GOL Linhas Aéreas Inteligentes SA (GOL) Q3 2021 Earnings Call Transcript

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GOL Linhas Aéreas Inteligentes SA (GOL -1.79%)
Q3 2021 Earnings Call
Nov 9, 2021, 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Welcome to the GOL Airlines Third Quarter 2021 Results Conference Call. This morning, the company made its numbers available along with three videos with the results presentation, financial review, and preliminary Q&A. GOL hopes everyone connected has watched them. After the company's brief remarks, we will initiate the Q& A session when further instructions will be provided. This event is also being broadcast live via webcast and may be accessed through the company website at www.voegol.com.br/ir and on the MZiQ platform at www.mziq.com. Those following the presentation via the webcast, may post their questions on the platform and their questions will either be answered by the Management during this call or by the GOL Investor Relations Team after the conference is finished.

Before proceeding, let me mention that forward-looking statements are based on the beliefs and assumptions of GOL's Management and on information currently available to the company. They involve risks and uncertainties, because they relate to future events and therefore, depend on circumstances that may or may not occur. Investors and analysts should understand that events related to macroeconomic conditions, industry and other factors could also cause results to differ materially from those expressed in such forward-looking statements.

At this time, I will hand you over to Mr. Paulo Kakinoff, CEO. Please begin.

Paulo Sergio Kakinoff -- President And Chief Executive Officer

Good morning, everyone, and welcome to GOL Airlines quarterly earnings call. I would like to start by highlighting our most important achievements of this period. The first one was the continued recovery in demand, which showed solid growth during the third quarter. At the end of September, Brazil became fourth among all countries with the most vaccines administered against COVID-19. Approximately 56% of Brazil's population is fully vaccinated, and over 74% have received their first dose, a higher percentage than the vast majority of the countries, including the United States. Similar to demand trends in other markets, the rising vaccination rate in the general population is supporting the air market's ongoing recovery. As a result, GOL's departures in the fourth quarter grew by 87%, reaching 52% of the levels in 2019. In response to this demand GOL's expanding its network and has already announced a new route from Congonhas to Bonito starting this December.

We are taking a conservative approach to increasing capacity as travel demand recovers to help maintain high load factors and profitability in our routes. The second important event was the transition of the fleet to Boeing MAX's. In preparation for the strong recovery in air travel, that we expect to see in the coming quarters, we signed agreements to accelerate the transformation of our fleet with the acquisition of 28 additional Boeing 737 MAX aircraft. This initiative is expected to reduce the company's unit cost by 8% in 2022. Under the new contract, we ran 2021 with 28 MAX aircraft, which represents 20% of the fleet. By the end of 2022, we expect to have 44 MAX aircraft, raising this total to 32%. With current purchase commitments, we will meet our 2030 goal of having 75% of the fleet in this new aircraft. And as is widely recognized, the MAX is 15% more fuel efficient, generates 60% less carbon emissions and is 40% quieter compared to the NG.

This aircraft positioned us to grow even more competitively, expanding routes to new destinations and providing efficiency gains, all of which will capture more value for all our stakeholders. The third important achievement was the conclusion of the merger with Smiles into GLA. The transaction will generate greater value from several operational synergies as well as new opportunities and strategies that will become even more significant during the airline market recovery. We are optimistic that the synergies from this corporate reorganization, expected to be approximately BRL3 billion in net present value for the next five years and the subsequent benefits to our shareholders will be realized in a relatively short period of time.

With that, I will hand the floor over to Richard, our CFO, who will present some financial highlights.

Richard F. Lark, Jr. -- Executive Vice President, Chief Financial Officer And Investor Relations Officer

Thank you, Kakinoff. Our most recent notable event was the success of our liability management program. In September, we issued $150 million in a retap at 8% annual interest rate, on our senior secured notes maturing in 2026. Moody's assigned the notes a rating of B2. Proceeds from the offering will be used for general corporate purposes, including aircraft acquisitions and working capital. In October, we refinanced our short-term bank debt in the amount of BRL1.2 billion via the extension of the 7th series of debentures and the issuance of our 8th series of simple, nonconvertible debentures. This refinancing enabled the company to return to its lowest level of short-term debt since 2014 at about BRL500 million, which will also improve GOL's credit metrics by better matching future assets and liabilities and reducing the company's average cost of debt. Our next relevant maturity date for outstanding debt is not until July 2024.

The GOL's balance sheet is now in a stronger position in terms of its outstanding debt versus our peers, which we view to be a competitive advantage in the current market environment. In addition, the company amortized around BRL518 million of debt in this quarter, the average maturity of GOL's long-term debt, excluding aircraft leases and perpetual notes is approximately three. four years, with the main obligations already addressed in our cash flow. The net debt ratio, excluding exchangeable notes and perpetual bonds to adjusted last 12 months EBITDA was 9.7 times on September 30, 2021, representing the lowest financial leverage among peers. Considering the amounts fundable from deposits and unencumbered assets, the company's potential sources of liquidity resulted in approximately BRL6.1 billion of accessible liquidity.

The recent capitalization of the balance sheet with the capital increase led by the majority shareholder, represented the recognition of GOL's value, as Brazil's largest airline with the best product. The refinancing of our short-term bank debt in October, added to long-term capital of BRL2.7 billion raised in the second and third quarters of this year, totals over BRL3.9 billion of capital raised in the last seven months. As for our discussion of financial results for the quarter, it was shared this morning in the video presentation, and we believe you all had a chance to access that. In short, our work to reestablish operating margins that can support the sustained growth of our operations is bearing fruit. We ended the third quarter with an EBIT, reaching BRL338 million and an operating margin totaling 17.7%. Concurrently, the adjusted EBITDA reached BRL464 million with a 24.3% margin, evidencing our successful efforts in matching supply and demand.

I will now return back over to Kakinoff.

Paulo Sergio Kakinoff -- President And Chief Executive Officer

Thanks, Richard. We are seeing a recovery in demand for air travel, and we believe that now with greater population immunization and a significant expansion of vaccination, we will have a strong fourth quarter, coinciding with the start of the summer season. I would like to close by thanking our employees, the Team of Eagles, who are working with extreme professionalism and commitment. All this intimidation puts us in a solid position to expand operations and achieve profitable growth. We reiterate our confidence that GOL will emerge a strong and even more resilient as markets normalize.

Now I would like to initiate the Q & A session.

Questions and Answers:

Operator

Thank you. The conference call is now open for questions. [Operator Instructions] Our first question is from Stephen Trent with Citi. Please go ahead.

Stephen Trent -- Citi -- Analyst

Good morning, gentlemen and thanks very much for taking my questions guys. I just wanted your high-level views on international demand to the U.S. spooling up again. Now that you're partnering with American Airlines, what sort of bigger opportunity are you seeing on the horizon? And do you see any opportunity as well for American to possibly increase its stake in GOL at some point in the future?

Paulo Sergio Kakinoff -- President And Chief Executive Officer

Hi, Stephen. Kakinoff here, good morning. Thank you very much for your question. Let me give you an overview on the North American market specifically. Firstly, we are now gradually reintroducing our international routes. So we have already made available the ticket sales for Cancun in Mexico, Punta Cana in Dominican Republic, and we are now resuming flights to Montevideo and Buenos Aires. So United States, it will be likely the routes to be added in our international portfolio by the second quarter next year. And this is because you're right, the borders are now open to the Brazilians, but -- and there is a considerable, but which is default, the exchange rate made the purchase -- the ticket purchase and the whole trip cost including hotels, card expense, pretty expensive from a Brazilian perspective. The real has devaluated quite significantly along the last quarter. So the Brazilian economic conditions also were affected during the last three months. And the combination of a pure excitement to resume international trips has a great contrast with the important constraints imposed by the exchange rate.

So the passengers are willing to fly, mainly to the United States, but that trip became quite expensive at the moment. So I cannot say that there is a boom related to North American related to airline tickets to fly to the United States. We are about to begin the Brazilian high season, December and January. And typically that's the period when you see more passengers willing to travel for leisure purpose. This is not going to be different this year, maybe is rightly better for the international market and the second constraint, which is also affecting the demand, is that there is a backlog to provide North American visas to the Brazilians, which we will not be absorbed neither address it in the short term. So if you have five members -- a family of five members, it's pretty much likely that at least one of them has no valid visa at the moment, making it not possible to fly to the United States. So all those things combined are affecting the potential slight catch-up that we could get, if not by the due constraints.

And finally, in our case, we have a partnership with American Alliance, who has already deployed a considerable capacity increase for the following three months. So we have decided to support that investment by selling the American Alliance tickets in our channels, as we have done already since April 2020 and through that package, we are simultaneously attending our customers and supporting the additional capacity increase deployed by American Alliance, our partners. So we believe that this is the best strategy to cope with the current demand and then we will resume our on-flight from Brasilia to Florida, where a market which has not attended by American Alliance at the moment from on the second part next year on. So this is, I mean, an overview on the North American market from a Brazilian perspective in the airline segment.

Stephen Trent -- Citi -- Analyst

Super, Kaki. I really appreciate that. And just very quickly, one last thing on business travel, any sort of high-level trends you're seeing in the domestic market? And let me leave it at that. Thank you.

Paulo Sergio Kakinoff -- President And Chief Executive Officer

We might be surprised by the speed to which the business segment is recovering to its pre-pandemic level. We are now verifying that -- identifying actually that some specific segments in Brazil is catching up its business travel behavior, even above the pre-pandemic level. Those are the services, generally speaking, mainly those companies pretty much benefited by the new customer behavior. So like food delivery, just to say one example and e-commerce. So those segments are booming, and they are probably more than they were before -- pre-pandemic and also some -- if I could say so, some other traditional segments, those are pretty strong in Brazil, such as the agricultural business, oil and gas, and some specific industries. So we foresee that by the beginning of the next year, we might be above our prior projection, which has considered that one-third of the business travelers would begin for good, which might be not the case. So it's still early to be precise on that projection. But at this moment, we see that some segments are recovering faster than expected.

Stephen Trent -- Citi -- Analyst

Great. Thank you very much, Kaki.

Paulo Sergio Kakinoff -- President And Chief Executive Officer

Thank you.

Operator

The next question is from Mike Linenberg with Deutsche Bank. Please go ahead.

Mike Linenberg -- Deutsche Bank -- Analyst

Hey, good morning everybody. I want to just kind of run through liquidity and I want to make sure I'm sort of comparing apples-to-apples here. So your total liquidity, it looked like it ended at BRL2.1 billion, and you're guiding to BRL3.8 million at year-end. Is that -- Rich, is that predominantly the American Airlines investment and an improvement or an increase in your ATL or is there other things we should be mindful of?

Richard F. Lark, Jr. -- Executive Vice President, Chief Financial Officer And Investor Relations Officer

Yes. No, the -- any transaction that's not closed is not in those numbers, so that is not in those numbers, Michael, nor is new additional capital raising. The Q3 number, and I'll walk you through that, Q3 number, which was composed of the BRL4 billion that you mentioned, which is about BRL1.1 billion of cash investments, about BRL300 million of restricted cash, about BRL600 million of accounts receivable and BRL1.9 billion of deposits. The way that would break down in the Q4 would be about BRL900 million to BRL1 billion of cash and investments about -- which is down around BRL200 million, because as we ramp up to the high season and get our fleet back up above 100 operating aircraft, we're investing in working capital, spare parts, if you will to get all these aircraft up and flying. So that's effectively going into assets, but it's obviously consuming some liquidity. And to some extent, it's also increasing our spare parts inventory, which supports the collateral in our senior secured notes program. The restricted cash will be a similar balance of around BRL300 million. Accounts receivable increases about BRL200 million to BRL800 million.

That's obviously associated with the ramp-up in operations and we expect by the Q1, we should be back to a more normalized level of accounts receivable, which should be somewhere between BRL1 billion to BRL1.2 billion. The deposit amount goes down from the Q3 to the Q4 by about BRL100 million, because as we -- as we return aircraft, we use some of those security deposits as well as advances of deposits to cost out the returns, because, as you know, we're accelerating our transition from the energies to the masses and so we're using those deposits to cost out aircraft deliveries, which is why, as we've said, we do have access to those deposits as it relates to the asset that they're supporting. And so that's why we include that number in our liquidity. So that's basically -- there's no external capital raising in there. It's all operational. So the different which is around that total number down from $4 billion to $3.8 billion, it basically represents an investment in working capital spare parts to end the year with a little over 100 operating aircraft.

Mike Linenberg -- Deutsche Bank -- Analyst

Okay. Okay, that's helpful. So it's flattish to slightly down before anything, and we know that we're hopeful...

Richard F. Lark, Jr. -- Executive Vice President, Chief Financial Officer And Investor Relations Officer

Yeah. Capital raising in there, as you know, we have -- in addition to that and kind of maybe taking advantage of your question, because we have some questions on how we get to the BRL6.1 billion of liquidity. In addition to what I described, we have potential financing sources of based on existing unencumbered assets that we have of a little over BRL2 billion. And so how we get to the BRL6 billion, the additional BRL2 billion comes out of unencumbered assets, about half of that is the collateral we have through the loyalty program. In Q3, we finalized the take in of the loyalty program, so now we control 100% of those assets and the additional collateral we have in spare parts intellectual property, which if we wanted to, could be deposited into our senior secured note program to raise additional capital. We have no plans currently to do anything with this additional collateral, but it is important to highlight that the unencumbered assets that we have represent a potential additional BRL2 billion of long-term capital should we choose to pursue that.

Mike Linenberg -- Deutsche Bank -- Analyst

Okay. That's super helpful. And then just you're always helpful in sort of calling out the, call it, the non-operating expenses associated with fleet idleness and personnel-related costs. And in this quarter, this fourth quarter, it looks like it's just going to be under BRL1 billion. Now, over the year, that number has actually moved up meaningfully despite the fact that you are putting more people and planes back into service. So I don't know, is that an FX-related issue, what's driving that number or am I just -- my logic in thinking that as you put more people and planes back to work and that, that should go down, that logic -- that maybe there's something wrong there and how it's being accounted for? If you could just detail that. Thanks, Rich.

Richard F. Lark, Jr. -- Executive Vice President, Chief Financial Officer And Investor Relations Officer

Yes. I think it's a depreciation effect, Michael, which is a noncash effect in there. Let me get back to that because that's a more technical calculation. But obviously, in that -- in the unit cost is the depreciation and so part of it relates to that. Also, in the Q3, the number -- in the Q3, the number of flights are still reduced. And so there's a substantial ramp-up in the -- in the Q4. And I will kind of revert back. But in the Q3, also in the month of September, as you know, we scaled -- had to scale back a little bit given the transition of our PSS, which impacted our scale and our revenues and our ability to improve fixed cost solution, because of the migration to the the revenue system, which was done in August and September. But in the Q3, we had 70 aircraft operators and so we still had 60 aircraft still idle into Q3. And so what you're seeing there in the Q3 is the effect of those 60 aircraft still idle. That number at the end of the Q4 will be reduced to hopefully less than 30. And so those -- we're trying to separate that out. I think we're one of the few companies that tries to separate that out for you guys. We're separating the idle costs versus the total. But we'll probably only see a normalization on a unit cost basis for comparative purposes in the Q1, but we're still going to have idle cost in the Q4.

Mike Linenberg -- Deutsche Bank -- Analyst

So no, when you say normal in Q1, are you saying that approach is zero in Q1 or -- I'm just assuming it gets to zero by the back part of 2022, but maybe it gets there sooner?

Richard F. Lark, Jr. -- Executive Vice President, Chief Financial Officer And Investor Relations Officer

No, no, no, no. In the Q1, because, again, look -- we've returned aircrafts. We are -- this Q4 is activation of a majority of the grounded aircrafts. And as we get into the January, February high season, there might be a little bit in there in the Q4, but for the most part, will be eliminated. And then you'll get into the normal seasonality, Q2 for us is kind of a down seasonality normally, we'll have to see where -- how the as Kaki said, we could have some positive surprises on the corporate demand taking the Q2 of next year, a little bit better than we might normally see. But for us, the Q1, again, we're 100% domestically focused. We don't have wide-bodies. We don't depend on the international piece and the rightsizing we did on our capacity and our fleet, if you will, should kind of triangulate to GOL being back to more or less normalized operating efficiency by end of December, beginning of January.

Mike Linenberg -- Deutsche Bank -- Analyst

Okay. Great. Thanks for that Rich. Thanks everyone.

Operator

The next question is from Dan McKenzie with Seaport Global Securities. Please go ahead.

Dan McKenzie -- Seaport Global Securities -- Analyst

Hey, good morning guys. A couple of questions here. I guess, first, another question on the corporate recovery. Big picture, what are you hearing from corporate customers today on their travel plans for next year? And then just related to that, given the FX volatility, I believe there's a certain percent of the revenue that actually benefits from a weaker Brazilian Real, so I'm thinking the oil and gas sectors, I'm thinking agriculture. So it seems like there should be a component of the revenue there that should do a little better, if the Brazilian Real weakens, but maybe you could clarify or even correct me on that?

Paulo Sergio Kakinoff -- President And Chief Executive Officer

Yes. This is -- firstly, the customers are paying -- the large corporates, they are basically the same-day we resume flight on January 1. And it is somehow attached to their home-office policy, which is for the vast majority to the end of this year. Why don't we talk specifically to those segments you have just repeated, they are already pulling some troubles ahead, but this is not even close to the potential they have told us to the next year on. In a side note, we have restructured ourselves to address that specific market via a new passenger service system in Sabre, which will likely give us an additional set of sales, because we can now in a much more flexible and fast way address some specific demand raised by the corporate cycle. So that we will have the combination of a better product with a redesigned network, which might accelerate with the speed. We are now envisioning to have that -- to see the segment -- the specific segment catching up.

Richard F. Lark, Jr. -- Executive Vice President, Chief Financial Officer And Investor Relations Officer

I think...

Dan McKenzie -- Seaport Global Securities -- Analyst

Yes. And I guess -- go ahead. I'm sorry, Rich. Go ahead, please.

Richard F. Lark, Jr. -- Executive Vice President, Chief Financial Officer And Investor Relations Officer

No, go ahead sir.

Dan McKenzie -- Seaport Global Securities -- Analyst

All right. Well, I guess, just tied to that point, I guess what I was trying to get at is, it seems like there should be some pent-up demand next year. And so, I guess I just was thinking that there's potentially some more revenue upside here that folks might be underappreciating. But going back to, I guess, a question for Edu or is just with respect to that cutover at Sabre that you just referenced, the ability to market products in a way digitally that you haven't been able to historically. So as you think about the grand vision, what is the time frame for exploiting that full capability and how material could that be?

Paulo Sergio Kakinoff -- President And Chief Executive Officer

I think that's going to be -- we're going to have 100% of these improvements and enhancements deployed until the end of this year. And then we view gradually, because those are marketing events, we'll be gradually offering them to the customers along 2022. It's really difficult to give you a flavor on how material those improvements can be. But we are now basically closing every single gap that we could get from a customer service point of view to a full legacy company, at the same additionally speaking, I mean, I'm talking about digital service, at the same time that will be now resuming the CASK advantage that we always had. So I believe that the combination of the two funds will -- it's more than promising. It's something that can definitely positively affect our results. But I wouldn't like to -- because it couldn't at the moment to share any percentage or precise numbers on that expectation?

Dan McKenzie -- Seaport Global Securities -- Analyst

Okay. Thanks for the time guys.

Richard F. Lark, Jr. -- Executive Vice President, Chief Financial Officer And Investor Relations Officer

Thanks. Let me just -- before we go to the next question on the sell-side analysts, let me weave in a question we have from one of our buy-side investors sending us questions on the platform. And I'll basically do that so that we don't have to save -- the people that sent the questions through the platform don't have to wait until the end of this, but we'll come back to the next question from the sell-side analysts, after I go through this question from one of our investors. It has three components on the results. Please explain what was the write-off of deposits for aircraft leases and aircraft lease deposits and management of deposits, so just to explain that to you to answer your question, in the cash flow in the quarter and the third quarter, we recognized provisions for return of aircraft BRL176 million. And against that, we're able to use and reverted BRL166 million of maintenance resource. And then we reduced -- we have a reduction in deposits of BRL264 million. And all this relates to what I was speaking about previously, but it refers to also maintaining current our maintenance provisions for the transformation of the fleet from MAX's NG.

So the provision for the return of aircraft, it's in that and you can see that in the tables in the back of the release and also in the footnote to the financial statement is about BRL176 million, which has to be a provision because from an accounting perspective, because we are accelerating the return of NG's to MAX's. And we are no longer constituting any more maintenance reserves, because we're utilizing deposits, maintenance or deposits to cost that out, as I mentioned in the previous question. So there's more or less 5% offset between use of maintenance reserves and what I just mentioned. Within that question as well, there was -- what was the provision for legal proceedings in your cash flow? In the cash flow, we have a payment for legal proceedings in there of about BRL150 million related to contingencies on PIS and COFINS taxes. And then there is, in that amount as well in that legal proceedings line item that you're looking at there from the person who asked the question. There are other credits that increased to BRL192 million that compensate, more or less compensate these values of these legal proceedings in the same amount.

And then the final component of the question in that category, what was the -- what was the reason for the increase in other expenses in the third quarter versus the second quarter of 2021, which is basically BRL296 million versus BRL167 million. And that is a -- the necessity we had to constitute an increased provision for contingencies on PIS and COFINS taxes for the importation of aircraft, because one of our peers, Azul, lost process and the amount of -- lost through the amount of BRL150 million. And so that forced us to change our perspective from a possible loss on that discussion, if those taxes apply to the implantation of aircraft, the probable and in the accounting policies process, when it goes probably don't have to constitute a provision. But that was based on -- we have not yet lost the discussion with the government, but as one of our peers did lose the discussion that then creates the need to increase the amount of provision on that. So hopefully, that answers your questions on some of those details, as you're looking at those items that are less focused on. So operator, we can go back to the call list on the sell-side analyst.

Operator

And the next question will be from Savanthi Syth with Raymond James. Please go ahead.

Matt -- Raymond James -- Analyst

Hey, good morning. This is Matt on for Savi here. Either Rich or Kaki, if you could -- regarding the 2022 CASK EX outlook, the 8% reduction versus 2019. Could you give us a little bit of color on what you're thinking in terms of capacity production and utilization there? Also, is there any change in the NGV deliveries or anything we should consider there?

Richard F. Lark, Jr. -- Executive Vice President, Chief Financial Officer And Investor Relations Officer

Sorry, you're asking about -- we didn't -- could you repeat the question, because I think you're asking about '22 --

Matt -- Raymond James -- Analyst

2022, right, the CASK EX -- OK. So I think it was more so maybe on the -- you talked about an 8% reduction in CASK from the fleet. I wasn't sure if the slide, I believe it was 23 -- 2022.

Richard F. Lark, Jr. -- Executive Vice President, Chief Financial Officer And Investor Relations Officer

Okay. The MAX has a lower operating cost than the NG and so as our aircraft portfolio increases, the amount of aircraft that are MAX, that has an effect of reducing our unit costs. The main source of that is the lower fuel consumption and we're getting the amortized roughly, for us, it's about 15% less fuel consumption. And so, I think that's what you're asking about.

Matt -- Raymond James -- Analyst

Okay. Certainly, that makes sense. I'm sorry. I thought probably it was maybe earlier looking to 2022 on the CASK EX side, is there anything that we should consider them in terms of how you plan to return to your fleet utilization or capacity early look into 2022, what we should consider? Beyond the --

Richard F. Lark, Jr. -- Executive Vice President, Chief Financial Officer And Investor Relations Officer

Yes. If I understood the question, I mean, we'll be back -- in our ecosystem, we'll be back to more normalized aircraft utilization numbers in the Q1, which for us is -- it should be -- well, the sweet spot for us is kind of 12 hours a day of utilization. We expect to be back above 11 hours of utilization in the Q1.

Matt -- Raymond James -- Analyst

Okay. Thanks, Rich. And then if I could, on the revenue side versus what you were thinking in late July, last quarter when you provided guidance to now, what's in the 4Q revenue outlook. What has changed, I know you talked -- looking out to 1Q, how some corporate segments have come back faster, but that 4Q number has gone lower versus late July, so I was wondering what has changed since then?

Richard F. Lark, Jr. -- Executive Vice President, Chief Financial Officer And Investor Relations Officer

Yes, sure. I think we revised down the revenue forecast for the Q4. It's mainly based on lower overall yields in the market and which has a big effect, just given the still situation of low efficiency and then also -- and that's overall market, that's not just us. And then the -- and we've been staying out of the way of that scenario and how do we stay out of the way of that, we keep capacity lower. And so when you combine those effects, staying out of the way of the low yield environment, given the overcapacity coming out of competitors and adjusting our offer down or our capacity down, those two effects magnify into the reduced revenue. But the catalyst is obviously more on the yield side. We have the ability to flex up capacity faster if we need to, given the amount of aircraft that we have. But we have had a management during these 20 months of the pandemic, focused on two key metrics; one is preserving our unit cost advantage in the post-pandemic environment and also matching our cash inflows with cash outflows.

And so that limits what we can do. And you've seen how we've done that. For those of you that have followed us, you've seen how we've done that through the pandemic in terms of minimizing any operating cash burn. So -- and how we do that through the capacity equation. It feels better, we can check that up now. But as Kaki mentioned, we're now in the process of reactivating our core network, which is mainly focused on the business traveler. And as you saw in the slide as well, that shifts our focus from a network perspective from that massive hub we created in Buenos Aires to manage through the pandemic based on connecting flights, which was not that convenient for GOL passengers to going back to a more point-to-point network with a very attractive point-to-point flights out of our other hubs and also from our markets out of Sao Paulo, Rio and Brasilia. That's happening as we speak. And so the GOL -- in the GOL ecosystem that can have a significant impact on yields, as if we have some positive surprises on the corporates coming back. I think we'll see that more in the Q1, because we're still in a transition on that, but we're still not back to normalized levels on market capacity as well as demand from the business traveling.

And also, the fact that you mentioned on the revenue side, obviously, they have the effect on EBITDA, because it means lower scale and so less fixed cost dilution. And so that's why our expectations for Q4 EBITDA are down a bit. The other thing that is in there is, as I was mentioning, I think, in one of the previous questions, is an increase in capex, about BRL200 million increase in capex in the Q4 that mainly relates to investments in spare parts inventories, and other assets related to reactivation of the operating. So when you kind of -- those are the factors one, obviously, on the yield capacity side or the other on the capex side that account for about BRL400 million reduction in our targeted liquidity for the end of the Q4, but about half of that number is investment in assets. Like I said, it also helps as a side benefit of increasing the collateral pool that's in our secured notes program. And those same effects will get you to the difference in the leverage.

Those exact same effects all kind of roll into that. And so it's a transitional quarter for us. And there are some exchange rate effects in there, obviously, that kind of run through those calculations and put pressure on it -- on the net debt side of the equation also. And those result in massive negative exchange rate effects, but those are noneconomic and don't affect the cash flow, just to highlight that because we have gotten some questions on what are exchange and monetary variations for those that aren't maybe familiar with investing in developing countries with weak functional currencies. And our functional currency is Real, therefore, we have to recognize the exchange rate variation on the balance sheet, and that produces accounting effects in negative and positive, the exchange and monetary variations, which continue to be quite large, given the short-term negative devaluation of the Brazilian Real. And so that for the most part, we recommend kind of backing that out, which is what we try to do in our furnished disclosures.

Matt -- Raymond James -- Analyst

Certainly. Thank you very much for the color there. Really appreciate it and the time.

Operator

The next question is from Duane Pfennigwerth with Evercore ISI. Please go ahead.

Duane Pfennigwerth -- Evercore ISI -- Analyst

Hey, thanks, good to speak with you. On fleet, can you just maybe play back for us the fleet simplification opportunity here? I mean, it's not just MAX, and you've outlined those, You did a number of fleet transactions pre-COVID short-term leases to solve for a gap, then COVID hit, can you just help bring us up to speed on where we are with respect to those shorter-term leases rolling off and what the fleet simplification opportunity is here?

Richard F. Lark, Jr. -- Executive Vice President, Chief Financial Officer And Investor Relations Officer

Yes. Yes, we still have a fair amount of NGs on short-term operating leases, where we have the optionality of either extending those or returning them. The nut there to crack is the availability MAXs. Market right now is constrained in terms of the availability of MAXs, just given that Boeing is still only producing below 20 MAXs a day, so it's still quite low, which is about a third of what they were producing pre-pandemic. We have all the financing sources lined up to add as many MAXs as we want to in the short-term and next year, the bottom line is the availability of new MAXs. There are still some white out there, but they have significant configuration costs and other issues that make them less attractive now. So we have the ability to accelerate the returns of entities based on the structure of our aircraft portfolio, which is still today of 100% operating lease. And I think another part of the simplification that you're mentioning that you're hinting at is that we will do also, as we move into the acceleration of the transition for NG to the MAX.

In addition to this, the operating cost benefit based on the lower fuel consumption and higher seat count on those aircraft and so on is the component of how we're financing those acquisitions and so we will also be doing more finance lease transactions, as we move forward, somewhere in the order of between four and maybe as much as 16 of those next year, depending on the availability of MAXs, and there's a significant equity value creation that comes with that. As you saw in the previous cycle, when we did 40 finance leases on the first order with Boeing that we've created in excess of $500 million of cash equity gains through that process, and it also gives us equity to borrow against and things like that. And so the other component, I would say, Duane, of that, is our ability to hit back in the game of owning a portion of our fleet. The reason why we're 100% operating lease today is pre-pandemic, we had finalized the monetization of our NG portfolio, and we were in the midst of -- still in the midst of the MAX grounding. And so we -- in that -- and then the pandemic happened and all that's kind of got pushed out. So we have enormous flexibility to return NGs at faster pace.

And the final activity, the availability and MAXs to do it operationally, we're scaled up in our operational capacity on a normalized basis, is easily two aircraft receipts and two redeliveries per month, two in, two out, four total. We can go as high as three per month, given our operational capability. So for us, it's operational easily done operationally to bring in 24 MAXs and transition out 24 NGs make sure if we need to do. So our fleet plan is a little bit less than that and part of it because we're still in the sourcing of the right MAXs for that activity. But I think it's important to mention that none of that is going to consume our liquidity, because we already have the financing sources lined up to pay for those MAX acquisitions that are in our plan, plus some additionals if we need it. We already have the -- if the liability is lined up, and we're still working on additional sourcing of aircraft. Hopefully, that answers your question.

Duane Pfennigwerth -- Evercore ISI -- Analyst

Yes. Listen, it does. The delivery rate came up on the Ryanair call as well. So I guess the question would be for the deliveries that you've outlined for the rest of this year and into '22, how many of those are already built? And how does that forecast feel relative to kind of the delivery rate that you're seeing?

Richard F. Lark, Jr. -- Executive Vice President, Chief Financial Officer And Investor Relations Officer

Well, in terms of what's coming out of the factory, we would need somewhere between eight to 10 aircraft, if the source is the factory. If the source is the whitetail market, we've got that covered. And that's what we're working on as we speak, because initially whitetail market is we have some additional reconfiguration costs that we wouldn't have if it was coming out of the factory for us. But maybe you can help us convince Boeing to ramp up production to sell more aircraft.

Duane Pfennigwerth -- Evercore ISI -- Analyst

I wouldn't be your guide for that, but just -- I'll sneak one more in here, Rich, because I'm always interested in your thoughts here. What FX rate kind of drives the long-term plan? And for what it's worth, how do we get there? How do you see the path to that long-term rate? Thank you.

Richard F. Lark, Jr. -- Executive Vice President, Chief Financial Officer And Investor Relations Officer

Well, we're not in charge of that, but the most bank market forecasts are for an appreciating Real, something with a 4-handle on it at some point next year. If you take fair value calculations, our fair value calculations are below four. We're now 12 months inside of presidential elections in Brazil and so that is going to be effective, it will be pay volatility high. We addressed in our presentation on the videos on the website this morning and also in our release, I mean, the Brazil's fiscal situation is much better and improving. I mean, it's much better than the U.S. fiscal situation, for example. And GDP in Q3 was up 4%, it's around 3% for the Q4, which is down a little bit. But I think my own personal opinion would be you're going to see weakness in the currency, because of the political dynamic between now and October next year. But I'm going back to Kaki's point that is going to keep a relatively captive volume for us for domestic air travel, which is perhaps the silver lining on that, which is why we're not focused today on driving international travel, just given the lower purchasing power of Brazilians in Reals.

And I have to point you to market projections on that, because first, there does seem to be a disconnect between the fundamentals of Brazil and the currency, which are related to other factors, high oil prices are a bull factor for Brazil, the raw materials sector in Brazil. The extraction economy, which primarily drives the Brazilian economy has been doing very well during this pandemic. And that will create a positive effect and what other people were asking about in terms of the elasticity of the return of corporate travel, in terms of those sectors being consumers of air travel. So on the volume side, I think the exchange rate is less of an issue. It obviously does affect cash flow, because it pressures both the oil price that we have to pay, which is million dollars as well as the aircraft cost, which is not ideal. But it doesn't look like we're going to be getting any, let's say, market relief on that anytime soon. And just given the volatility and the relative perception of the outside world on Brazil. And that's my two-sense on that, but we're not the boss of that. We're price takers on that.

Duane Pfennigwerth -- Evercore ISI -- Analyst

Very fair. Thank you.

Operator

[Operator Instructions] The next question is from Alejandro Zamacona with Credit Suisse. Please go ahead.

Alejandro Zamacona -- Credit Suisse -- Analyst

Thank you. Hi, Paulo. Hi, Richard. Thank you for my questions. I'm just curious on what's your view on the potential recovery of the international market to pre-COVID level? And what would be the impact on yields amid international market reactivation?

Paulo Sergio Kakinoff -- President And Chief Executive Officer

Hi, Alejandro, actually, we are not that bullish on the international market recovery for 2022. There are still different regulations and different sanitary requirements, which make us doubt whether it's going to be possible to harmonize all of that in the first half of the year. So this is one thing. The second is also that a potential overcapacity will be deployed, because you can imagine in terms of amount of wide-bodies available in the world, those have not been -- those have not been utilized for, I mean, many months. And also, clearly, if there is going to be one specific segment, being severely affected by the so-called new normal behavior, it's going to be the long-haul business trips. I think that this customer will really think twice before deciding to take a plane for a short business trip, mainly long haul.

So honestly, I think that, generally speaking, the international markets will be a factor. They are already affected, and that effect will last longer than expected. So -- but on the other hand, I believe that the long-haul leisure travelers will be there and mainly for the most important tourist destination. So -- but how important was the business struggle, pre-pandemic for those airlines operating wide-bodies, business classes, and first classes, I am not bullish about this specific market demand.

Alejandro Zamacona -- Credit Suisse -- Analyst

Okay. Thank you. And then a second question, if I may, on the maintenance, we saw a significant increase during this quarter in the maintenance expense. So we were wondering what was designed this increase and what can we expect going forward? I assume that it's a catch-up from the deferred maintenance. But I'm just curious on hearing your thoughts. Thank you, guys.

Richard F. Lark, Jr. -- Executive Vice President, Chief Financial Officer And Investor Relations Officer

Yes. Sure, Alejandro. I guess you didn't hear the answer to the previous question, but I'll go through that again. The -- you're asking about the increase in maintenance expenses from Q2 to the Q3, from BRL88 million to BRL246 million. That is from -- and maybe I'll give it -- I'll answer it from a different perspective. That is related to the acceleration of the transition of the fleet from NGs to MAXs, where we are accelerating the returns of aircrafts. Now over the next couple of months, over the next year, and what you have to do on a quarterly basis is always be fully provisioned on your future redelivery estimates. And so as we're accelerating now, the return of the NGs, we have to top up. We have to increase the amount of provisions for maintenance on aircraft. And so in that particular case, there's a certain number of aircraft in the -- in the mid-single digits, where those provisions increase. That -- so it's in there, always remember that that's -- you always have to be estimating. If you do your accounting properly, you always ask that question to make sure that companies are provisioning properly their future redelivery costs.

You have to always be adjusting your provision for that. And for us, the main component of those delivery of cost is engine overhauls. And so in our particular case, as we increased the number of engines that we're returning and the number of MAXs that we're bringing in, those provisions in the Q3 increased from BRL88 million to BRK246 million. Okay. What I'm going to do -- No, sure. No, no worries. We have one more person in the queue to ask a question. But before that, I'm going to take another question that we have from the platform, which is asking about yields, RASK and CASK, Q2, Q3, Q4. And so, I'll just walk through that. We had a 15% increase in yields in the Q3 and what's implicit in our Q4 guidance is basically flat yields versus the Q3. We're being conservative on that, given the capacity environment, given that we are forecasting load factors up a little bit, that will and in the Q4 is implied a slight increase in RASK over where we were in the Q3. We did the BRL0.26 in the Q3, we think we could be around something around BRL0.28 in the Q4.

No, the cost side of the equation, the recurring unit costs that we did in the Q3 of just under BRL0.22 in Real, in those Q4 guidance numbers that we provided is a similar level, even though we are, as I was mentioning, increasing the operating fleet and diluting fixed costs, as we return NGs and accelerate transition from the MAXs, we have a combination of higher expenses for maintenance for the redeliveries, higher provisions and also higher depreciation. So that goes to just looking at, that basically addresses that question, which is basically a conservative forecast for the Q4 guidance we're providing, it's mainly volume-driven. It's not being driven out of an increase in yields or a reduction in unit cost. So as Kaki was mentioning, if we get a higher positive elasticity on the business side, that's going to have a positive impact on yields and could translate into better revenue numbers for the Q4. With that, operator, we go back to the last question in the queue. Operator, you can go to the last question in the queue.

Operator

[Operator Instructions] The next question is from Matthew Breckenridge from DSC Meridian. Please go ahead.

Matthew Breckenridge -- DSC Meridian -- Analyst

Hi, my question has actually been answered. Thank you very much.

Richard F. Lark, Jr. -- Executive Vice President, Chief Financial Officer And Investor Relations Officer

Okay, Matt. Thanks.

Operator

This concludes today's question-and-answer session. I would like to invite Mr. Kakinoff to proceed with his closing remarks. Please go ahead, sir.

Paulo Sergio Kakinoff -- President And Chief Executive Officer

I just would like to thank you all very much for the attention. Have a nice day.

Operator

[Operator Closing Remarks]

Duration: 63 minutes

Call participants:

Paulo Sergio Kakinoff -- President And Chief Executive Officer

Richard F. Lark, Jr. -- Executive Vice President, Chief Financial Officer And Investor Relations Officer

Stephen Trent -- Citi -- Analyst

Mike Linenberg -- Deutsche Bank -- Analyst

Dan McKenzie -- Seaport Global Securities -- Analyst

Matt -- Raymond James -- Analyst

Duane Pfennigwerth -- Evercore ISI -- Analyst

Alejandro Zamacona -- Credit Suisse -- Analyst

Matthew Breckenridge -- DSC Meridian -- Analyst

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