Azul, the Brazilian airline known by its ticker AZUL, reported a strong start to the year in its first-quarter earnings call, underscoring record results, significant margin growth, and a positive outlook for 2024. The airline announced a 4.5% increase in operating revenue and a 37.4% increase in EBITDA, achieving a record EBITDA margin of 30.3%. Solidarity with those affected by the floods in Rio Grande do Sul was expressed, with the company participating in relief efforts. Azul's unique network and diversified business units were highlighted as central to its success, and the airline expects to grow further, projecting increased cash flow and reduced leverage.
Key Takeaways
- Azul reported a 4.5% increase in operating revenue and a 37.4% increase in EBITDA.
- The company achieved a record EBITDA margin of 30.3% in the first quarter.
- Azul is participating in relief efforts for the Rio Grande do Sul floods, in partnership with Itau Bank.
- The airline's unique network and diverse business units drive its success.
- Azul anticipates its best year ever in 2024 with improved cash flow and reduced leverage.
- Strong cash generation has allowed the company to pay down debt and invest in growth.
- Azul expects to be 15% larger in the second half of the year with increased EBITDA.
- The company projects year-end leverage to be lower than in Q4 2019.
- Forward bookings show a 100% recovery in corporate volumes and a 40% increase in leisure volumes.
- Azul expects a 10-11% capacity increase this year, with a higher rate projected for 2025.
Company Outlook
- Azul is on track to have its best year ever in 2024.
- The airline projects improved cash flow and reduced leverage in the coming years.
- Upcoming deliveries of Embraer E2s will contribute to revenue growth and cost reduction.
- Positive momentum in forward bookings with complete recovery in corporate volumes.
Bearish Highlights
- The second quarter is expected to have slightly lower numbers due to fewer holidays.
- International cargo yields remain soft.
- Potential supply chain risks could affect aircraft delivery schedules.
Bullish Highlights
- Azul's exclusive network and business diversification are key success drivers.
- The airline's loyalty, vacations, cargo, maintenance, and charter businesses are showing growth.
- Domestic cargo demand is growing in the mid-single digits.
Misses
- No significant misses were discussed during the earnings call.
Q&A Highlights
- John Rodgerson stated that no significant one-time adjustments are expected going forward.
- David Neeleman explained the transition of the widebody fleet, with two A350s leaving and four A330s joining.
- Azul is preparing for a recovery in international capacity in the second half of the year.
Azul's first-quarter performance sets a strong foundation for the airline's projected growth and margin expansion. With a strategic focus on its unique network and business diversification, the company is well-positioned to navigate through the current market environment and capitalize on the recovery in travel demand. The airline's commitment to its business plan and future growth, combined with its efforts to support communities in need, underscores Azul's resilience and forward-looking approach in the face of challenges.
InvestingPro Insights
Azul's first-quarter earnings report paints a promising picture for the airline, with significant margin growth and a positive outlook for the year ahead. To provide further context to these results, let's delve into some real-time data and insights from InvestingPro.
InvestingPro Data indicates that Azul's Market Cap stands at 743.52M USD, reflecting the company's current valuation in the market. Despite not being profitable over the last twelve months, as indicated by a negative P/E Ratio of -1.60, analysts predict the company will be profitable this year. This aligns with Azul's own positive projections for 2024. Additionally, the airline's Revenue Growth over the last twelve months as of Q1 2023 was 16.34%, showcasing a solid performance in terms of increasing revenue.
InvestingPro Tips highlight that Azul is a prominent player in the Passenger Airlines industry, which is crucial to understanding the company's competitive landscape. The stock price has experienced significant volatility, which investors should consider when evaluating the stock. Moreover, Azul's stock has taken a big hit over the last six months, with a 6 Month Price Total Return of -31.02%, suggesting that the market has reacted strongly to various factors affecting the airline.
Azul's strategic focus on its unique network and business diversification, as mentioned in the article, is a key driver of its success. However, the InvestingPro Tip regarding the company's short-term obligations exceeding its liquid assets is an important consideration for investors looking at the company's financial health.
For readers interested in a deeper analysis, there are additional InvestingPro Tips available on the platform, which can provide more nuanced investment insights. By using the coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking further valuable information that can inform investment decisions.
Full transcript - Azul SA (NYSE:AZUL) Q1 2024:
Operator: Hello, everyone and welcome all to Azul's First Quarter Earning Call. My name is Zack and I will be your operator for today. The event is being recorded and all participants will be in listen only mode until we conduct the Q&A session following the company's presentation. [Operator Instructions] I would like to turn the presentation over to Thais Haberli, Head of Investor Relations. Please, Thais, proceed.
Thais Haberli: Thank you, Zack, and welcome all to Azul's first 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. Presented today will be David Neeleman, Azul's Founder and Chairman; and John Rodgerson, CEO. Alex Malfitani, our CFO; and Abhi Shah, the President of Azul, are also here for the Q&A session. Before I turn the call over to David, I'd like to caution you regarding the 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 David. David?
David Neeleman: Thank you, Thais. Welcome, everyone, and thanks for joining us for our first quarter 2024 earnings call. First of all, I wish to express my solidarity with the people of Rio Grande do Sul during this very difficult time. We are deeply saddened by the loss of lives, the displacement of people, and the widespread destruction caused by severe flooding in that region. On a personal note, my family has deep connections to that region. My father's done business there for decades. My daughter served a mission for our church there, and we have many, many dear friends. Azul crewmembers from all over the country have put their heart and soul into relief efforts, donating time, money, and supplies, while at the same time running the day-to-day operation. I've always stated that we have the best crewmembers in the world, and they are once again proving it. I cannot thank them enough for their passion and their dedication. We've already received more than 1,300 tons of supplies and donations, and the challenge now is to swiftly get the supplies to those who need them. With that in mind, we have created together with Itau Bank, a fund to enable as many dedicated flights and truck shipments as possible. I want to especially thank Milton Maluhy, the CEO of Itau for his partnership and support in these efforts. During our earnings -- turning to our earnings presentation, I want to remind you of the fundamentals of our business. Our exclusive network, diverse business units, combined with a growing, efficient, and flexible fleet are key drivers to another record quarter of results. One clear example of this is the fact that we continue to be the only carrier in 82% of our routes. Many thought that as we grew, we would have to encounter more competition, but in fact, the opposite has happened. We stayed true to our strategy. We grew within our network, and by doing that, the percentage of routes that we are the only carrier has actually increased. On slide five, we show one great example of this effect, our focus city, Belem, in the north of Brazil. In the past, if a customer from the north of Brazil wanted to fly to another destination in the north, they first needed to fly south, the so-called V routes, adding hours and sometimes more than a day to their journey. We saw that as an incredible opportunity to connect all of the north of Brazil via Belem. Since 2019, only in Belem, we're up 70% in departures. Out of the 23 destinations served, we have competition on only five of them. This is just another of the many examples around the country of how we've been able to grow by finding and developing new demand. We are confident Brazil still has a lot more room to grow, and Azul will continue to explore that opportunity. On slide six, we summarize Azul's ecosystem of business, which has powered our growth and diversified our strategy. In Q1, our core businesses of loyalty, vacations, and cargo once again had solid results. For example, gross billings of our loyalty program increased 31% versus the first quarter of 2023. And our vacations business increased gross billings by 75% year-over-year, thanks to strong demand and leisure markets supported by our dedicated vacations network. Even with all this growth in the Brazilian market since we founded Azul in 2008, Brazilians still travel significantly less than countries such as Colombia, Chile, or Mexico. So, imagine the opportunities we have to grow even more in these businesses. In addition, we continue to ramp up our maintenance unit, Azul TecOps, our overhaul and maintenance unit. We have seen accelerated growth in our charter unit, Azul OnDemand as well. These fast-growing high margin businesses strengthen our leverage in our business model and are a major factor in driving margin expansion. I am proud to see the great strength of our company. Once again, we are reporting record results and margin growth. We are doing all we can to help the people of Rio Grande do Sul at the same time are laser-focused on our business and our path through 2024 and beyond. With that, I will now turn the time over to John to give you more details on our record first quarter results. John?
John Rodgerson: Thanks, David. First, as David said, our heart goes out to all the people affected by the devastating floods in Rio Grande do Sul. I've been in contact with dozens of our crewmembers and we're doing all we can to support them during this difficult time. I'm so proud of all of our crewmembers for their incredible volunteer efforts, which are deeply appreciated by the people in the south. The culture and sense of family at Azul are stronger than ever. One question I'm sure you all have is when do we expect the Porto Alegre Airport to reopen? The answer is we do not know yet. And of course, NOC [indiscernible] report are monitoring this difficult situation and we will determine when the airport can be reopened safely. In the meantime, we're working with authorities to allow a limited number of commercial flights into the neighboring Canoas Air Base. This will allow the industry to reconnect the region to the Brazilian airline network, enabling critical movement of people and supplies. We will keep you updated as the situation develops. Focusing now on our results. As you can see on slide seven, we once again had a record quarter. Our operating revenue increased 4.5% to R$4.7 billion, driven by a healthy demand environment, robust ancillary revenues and growth in our business units. RASK and PRASK stood at record levels for our first quarter, demonstrating the strength of our business model. Capacity for the quarter grew 2.6%, supported by a 6% growth in domestic market, offset by a temporary reduction in our international network due to a transition in our widebody fleet. EBITDA reached R$1.4 billion, a record for our first quarter, and an increase of 37.4% compared to first quarter 2023. Our EBITDA margin of 30.3% was also a first quarter record and one of the highest in the world. It clearly confirms our ability to grow and extend margins at the same time. As David mentioned, as we grow, we get stronger and more profitable. On slide eight, you can see the continued evolution of our EBITDA. Since first quarter 2019, our EBITDA has more than doubled as the company has grown. But now our EBITDA margin has reached a record as well, to more than 30%. This is especially remarkable, given the fact that both currency and fuel are much more challenging today than they were in 2019. So even with these headwinds, we were able to grow and expand margins, demonstrating once again, the strength of our business. On slide nine, I want to highlight one of our key initiatives to further expand margins this year and beyond, aircraft utilization. We have significantly increased aircraft utilization compared to last year, supported by strong demand throughout our businesses. For example, our vacations business alone has doubled its dedicated route network. These flights allow us to increase utilization at non-peak times, while at the same time, bringing us a whole new segment of demand. These are opportunities that we continue to develop and we're extremely excited with the progress we're making. Looking ahead to the rest of 2024, I want to talk about a key driver of our growth and EBITDA expansion, our E2 deliveries. As you can see on slide 10, we will significantly increase the rate of E2 deliveries this year with 13 new Embraer E2s. To remind you, the E2 has 18 more seats and delivers 18% lower fuel burn compared to the E1. This means we get a 26% reduction in our cost per seat. In summary, with this aircraft, we can have more revenue and lower costs compared to the first gen E1s that we're flying today. Today, we have 20 E2s flying, but by the end of 2025, that number will more than double. Slide 11 shows how relevant the E2s are becoming. In the next 12 months alone, the flights and capacity flown on E2s will more than double. The economics of the E2 allows us to fly longer stage length and more hours in the day, and as a result, drive significant operational leverage and margin expansion. Azul will be a larger airline as we exit this year. Our broad network and unique connectivity serve as the ideal platform for this profitable growth going forward. Moving on to slide 12, you can see we have a consistent growth in EBITDA expansion over the last 15 years, only interrupted by the pandemic. But if you exclude that period, you can see that we're back to the earnings growth trajectory that we've always had, and there's more to go. Our 2024 EBITDA of R$6.5 billion will be by far our best year ever, and still the best is yet to come. Our strong operational performance leads to improved cash flow and reduced leverage. On slide 13, you can see that even in a seasonally weak quarter from a cash perspective, the operation was able to generate enough cash to paydown aircraft debt, CapEx, and interest. We've also been able to invest in our growth with, for example, pre-delivery payments for upcoming aircraft, which we know will come back when these aircraft are delivered. In the second half of this year, the airline will be about 15% larger than it is today. Combined with favorable demand seasonality, EBITDA will be even higher, while the cash outflows will practically not change, clearly leading to improved free cashflow generation. As we annualize these numbers, you can clearly see that we're on the path to sustained cash generation. As a result, as we show on slide 14, thanks to significant EBITDA generation in 2024 and continued paydown in debt, our leverage at the end of this year will be around three, lower than what we had in the fourth quarter of 2019. As we reach this milestone, we will exit 2024 as a truly stronger company than we've ever been. Concluding on slide 15, our business is doing extremely well with record revenues and EBITDA. Going forward, our continued fleet transformation and increased aircraft utilization will lead to much higher growth in EBITDA than in lease payments or CapEx. Our interest payments will also reduce as we paydown debt and our cost of capital improves. This leads directly to higher cash generation, which is why we're so excited about the future. More importantly, our customers love to fly us and our crewmembers love to work with us. We are sharply focused on executing our business plan for 2024 and beyond. With that, David, Alex, Abhi and I are available to answer your questions and I turn the call over to the operator.
Operator: Ladies and gentlemen, thank you. We will now begin the Q&A session. [Operator Instructions] First question will come from Gabriel Rezende, sales side analyst, Itau. Gabriel, we will open your audio so that you can ask your question. Please proceed.
Gabriel Rezende: Hello, everyone. Thanks for taking my questions. It would be great if you could provide some comments regarding the forward bookings and the respective yields you are seeing at this point for the coming months, the months that you already have some visibility, mainly considering that Azul has been able to maintain yields at a very attractive level, increasing on a year-on-year basis, despite what has been happening with fuel costs and the favorable effects on a year-on-year basis as well. So that's my first point. And the second point, if you could provide some comments regarding potential supply chain risks that could challenge your expectations for the aircraft to be delivered this year. I understand this might be a key point for your guidance and expectations regarding fuel savings as well. Thank you.
Abhi Shah: Yeah. Hi, Gabriel. Abhi, here. I can take the first part. So, overall, we feel pretty good about demand. We are in the middle of second quarter. So, there is second quarter seasonality, which is very similar to last year. So, I expect similar flown risks this second quarter to last second quarter. But we are seeing really good momentum in terms of future sales. I'll give you some highlights here for the month of April. So, the month of April, for example, we had a 100% recovery in corporate volumes versus pre-pandemic. We had a 40% increase year-over-year in corporate volumes versus last year and a 40% increase in leisure volumes versus last year as well. So, looking ahead to the middle of June, end of June, July onwards, we feel pretty good about how the curves are building and how the demand is kind of moving forward. So, I would say second quarter seasonality very similar to last year, but a really good month in terms of forward bookings. Like I said, up 40% in the month of April. Looking ahead, John.
John Rodgerson: Just quickly on the supply chain issue that you highlighted. We have great partner in Embraer. We have great partner in Airbus as well as ATR. And we're closely tracking the deliveries this year. And we were assured by our partners that all the deliveries we're supposed to get will happen on the new schedule. And so, they're more backend loaded than we would want. However, that's why we're exiting 2024, a much larger airline, which rolls forward to 2025, that will be a much larger airline going into 2025 because of the backend nature of when the aircraft will deliver. I just want to remind everybody that all of our engines are under power by the hour agreements, which is a strategic advantage at this time in the industry. People that do not have deals locked in with the OEMs, it's a strategic disadvantage. And all of our engines are now under a long-term agreement with the OEMs, which means we've got great partnerships in the ability to grow going forward.
Gabriel Rezende: That's very clear. Thank you, John. Thanks, Abhi.
Operator: Thank you. The next question now comes from Victor Mizusaki, sales side analyst at Bradesco. We will open your audio, Victor, so that you can ask your question. Please proceed.
Victor Mizusaki: Hi, congrats for the quarter. We have two questions here. The first one is a follow-up with regards to the aircraft deliveries. So, John, considering that the deliveries are back-loaded this year, what does this mean in terms of capacity growth for 2025?
Abreu [ph] 17: 33:
John Rodgerson: Yeah. Hi, Victor. So, the aircraft for this year, I think, our guidance for capacity growth was 10% to 11%. There's going to be a little bit of an impact now with the Porto Alegre network. So, I think 10% to 11% is a good number for this year. When you then take the aircraft that we are expecting second half and beyond, and you annualize that towards next year, you can expect a slightly higher rate for 2025. We don't have 2025 guidance yet. And of course, we're still closing the fleet plan. But this year, between 10%, 11%, and a little bit above that for 2025 versus 2024 in terms of overall ASK growth.
David Neeleman: And Victor, obviously, we can't comment on kind of the news reports. The only thing I'll say is, we believe strongly in what Azul is building. We believe strongly what we have going forward. And we're big fans of consolidation. I think that that's also something that we've been pretty open about for the last five years or so. And so, we'll see what happens going forward. There's a process in place and we're watching very closely. And that's all we can really say.
Victor Mizusaki: Thank you.
Operator: Okay. So, the next question will come now from Savi Syth, sales side analyst from Raymond James. We will open your audio, Savi, so that you can ask your question. Please proceed.
Unidentified Analyst: Hi, this is Zara on for Savi. Our first question is, can you comment on what you're seeing in the domestic market in terms of competitive capacity?
David Neeleman: Yeah. Hey, yeah, absolutely. So, regarding competitive capacity, we see a pretty mild competitive capacity environment disciplined. We think overall capacity growth this year, I think is going to be low single digits for the industry overall. We're not seeing any large variations from any of the players. So, it feels pretty disciplined overall. I think everybody's focused on results. And even the allocation of capacity within the networks, as I've said many times before, I think airlines are focusing where they are strong. And I think that's providing the best results for each one. And I think that's the best for the consumer. I think it's the best for the industry overall. So, if you were to model the whole year domestic market, I would say overall capacity growth this year, a little bit now Porto Alegre puts that in doubt, but I would say low single digits.
John Rodgerson: And I just want to highlight, the OEM issues that exist with engines across all of the engine manufacturers are making it really tough to add capacity in the short term. And Airbus and Boeing (NYSE:BA) having issues delivering aircraft on time. So, I think that keeps capacity in check for the foreseeable future as well, which that makes for a healthy environment.
Unidentified Analyst: Okay, great. Thanks. And then, just one more quick one. Do you have any color on cargo demand as well?
John Rodgerson: Yeah. So, cargo continues to be sideways, I would say. Internationally, we're not yet seeing a robust -- we're seeing strong demand, but we have not seen a return in cargo yields. International cargo yields are still low. And I think many airlines that have reported so far have already commented on that. Domestically, we are growing, which is good. We see strength in our partnership with e-commerce players like Amazon (NASDAQ:AMZN), for example. Amazon had a press release about Azul a couple of weeks ago. So, we're growing with them. So, we are growing. I would say growth is going to be in the mid single digits this year, which is still a positive scenario compared to many airlines around the world that are still reporting negative cargo revenue growth. So, I would say domestic growing mid single digits. International, good demand, but yields still soft and we haven't seen. So, I would say kind of mid single digit growth on the cargo side.
Unidentified Analyst: Okay, perfect. Thank you.
Operator: Okay. So, the next question will now come from Alberto Valerio, sales side analyst, UBS. We will open your audio so that you can ask your question. Alberto, please proceed.
Alberto Valerio: So, thank you very much for taking my question. First, I would like to congrats all Azul team for the initiatives that they are doing in Rio Grande do Sul. I have two questions. First one, it's about the seasonality of the year. Usually, we have a first and second quarter very close one to each other. Last year we have a slightly worse second quarter compared to the first quarter. Would you like to see about this year, how this year will be? And my second one is about the cash generation for the year. We -- in the beginning of the year, we are forecasting a zero cash burn for the year. If you can keep thinking that way, we have a slightly negative numbers for the quarter compared to our numbers. I think it's R$200 million difference. I would like to see if you can still keep this cash generation at zero for the year. Thank you very much.
John Rodgerson: Yeah, Alberto. On the seasonality, yes. This year as well, we will have 2Q, slightly below 1Q levels, very similar to last year, and then the rebound in 3Q and 4Q. Last year we had many holidays in 2Q, especially in April. This year we have much fewer holidays, which is good from a bookings' perspective. We are seeing significantly higher bookings, especially with the more days available. But we are seeing a more diluted flown revenue environment, just not as peaky, not as many peak days as we had last year. So overall, we will have similar seasonality to last year, 2Q, slightly below 1Q, and then a rebound in 3Q and 4Q, which is normal for Brazil.
Alexandre Malfitani: Yeah. And Alberto, on the cash, right? We're very excited. I think this is a year where you're starting to see everything that we've built and everything that this strong EBITDA generation can provide. And you can see by the slide that we provided, kind of using the direct method, right? You can see that our EBITDA in a seasonally unfavorable quarter in terms of cash like Q1, was enough for us to pay everything that we have to pay. Right? We generate a lot of cash inflows from the operation, and that's enough for us to pay for all of our rent, to pay for all of the interest, all of the CapEx. Normally in a seasonally unfavorable quarter, you could even burn a little bit of cash on that basis, right? A free cash flow to firm, and still generate cash for the full year, right? Especially the way that Abhi talked about the seasonality, he talked about first quarter and second quarter, but also you have to think about how the first half is different from the second half, right, in terms of when the capacity growth is coming, what is the fuel curve for the year, right? Clearly fuel is going to be higher in the first and second quarter, and it's going to be for the third and fourth. And just the natural demand seasonality that you have during the year, you always have demand accelerating into third quarter and fourth quarter. So, if we're breaking even in a quarter like Q1, we're very excited about what the result is going to be for the full year, right? And we reaffirmed our leverage guidance, right, for the year, right? We will be below the leverage that we had in 2019 in the pre-pandemic, which gives you an estimate for what the cash position is going to be. And that's 2025, right? That we're very excited about. That's 2024 that we're very excited about. But if you start doing this math for 2025, 2026, the number that we're going to generate this year, which will be a positive number, can increase by about a billion every year after that, right? It's not that we turn positive this year and then, stay at those levels. EBITDA generation is going to continue to grow. And as you know, we don't really have a lot of increased fleet costs, right? The CapEx, what it is, the rent goes up, but it doesn't go up as much as EBITDA. It doesn't even go up by as much as capacity because some of the capacity growth comes from the upgaging of E1s into E2s and A320s. And some of it comes from increased aircraft utilization as we described, right? So, the revenue growth and the capacity growth is going to outpace growth in rent. And so, when you do that math, you can see these significant jumps in the cash flow generation year-over-year going forward.
Abhi Shah: Especially as the airline just gets size, with all of these E2s that we're talking about.
Alberto Valerio: Thank you very much, Abhi, Alex and John.
John Rodgerson: Thank you.
Operator: Okay, so the next question will now come from Rogerio Araujo, sell side analyst, Bank of America. We will open your audio, Rogerio, so that you can ask your question. Please proceed.
Rogerio Araujo: Hey, good afternoon. Thanks very much for the opportunity. I have a couple here. One is one-off costs and expenses. The company had been reporting 5%, 7% of revenue in one-off costs in the previous quarters, but now it was zero. And this led to a strong margin gain when taking out this -- when actually including these one-off expenses. My question is, how should we think about it in the upcoming quarters? Should it continue to be close to null? And that's the first one. The second is on the 2.6% capacity expansion in the quarter. You're talking about a temporary reduction because of international capacity on this widebody fleet transition. If you could have more detail on that, would be great. Thank you.
John Rodgerson: Great, yeah. On non-recurrent, a lot of the non-recurrent that you had been seeing in 2023 was related to the restructuring, right? We were deeply in restructuring mode last year, and that caused restructurings in the fleet, in the lease payment schedule, obviously a lot of one-time fees to advisors, a lot of fees for new issuances. So yeah, going forward, unless there's anything that's actually extraordinary, we do not expect to have anything relevant in terms of one-time adjustments.
David Neeleman: And Rogerio, on the capacity growth, yeah, so a big impact this quarter from the international widebody fleet. To give you more detail, we had our two A350s that were flying. They, as part of the restructuring from last year, were returned to the lessor at the end of January. So, they exited the fleet. We have four A330s coming to replace them, but due to the transition of the fleet, they are coming now. So, one is already flying, it started flying in April. The second one is going to start flying in the first week of June. The third one's going to start flying third week of July, and the last one at the end of August. So that's why you have the slow ramp up in capacity. You have the dip that was February, March, April, and then you have the recovery in international capacity as we go through 2Q, 3Q, and 4Q. So that's on the international side. We basically have two widebodies leaving the fleet end of January, and then we have four coming in. We also had some heavy maintenance calendar timing. And then as John mentioned, we have the E2s coming sort of second half of the year. That's going to provide some capacity for this year and then for next year. But that's the detail on the widebody fleet.
Rogerio Araujo: Okay, that's pretty clear. Thank you very much.
John Rodgerson: Thanks, Rogerio.
Operator: Okay, so this closes our Q&A session for this call. We'll move the call over now to John for closing remarks. Please, John.
End of Q&A:
John Rodgerson: I appreciate everybody, and look forward to seeing many of you in New York this week. And once again, let's pray for the people in Rio Grande do Sul. Very catastrophic what's happened there, and rest assured Azul's doing all we can to help as we run a fantastic business. We'll continue to grow this business going forward. We feel very strongly about what we've built, and we're going to continue expanding margins and generating cash on a going-forward basis. Thanks, everybody.
Operator: Okay, thank you. This concludes the Azul audio conference call for today. Thank you very much for your participation and have a good day.
Thais Haberli: Goodbye.
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