-grounding on the MAX.
Unidentified Analyst
Okay. Thank you both very much.
Richard Lark
Just before going to the next sell side analyst on the call, as you know, we’d like to work in questions that we get from the platform in here, some of which come from the buy side. So I’m just going to work in two questions here now just to make sure we address those who have put in the questions on the platform and are waiting questioners. What do you think will be your indicator as after GOL reach normalization by Q4 of 2022? Could you give us some trend indicators on how you expect will be the behavior on yields CASM ex fuel and margins and run rates for 2023.
Well, I think the main headline for this quarter is that GOL converged its efficiency. Almost back to pre-pandemic levels, at the 11 hours of utilization, we still need to squeeze another one hour a day out of the aircraft and we expect to start or to be in the first quarter towards the end of the first quarter 2023 with improved above, getting back to that full peak productivity yields going forward are expected to have a more flat behavior versus 2022.
I think we’ve highlighted that there at record levels and fares are very high, which have been necessary just to almost break even operationally, given the level of oil prices, that we plan to invest in, incremental additional capacity and lower fares to stimulate demand.
And additionally, we still have around a 20% capacity lag, versus 2018. So, as you’ve seen, the revenues, we’ve revised since we revised up our revenues, run rate for this year with 20% of our capacity. And so, when you combine both of those effects with capacity coming up, plus the expected deal behavior yields. We expect that this point would be flat next year, versus this year.
On CASM ex-fuel, as you saw in US dollars, when you convert to US dollars, it’s already lower than in the third quarter of 2019. And we expect to see further improvements, as we get back to full productivity in the Q1. And so, expect to see that better than the 3.6 in dollars that it is now expect to see that, in the 3.5 range. So there should be some further improvements on that we also have implemented several fixed costs reduction initiatives.
As an example, we’ll — with the natural turnover, that’s happened in the business during the pandemic, just a natural turnover in operations, mainly things like airports and in other areas, we’ll end 2022 with almost 2,000 employees less than our pre pandemic. And so, our productivity has adjusted there.
Now what I’m going to add, there’s another question, which I think it’s worth adding onto, because it’s a little bit like the question we got from the, the Raymond James person on the sell side. So I’ll flip to see what the question is. Regarding the MAX, the — sorry, just flipped off my screen here. Let me go back to the question just popped off here press the wrong button. One second. Apologize for that.
And it’s basically — the talks about the additional purchase order for the incremental 18 aircraft with Boeing. What’s the rationale behind that? And, and the financing of such and so. So I think I Celso, you could respond to that — and compliment, it’s a little bit of a compliment to the previous question.
Celso Ferrer
Yes. Yes. Okay, Rich. So, this transaction was a continuation of acceleration program with Boeing that was already publicly disclosed it in January this year, we now we have completed the remaining six aircrafts with Boeing to complete the 44 MAXs that we expect to have by the end of this year. Those are whitetails with attractive price conditions. Those are all MAX eight aircraft. And we may finance those planes in the same credit lines that were disclosed in January this year.
The additional 12 months then there has to be delivered between 2027 and 2030. And we want to secure those positions, we the MAX stands will be really, really important for us to reduce even for our cast, we expect to have the first MAX stands by 2025 and those incremental will be to have the right number of MAX stands in the three fleets we have designed for the company in five years from now. So it will not change the short term plans of the company. This we are not changing the fleet plan is just execution of the plan. As we go into this delivery scattered like I said, we don’t have the same availability of production that we used to have. So we are trying to find good deals. Being very programmatic on the aircrafts we’re bringing to the fleet with the right price and right financing. And this is what we’re going to do the six additional MAX-8.
Unidentified Analyst
Okay. I’m going to slide on one more question here from the platform, and then we can go back to the analysts in the queue. This next question here is, what is the plan to mitigate the volatility of oil prices? Are you planning to rebuild edge protection for oil? What about ex?
Richard Lark
Well, we go utilizes instrument today, this is probably a question that other people have as well. Today, the position that GOL has with instruments has, we have protection for 25% of — over the next 12 months, exposure at around $85 a barrel. And if oil gets over $100, that the way we’ve designed the instrument that goes to 50% protection. Obviously, we’ve been doing our hedging. We have been, as you know we came into the pandemic very well hedged. And that created an asset for us.
We had about BRL1.5 billion of an asset that we use to help pay for a lot of the needs in 2020. But we monetized most of those hedge positions. And the last couple of quarters, we have been gradually rebuilding. And so today that when we have in terms of — we’ll be doing it in a way where we use minimum amounts of cash, but today will be built, basically gives us about 25% hedge for the next 12 months at around $85. And the way it’s designed, it would cover us make us about 50% hedge if oil prices reach more than $100 now and about anyway, so that’s basically I think the important point. And a big chunk of those positions are not exposed to mark the markets.
And then on the FX side, we continue to do low levels of FX hedging, but just given the volatility, a lot of those hedges get done and come off and get monetized into quarter. Anytime we get some interesting gains. There’s the competition to take those gains and use those for paying expenses, and so on.
So with that operator will turn back over to the queue, please.
Operator
Thank you. The next question will come from Alejandro Zamacona with Credit Suisse. Please go ahead.
Alejandro Zamacona
Thank you. Hi, Celso and Richard. Thank you for taking my questions. Just a quick question on capital allocation. Do you have any plans to improve the balance sheet? I know this call is specifically for GOL. But I think that could be also interesting to have some information regarding a potential capital increase in GOL. Do you have any color on that? I’ll be appreciated.
Richard Lark
No, no. On that point, I mean, if GOL wants to announce anything there that would be made the case. And so we pride ourselves on not providing MNTI to investors and so on. And so this would be not the appropriate format to do that. So please, if you could just please keep your questions on any questions you might have on helping you understand, what we just disclosed in terms of the Q3. Also like we have a pretty detailed guidance through the end of this year. We’re not talking specifically about guidance for 2020. We’re not — we’ll provide that at the appropriate time. But if you could focus your questions on that, I think that would be most productive.
Alejandro Zamacona
Yes, sure. Sure. And then my second question is on expectation some follow-up recovery. And if you can comment on — I know you mentioned some early expectations for 2023. But you can also mention in terms of capacity, what are you expecting, and also the latest trends on the corporate demand? Thank you.
Celso Ferrer
Hi, Alejandro. I will — I have received all the questions regarding the demand scenario as well. So I tried to answer your question also addressing all the points that came along the call here. I mean, demand is coming, but not at once. We are seeing demand improving quarter-after-quarter, as the metric market is proving really to be resilient at even in this high cost environment. And GOL protected liquidity and design growth to happen in a way that cash and value would be maximized to the company. Both of our main competitors, they — what happened is that they really added capacity in the beginning of the year. While we are waiting for the, let’s say, more healthy season of the year to bring back the network.
If you compare, our growth for the fourth quarter will be around 11% while they are going to be almost flat compared to third quarter. That is it for the first time we’re going to see more rationality right now. And we — the pricing plan is more rational, but we see — we still see some inconsistency. If we go to the, let’s say, group level or reserve level, we can see that some competitors are adding a lot of capacity and rules for example, just as an example that creates a kind of a challenge for the price environment.
But overall, we are really confident that all the capacity we are deploying right now, which is even less than what we had in 2019, it very carefully, we are going to be able to expand the RASK and the unit’s revenue. And while growing third quarter and what do we want, we want to really start 2023 at the high level of unit revenue, but also at the light high level of utilization. And with the whole network and schedule already deployed. Of course, we’re going to navigate through the seasonality of next year, but we want to start 2023 by having the, let’s say, the levels of productivity at least compared to the — what we had in 2019. So, with that we are going to offer an even lower ASK fuel and fuel because of the fleet renewal program.
Alejandro Zamacona
Perfect. Thank you very much, Celso.
Celso Ferrer
Thank you
Operator
The next question will come from Hillary Cacanando with Deutsche Bank. Please go ahead.
Hillary Cacanando
Yes. Hi. Thanks for taking my question. I think you have 25 MAX 10 on order and I was wondering if you have the option to shift to another MAX variants in the event that Max 10 are not certified, because going out there saying that if they can’t get the extension then they’ll just grab your MAX 7 and Max 10 variants, I was just wondering if you have the option — if you have the flexibility to switch to like MAX 8, so what your plans will be if you don’t have that? Thank you.
Celso Ferrer
Hi, Good morning. Hillary. Yes. We have the flexibility — it’s Celso speaking and we — yes, we have flexibility to convert those MAX 10 to other MAX aircraft. And even if one day Boeing launcher a new middle of the market aircraft, we also have the right to convert. We believe that the MAX 10 will be certified that the assumption we have on our plan. But of course, we are protected by the contract if we need to convert those to eight or nine or whatever we have. But the MAX 10, our first MAX 10 will be is scheduled to be delivered in 2025. So we don’t see major risks that it could change.
Hillary Cacanando
Okay. That’s great to hear. And then I just wanted to with the just the global economy kind of slowing with high interest rates and global inflation and things like that. Are you seeing any pressure on pricing and what’s your confidence level in terms of being able to keep your pricing where you want them to be in the current environment?
Celso Ferrer
Yes. I think we are in a high cost environment overall, Hillary, here and we — in Brazil ideas especially down in the second half of the year, inflation is getting fuller we also have inflation in the next in the last 12 months, which is good news. But overall, we see for the industry at challenge they have, — had difficulty with interest rates and also inflation. We think that, the US is going to continue to be high. I mean, that’s not only for to offset the fuel costs, but also FX and US inflation. Richard, if you want to add something.
Richard Lark
No.
Hillary Cacanando
Okay. Thank you for you — thank you for your time.
Richard Lark
I was just going to say, operator, we’re going to — I’m going insert a question from the platform, and then we can go back to the — go back to the queue. The question here is, and I think I’ll send this one to you Celso to respond. It’s Can you discuss the competitive landscape? Are you discipline capacity, addition from competitors, how does your task compared to competition on similar routes and leg winds?
Celso Ferrer
Okay, Rich. Like, what we’re seeing from now on is more rationale, more rationality in the market, as competitors starts to flex their capacity, while the parents what they did before, and then they grew the capacity in second quarter and third quarter, in our view, more than needed. And now I’m seeing that, they are planning their capacity to address fourth quarter demand and first quarter demand last year. So our view is that, we are going to be seeing a healthy environment on yields, for at least the next six months.
And we are of course, expanding the network. Now, on the most — on the core of our network. So what we did before the beginning of the year, we brought back the whole number of destinations we have we concentrated the frequencies on the on the hubs, and from now on, we have any frequencies to the high frequencies and business markets.
So in that sense, huge — should continue to improve. Also, the use we had sold for the next month are also much higher than before, we have our ETL more than 1.5 billion higher for the fourth quarter. So what which means that we have been planning the revenue for the next quarter and by already knowing that we are going to be facing a more even higher cost environment, but also a rational behavior from the competitors.
We are focused on the CASM ex fuel, the CASM ex advantage we have today, we have 10% against one of the competitors and 30% advantage against other competitors and we want to keep the improving these gaps.
Richard Lark
Okay, I’m going to slide — I’m going to slide in, because we’re getting some good questions on the platform. I’m going — do two more questions. And then we can flip back to the — back to the queue. Because I think we have kind of another 10 minutes here we can we can do. Next question is, how is how is jet fuel trending in Q4. The guidance compliant — your guidance complies higher jet fuel expense in Q4. Is that correct?
Well, after the all-time record peak in July and August, because again, remember in Brazil, that there’s a lag between what you guys see with international oil prices and how that works its way into our costs in Brazil, it was kind of upwards of almost a 45 day lag. Now, so there was a — was a big, big peak in July and August, there was a 10% reduction in September, October. But there’s going to be a new increase in November based what’s going on now that obviously gives us a slight advantage, if we need to take some actions in — in hedging. But the other — the other — the other phenomenon it’s very different — for example, pre-pandemic numbers is what’s been going on with the crack spread.
So WTI and Brent are more stable, the crack spread is significantly higher. And also there’s the FX component, because we pay for our jet fuel in Brazilian Real. And so the funding that comes through the monopoly provider, it’s basically, the average of what happened in the previous month in WTI. Brent, jet before then there was a crack spread component in the FX component.
The FX has now gotten back to 5.3, 5.4. And so, I already talked about what we’ve been able to do in terms of forward hedging, which gives us a moderate degree of protection. But that’s what’s reflected in the — in the guidance, based on what we’re seeing that’s going on with international prices. And we do expect there’ll be another increase in — in November. And so based on what’s going on with the prices here.
And one other question — the — that I wanted to pull in here. The question is the following, I’ll just read it. It says we are heading into the travel season. Liquidity sources are something and something we’re all watching, in addition to bond maturities coming up, I guess he’s referring to the next Bond maturity, which is July of 2024. Can you talk a little bit about the travel season? And how that will impact cash generational liquidity? I’ll flip that to Celso.
Celso Ferrer
Yes, I mean, travel season is starting right now. And then the winter IATA season is our summer here, we are growing by 11% with the test on fourth quarter compared to the third quarter. So that represents of course an additional seat to be sold. So it tends to be a working capital positive experience for us. And that will continue until February next year, which we consider the high season in Brazil, we are during this period, increase utilization, focus on the network to the main airports in Brazil, also launching new Point-to-Point routes to the most important leisure destinations here in opening up new destinations and international markets.
Like I said, Miami and Fortaleza to Miami is strengthening our partnership with American Miami, which is now a key advantage for us on the on the US market. And yes, I mean, we are entering into the best season for us now.
Richard Lark
Operator, we can go back to — operator we can go back to the —
Operator
The next question will come from Pablo Monsivais. Please go ahead, sir.
Pablo Monsivais
Hi. Thanks for taking my question. I have just one simple question in your press release about financial flexibility that you’re saying with the new credit facility, you got to add a little bit of guidance of the sides the cost costs. That will be very helpful. And I guess that my previous question was already answered about the competitive environment for next year. But any further color would be appreciated. Thank you.
Celso Ferrer
Yes, I think what you’re talking about is the engine facility, we announced, for the nine, the nine spare engines that we’re going to be acquiring direct from CFM. The flexibility there is what I mentioned before is that that will allow us to keep some flying longer in with avoiding the cash outflows that are required to do engine overhauls, which are very expensive. So that’s what we mean by the flexibility.
So it’s basically, and it’s basically fully financed those new edges can be used in operations which will allow us to also manage our capacity effectively through the high season as I kind of — been trying to obviously you have to look at how we’re managing the company today reflects. I guess, you could probably go all the way back to 2016 with 2015-2016, 2017 where GDP contracted sent over two years. But pre-pandemic, we had the Max grounding the Avianca Brasil bankruptcy a typical problem, all of which kept NGs, the NG portfolio and the engines flying much longer than we expected.
And the company not able to start transitioning earlier to the MAXs with the brand new engines and the maintenance all that. And so what you see in that is — and then the flexibility component is exactly that. It is it gives us operational flexibility, especially now through the high season to keep NGs flying longer and it’s fully financial. So maybe you want to compliment, because I think it’s an important point, which might not be obvious for maybe if some of you guys haven’t been following role fully over the last cycle or maybe less familiar with airlines, that might be helpful to give a little bit more information on that, so.
Celso Ferrer
Hi, Rich. Can you repeat the question, please?
Richard Lark
Yes. His question was, what do you mean by flexibility with the — he’s referring about the new financing mechanism that we announced related to the spare engines that are coming in?
Celso Ferrer
Yes. So, yes, we are really focused on the instruments to finance the CapEx of the company. So we now have this financing of the engines, also the financing of the MAX, and now the focus is to finance the CapEx, especially engine overhauls, that it’s going to be key for us to deliver the capacity of next year.
So we’re pretty much focusing just the right level of investment and finance over the CapEx through finances mechanism that is now available in the market with the suppliers. And we are confident that we will be able to finance most of the CapEx for next year.
Pablo Monsivais
Correct. Thank you very much. That was super useful.
Operator
This concludes today’s question-and-answer session.
Richard Lark
Just one second, operator, we will conclude the call, but there was one additional question that came in that specifically asked us to answer the questions from Matt, which I think was the Raymond James analyst. And I’ll just repeat more courtesy. The information that’s been provided on what ABRA is doing, has already been provided, there’s no additional information. I was just trying to be polite. When I said to Matt, if he wants, he could send us an email without those questions or call us. But he would get the same answer as I’m providing here. There’s no additional information to be provided with respect to that all the information that GOL provides as a public company is provided simultaneously to everyone.
One of the reasons why we provide like that super detailed guidance for you guys, which is about 20 different metrics, because it allows us to basically tell you how we’re thinking and talk to you about numbers. In theory, if we didn’t provide that level of guidance, we wouldn’t be able to have conversations with sell side and buy side about what GOL is doing. But all the information that’s available and they can be provided with respect to what ABRA is doing has already been provided. There’s no new information that is available to be provided.
So, with that, operator, you can conclude the call.
Operator
Yes, sir. This concludes today’s question-and-answer session. I would like to invite Mr. Celso to proceed with any closing remarks. Please go ahead, sir.
Celso Ferrer
Thank you all and I hope you enjoyed today’s webcast. Our Investor Relations and Communication teams are available to speak with you as needed. Thank you very much.
Operator
This concludes GOL Airlines conference call for today. Thank you very much for your participation, and have a great day.
Be the first to comment