Azul (AZUL) Q3 2026 Earnings Call Transcript

DATE

Thu, Nov. 12, 2026

CALL PARTICIPANTS

• Chief Executive Officer - John Rodgerson
• Chief Financial Officer - Antonio Garcia
• President - Abhi Shah
• Head of Investor Relations - Thais Haberli

TAKEAWAYS

• Operating Revenue -- BRL 5.6 billion, representing a 13.2% increase compared with the second quarter of 2026.
• EBITDA -- BRL 1.2 billion, an increase of 136% compared with the second quarter.
• EBITDA Margin -- 21.4%, reflecting improved fixed cost absorption and revenue quality.
• RASK -- BRL 0.47, an all-time high that increased 8.8% quarter over quarter.
• CASK -- BRL 0.43, representing a 5.1% reduction from the second quarter primarily due to lower fuel costs.
• CASK ex-fuel -- BRL 0.27, decreasing 2.1% quarter over quarter.
• Recurring Free Cash Flow -- BRL 764 million, supported by operating results and positive working capital contributions.
• Immediate Liquidity -- BRL 4.1 billion, up 11.8% from the previous quarter.
• Pro Forma Liquidity -- BRL 4.6 billion, including a $100 million equity investment from American Airlines received in early Oct. 2026.
• Capacity -- 4% growth quarter over quarter, though capacity for the first nine months of 2026 declined 6.7% year over year.
• Gross Debt -- BRL 22.6 billion, an increase of BRL 1.2 billion compared with the second quarter due to new financing and lease additions.
• Leverage -- 3.3x, representing a reduction of 1.9 turns compared with one year ago.
• Business Unit Revenue -- BRL 0.10 per ASK, contributing approximately 20% of total unit revenue from loyalty, logistics, and other services.
• Chapter 11 Payments -- BRL 300 million in the third quarter, with approximately BRL 230 million remaining to be paid in the fourth quarter.
• Fleet Expansion -- Five aircraft added during the quarter, including two A330s, two E2s, and one A321 freighter.
• Order Book -- 32 new aircraft deliveries expected through 2030, which management described as one of the most disciplined in the region.
• FNAC Financing -- BRL 1.3 billion drawn from the first tranche, with an additional BRL 1.3 billion expected in Dec. 2026.
• Fuel Financing Line -- Approved up to BRL 2 billion to fund domestic fuel payments through 2027.
• Route Monopoly -- 82% of the company's routes have no nonstop competition from other carriers.
• Crew Engagement -- 92% in 2026, reaching the highest level in the company's history.

Need a quote from a Motley Fool analyst? Email pr@fool.com

RISKS

• Shah stated, "fuel prices remain highly volatile, up more than double compared to our pre-war scenario and up 40% since the last time we talked on our 2Q call," noting a significant headwind for margins.
• Garcia warned that for each BRL 0.10 move in the dollar exchange rate, the company sees an increase in lease and loan liabilities of approximately BRL 240 million.
• Shah noted that delays in wide-body aircraft deliveries from Airbus required the company to extend certain wet leases through the first quarter of 2027, impacting unit costs.

SUMMARY

Azul S.A. (NYSE:AZUL) reported a sequential improvement in financial performance for the third quarter of 2026, focusing on capacity discipline and liquidity strengthening following its restructuring. Management stated that the company prioritized yield over volume, resulting in record unit revenues despite a high fuel price environment. The airline secured significant funding through government-backed financing facilities and a strategic equity investment from American Airlines. The company is not providing specific financial guidance at this time due to ongoing volatility in fuel prices and exchange rates.

• CEO Rodgerson stated, "Azul was once again the most on-time airline in Brazil," emphasizing the link between reliability and premium demand.
• The company relaunched its Espaco Azul premium product, which saw its Net Promoter Score increase by 14 points in Oct. 2026.
• Management indicated that the airline's diversified business units, including loyalty and logistics, generate revenue that is less sensitive to seasonality than core flight operations.
• President Shah noted that the company has recovered approximately 50% of recent fuel price increases through fare adjustments and intends to pursue full recovery.
• The company expects to draw the remaining BRL 1.3 billion of its FNAC financing facility in Dec. 2026 to further bolster its cash position.
• CFO Garcia explained that the airline is shifting its capital structure toward Brazilian real-denominated debt to reduce exposure to U.S. dollar volatility.

INDUSTRY GLOSSARY

• ATL: Air Traffic Liability, representing revenue collected for tickets sold but not yet flown.
• CASK: Cost per Available Seat Kilometer, a standard industry metric for unit operating costs.
• E2: The Embraer E-Jet E2 family, a line of efficient narrow-body aircraft used in the company's domestic fleet.
• FGE: Fundo Garantidor de Exportações, a Brazilian government fund providing guarantees for specific financing lines.
• FNAC: Fundo Nacional de Aviação Civil, a Brazilian fund dedicated to the development and financing of the civil aviation sector.
• RASK: Revenue per Available Seat Kilometer, a standard industry metric for unit revenue.
• Wet Lease: A leasing arrangement where one airline provides an aircraft, complete crew, maintenance, and insurance to another airline.

Full Conference Call Transcript

Operator: Hello, everyone, and welcome all to Azul's Third Quarter Earnings Conference Call. My name is Georgi, and I will be your operator for today. This event is being recorded. [Operator Instructions] Now, I'd like to turn the presentation over to Thais Haberli, Head of Investor Relations. Please proceed, Thais.

Thais Haberli: Thank you, Georgi, and welcome all to Azul's third 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. Before we begin, I'd like to caution you regarding our 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. Presenting today will be John Rodgerson, our CEO; Antonio Garcia, our CFO; and Abhi Shah, the President of Azul. With that, I will turn the call over to John. John?

John Rodgerson: Thank you, Thais. Welcome, everyone, and thank you for joining us today. We're pleased to present Azul's third quarter 2026 results. Let me start on Slide 3. This is the message we want you to take away. Azul is delivering on its promises. When we emerged from our restructuring, we committed to 3 things: capacity discipline, a business that funds itself and a stronger liquidity. This quarter, we delivered on all 3. First, capacity discipline. During our restructuring, we redesigned our business model around one principle. We manage capacity for returns, not volume. When fuel prices rose this year, we acted early. Azul was among the first airlines to announce capacity reductions to protect profitability and liquidity.

And today, we see others in the market moving in the same direction. We deliberately moved capacity away from fuel-intensive long-haul routes to focus on markets where our network is strong. The result is clear, record RASK and better margins quarter-over-quarter. Second, cash generation. Our business is increasing its ability to fund itself. We generated more than BRL 760 million of recurring free cash flow in the quarter despite a high fuel price environment while meeting all scheduled obligations. Third, liquidity and funding. In September, we secured the FNAC financing facility and drew the first BRL 1.3 billion tranche, with the remaining BRL 1.3 billion expected in December.

In October, American Airlines' $100 million equity investment in Azul was approved and funded. We are very excited to have American Airlines as a shareholder and partner. We also secured approval for a fuel financing line of up to BRL 2 billion guaranteed by the Brazilian government to fund domestic fuel payments in the fourth quarter of '26 and 2027. Azul is the only airline in Brazil to have successfully structured both government lines. These were commitments, and we delivered on all of them. Together, disciplined capacity, recurring cash generation and stronger funding base gives us the flexibility to navigate fuel volatility and carry out our strategy with confidence.

On Slide 4, I want to remind you what makes Azul a unique story. First, our network. Azul flies to roughly twice as many destinations as any of our competitors. Our network is built around our hubs and focused on profitability. We are the only airline in 82% of our routes. This is a competitive advantage that took years to build and cannot be easily replicated. Second, our fleet. We fly an optimized and diversified fleet with the right aircraft for each market. This flexibility allows us to serve markets no one else can and to adjust capacity quickly when macro conditions change as we did this year. Third, a disciplined fleet plan.

We have a smaller aircraft order book than our competitors, which means lower capital commitments and more flexibility as we move forward. Abhi will share more details on our fleet plan later in the presentation. Fourth, our beyond-the-metal business units, which diversify our sources of revenue and strengthen our cash generation. And fifth and most importantly, our people. Our almost 15,000 crew members and our service culture turn a great network and fleet into the best travel experience in Brazil. They are the reason Azul is once again the most on-time airline in the country. And this year, Azul was the only airline recognized by Time Magazine as one of Brazil's best employers.

No other airline in the region combines these advantages. You can see the people behind the results. I want to thank all of our crew members for their passion and dedication. Our service culture is a competitive advantage that cannot be copied simply by buying aircraft. It is built every day, flight by flight, by people who care about our customers and about each other. In our 2026 crew member satisfaction survey, our engagement reached 92%, the highest level in our history and well above the average 32% in the country. Engaged crew members create better experience for our customers and better experiences create loyalty.

This is why investing in our people is one of the most important investments we make. Our crew members are passionate about serving, and the results speak for themselves, as you can see on Slide 6. Azul was once again the most on-time airline in Brazil, and our NPS improved 32 points in 2026, reaching multiyear highs. Reliability is the foundation of our customer satisfaction, loyalty and premium demand. We continue to raise the bar on our product. In October, we relaunched Espaco Azul, a differentiated premium product on domestic flights with enhanced onboard service, priority travel benefits and more comfort. Combined with our seat back entertainment, fast free WiFi, our customers enjoy the best travel experience in Brazil.

Customers responded right away. Espaco Azul NPS rose 14 points in October alone. Great people, reliable operations and a differentiated product. This is how we attract premium customers and support the revenue quality you see in our results. With that, I will turn it over to Antonio, who will walk you through our third quarter results. Antonio?

Antonio Garcia: Thank you, John, and thank you all for joining us today and for your continued interest on Azul's progress. We see 2026 as a transformational year for Azul. Throughout the year, we have stayed focused on executing our strategy with discipline, strengthening our competitive position, improving our operating performance and implementing the key initiatives that will drive the future of our business. We are also confident in our liquidity position, which gives us the flexibility to execute our plan. Last quarter, we told you we were taking the right actions in a challenged volatile fuel environment and that we expected much stronger results and liquidity in the second half of the year. Turning to Slide 7.

That is exactly what we delivered. Operating revenue reached BRL 5.6 billion, 13.2% higher than in the second quarter. RASK was all-time high. What is most important is that we grew unit revenue while recovering capacity. RASK increased 8.8%, even with the capacity growth of 4% quarter-over-quarter. Usually, more capacity puts pressure on the unit revenue. For us, it did the opposite because we put every additional seat where demand yields are strong. EBITDA reached BRL 1.2 billion with a 21.4% margin, an increase of 136% compared with the second quarter. And we ended the quarter with an immediate liquidity of BRL 4.1 billion, up almost 12% from the second quarter.

Pro forma immediate liquidity reached BRL 4.6 billion or 20.1% of last 12 months revenue, when includes the $100 million equity investment received from American Airlines in early October. Each of these metrics improved sequentially, in line with what we outlined last quarter. This is a clear evidence that our strategy is working. Disciplined capacity allocation and focus on revenue quality are driving margin expansion and recurring cash generation. In addition to our capacity strategy, our business units continue to deliver strong and consistent results, and they are an important driver of our revenue quality. On Slide 8, you can see how our business units expand value creation beyond the metal.

RASK increased from BRL 0.4341 in the second quarter to BRL 0.4723 in the third quarter, and our business unit contribute approximately 20% of the total or about BRL 0.095 per ASK. Our loyalty, vacation, logistics, regional aviation, maintenance and media businesses are strategic and have differentiated models and attractive cash flow cycles. They generate consistent revenue that is less sensitive to the seasonality than our airline business, provide a reliable source of income throughout the year. This diversifies our revenue, makes our results more resilient across periods of volatility and creates value beyond our airline operations. Turning to costs on Slide 9.

CASK was BRL 0.4254 in the quarter with 5.1% lower than second quarter, mainly reflecting a 9.9% reduction in fuel cost per liter. CASK ex-fuel was BRL 0.2712, 2.1% lower than quarter-over-quarter, reflecting the better fixed cost absorption from 4% higher capacity and continued cost discipline. As we said last quarter, a meaningful part of earnings increase in unit cost reflected a temporary impact from lower capacity, and we expect it to reverse as capacity fleet availability normalize. That is exactly what we are now seeing. Looking ahead, we remain focused on cost control across the organization.

We are managing every line of our cost base with discipline so that as capacity recovers, a large share of each additional Brazilian reais of revenue converts into margin and cash. On Slide 10, you can see what drove the recovery EBITDA. Compared with second quarter '26, EBITDA more than doubled from BRL 510 million to BRL 1.2 billion. Lower fuel prices contributed approximately BRL 201 million, but the largest driver was the fare recapture, which contributed approximately BRL 464 million. This was the results of our own actions. Moving to Slide 11. Let me walk you through the main moving parts of our cash flow this quarter.

We generated BRL 764 million recurring free cash flow in the quarter, supported by BRL 1.2 billion EBITDA and the positive contribution from working capital, mainly driven by the change in ATL at around BRL 550 million. In the quarter, we paid approximately BRL 500 million in CapEx and about BRL 700 million in lease liabilities. Below the recurring free cash flow line, we paid BRL 371 million of semiannual exit financial interest with the next payment due only in the first quarter of 2027. We also increased advanced credit card receivables by approximately BRL 500 million compared with the second quarter as part of our active treasury management.

In addition, we paid more than BRL 600 million of debt amortization and other financial items and approximately BRL 300 million of the remaining Chapter 11 obligations as planned. These payments were funded by our operating cash generation and the first tranche of FNAC. I would like also to highlight that the Chapter 11 payments are nonrecurring items were anticipated as part of our restructuring plan. They will continue to decline as they do as a growing share of our operating cash generation will flow direct to liquidity. On Slide 12, immediate liquidity ended the quarter at BRL 4.1 billion, up 11.8% from the second quarter.

Including the $100 million investment from American Airlines received in early October, immediate liquidity stood at approximately BRL 4.6 billion or 21.1% of the last 12 months revenue. We are comfortable with our current liquidity position and with how we expect to end this year. Our liquidity is supported by recurring cash generation, disciplined capital allocation and remaining BRL 1.3 billion FNAC tranche expected in December. And the FGE fuel finance line will fund the domestic fuel payments in the fourth quarter of 2026 and the first quarter of 2027. Together, this gives us the financial flexibility to navigate in a volatile environment and continue to execute our plan. Moving to Slide 13.

Our balance sheet remains strong and continues to support our restructuring commitments. Gross debt ended the quarter at approximately BRL 22.6 billion, up BRL 1.2 billion from the second quarter. Loans and finance increased just BRL 507 million, mainly reflecting the BRL 1.3 billion FNAC tranche. This was partially offset by prepayments of approximately BRL 400 million of higher cost debt and by scheduled debt amortization. In the quarter, we paid BRL 371 million of semiannual exit final interest with the next payment due only in the first quarter of 2027. Lease liabilities increased BRL 780 million and reflecting the addition of two A330s, two E2s and one A321 freighter to our fleet as well as for engines.

Leverage ended the quarter at 3.3x, 1.9 turns lower than a year ago, reflecting a significant improvement in our capital structure compared to last year. Leverage was affected by lower last 12 months EBITDA, as the higher fuel price impacted our results for almost -- for most of 2026. We are confident in our business ability to generate stronger EBITDA as fuel prices stabilize. And this quarter's results already show that progress. Together with the recurring cash generation and declining restructure-related payments, this will support to continue to deleverage of Azul. Finally, as many of you will ask about guidance.

Since I joined Azul, my priority has been clear to build up a liquidity position strong enough to carry us through the volatile periods, and that is exactly what we have delivered. Today, we have the liquidity to navigate to the continued volatile fuel prices and exchange rates. Given this environment, we are not providing guidance at this time. Our focus remains on what we can control: discipline, capacity allocation, revenue quality and cost discipline. With that, I will turn the call over to Abhi, who will discuss the fuel environment and strategy for capacity allocation and fare recapture. Abhi?

Abhi Shah: Thanks, Antonio. Hi, everyone, and thank you for joining us today. As you can see on Slide 14, fuel prices remain highly volatile, up more than double compared to our pre-war scenario and up 40% since the last time we talked on our 2Q call. My job in response to this is clear: maximize RASK and hence, profitability. In a high fuel environment, every seat has to earn its place, and this means exceptionally disciplined capacity allocation together with a network strategy and network advantage that gives us the best chance of revenue recapture. Azul was the first airline in Brazil to proactively announce capacity reductions in response to higher fuel prices.

Slide 15 shows what that discipline looks like in practice. On the left, you can see that our capacity declined in every quarter of 2026 so far. For the first 9 months, we are down 6.7% year-over-year. Our initial plan for the year was already a very conservative 1% growth. However, as few began to climb, we have been the most active in making these adjustments. Our network strategy is focused on our hubs and in geographies where we have a very strong presence. As John mentioned, more than 80% of our routes have no nonstop competition, a structural advantage that has only gotten stronger over the years.

On the right, you can see how our approach compares with the industry. Since 2024, Azul has grown capacity by only 2%, while our main competitors have grown by more than 20%. Our plan was laid out to build a more disciplined, resilient business, and we have clearly followed through on this commitment last year and again this year. Slide 16 shows the result of this disciplined strategy and our ability to raise unit revenues. You can see our RASK evolution from the moment we deployed our new optimized network starting in July of last year.

In fact, ever since we made this commitment to build a more resilient business model, RASK has increased 22.6% from BRL 0.385 to a record BRL 0.472 this quarter. In every quarter of 2026, unit revenue was above the same level last year, 4.3% in 1Q, 12.7% in the second and 5.5% now in the third. There was a massive increase in unit revenues last year that significantly brought up our base, and we continue to improve upon again that this year. This shows how the structural advantages within our network, together with the business units allow us to increase unit revenues even in an environment where the industry is adding significant capacities.

On Slide 17, you can see how Azul compares with leading airlines across the Americas across 2 different metrics: unit revenue expansion and fuel cost per capacity since 2Q '25. As I mentioned, our unit revenue increased 22.6%, among the highest among all the airlines shown here and well above many large U.S. airlines. On the cost side, our fuel cost per ASK increased 42.4%, the lowest in the group. Putting this together, you can see that we truly are leading the industry in this balance of unit revenue expansion and fuel price recapture. This is a direct result of our disciplined capacity allocation and network deployment. Our capacity strategy is also reflected in our fleet commitments.

On Slide 18, you can see our delivery schedule for the next couple of years. In total, we expect only 32 new aircraft through 2030, while several aircraft also leave our fleet during this time frame. This reflects a deliberate recalibration of our delivery schedule and one of the most disciplined order books in the region. It gives us significant flexibility and optionality to adjust our conditions to adjust as conditions evolve in an uncertain environment. We are not burdened by excessive PDP and other payments required when an airline is forced to accept aircraft. We do not have to place aircraft into our network or launch unprofitable flying simply because we have airplanes arriving.

Thanks to this resilient plan we committed to that we are now executing, we have the flexibility to fly exactly the capacity we need at this time. With that, I will turn the call back to John for his final remarks.

John Rodgerson: Thank you, Abhi. Let me close showing Slide 19, which brings together everything we discussed today. In the third quarter, Azul delivered an EBIT margin of 9.9%, higher than all U.S. carriers. We achieved this in a quarter when our fuel prices were 40% higher than a year ago, demonstrating the strength of our business model. This result did not happen by chance. It reflects the decisions we made, disciplined capacity, a network built for profitability, a premium product our customers value, a flexible fleet plan and the passion of our crew members, and it reflects the promises we made when we emerged from our restructuring, which we are now delivering quarter after quarter.

This gives us great confidence that we're on the right path. Demand remains healthy and operations and customer satisfaction keep improving. And every milestone we deliver makes our balance sheet stronger, and we have strategic equity investments from both United and American Airlines, supported by a management team with decades of aviation experience. Azul is well positioned to keep expanding profitably, generating recurring free cash flow and create long-term value for our customers, crew members and shareholders. I want to once again thank our crew members, our partners and investors for their support and trust in Azul. With that, Antonio, Abhi and I are available to take your questions.

Operator: [Operator Instructions] Let's go to our first question. It comes from Gabriel Rezende, sell-side analyst, Itau BBA.

Gabriel Rezende: I would like to follow up a little bit on the fuel price volatility and try to understand how much are you guys anticipating in terms of price pass-through? We have seen a strong jump on yields on both quarter-on-quarter and year-on-year metrics. Just trying to understand how you're planning to continue to increase prices as we walk into the 4Q, early 2027 and also trying to understand how our competitors behaving? Just trying to see whether everyone continues to behave rationally or perhaps the consumers are not willing to continue to pay this much.

Therefore, we could anticipate some capacity decrease in the coming months as we walk into -- we continue to see this still high volatility in terms of fuel prices.

Abhi Shah: Gabriel, Abhi here. Sure. So overall, I'm not a believer that there is some sort of artificial limit on what unit revenues can be. We have a record unit revenue this quarter. And if you asked us many years ago, would we get to near BRL 0.50, probably we'd say no, right? So the conditions are changing and the consumer is adapting, which is why I really wanted to show our unit revenue performance since we launched our new network because it doesn't happen overnight, right? It's an accumulation of a lot of effects, accumulation of very disciplined execution.

And you can see that we've been able to produce probably one of the highest unit revenue improvements over the last 1.5 years, let's put it that way, right? And that process continues. And that process will continue. I think the industry overall is doing its best. But I would say that we have been inconsistent, partly because of the calendar this year, we had a lot of interruptions, first with the World Cup and that then with elections. And that has not allowed the industry to have significant momentum, and we've given back some of the gains that we have been trying to do, right? So we have fare increases and then we give it back.

So it's been inconsistent, but I think everybody is trying in the right direction. You saw LatAm's, Brazil RASK in reais was 1.8%. In 3Q, we were what, 5.5%? Not bad, but not enough, right, in this fuel environment. But what I think is that the industry is working towards continuing to recapture. What we have seen in terms of capacity is that GOL, in particular, October onwards has cut capacity. That continues February onwards as well. We are looking to be very, very disciplined, as we have said, seeing that I think this fuel environment is going to be longer, at least into 1Q of next year. So I think the conditions are very positive to continue this process.

It doesn't happen overnight. But as you can see, we've been able to produce really good unit revenues over the last couple of quarters. If you just compare our 22% with our 42% fuel RASK, that's about a 50% recapture already, right? We know fuel is going to go up now. We're going to weather this storm and come out much stronger on the other side. So I'm seeing positive momentum in the industry, but we need to be consistent, remain consistent. I'm seeing capacity come out fourth quarter and first quarter. That's going to be very positive. Post election now, consumers are very focused on peak summer. So we are seeing positive momentum in bookings.

So I think the table is set for a good high season. As long as the industry is consistent, I think we will continue the strength.

John Rodgerson: I just want to highlight these large order books are more liability than an asset, right? I mean we came into this with a more conservative approach. We cut quickly. And it's really difficult to tell an OEM, you're not going to take a delivery of an aircraft in the same calendar year, right? So that flexibility that we have in our business plan is a strategic advantage. I don't think there's any airline in the world that wants to be taking all of their orders with fuel prices where they are right now.

Operator: Our next question comes from Julia Orsi, sell-side analyst at JPMorgan.

Julia Orsi: So just a couple of follow-ups here. The first one is a follow-up on the tariff environment and the demand landscape. How should we think of the FX component going forward now that we have there's another macro volatility waiting in? And the second is on the tax reform. Now that we're starting to get more clarity on the final tax rates and the final outcome of the tax reform. Can you provide more details on what should we expect in terms of the impacts related to the tax reform?

Antonio Garcia: Antonio speaking here. So in regards to the tax reform, for us, it's still not clear. There's a lot of moving parts to be defined for the airlines. That's why we are not -- we are in the position to implement, we execute, but we have everything set in the new legislation. It still not defined. I would say our first feeling was not a big impact, but it's too early to say that.

Abhi Shah: And on the fares, like I said, the process continues. We have positive momentum right now in terms of demand post-election, pre-summer peak. We think that momentum will carry through. We have capacity discipline coming in as well late fourth quarter here, early first part of next year. So that should be very positive. But the process has to continue. I think 50% is what we have recovered so far. Our intention is to recover 100%. And even more than that, as fuel prices start to normalize sometime next year, our intention is to maintain these yields, right, maintain this revenue environment.

The industry is not going to be giving this back, and that's going to result in a stronger industry going forward. So the process has to continue.

Operator: The next question comes from Mike Linenberg, sell-side analyst, Deutsche Bank.

Michael Linenberg: Can you hear me?

John Rodgerson: Absolutely, Mike.

Antonio Garcia: Yes.

Michael Linenberg: Good. I have a few questions here. We've seen the currency depreciate against the dollar somewhere between 5% and 10% over the last month or so. Is there a rule of thumb every 5% or 10% move in the real versus the dollar, how we should think about how that impacts whether it's on the P&L basis or on a balance sheet basis? Anything that can help us just given that big move?

Antonio Garcia: Yes. Mike, just as Antonio speak here, we closed it with BRL 5.18 for the dollar, for $1, means today's BRL 5.5 is not too much. For each [ BRL 0.10 of dollar ], we have an increase in our lease and loan liability around BRL 240 million.

John Rodgerson: Mike, I would just going to add something here. I think one of Antonio's objectives is to start to move away from U.S. dollar-denominated debt into Brazilian real debt. And I think some of the move seen from the Lula government to provide these financing lines in local currency is a big move that should take volatility out of the business as we move forward over the next couple of years. So the FNAC line is in reais. The FGE line is in reais. Remind you that we have the ability to finance E2s in reais as well. And so that is an advantage that we have as we move forward given the volatility in the currency.

Antonio Garcia: And Mike, I would not take the current exchange rate as a granted for the whole year because government is moving right now with some cuts in the budgets, and that should be a reflect also. And as we normally see in the elections in this country, you have a stability and things normalize in the second step, I would say. But at least today, the impact is not as big as people believe.

Michael Linenberg: Okay. And then just a clarification, Antonio, when you talked about the Chapter 11-related payments, which now are down to about BRL 300 million this quarter. And I think you said that was remaining, or maybe you said that there was just a little bit left. Can you just update how much more of a drag in the fourth quarter, if any, from the Chapter 11-related payments?

Antonio Garcia: Yes. Thanks for the question, Mike. In total, we said for the restructuring program, BRL 1.5 billion. We still have just BRL 230 million to be paying in Q4.

Michael Linenberg: Okay. That's perfect. And then if I can squeeze in one last question to Abhi. We're watching the ACMI and other line item closely. It was up. Presumably, it's peaking now. I did see in your forward schedule, though, that it looked like you maybe extended some of your wet leases with euroAtlantic Airways, a few other of these ACMI providers. Is that -- when does that wind down? And is that also tied to maybe an induction of the A330 aircraft? I know that, that does take time. You have to reconfigure them. You have to run them through the MROs. And so maybe there's a little bit of a drag there.

Abhi Shah: Mike, I see you've been following our site and our app very closely. Can't get anything by you. But yes, you are correct. So just to remind everybody, of the 9 wide-bodies that we -- that exited our fleet this year, 4 have been replaced and are in service. Another 5 will be entering service between now and end of January. The reason, Mike, that we had to extend a couple of these is because some of those entry into services slipped from November, December into January, and including our friends from Airbus still haven't delivered our A330. I can put that in there. So that's the reason, Mike, you've seen that extension to the right.

Now we're expecting to clean that up, almost all of it by end of January, a little bit then goes into March. But this is just nothing more than the 5 remaining aircraft going through checks, going through engine stuff, being painted and then coming into Brazil and being ready for entry into service. So 5 airplanes to go, probably 2 this year and 3 in January.

Michael Linenberg: Great. Nice seeing the progression this quarter on the liquidity front.

Operator: The next question comes from Bruno Morato, sell-side analyst at Bradesco BBI.

John Rodgerson: Bruno, I'm not sure we heard you. If you could repeat yourself.

Operator: We have received Bruno's question in writing, and he asks 2 questions. In the first question, in the quarter, you had BRL 302 million of nonrecurring items related to Chapter 11. Could you update us on how much is still left to be paid in the fourth quarter '26? And will any payments remain to be made in 2027? His second question was in the quarter, what was the impact of pilot retention on results?

John Rodgerson: Yes. Let me -- I think we just answered that question to Mike. And I think there's some minimal payments that go into next year only to one OEM, which is GE. And so it's pretty minimal as you go into next year. And Antonio highlighted is BRL 230 million. I think -- I don't know if I call it pilot retention. I think we've hired pilots to kind of get ready as we take capacity back online. We have made some adjustments where appropriate. And we feel very confident.

As Antonio stated in the second quarter, that line item for salaries should remain flat, and that's what it did Q2 into Q3, and we expect that to be kind of our new run rate going forward.

Operator: [Operator Instructions] With that, we conclude our Q&A session. And we also conclude the Azul's conference call for today. Thank you very much for your participation, and have a good day.

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.