Status Update

Mar 24, 2020

Press Release

Good morning, everyone. This is Leandro Santos from XP talking to you. Thank you very much for being here with us and good morning. We are pleased to have here with us Mr. John Rogerson and Mr. Alex Mofthani from Assul. They will talk to you for a few minutes around 10 or 15 minutes. And after that, we are going to have the Q and A session. So the operator will give you all the instructions after Azul's presentation, okay? So John, if you may start with 1, please. Great. Thanks, everybody, and I appreciate your time. And I just want to apologize for the late start here. It was XP Salt, not Azul. So just to make it very clear, we're in uncertain times in the world, we're in uncertain times in Brazil, and it's a very fluid situation. I think what's happened in the last 2 or 3 weeks has been every day there's something new. And what we found is that over the last, call it, 72 hours, it was not viable to continue to operate 300, 400 flights a day, which was our original reduced schedule. What we found is that the governor of Sao Paulo has essentially shut down the city of Sao Paulo. Rio has done the same. So for our crews in order to stay overnight at hotels and restaurants, it wasn't viable. And so what we decided to do and we actually decided to do this as an industry is kind of reduce to just a core essential air service. And so we'll be doing that over the next, call it, 4 to 6 weeks to hopefully flatten the curve a bit and kind of get everybody concentrated on what the restart plan looks like for Azul for the economy. And so but I want to let you know all of the actions that we've taken. I think Azul has been extremely aggressive in reducing our capacity very quickly, negotiating with lessors, negotiating with commercial banks. But I think what I'm most proud of is that we have over 7,500 crew members of Azul that are asked to take or that have offered to take an unpaid leave of absence. I mean, that's pretty powerful when we can get 50% of our employees off the books starting April 1. And some of them have taken 1 month leave, some have taken 3 all the way up to 6 month leaves. And so what we're doing at this time, and I'll let Alex walk through it, is we're doing everything we can to preserve cash because we entered this crisis as one of the most profitable airlines in the world. We were cash flow positive, one of the only in the region to be cash flow positive last year. And so we will certainly enter the other side of this as a very strong airline as well. We serve over 100 cities in Brazil. We're the only ones that serve 45 cities in Brazil. Azul certainly has a right to exist, certainly means a lot to the Brazilian economy. Many cities really depend on our service. Many of our customers depend on our service. And so we've built a fantastic airline that's been recognized around the world as top 10 in the world the last 2 years. We have 14,000 fantastic crew members, and I've really seen their support over the last 2 to 3 weeks. They understand these are uncertain times. They understand that they need to pitch in to help to get us to the other side. But this is a cash game. And so we've had several conversations with the Brazilian government, the Minister of Finance as well as Secretary of Aviation as well as the Minister of Infrastructure and been recognizing the importance of our industry. And there are measures coming in place over the next couple of weeks that will really support this industry overall. And they've made it very clear, they're not choosing champions, but they're choosing airlines that are primarily focused domestic in Brazil that are everybody is feeling a little bit of a pain, whether it be lessors, whether it be labor and the commercial banks as well and to get us to the other side of this. And so Azul is a fantastic company. Many of you have been great investors along the way. We've got a large order book with Embraer. And so when you think about the importance of supporting Azul in these uncertain times, It's really important for the Brazilian economy that Azul comes out of this strong. We see what's been done in Asia. We've seen what's been done in Europe, and we've seen what's been done in the United States. And so it's important that this is not a problem of mismanagement by any airline in the world. This is a catastrophe that's taken over the economy. And so with that, we've come into this with a strong cash position, but we need to do everything we can to preserve this. We believe this is a 2 to 3 month problem and then we get back to building demand and flying close to our full schedule by July. We understand that it could be a 6 month issue, but we are actually starting to see government kind of change tune a bit and realize you can't have a full shutdown for too long because it would be disastrous to the economy. And so I just want to let you know that we're working very hard. It is a very fluid situation. We were the first one to announce our capacity adjustments. We were the first one to announce a leave of absence program. And we'll continue to make the necessary adjustments that are needed to make sure that Azul makes it through this tough time. Initially, we reduced executive salaries 25% the 1st week. We've already done that at 50%. Initially, we had 3,000 leader absences. We're now at 7,500, and we're pushing that to get as high as 9,000. We're communicating daily with our people to do that. And so we also have a role to play in Brazil. And so we are doing things that are very important to help in this time of crisis. We transported a mobile hospital from Manaus to Campinas yesterday with 300 beds. And so it kind of helps set up in case the situation worsens. We're transporting medical staff. We're transporting a lot of professionals that are helping in this current crisis. And so this will pass and I'm sure that we will be a better, stronger airline after. It's not fun. But I will tell you that we have an entire team that's fully dedicated to getting through this. And with that, I'll pass the time over to Alex. Great. So yes, I think John's point of view is exactly what has been consolidated over the last few weeks. And to give you an update on how we are managing the situation, right, we just need to get through this downturn, this kind of fall in demand and get to the other side when demand starts ramping up again. And in many ways, the significant reduction in our schedule is actually helpful, right? It's actually easier for us to keep our cash management strategy when we're operating a very small airline as opposed to if we're trying to operate a third or half of our airline. It also happens that it's the right capacity for the demand that we're seeing, right? So it all makes sense. It's all kind of consistent. It all helps us cross this river and get to the other side. The vision that we've consolidated with our all of our stakeholders is that everybody is contributing. Everybody is going to cooperate for us to get to the other side. Azul has a lot of stakeholders that will benefit from our continued operation. Obviously, starting and as John mentioned, we're taking a pay cut. We gave up bonuses even though 2019 was obviously a great year, but this isn't the time to think about bonuses in a situation like this. Our crew members are giving up their profit sharing as well as signing up in massive amounts to unpaid leave. Just to give you an idea, when we had the Brazilian recession in 2015, 2016, we had sign ups in the 100, right? We're talking about 10 times what we saw back then. And so many expressions and manifestations of support and of love for this airline for what we've created. We're all in this together. I think we've really created a culture where we've always said that for us, this isn't a job. I think it's starting to be very clear that for 1,000 of our crew members that this isn't just a job, right? There's more to it than just a job. And this is an important factor when you have this team spirit within all of the ranks to help us get through this tough situation. We've been talking to LaSors for a number of weeks. They're all being very commercial and constructive. They know that the best way for them to get everything that they are contractually entitled to is to support Azul. This isn't a problem of an unprofitable airline that's hitting tough times. It's a very profitable airline and not only profitable, but also a growing airline route. So there's not only the ongoing contract that we have today, the many years of leases that we still want to pay to Aviso source, but also all the future business that we'll have once we start growing again. We've always talked to you about the potential of the Brazilian market. We haven't even come close to scratching the surface on how much this market can grow. Obviously, once this situation has been resolved, once we have passed through the strategy. Same thing with suppliers. There's the current business and there's also the future business that's very attractive to them. Azul is a very big fish, a very valuable client to all of these suppliers. Same thing to the banks, the current exposure and all the future business that we will have as well. Again, for all the stakeholders, the best way for all of them to get everything that they are entitled to is for them to help right now, right, is to give us credit, is to give us time. We have plenty of cash to survive many months as long as we can restrict the cash outflow, as you know. So and the vast majority is already helping. All the conversations we're seeing are very constructive. And I think once we have a little bit more visibility on when this crisis is going to end, it will be easier for us to talk a little bit more about what kind of numbers we're talking about, what kind of cash flow we can start generating again and what that will mean. I know all of you are trying to model what Azul can be worth. And obviously, 2020 isn't a relevant year for valuation. It's a relevant year for cash flow and for debt. But in terms of profitability, 2019 is obviously a much more relevant year. And hopefully, we can get back to that kind of profitability as soon as possible, as soon as life starts getting back to normal. The other important thing that's a vision that's also been kind of challenging with our suppliers, our partners, our stakeholders is that it's clear that it's hard to step into Azul's shoes, right? We do something that's pretty unique. As you guys know, our business model is pretty different from the other ones. Not saying that it's better or worse, but like John says, we have earned the right to exist. It's very unlikely that if Azul didn't exist, that somebody else would be doing what we're doing or that we that somebody would step into our shoes because of how different the operation is, right? You can't operate our network if you don't have a diversified fleet as we do, right? And operating a diversified fleet is complex. It adds cost, right? And in spite of that, we've been able to have very high profitability consistently for a number of years. So it's very unlikely that somebody else would be serving the demand that certainly will exist once this crisis has ended, right? And one thing that our suppliers and partners all mention is, obviously, this is a global situation where all of their partners and all of their airlines are struggling, right? Nobody carries 6 months of cash in their balance sheet. It'd be just a very inefficient capital structure. If you just carry 6 months of cash just in case a situation like this, which happens 1 to 300 years or whatever, happens. And so everybody is in the same boat. Everybody is in the same situation. What's happening is that partners are having to choose who are the winners and who are not, right? Who is sort of likely to exist and who is not likely to exist. And I think that's a big sign of the support that we're getting from all of our stakeholders that like you, like us, they all believe that Azul has a role to play once this crisis has ended. So we're feeling very confident. There's a lot of work to be done. It's not going to be easy. It's going to take a while. But that's how we're managing right now. We are preserving cash. We're getting a lot of support from all of our stakeholders. And we feel we can sustain this for many months. Hopefully, it won't take many months for us to start seeing the exit. But if that's what it requires, we are confident that we can do it. So thank you all for your support and your interest. And with that, I'll throw it back to Xfries so that we can take some questions. Thank you, Alex. Operator, we can move on to the Q and A session. Ladies and gentlemen, we'll now begin the Q and A session. Our first question comes from Pavy Fye with Raymond James. Hey, good morning, everyone. And Alex, maybe it's a question for you. Just curious if you can share, I know this is kind of a low period anyway. So kind of what your normal cash burn is around this time and given the stuff that you've taken, what have you achieved and what more you think you can achieve? I mean, it's a day by day situation. It's a negotiation with all of our creditors. Normally, on average, in a year like this, our expenses would be sort of in the $900,000,000 a month, obviously, peaky times more and off peak less. We're not going to see anywhere near the kind of cash burn as that amount, right? Because first of all, we always complain about how fuel is expensive in Brazil because of exchange rate, because of taxes, because of the import parity. But the flip side of it is fuel is completely variable. And if I don't fly, I don't have to spend it, right? So as opposed to the U. S, where you have lower cost of fuel and maybe high costs like labor, in Brazil, it's the opposite, right? Fuel is variable. Salaries are somewhat fixed, somewhat variable. And but when you stop flying, you are able to eliminate a big chunk of your expense. And then when you add to that the pay cuts that we're doing and the massive support we're getting from our crew members signing up for unpaid leave of absence, we can reduce our payroll more than 50%. I mean, in April, the reduction will be 65%, right? That's a significant reduction. It's almost BRL100 million just in payroll connection that we're doing. And what we got to be careful, because we're negotiating with people, right? And so everybody, lessors want to get paid because they also need to know that a deal needs to be stronger on the backside of this. And so when you kind of say, hey, look, we're going to get some relief on not paying leases. We're not flying aircraft and so we're not we don't have to necessarily take the maintenance and the fuel and all of that, and then you're able to reduce your payroll by 65%, I would challenge another company in the world that can do that as quickly as we have done that. And I think that shows the way we're managing this crisis. And we show the way that we've been managing it from day 1. And so again, everybody wants to get paid everywhere in the world right now, but these are uncertain times. And our challenge is to hold on to as much cash as we can so that if this goes beyond 3 months, then we are a winner on the backside of this. Yes. I think the important thing that, well, another vision that's kind of coalescing with everyone is, we realized after many, many conversations with banks and suppliers and the source, when you hear an airline with a cash crunch, you kind of intuitively assume that, oh, it's a bad business, the sector is very tough. And you have to remember, there are a handful of airlines in the world that are profitable and sustainable, and we're proud to be one of them, right? So you kind of have to separate the wheat from the chaff and realize that this we're not in this situation because of an unsound business model. We're in this situation because, again, nobody carries 6 months of revenues just in case. And so once that clicks, everybody is like, okay, I get it. The way for me to get paid in full is for me to not get paid in the short term, right? Because otherwise, if we start paying everybody, the cash disappears a lot faster than if we're controlling it the way we're controlling. And the big key here is, we've talked about this before, this has got to be need based, right? We're only going to hold the cash that we need to hold. And today, we believe we need to hold as much cash as we possibly can because we don't know how long the situation is going to last, right? But once we start to have a little bit more visibility, obviously, we'll have every reason and every incentive to start making these payments and start showing our stakeholders the support that they've showed us, right, in a responsible way, in a way that enables us to ramp back up to a full new schedule. And that's we're getting a lot of positive reception from our partners to that vision. I also would add, Savi, it's kind of an interesting phenomenon here that you Alice is the CFO of the company, and I'm the former CFO of the company, right? So you got 2 CFOs who's kind of leading the cash game right now, and I think that's really, really important. And we've all worked together for 12 years, right? And so when you think about dealing with suppliers like lessors, the same people that negotiated with them 12 years ago are negotiating with them today. And the same people that built the vision for this company 12 years ago are here today, and they will be here for the next 5 years as well. And I think that matters, right? And when people are doing business, it's a relationship business. When you're dealing with GE, Airbus, Embraer, this is a relationship business. And they understand what we've built. They understand what we're capable of. And we're and we trust each other as a management team, and that really matters. I think we're very much on the same team and then on the same page with what we're trying to accomplish. That's all very helpful color. Thank you. And if I just follow-up on, you mentioned there's no visibility here and this might be an unfair question. But as you get to the other side of this, I'm guessing you're going to delay some maintenance work. I'm guessing there might be some troop training that gets delayed. How quickly can that capacity be brought back? And is there any kind of cost planning that we should be mindful as we start to ramp back up on the other side of this? I think it varies. I think we have a lot of different plans on the shelf, and we're kind of revising them and even building new ones. But we can certainly plan for a speedy return or for a slow return. A slow return will probably give us a little bit more ability to plan. But we need to get back. We have fixed costs and the fast return may require more cash if we need to get the whole fleet in place. But it will probably start generating more cash more quickly as well, right? So there is a trade off there. And what we have to do is plan for the two extremes, and we'll be ready for any situation that comes along. So we can avoid a lot of the cash if we're not using the aircraft. Also, there's a lot of aircraft that we don't necessarily need to use. We have a big order of aircraft. We have aircraft that are ready to be delivered, right? They're brand new, ready to fly. They're we're working with our suppliers, with our OEMs so that they hold on to those planes, obviously, in this situation. But that's capacity that can quickly come back in operation if we need to get to some capacity. Yes, Savi, we're built to fly. Our people want to fly. And I think that you'll have an enormous effort from Azul. But I think what we're looking forward to is not necessarily flying the full schedule, but selling the full schedule, right? And so when Avi kind of puts everything back in place and confidence comes back to the market, that's when we know that we're going to be okay and we'll only fly what the demand is there for. And so whether that's in 2 months or that's in 6 months, we're only going to operate to the extent that Abhi has the demand that he wants to acquire. That makes sense. Thank you. So while we're waiting to see if we have any other questions, one thing that's relevant that I'd like to mention is that our cargo operation is doing extremely well. We're very happy to see that operation being more resilient. And we're doing everything we can to see, even though we are reducing significantly the passenger side of the business, what still makes sense for us to fly not only with our dedicated freighters, but even with passenger aircraft serving as cargo airplanes. And there is a lot of business that still makes sense even in this scenario, right? So you all know the value of the franchise that we've built on the passenger side, but we're also building an extremely valued business on the cargo side. You know how excited we are about building that into an integrated logistics operator. You saw the success we had last year, growing essentially 50% and becoming the 2nd largest operator in Brazil. It's a very profitable business. And the fact that in this crisis, it's also doing well is very, very encouraging. So our next question comes from William Wang with question. Can you talk a little bit more about the possible help from the government from the BNDES What is the level of terms? They're seeing about BRL10 1,000,000,000, right? So that will be the Thanks, William. So we've been in constant conversations with BNDES as well as Belco de Brazil and Caixa. They recognize there's a need to support the industry at this moment. They're seeing what's done elsewhere in the world. They want to do something that's market. They'd like to give a great signal to the market that they're supporting the Brazilian airlines. This is not Nazul specific. It certainly would help LatAm and GOL as well, which we're okay with, similar to what's being done in the U. S. And in Europe. But I think given that signal and kind of providing capital and really it's a working capital at this stage would then allow for the private banks to come in as well to help support. And so I think that they're taking a very commercial tact to it. We had calls with the MDS over the weekend on Saturday Sunday. And so it shows that they're very much aligned and understand the health of this industry is very important, especially when you consider that Azul is flying to 40, 50 cities that nobody else is flying to, when you consider the fact that all the hotels and restaurants and taxis and Embraer, how many jobs are at Embraer that depend on Azul being strong on the backside of it and being able to take E2s. And so I think the government is very aligned. And their only thing was is they wanted to make sure that everybody was feeling a little bit of a pain. And we said we're okay with that because that's the right thing to do. And so what should happen on this is airlines that enter this crisis strong should come out strong. Airlines that enter this crisis mediocre should come out mediocre. And airlines that enter this crisis weak should probably not exit it, right? And so there probably should be less airlines on the back side of this. And I think that that's the understanding of the government as well. And we were showing them, look, our unsecured debt was trading at 4.5% 30 days ago, right? Let's just put things in perspective, folks. I mean, where Azul stock was 30 days ago, where our debt was trading 30 days ago, the world is completely upside down. But it's kind of binary, right? Are we going to have a world? Are we not going to have a world? And if we're going to have a world, and I believe we're going to have a world, Azul is going to thrive in that environment. And so the one thing I just wanted to kind of remind everybody, I came to Brazil, the exchange rate was 1.58, okay? Today, it's 5. I came to Brazil, the GDP was growing at 8% a year. We've seen negative GDP growth for the last 5 or 6 years. We are survivors. We've seen crisis before. This is by far and away the biggest crisis that this industry has ever seen, but we'll get through it. Aviation is needed for Brazil. You cannot have a country the size of Brazil that's not connected. And I think BNDES really understands that. I think Paul O'Guayd's team really understands that and certainly, Prestige or Administrative Infrastructure certainly understands that. And so we've done things the right way since the beginning, and we're going to continue to do things the right way. And so I'm very confident that the government is going to step up. Okay. Thank you. And you had some commitment for issuing the iPhone side. Do you have any penalty related to the delay of the additional capacity? Sorry, commitment to other Yes. I mean, to be entertained for this year and the next 2 years, right? And you're saying that probably this new facility will be delayed or right now you're not receiving any new air tanks. Do you have any penalty related to not receiving these airplanes? No, I think everything I think everybody understands Embraer Airbus. We're in a different world right now, right? And so what's most important is to have healthy airlines on the backside of this. And so everybody is playing the long game here. Nobody is playing the next 2 month game. Everybody's playing the long game. And so if you're playing the long game, you're going to want to make sure that Azul is healthy and gets to where it was pre crisis. And I believe that that's what all of our manufacturers are doing. And they're true partners. These are not OEMs, these are partners. When you think about Embraer and the relationship that we've had for 12 years, they're partners. Airbus is a partner of ours. And partners kind of come together in times like this. And so if the market is not ready for us to take any of their aircraft, we won't take any of their aircraft. And so nobody has had any discussions of penalties or anything like that at this time. Let's get let's the world is attacking this crisis right now. The world is attacking a virus right now. And then we'll deal with things as they come after. Yes, Willy. I mean, just to give you an idea, I mean, this is, like John said, the biggest crisis that the industry has gone through. And even with smaller kind of macro impact than this, we've been able to negotiate delays on our deliveries. There's some contractual kind of escalation embedded into the contract, but we've also been able to negotiate relief from that, right? In the end, I think our partners have been very supportive of Azul in the past, like before we went public, for example, we needed their help and they stepped up. And then when we could help them and when we could recognize their support, we did so, right? And that created goodwill and credit with our suppliers. So that now when we need support again or when we just need flexibility, we have the credibility to ask for them and they know we're good for it, right? I think this is a Zul has kind of created a reputation where we're constructive, right? It's not our style to kind of try to leave to take every single penny from our suppliers. It's a long term relationship. When we can help them, we do. When they can help us, we do. And when everybody needs help, we're going to work together to figure out the best solution. Nobody is going to try to kind of push you or squeeze you when you're fighting for your life, right? And this is a crisis that's affecting the whole world and not only airlines, it's also affecting suppliers. And so we'll be kind of sitting on the same type of side of the table trying to figure out what's the best way for everybody to come out of this in the best way possible because we're also a stakeholder in Embraer, right? We're very excited about the success of the E2, and we can't wait for that aircraft fill the skies of Brazil. Okay. But can we expect an increase in lead costs after probably due to the negotiation and the tough environment? No, I don't see any reason for that. The lease cost is a lot more driven by the cost of capital than the cost of the aircraft itself. So I think it will all depend more on how much cash and the cost of cash. And given all the measures that every single government in the world is going to have to do in terms of increasing liquidity, we probably do not expect a reduction or an impact in the cost of aircraft financing. Okay. Thank you. Our next question comes from Stephen Trent with Citibank. Good morning, everybody, and thanks for hosting this call. Very, very helpful. I apologize if you guys had already mentioned this. I took a little bit of time to get into your call. But when we think about the government reaction, I understand that commercial aviation is under federal jurisdiction under the ANAC, etcetera. But any color with respect to the extent to which the big Brazilian states are also thinking about relief for the group? Yes, Steve. So we've I've met personally a couple of times with Governor Doria in Sao Paulo. A lot of the states are looking at supporting with ICMS benefits to kind of help us on the backside of this. The support that they can provide right now is not necessarily relevant because we're not really flying. We're only flying 10% of our network. And so what we really are looking for from the governors kind of going forward is how do we restart this in a way that we get everybody flying again at decent prices. And so I think that's where the governors can really step up, and those are the conversations that we're is the Brazilian federal government's response, I mean, from what I can see, it's been a pretty good one in terms of stepping up to health. What do you say as well? Is it fair to say that maybe there's a little more urgency for Brazil's spreads to help? I mean, especially as Brazil's airlines just had a big consolidation event last year? I think they're not necessarily concerned about the fact that there was, Avianca, Brazil that went away last year. I think they making sure that Brazil Aviation is healthy. And so they've taken great measures and kind of deferring all of our navigation fees and doing emergency measures in place. And so I think that they will continue to support us at the federal level, and I think that they've taken great measures so far. And so I'm pretty confident that we'll continue to work closely with the federal government. And what do they want? What does the government want? They want to help the industry that can continue to add dots on the map. And that's what Azul does, right? We continue to add new cities, bringing more and more people into the economy that's helping them grow GDP across the board. I think one of the saddest things, Steve, about this was we grew, I think, in February 27 percent ASKs in the month of February. We were up in load factor. Demand was fantastic prior to this, right? And so we were on target to grow about 20% this year, and we grew 20% last year. And so it's very disappointing for us as a management team to kind of look at it and say, wow, we were going to have a fantastic 2020, and then boom, this hits. And so I think that the government is well aware of that. They were seeing the same signals that we were. And so we just need to get through this. And so hopefully, by attacking it as quickly as we can and shutting down quickly so that we can restart quickly is kind of the plan that we're embarking on right now. And Stephen, the conversations we've had, we've been very impressed by the vision and the quality of the team that's dealing with this, right? These are all extremely qualified professionals. Unfortunately, I think once you see the reports in the press, it kind of looks less coordinated and less thought out as it really is. When we've had the meetings and the calls, we're just very impressed about how clear the vision is. They're trying to save the sector. They don't want to pick champions, but they also don't want to create economic distortions of maybe preventing the sector to adjust itself, right? Great airlines need to be to continue to be great airlines And weak airlines should not necessarily get a lot of support to maintain an operation that potentially was not sustainable, right? And so we've seen a lot of clarity in the vision that it's necessary to provide support, but that support must still follow some fundamental guidelines of fairness and even business logic, right? And we completely support that, and we've been very impressed with the conversations that we've had. Okay. That's very, very helpful. I will let somebody else ask this question, but thanks very much guys. Thanks, Steve. Our next question comes from Mel Roberts with Jean and James. Hey, good morning, Matt, Jean and James. Two quick questions for me. First, can you talk about any steps that you have taken to raise cash? And also in regard to the E1s, are Breeze and Locke still taking those as expected? Or have there been any changes there? Sure. So we're in conversations with anyone, financial support or any partner that can provide lines of credit right now. A lot of the access to cash continues the same. A lot of it, if it's more structured, if it's more material, then obviously there are a lot of credit conversations. Everybody is trying to get comfortable with the credit that they are providing. But for example, just to give you an idea, we've been selling points in advance, right, into those old debts, something that we always mentioned as something that we could do, that it's a liquidity source that our loyalty program could provide. And the confidence that we will come out of this and we'll continue flying gives our partners confidence that they can continue to buy points, right? And so we've done some small sales right now, but we've got a few big sales being negotiated that we're confident that we'll be able to close. We're also talking to non government banks about lines of credit. The conversations are going well. Again, they're all leveraging the sustainability and the profitability that Azul has in the long run. But also there's a lot of interest in seeing what we're going to see from the government and from the MDS, right? Because that so I think the movement there will be first to see what the government is going to provide in terms of support. And then you will see, like John mentioned in the beginning, non government banks also falling in line and each one kind of trying to help the best way that they can. Some of them can provide additional cash. Some of them can provide lines of credit, letters of credit, supplier financing, everybody kind of plays in different arenas. Very we've already been able to close a few. We've been able to get support from a few. And even that's all even before a more firm announcement from the government and from the MDS on what we can get from them. And once that happens, obviously, our the clarity and the certainty that we're going to survive and get out of this is going to increase, which should attract more capital from other players as well. Thanks, Alex. And then in regard to the E1, is there any change there? Yes. So from WAD and Breeze, I mean, we had a schedule of deliveries to Breeze that was fairly light in the first half. It was mainly geared towards certifying the airline. And that timeline continues. They are still interested in maintaining that timeline. And so we're confident that those deliveries are going to happen. With lots, there's also interest, But we all know what the situation is in terms of airlines that are already operational are all grounding their fleet right now. But they're all counting getting back to a full schedule or close to a full schedule as soon as we have clarity into how this crisis is going to end. And so we're still maintaining the negotiations and the time line to make those deliveries, But potentially, there's going to be just a shift to the right in terms of when these deliveries happen. But the agreement is still in place. Yes. And I think a lot kind of having the Polish government support is also very helpful as well. And so they've been very clear with us that they still want the deal. And obviously, there may be a few delays. But to the extent that we exit aircraft slightly slower, we can defer E-2s, right? And so there's the ability for us to make adjustments as necessary. Our next question comes from Tom Stic with Bank of America. Hi, thank you for having this call. I also joined 2 minutes late, so I apologize if you've already answered this. My first question is what share of leases are being renegotiated? Maybe just some color here around the quantitative impact to cash savings in the short term? And then my second question, but it sounds like you expect demand to come back pretty quickly once this crisis is over. Could you just talk a little bit more about the consumer sentiment recovery time line and what you expect there? Yes. So on the lessor side, we're being fair and equitable. So we're negotiating with everybody. And everybody is coming to the table. We're not picking favorites. And the ask is very similar. And the reception has been fairly consistent as well. So the answer is really 100% of the leases are the payment terms for the leases are being negotiated. And we, like John said, we were very proactive in kind of realizing that what was happening in Asia and Europe and Brazil and the U. S. Would probably happen in Brazil in terms of demand falling. And we reached out to our resource very quickly. We also started to offer unpaid lease with assets very quickly weeks before anybody else. And the first reaction from our resource was actually somewhat of a surprise saying, hey, your demand is still good. You have a lot of cash. Why do you need this, right? And so they were initially a little bit reluctant to respond. And now that it's clear that the need has arrived, right, as we knew it would, then the level of responsiveness and willing to help has actually increased, right? Because, again, we're all just trying to do what's required. We're not trying to take commercial advantage of the situation. We're all long term partners. And so now the conversations are being very constructive and Los Osos have been very receptive. We don't have anything that we can kind of communicate to you in terms of amounts and things like that. Also because, like I said, this is going to be based on need, and we don't know what the need is, right? We know the need that we have today, but we don't know how quickly we can resume payments. We don't know how quickly we can pay what we didn't pay during the crisis, right? So that's just an ongoing conversation that we're having with all of our lessors, right? And I think Brazil, because it took a little bit longer for the virus to get to Brazil, We're a few weeks kind of behind, I think, everybody else. So that gave us some benefit that we're able to see how demand was going to get affected, how all of a sudden you're going to see people going into social distancing and isolation and demand would fall off. I think we're also more looking towards those countries that are a few weeks ahead of us to see how life gets back to normal, right? So I think Brazil is also going to be a few weeks behind the other countries, unless maybe and maybe we're lucky, maybe hopefully we can see something where Brazil is impacted less than other countries. I think there is a lot of data that shows that the virus tends to hit kind of latitude above 25 degrees dark. So Brazil may still see a smaller impact than other countries. We don't know. We're not betting on it. We're assuming that we're going to have a similar level and duration of this crisis as other countries. But I think we'll be seeing indication in other countries before we see them in Brazil in case that really happens, in case they impact in Brazil is similar to what we saw elsewhere. I think also, look, the U. S. Is at the end of a very long cycle, right, and one of the longest cycles that the U. S. Has ever seen. Brazil was at the start of a cycle, right? We were got through a very tough recession. The pension reform was approved last year. The economy was starting to go. And that's why we believe it will snap back quicker here in Brazil because Brazil is trying to start flying. And what we've been able to show many of you is that Brazilians still travel much less than Colombians do, much less than Chileans do. And so there's a tremendous opportunity to continue to grow the Brazilian market once things get back to normal. And so our focus right now is getting things back to normal, making sure that the virus is contained, making sure that we're taking care of the most vulnerable in society in that respect. People are in the risk area. But Brazil will get back to normal, and Brazil should be to start a nice run here over the next couple of years. Our next question comes from Victor Mizusaki with Bradesco Padilla. So in the opening remarks, you mentioned that you're now talking about kind of global pricing in the airline sector. So in this scenario, I don't know if you can comment first if you have any kind of thoughts with United in order to give any financial support to Azul? And number 2, if Azul would need to give a kind of also kind of financial support to that. And my second question, think about the routes that you're still flying. Can I assume that these routes are all profitable or no? Yes. So first of all, I don't believe that if United is asking for money from the U. S. Government at this time that they're in a position to kind of support. I think every airline in the world is not set up to stop receiving revenue for 2 to 3 months. And so no on the United. However, I think we're a very strategic partner of theirs and we'll be a strategic partner of theirs for many years to come. As for CAPP, I think if there were ever a company that needed to exist in a country, it would be CAPP, okay? And so TAP is vital to the economy of Portugal. It brings in thousands of jobs. It brings everybody to Lisbon and Porto. And so to the extent that TAC went away, the Portuguese economy would be destroyed as a result of that. And so I think that you're going to see state aid has been waived in Europe right now. And so I think you'll see guarantees coming in from various governments and actual cash injection into those airlines. And I think it's the right thing to do. Think of how much TAP pays a year in taxes. And so, no, there is not a plan for us needing to support TAP at this time. We're in a secured position in that airline. And so we're not equity, we're debt into equity. And so obviously, this has been a very rough time for all airlines in the world. But again, TAC will exist 10, 20, 30 years from now because the Portuguese country Portugal needs them to exist. And so I think that that's how we're seeing things. And I think as you talk about the network, a 10% network, there aren't going to be people that need to travel, Victor. And so what we want to do is we want to make sure we're doing everything we can to be profitable and not burn cash over the next 4 to 8 weeks. And so when we came out and did a schedule that's only a 10% of what we're capable of doing, that's to preserve cash, right? And so we believe we will fly those routes profitably. To the extent that they are not profitable and we're burning cash, we'll come further. But we believe that, that is the right level of service that's needed during this time when for much of Brazil is in a quarantine situation like Sao Paulo in Rio. And so we'll continue to look at that and adjust. And so we're not done yet with all of the actions that we'll be doing, and so we'll continue to make adjustments as needed. Okay. Thank you. So guys, here is Leandro Beck. We have no more questions on the line. So I would like to pass on the floor back to Mr. John Rogersons for their final consideration. I just want to thank everybody. I know it's been an unbelievably wild ride. But again, we're equity holders in this company. We're doing everything we can to drive the value of this company back up again. And I believe we will be back to where we were previously with a lot more to do. And we'll continue to act as quickly as we can. And everybody is aligned. I think the government is aligned. I think our shareholders are aligned, our debt holders are aligned. Everybody is aligned in making this company building it back to where it was just 6 weeks ago. And so we want to thank you. And obviously, feel free to reach out to Andrea, Alex or myself or Avi with any questions that you may have. Thanks, everybody. Thank you very much, John. Thank you very much, Alex. It was a pleasure to have you here, Rafal, this morning. Thank you. That does conclude the IXP audio conference for today. Thank you very much for your participation. Have a good day and thank you for using Chorus