Release Date: November 14, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Azul SA (NYSE:AZUL) reported an all-time record revenue of 5.1 billion reais, showcasing strong financial performance.
• The company achieved a significant EBITDA margin expansion despite currency devaluation and higher fuel prices.
• Azul SA (NYSE:AZUL) successfully negotiated with lessors and bondholders, resulting in a substantial reduction of over 1.5 billion dollars in debt.
• The company's Elevate program is already yielding results, improving efficiency and reducing costs.
• Azul SA (NYSE:AZUL) projects a record EBITDA of 7.4 billion reais for 2025, indicating strong future growth potential.

Negative Points

• Azul SA (NYSE:AZUL) continues to face disruptions due to fleet engine removals and supply chain issues, impacting short-term operations.
• The company is dealing with challenges from a devalued currency and high fuel prices, which have increased operational costs.
• There are ongoing delays in aircraft deliveries, affecting the company's capacity growth plans.
• Azul SA (NYSE:AZUL) has a high interest expense, which has been a significant drag on cash generation.
• The macroeconomic environment, including currency devaluation and OEM challenges, necessitates higher fares to maintain profitability.

Q & A Highlights

• Warning! GuruFocus has detected 5 Warning Signs with AZUL.

Q: Can you update us on the expected deliveries for wide-body aircraft by year-end and for 2025, and any delays? Also, how much capacity growth is assumed in the 2025 guidance? A: We received four wide-body aircraft this year, and the next set, the A330 Neos, is scheduled for late next year. For the E2s, we expect 10 deliveries this year, with some delays, and 12 to 15 next year. Capacity growth is projected at about 10% for next year, with higher growth on the international side due to the wide-body deliveries. (Answered by Unidentified_6)

Q: Regarding the 807 million of debt to be equitized, can you explain the phases and the underlying shares tied to this amount? A: The transaction will likely close by the first quarter, with dilution based on the share price at that time. The debt conversion happens in phases: an initial 10% turns to equity, followed by a second chunk, and the rest is a convertible note expected to convert by the end of 2025. (Answered by Unidentified_4)

Q: Does the 2025 guidance reflect the completion of current initiatives and the current FX environment? Also, what is the demand environment like today? A: The 2025 EBITDA guidance of 7.4 billion is firm, using Bloomberg's forward curve for oil and adjusted focus survey for FX. The demand environment is recovering well, with improvements in bookings and fares, and our business units are diversifying revenue effectively. (Answered by Unidentified_8 and Unidentified_6)

Q: Can you quantify what percent of the cash impacts from FX devaluation was offset by higher fares this quarter, and what should we expect for fares in Q4 and 2025? A: We expect steady improvement from Q3 to Q4, with seasonality favoring Q4. We've recovered 60-80% of the FX and fuel impact, and the industry needs higher fares due to macroeconomic conditions. (Answered by Unidentified_6 and Unidentified_4)

Q: There was a drop in salary expenses despite expanding operations. Is this sustainable, and what should we expect for this line in upcoming quarters? A: We aim to maintain and improve productivity levels through fleet transformation and efficiency initiatives. The current productivity is sustainable, and we expect further improvements. (Answered by Unidentified_8)

For the complete transcript of the earnings call, please refer to the full earnings call transcript.