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GOL Linhas Aéreas Inteligentes S.A (NYSE:GOL)
Q3 2019 Earnings Call
Oct 31, 2019, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to the GOL Airlines Third Quarter 2019 Results Conference Call. [Operator Instructions]. At that time, further instructions will be given. [Operator Instructions] This event is also being broadcast live via webcast and may be accessed through the GOL website at www.voegol.com.br/ir and MZIQ platform at www.mziq.com. Those following the presentation via the webcast may post their questions on the platform and their questions will be either 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 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. Please begin.

Paulo Kakinoff -- Chief Executive Officer

Good morning, ladies and gentlemen, and welcome to GOL Airlines conference call. I am Paulo Kakinoff, Chief Executive Officer, and I'm joined by Richard Lark, our Chief Financial Officer.

Richard Lark -- Chief Financial Officer

Good morning. It is my pleasure to be with you all today.

Paulo Kakinoff -- Chief Executive Officer

This morning, we released our third quarter figures. Also, we made available on GOL's Investor Relations website three videos with the results presentation, financial review, and a preliminary Q&A. We are very pleased to report that this was the 13th consecutive quarter in which the company reported operating income as well, which had record net revenue reflecting GOL's competitive leadership and financial discipline in managing its business. The passionate work of our team has been the main driver of our superior results. Once again, we improved our operating indicators. Revenue per passenger kilometer RPK increased 12.8% totaling $11.1 billion driven by a 13% growth in number of transported passengers, while available seat kilometer ASK growth was 7.6%.Strong passenger demand and dynamic revenue management enabled GOL to offset the increase in operating unit costs. The Company achieved; Average yield per passenger of R$0.3150, an increase of 14.8% year-over-year. Average load factor of 82.9%, an increase of 3.8 percentage points compared to the third quarter 2018. And on-time performance of 91.2% in this quarter according to Infraero and data from major airports.

We continue to drive strong revenue growth. Net revenue was R$3.7 billion, the highest ever recorded by the Company, and an increase of 28.3% year-over-year. GOL carried 9.8 million Customers in the quarter 13% growth over third quarter 2018, with 9.2 million in the domestic market 11.4% growth and 0.6 million in the international market, up 48.6% year-over-year. Net revenue per available seat kilometer RASK was R$0.2767, an increase of 19.2% versus same period of last year. Net passenger revenue per available seat kilometer PRASK was R$0.2612 a 20.4% growth over third quarter 2018. The net revenue guidance for 2019 is approximately R$13.7 billion.

We have used our fleet plan flexibility to accommodate the increased demand for our passenger transportation services and to manage the MAX delays and recently unplanned maintenance requirements on some of our NGs. In the fourth quarter we added five leisure Boeing 737 800s to the fleet and rescheduled the redelivery of four of our NGs. We are working with the assumption of the MAX returns to service in our network in December, 2019. And in parallel we executed a plan to cover our capacity needs for the Brazilians summer high travel season of January and February and subleased seven aircrafts.

To conclude, I would like to expand and also thank you to all of our employees. I am very pleased we followed company's results, recently in this quarter and proud of our team who did an amazing job of minimizing the effects of MAX delays. With that, I'm going to hand you over to Rich, who is going to take us through some additional highlights there.

Richard Lark -- Chief Financial Officer

Thanks Kaki. I'd like to begin by also adding my thanks to all of our terrific employees for their commitment and hard work. Now we'd like to comment about GOL's cost environment, unit costs based on cost per available seat kilometer, CASK excluding non-recurring expenses increased by 5.8% from R$21.3 in the third quarter of 2018 to R$22.5 in the third of 2019, mainly due to higher personnel expenses, higher passenger costs and higher depreciation. Fuel cost per ASK decreased 6.7% consequence of a reduction of fuel taxes partially offset by additional fuel consumption due to the MAX delays. CASK ex-fuel excluding non-recurring expenses increased by 14.2% due to a number of factors, one a 37.3% increase in depreciation due to the addition of six net aircraft in the fleet and a reduction in depreciable life of capitalized engine maintenance and large components.

Two, an 18.4% increase in personnel expenses, mainly due to an increase in the federal payroll tax rate to 20%, a 3.6% cost of living adjustment and the hiring and training of 723 new employees due to the expansion of operations, new routes and new basis. And finally, increases in passenger costs, service provided, sales and marketing and landing fees. GOL has the lowest unit costs in its markets. GOL's 2019 non-fuel CASK guidance is approximately R$14.5. Our margins remain solid due to strong cost control and yield management. The company achieved a positive operating result for the 13th consecutive quarter. Third quarter 2019 demand enabled GOL to achieve an EBIT margin of 18.6% in the quarter, the highest since 2006.

Operating income EBIT was R$692 million in the quarter, R$451 million higher year-over-year. EBITDA margin was 30.7%, an increase of 11.8 percentage points. GOL's 2019 EBIT margin and EBITDA margin guidance is approximately 17% and 29% respectively. Lastly, we would like to share the continued success of our balance sheet strengthening. GOL reported operating cash flow generation of R$1.1 billion in the quarter. Total liquidity was R$4 billion, R$370 million higher in comparison to June 30, 2019 and R$1 billion higher than a year ago.

GOL's affected R$998 million of debt repayments in 2019, the U.S. dollar appreciated 4% end of period against the Brazilian Real causing a net exchange rate and monetary variation losses of R$623 million. Net debt excluding perpetual bonds to LTM EBITDA was 2.9x as of September 30, 2019, slightly better versus June 30, 2019 which was 3.1 times.

Now I'd like to return to Kakinoff.

Paulo Kakinoff -- Chief Executive Officer

Thanks Rich. In summary, our results this quarter reflect the new competitive levels achieved by our company. Our commitment to the continuous improvement in results has proven the strategy assertiveness of offering a differentiated and high quality product, while relentlessly focusing on cost efficiency. We remain focused in offering the best experience in air transportation, with exclusive services to customers on new and modern aircraft that connect our main market with the most convenient schedules. We are focusing on prudent management of the balance sheet and liquidity, maintaining cost leadership and continuing as the preferred airline for our customers while driving sustainable margins and returns for shareholders. To conclude, we remain optimistic for the last quarter of 2019 with the scenario of demand recovery, the aviation industry in the country and our continuous capacity discipline.

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

Questions and Answers:

Operator

Thank you. The floor is now open for questions. [Operator Instructions] Today's first question comes from Duane Pfennigwerth of Evercore ISI. Please go ahead.

Duane Pfennigwerth -- Evercore ISI -- Analyst

Hey, thanks. Just curious there was some media reports that the FAA was in Brazil this week. Did GOL have an opportunity to speak with them? And did you get any insights into how they are thinking about our return to service timing, not Boeing, but the FAA specifically?

Richard Lark -- Chief Financial Officer

Yes, Duane, thanks. Hi. We had the annual ALTA conference in Latin American airline association conference in Brazil this week. A lot of conversations with a lot of the industry players but nothing different than the guidance that we've also received, similar to what we received from Boeing, which is an expectation that during the month of December, the work there would be finalized. So we have no new information from that specifically. As you know, GOL and the Brazilian ANAC participate in the various committees that are dealing with on behalf of the airlines and the regulators very, very actively involved in the process. And our understanding also is with the ANAC, since there's so very closely involved with the process and what the FAA is doing that there would be a very short lead time between a decision by the FAA and what the ANAC is doing specifically.

Duane Pfennigwerth -- Evercore ISI -- Analyst

Okay. Appreciate that color. And then just following the Delta announcement with LATAM, can you characterize the level of interest that you're getting from other global airlines and what are the attributes of an ideal partner for GOL from here?

Paulo Kakinoff -- Chief Executive Officer

Hi, good morning. Kakinoff here, we are now back on to our regional strategy through us do not belong to any kind of alliance and make the most out of our own asses, that we are holding at the moment that 80% of the Brazilian market who have a huge capability to feed partners and also to transport the passengers arriving in Brazil at both international airports, mainly Guarulhos and Galeao and therefore our behavior from now on is to resume the traditional or the regional strategy just to code-share, either code-share or interline with the largest possible number of partners which give us a sizable opportunity which is ahead of us.

I mean, if you consider North American carriers going to Brazil and those potentially who code-share with us, we could easily have double the number of seats available in both ways to the specific customers, North American and Brazilians by either code-sharing or interlining with them. And this kind of possibility is on the table at the moment and this is what we are analyzing.

Duane Pfennigwerth -- Evercore ISI -- Analyst

Thank you. And then just for a follow up there. Looking back over the years, are there any product changes or onboard service changes that you pursued as a result of your prior relation? I don't want to say forced into but are there product attributes that you now have the flexibility to change going forward. And thanks for taking the questions.

Paulo Kakinoff -- Chief Executive Officer

Actually, we've had that flexibility before. I mean, we were solely deciding on our products and services every time. I mean, we are permanently refining our customers proposition. And you could expect minor improvements because the basic product seems to be the most effective and possibly the most successful.

If you analyze our market penetration in both larger segments, I mean the leisure and the business travelers, we are leading the market with a considerable advantage in comparison to the second competitor. And we have, in practical terms, two different airlines within the same airplane. I mean, we are offering one of the best economy class experiences for domestic airline, even comparing ourselves to other international carriers. And at the same time that it has been able to last year, give you an example to sell around 20 million tickets at the average share of $50. So I mean, the products and the services are now delivering the desired balance between low fares and high value customers are succeed with this.

Duane Pfennigwerth -- Evercore ISI -- Analyst

Okay. Thank you.

Paulo Kakinoff -- Chief Executive Officer

Thank you.

Operator

And our next question today comes from Michael Linenberg of Deutsche Bank. Please go ahead.

Michael Linenberg -- Deutsche Bank -- Analyst

Yes. Hey, Rich, Kaki. So I saw the release out that where you indicated that the Delta agreement was less than 1% of your revenue, but as that winds down, what are we going to see, is it going to show up in revenue? Is there anything on the cost side? I know that the relationship went beyond revenue like should we as we think about over the next quarter or two, how does that show up, if at all maybe it de minimis the impact.

Paulo Kakinoff -- Chief Executive Officer

Hi Michael. Firstly, we found this partnership, hi I strongly believe that both companies learn from each other. There were several interactions and we could also contribute the same amount of knowledge that they had contributed with us. As I mentioned before, Delta had a really small penetration it has, there is more penetration than the Brazilian market is deferred, among the three main players.

And we had an agreement with them so there are only one alternative if not by exclusively operating with Delta, which is to have partners potentially that are bigger and larger. So considering the revenue aspects, it can only be more meaningful to our company case that we would either interline or code-share with these two potential partners. At the cost side, there was no either negative or positive effect by the code-sharing with them. The more we could increase our the number of passengers distributed by us in Brazil coming from the United States, naturally we are, it would be enhancing our gain of scale, and therefore as deliver to you. The cost dilution would be higher. So direct costs or regarding structure, there is nothing specific, we have Richard would like to.

Richard Lark -- Chief Financial Officer

I was going to say, one of our big cash flow items as we've been doing the overhauls of the engine has been and majority of that business is done through a contract with ETL. And so we have some more flexibility there, pricing, payment terms that's been we've had a lot of investment in that component. We've also seen that show up in directly in our results through the depreciation component.

And we still have another year to a year and a half, phasing out a lot of the engine overhauls. But another thing I would and maybe kind of complimenting the last question, over the last couple of years, GOLs made a lot of investment in the product and the service, which has been part of the key in becoming the leader in the corporate market.

But that also applies to the product we're offering to our international code-share and interline partners. And so that was developed, to work with any airline that would value having the premium domestic service. And so if you're already a business class passenger flying down from where you are in New York to some follow and you want to connect on to could achieve out of the whether this airport, you can travel in the GOL comfort class, you have a differentiated boarding.

And that investment that we have made that this company has made in the product was not only available for the as you were saying, the 0.3% of our passengers that were coming off of Delta aircraft, they were also applying to almost 6% of the passengers on our network that are coming from these almost 90 code-shares and interlines.

To the extent, that's irrelevant for a partner where they want to have the local premium, kind of the last mile. The average flight in Brazil as you know is an hour and 10 minutes. And so that product that's an attribute we have to the product, which makes us in addition to the network, which is the key attributes, what makes us very attractive to any partners that want to plug into our network in Brazil.

Michael Linenberg -- Deutsche Bank -- Analyst

That's helpful, Rich. And then just on a second, I know Duane brought up the fact that there was a meeting in Brazil earlier in the week and we had a lot of announcements from some of the regulators and the aviation authority of Brazil. Things like talking about the 100% foreign ownership and the reduction in the fuel tax, which is obviously helping you.

I also believe there was something out about, the government talking about doing away with this international passenger tax. I think maybe it's on flights within the region to Brazil in year one. And as it plays out over the next few years, it will include longer-haul flights like to the U.S. So curious about initial take that tax, how much does it help someone like GOL. And is that in your guidance for 2020, do you have some of those tax benefits flowing through and driving that better P&L, if you could just any commentary around that since a lot was said this week would be great. Thank you.

Paulo Kakinoff -- Chief Executive Officer

Hi Michael, yes, that could be beneficial to our passenger flow. Considering that we are specifically for international travelers, our international network, we are caring more leisure travelers than business. So they are more price sensitive and $18 tax reduction would be meaningful to them. So we are not considering that we were not considering that this year for sure, but when we are talking about 2020 guidance that we have already disclosed today, this effect is already built in.

Michael Linenberg -- Deutsche Bank -- Analyst

Okay. That's actually very helpful. But it does sound like it could even be more stimulative than we realized. So maybe there's potential upside?

Paulo Kakinoff -- Chief Executive Officer

Yes, yes.

Michael Linenberg -- Deutsche Bank -- Analyst

But that's good to know.

Paulo Kakinoff -- Chief Executive Officer

Yes, definitely.

Michael Linenberg -- Deutsche Bank -- Analyst

Great. Thanks everybody.

Paulo Kakinoff -- Chief Executive Officer

Thank you.

Operator

And our next question today comes from Dan McKenzie of Buckingham Research. Please go ahead.

Dan McKenzie -- Buckingham Research -- Analyst

Hey, thanks. Good morning guys. A couple of housecleaning questions here. First, the fourth quarter CASK ex-fuel outlook of up 4% to 6%. I'm just wondering what the exact basis that you're using from the fourth quarter of 2018. And then the second one, the slightly reduced EBIT margin outlook for the full year. I'm just wondering, if you can clarify that a little bit, is that just simply a function of reduced ancillary revenue, higher margin ancillary revenue or is it perhaps higher depreciation or is it less growth or something else? I'm just wondering if you can clarify sort of the bigger drivers behind them.

Richard Lark -- Chief Financial Officer

Sure. Yes. The first question Dan, the number because we're because you have and maybe just even before that we've been providing the we're relevant providing the quarter for the previous year 2018 in the IFRS 16 methodology. And so you'll see that there's a table in the release and also the comparisons in the quarter release versus a pro forma 2018 for IFRS 16. So that's a lot of work to do, but it's all apples-to-apples.

But you're asking for the recurring ex-fuel CASK for to answer the question, the recurring ex-fuel CASK in the comparison for fourth quarter 2018 would be 15.17. So for the reference there, if you so that's the number thats referencing.

The other question on the as you saw in actually our EBITDA guidance if you will, is performing little bit better than expected. And we took the EBIT to the operating margin guidance down a little bit. There's really two, a couple reasons there. One is that as we highlighted there is this year there were some changes in some of the estimates of the depreciable life on capitalized maintenance.

And so those the depreciation numbers went up a bit. Obviously no impact on the EBITDA and an impact on the depreciation number, which has gone up. But within that, in addition to the accounting SME change, there's two kinds of sub impacts. One is that a chunk of depreciation is dollarized because they're dollarized assets.

So the higher FX also has the indirect effect of increasing a little bit to depreciation. And as you know, in the year, we recently, right now, since the beginning of October and we'll kind of run into the beginning of December, we're doing unplanned maintenance on some of our older NGs due to the maintenance on the pickle fork, which has been widely disclosed. Those unplanned maintenances, fortunate that also goes into indirectly into some of the capitalized components of that maintenance. So there's also a little bit of pressure there because of that issue on depreciation.

But the main effect was the change in the depreciable life. And then there's this two sub effects of the dollar the weaker or the stronger dollar. And then a little bit unplanned maintenance on the pickle fork on some of the older 737s that, as you see is happening now, not just with us, with Southwest and Qantas and some other airlines.

And so those changed our increased our depreciation in the Q3, as some of those effects as well as are going to have a little bit higher weight in the Q4 of this year and also next year because you saw kind of across the board, 2019 and 2020, we took the EBITDA guidance that we provide you guys up by a point. But in 2019, we took the EBIT guidance down by a point and we kept the 2020 flat. The root of that is the effect that I just described to you.

Dan McKenzie -- Buckingham Research -- Analyst

Yes, understood. Okay, that's helpful. And with respect to the pickle fork, I did see the higher cost called out in the release. I'm not sure if there's a revenue loss that you'd want to put with that as well. But just with respect to my second question here, I'm thinking the return of the MAX had drive a nice CASK ex-tailwind next year, yet that doesn't seem to be embedded in the 2020 cost outlook.

And so I'm just wondering from where you sit today, as you look at the kind of the guidance for next year, what the bigger cost pressures are that might be offsetting some of the goodness that you're getting from bringing the MAX back or if perhaps just there's some conservatism next year in that outlook, just from where you sit today?

Paulo Kakinoff -- Chief Executive Officer

Yes. Regarding the pickle fork, the revenue already considers into our 2019 guidance, revenue wise, it has been minimized by our capability to enhance block time, aircraft block time and also further increase the load factors. So we were more affected in October due to the short period of time to inform and reaccommodate our customers, which made our fare curves being affected, mainly considering the short period prior to departure sales. That was the most affected portion of our revenue curve because we had to reaccommodate our passengers measurably in our own flight.

So from November on, and this is basically November because we are considering to have the fleet, the NG fleet for the operational, about the second week of December. In November, we had more time to properly reaccommodate the passengers and the booking curve was not so advanced as we had in the beginning of October.

So I would say that considering the potential heat, we were able to mitigate it to a very little level. It shows how resilient this business model is because to any other line, find itself strong, we need to 10% less planes in its fleet than it was planned and then it was predicted and basically go through that without no noise and not affecting significantly our results, its possibly one of the best examples on how progress resilient this business model is.

Regarding the 2020 CASK ex-fuel, you can imagine that we have been pretty conservative in almost everything with MAX. I mean, even assuming, and this is our premise at this moment that the MAX might be grounded by the third week of December. We are also considering that we will mostly reintroduce those planes in operation. And then we can get some cost upside on top of what has been already disclosed by is speeding up the market reintroduction process. But this is something which cannot be considered as definitive because the MAX situation is still somehow unclear.

Richard Lark -- Chief Financial Officer

Dan, let me accompanying as to what Kaki was saying because there's been a lot going on this year obviously. Last year we had the trucking strike, you guys saw how we dealt with a trucking strike. We only had 12 canceled flights during that period of time where our competitors each had over 500.

And that's kind of part of the GOL operating model for a variety of reasons gives it flexibility to deal with a lot of different types of disruption. This year, we have the capacity shock of Avianca going out of the market. We had these significant delays on the deliveries of the MAXs and then we've had the unplanned maintenance on some of the old NGs. It's been an enormous amount of aircraft that have had to be replanned this year.

But let me just maybe I'll highlight a couple of effects for you, which are in this. On the revenue side, it's pretty difficult to kind of estimate what the net effect of all these things have been. Because of the power of the capacity shock, but clearly, MAX delays which have much greater revenue productivity than our current fleet. And as we go into the high season here with the unplanned maintenance on the older NGs and what we've had to do to resupply those. And we kind of highlighted this, if you go to video presentation, which on the website we put a slide in there, which kind of shows how we dealt with this resourcing this year. 100% we had less, we weren't optimizing revenues given what we had to do there with all these issues.

Having said that, we're delivering what we promised pretty much across the board in terms of revenues, costs and margins and profitability. It's like even better, especially on the cash flow and deleveraging. And so how we get there, there's a lot of complexity on that. Number one on the revenue side, so definitely there has been a revenue impact, but it would be highly complex to specifically specify at this point in time. We also need to wait till we get on the other side of the MAX and the pickle fork and then when the dust settles, we can provide some clear visibility on what we may or may not lost on that in terms of our revenues.

Now on the cost side, a couple of things, especially as it relates to the exact same issues. And as we can talk about 2020, this year we would have given our fleet plan on the MAX. What we expected to have in operation, now already in the second of this year. It was really the second half of this year, starting in July with the bulk of our orders would start to come in. That would have already provided us a 3% to 5% lower power of this lower unit cost. We didn't get that this year. We're going to catch up next year. And so we the plan is to be back by the end of next year to at least 32 MAXs at the end of next year in the fleet. And so we're definitely going to have the benefit of that, which in our calculations would probably be a little bit in excess of that 5% potentially. Once we get back to the clarity on the MAX deliveries, that's kind of one point overall.

There's some additional components as well, just as you compare 2019 to 2021 is that the significant reduction that we had in the ICMS jet-fuel tax. We'll have the full year effect of that next year. This year, it was just a half year effect was it really kicked in, in the second half. Another component that can affect this, this year we've continued to have a very strong demand out of business, And we've built up close to a 40% market share in that market during the second and third quarters of this year. And we'll get the full effect of that next year. And so that will also be something that is a slight difference from 2019 to 2020.

Another point, we still have 11 NG owned NG aircraft in our portfolio, which have at least $100 million of balance sheet equity. If we didn't have the situation with the MAX and these other issues this year, we would've continued our monetization plan of those aircraft. And so we postponed that. We plan to reinitiate that at some point next year. And then, finally, as I was mentioning previously in the question on depreciation, we had some additional some higher if you will depreciation costs this year on NGs because of the MAX situation.

And so there's been a variety of effects this year, some of which we've highlighted as non-recurring, but there's a bulk of these that they're not non-recurring because they're part of the general operations of the business that we have today. But many of them will, either reduce or be optimized next year as we get back on the track of transforming the fleet.

And so I just want to maybe highlight some of those points and cover kind of all the ground that can be impacting our revenues, not just this year but also next year. And also the impacts on the 2020 CASK overall, not just the CASK ex-fuel but also on the fuel side of the equation as well, also as we highlight an additional point, right now we're consuming, we are having a higher consumption of on the volume side of jet-fuel because we're operating NGs versus plan in lieu of MAXs. And that will also come in next year. But I think we'll have better clarity on all these things probably in January of next year.

And so when we discuss Q4, most likely when we discuss Q4 at the end of February, we'll be able to give you guys, better specificity on all of these things as it relates to 2020. We're providing a lot of guidance there, a lot of details to help people understand how we're thinking about managing the business, it's guidance. By definition, it's guidance. It's what we're thinking about. It's not conservative, it's not aggressive. It's the guidance. And so that's what we're working toward. And as we have better clarity on a variety of these uncertainties right now, we'll be able to maybe answer some give some more clarity granularity on what's going on with both the unit revenues and the unit costs as we transition.

But as Kaki mentioned right now, there is still some uncertainty about when exactly we're going to have get back on track with the fleet transformation. And so as soon as we have that, that's going to be a trigger for us to assume some more definitive positions on a lot of these questions we're getting, not just today, but for a couple of months now. We're going to keep getting them for another couple of months, I suspect.

Dan McKenzie -- Buckingham Research -- Analyst

Understood. Thanks so much for the comprehensive answer.

Operator

Our next question today comes from Savi Syth of Raymond James. Please go ahead.

Savi Syth -- Raymond James -- Analyst

Hey, thanks for the time. Kaki, you had mentioned on the kind of prepared recording, the fleet flexibility and then the MAX not being in the high season, its probably not much of an issue. But it sounded like you should be able to get the MAX that's grounded up in the air pretty quickly. I know some of the U.S. carriers have talked about kind of one to two months to get them ready and back up.

I was wondering if you could talk a little bit about once we do get the recertification, how quickly the MAX can that onsite can come back on and how many kind of MAX can you get delivered from Boeing? How many can you end up to in any given month, if Boeing is willing to deliver?

Paulo Kakinoff -- Chief Executive Officer

Hi, Savi, thank you very much for the question. Actually we are in Brazil under our own regulator rules, which is called ANAC. ANAC has already politically position itself saying that they would act in accordance with the FAA. So we do expect the kinds of simultaneous release of both agencies at more or less at the same time. So I don't predict any kind of disturbance in that process, once FAA say that the plane is allowed to be ungrounded.

Nevertheless, what we have done to guarantee our revenue opportunities along the high season. These two recomposed our interest to rebooting our fleet availability by bringing more NGs to operational NGs to our fleet. So we have now for the high season only six planes from Transavia, traditionally we are sending them, from four to six planes every year during the European summer. And now this year we are also having the benefit of this long-lasting partnership and bringing these planes at the same lease cost, same lease rates that we were asking them to operate during the busy and high season.

Also, we have leased some other five short-term lease aircraft, but short term, I mean one to two years. And through these movements we are now forecasting our high season, without the need of the 737 MAX being operational again. If this would happen we can further enhance our operational performance and also address some opportunities to like additional flights or new frequencies on the most amended routes during the high season.

But the guidance that you have already in place for 2019 and 2020 does not depend on the MAX return, along the Brazilian high season. We took that action in order to avoid that any postponement in this and grounding process would jeopardize our particular results.

Richard Lark -- Chief Financial Officer

Yes. Just accompanying what Kaki said, the MAXs are ungrounded, prior to during the high season, call it December, January and February. We can take we have ways of, normally we during the high season, we have a lot of extra flights we've put into certain places in our network or extra frequencies for those flights, especially in from kind of mid-December until mid-February. Carnival is late this year, Carnival is at the end of February.

So to take advantage of the Brazilian summer season where you've got a lot of traffic, especially intensively on Friday through Monday, going to the beaches and other places on the weekends. And we can easily put those into the network and generate some additional revenues, taking advantage of the Brazilian high season. For some reason that would go beyond the Brazilian high season, in other words, we go beyond February.

As you know, during the March, April, May, low season, the way we do our network management during the course of the year entry year, we vary our capacity down around 10%. And so we'll put 12 to 14 aircraft on the ground in maintenance roughly in the second quarter anyway. And so if that extends, we would then be putting the MAXs flying during the low season and then taking another 12 to 14 aircraft out of service anyway for activity in maintenance.

And as Kaki said, we've covered that gap to bridge us through our high season. And there would be some upside there if the MAX is freed up to be producing revenues sooner. But through the tools we use, for example, as Kaki mentioned, the subleasing tool we have, summer lease, winter lease tools we have we've covered our risks on that, to be able to satisfy demand, which as you've been following across the board in Brazil, not just in our sector now, but in other sectors as well and starting to pick up from an economic perspective and that will provide some pretty buoyant demand for air traveler here over the next couple of months.

Savi Syth -- Raymond James -- Analyst

That's helpful. Thanks. And during kind of the 2020 outlook, that was kind of mention of loyalty revenues that are being a bit softer. What's driving that?

Richard Lark -- Chief Financial Officer

Well, the couple of things, I mean, one is I think we -- this shouldn't be news. I think it was probably a year ago that as a demand for air travel has been picking up. And given the good rational capacity management, there is a counter cyclical component in different components of the businesses just because of how it works once a derivative of the other. And so that's one.

And then the other component that we highlighted as well a couple of quarters ago was the expectation of increasing competition, I would say increasing non-price competition, resulting from the reintegration and merger of the various loyalty program activities that LATAM has.

As they finalize their process, I think it was in sometime in the second quarter. And that's basically happening now in terms of higher competition in that space as well as higher demand from you can see it reflected in the load factors on not just GOL but the sector as a whole.

So a combination of those factors creates a little bit that trade off, but that's a normal part of that business. I mean, we've -- Smile's just celebrated its 25th year anniversary. We've been with that business since 2007, so 12 years now. And that business also has competitive and cyclical aspects, which is the symbiotic nature of those different businesses that we have.

But on a separated carved out stand-alone basis, you see the effects of that, which effectively is the cost of goods sold of our loyalty program increases in this part of the cycle. And on the cost side of that business, if you will, which is consolidated out in our results because what's cost for one is revenue for the other. But then on the revenue side, there's higher competition in the point space.

And so then that has had a, already started to have an impact in the margin. But this is something I think that we highlighted, over a year ago in terms of what we expected from a group perspective. And, it seems to be more or less happening along the lines, and timing that we expected. And so and that, so our business, our consolidated results, we're seeing those effects as well in our consolidated results versus previous expectations.

So there's a slight adjustment there in the expectations of the revenues that are generated from that, ancillary revenue, non-passenger revenue, and also some adjustments on the minority interest as well in the expectations, over the next couple of quarters.

Savi Syth -- Raymond James -- Analyst

Okay. Thanks for that reminder. Sorry, I'd forgotten about that. Just on, just a housekeeping question, the last one I have on the non-reoccurring that you called out on the -- in the operating income, the 78.9 million, could you provide a little clarity on what's included in that?

Richard Lark -- Chief Financial Officer

Yes, I mean, there's a variety of items in there and we're not, we're just separating things out there that are really one time affects not related to disruptions, right. Specifically, but there is, there's some effects there related to the MAX. There's also some effects there related to some investments, short-term investments we've made, in consulting and, other projects to deal with things that are really not at the airline operating level, they are more at the holding company level.

And then there is a chunk there that relates to the return of aircraft, which generally ends up being provisions when we make decisions on returning aircraft, specific dates and so on. We're maintaining provisions on those, but as we've been changing around a lot, the actual return dates because of the MAX situation and because of the unplanned means on the NGs, that has created a little bit more, let's say volatility on our ability to get accurate provisions on what we expect on the aircraft return costs.

And so all of those are in there, it is kind of divided, among all of those. As I was saying before, in terms of whats specifically related to the MAX and some of these other, and the NG issues, I think that's something that when we get on the other side of the delays on the MAX, we can provide some more clarity on, on what that ended up costing us from a expense as well as cash flow perspective.

But there is obviously there is a little bit of an effect there on, in the system on additional types of expenses that we have on us because of having to reschedule the network and replan, reschedule flights, take flights out of the network, reorganize, have to pay, there's certain costs there that we have to do with reimbursing passengers and things like that.

A variety of costs there that come in as it relates to the overall business that would not have happened, if we were not reorganizing the maintenance schedule and the aircraft return schedule and dealing with the replanning of the fleet.

This year, and you can better see this in the chart in the presentation that's in the video. If you were to do a, by the end of this year when all the dust settles, this company will effectively have, rescheduled intra year over 40 aircraft to deal with the various types of assets of disruptions that we've had to deal with that.

And so I would say probably about one third of our fleet. And so that creates a lot of attrition in all the components of the business and as impacts us -- secondary and tertiary impacts on a lot of different components.

We've also had to spend additional money, to keep chugging along in terms of producing our revenues and profitability. So, as I was saying, like there is a weight in there that's weighing on that -- those results. We've tried to separate out some of that, which is clearly identifiable, but there's other effects that are in the recurring tasks which are also, related to that.

And so that's what I would say at this point in time. But, I think, when we talk about Q4 at the end of February, I think we'll be able to provide some more clarity on that in terms of, what our 2020, unit costs, are excluding these effects, which some of which have been excluded as non-recurring, and then others, which are creating the attrition on the overall unit cost.

Savi Syth -- Raymond James -- Analyst

That's helpful color. Thank you.

Operator

Our next question comes from Stephen Trent of Citi. Please go ahead.

Stephen Trent -- Citi -- Analyst

Good day gentlemen. And thanks very much for taking my questions. You've already provided some very, comprehensive detail on top line and what have you and really appreciate that. So you've largely already answered my inquiry, but just a tiny follow-up if I may on Dan McKenzie's question from earlier. When I think about, 4Q at least heading into 4Q year-on-year, thinking about unit revenue, clearly you guys mentioned the MAX, and having to rebook passengers, when I think about sort of the year on year, the normalized year on year trend, is there any stage length related inputs I should factor in there?

Richard Lark -- Chief Financial Officer

Hi, Steve. You're saying just in general on Q4 or specific, a specific item?

Stephen Trent -- Citi -- Analyst

Yes, just broadly speaking on Q4, when I think about, recognizing that there's a great deal of noise with the MAX as you guys have highlighted, how should I think about -- to the extent you're allowed to tell me, what, I should, consider from a stage length adjusted, excuse me, average stage length adjustments kind of year on year and I saw you were launching up, a third international flight for example to the U.S.

Paulo Kakinoff -- Chief Executive Officer

You're asking specifically on stage length, is that what you said?

Stephen Trent -- Citi -- Analyst

Yes. Yes, that's right.

Richard Lark -- Chief Financial Officer

So that would be around 1100, 1100 kilometers, for the Q4 that would be the expected stage length, not a whole lot of change on that versus expectation. Cause you know, we're, we've slowed down significantly the roll out of the international destinations because of the delays on the MAX delivers. And so especially in the routes where it was specifically required the MAX, for that mission such as Miami, Orlando. We are rolling out still as you saw, shorter haul destinations such as Lima from Brazil and Orlando from Manaus. And we're doing our Cancun flight. But so that, yes, that expansion there, which will have an impact on the cost, as I was saying that that will get caught up as soon as we have the MAXs working again.

So the seven MAXs we have grounded, the missions that they can be deployed on are specifically related to these longer haul markets, which, we said in our planning can happen as early as the Q1 of next year, but not before. So that that's not going to be expanding, until that point in time.

Stephen Trent -- Citi -- Analyst

And it's very helpful Rich and just one other final very quick question. It seems kind of once again, at least in news flow that elements of the government seem to continue to trying to entice, foreign carriers to launch service, but it really seems like nobody is abiding with, I mean, aside from competition, consumer and other laws that a foreigner could find onerous. Is my view on that reasonable or are you hearing anything differently in terms of what the competition landscapes, how it's evolving.

Paulo Kakinoff -- Chief Executive Officer

Hi Stephen, Kakinoff here. The market is now open. I mean there are several news, rumors, things like this and you probably know, you should remember that at GOL always support the foreign capital lift in the market, which was finally approved, showing that we have appreciation for the competition and no fear to compete. And I can't tell at the moment whether some of these rumors will be translated into a concrete movement. They might be. But I think that we are, well prepared for any kinds of competition. They have mentioned too many times, the low cost carriers and when you compare our equivalent task, you have this data available, in our pack. If you're going to compare our equivalent task with the international benchmarks, there is small room to have somebody else coming to Brazil and operate at a lower level, which is somehow protecting our business models.

They could, there's a lot of marketing, on this kind of subject, but competing exactly, in the same scenario, in the same environment, I don't think that sustainably, not a competitor who creates or produce a much lower red tank than ours. If so, I mean that might be more harmful to some of our competitors than to ourselves.

Stephen Trent -- Citi -- Analyst

Very helpful Kaki. I will leave it there. Thanks very much.

Paulo Kakinoff -- Chief Executive Officer

Thank you.

Operator

Our next question today comes from Rogerio Araujo of UBS. Please go ahead.

Rogerio Araujo -- UBS -- Analyst

Hi Richard, hi Kakinoff, thanks for the opportunity, a couple of questions here. First, if you could provide an update on the industry deployment from GOL and also the other players in the upcoming months? What does GOL expect in terms of competitive environment in the upcoming quarter? And also second question, a follow-up on Detla kind of relationship, if I'm not mistaken, there was also some relationships on the maintenance front and could you give some color on how that agreement worked. I think it was also -- it also had some working capital related, especially payables on that maintenance, if I not mistake if you could provide more color on how the agreement worked and how could this change now? And that's my questions. Thank you.

Paulo Kakinoff -- Chief Executive Officer

Hi Rogerio, thank you for the questions. Regarding capacity, I believe that the industry, we will continue to behave rational. We have to -- that something and clear coming from one specific player, which is Azul, we know that they are upgrading some of the fleet, but also there are a portion of this capacity being added by them, which, is not so clear. The motivation behind it, but in an overall perspective, and considering assuming that the Brazilian economy is next year could produce a GDP between 2% to 3% growth, I think that all the capacity projections that we have got access based on the press or the competitor saying, plus our own, I think that the industry will have another healthy year with regards to the capacity rationality.

Richard Lark -- Chief Financial Officer

And we're, I mean, we've added our business to try to grow, at or below our sustainable growth rate. And, I think that's the key, to create value for our shareholders. That's what our shareholders want. And, we're growing at that rate, which, is right around, it's probably a little bit higher than the historical elasticity, but, we have a little bit of repressed demand it's catching up. So, it's kind of our normalized capacity growth rate. We're kind of, around a three times, GDP, run rate and GDP growth rate here. Let's say normalized throughout the year from a seasonal perspective, which for us, is around, call it 7%, in a domestic market.

And I think it's important to separate domestic from international because they have different impacts. And so, the growth rate of Brazil over this next part of the cycle should be around that 7%, which is around the 2.5, roughly 2.5 times GDP elasticity, you could have a little bit more than that in the short-term, maybe as much as eight, I'm saying kind of throughout the year. And in the next couple of months because of the seasonality, we're probably going to see low-teens growth.

Those are the demand numbers that are given to us. And our job is to match capacity with that. I think domestically, if you look at networks and model networks on Brazil as a whole, you see similar capacity expansion out of LATAM Brasil and Azul is about three times that. And so, the law of supply demand applies to all of us. And so then you'd have to ask if on the demand side, you're a glass half full guy, which I know you are Rogerio or you're a glass half empty guy.

I mean, if you're a glass half full guy, the incremental inventory that's coming into the market, dovetailing with better economic growth, I've been hearing some people talk about potentially 4% GDP growth in Brazil next year. But it is possible that we could have a very nice demand, uptick, to match that, capacity growth with no impact on the yield environment.

And if that doesn't happen, it would have to be something that would, pay for that, pay for that excess capacity or the capacity growth would have to slow down. I think we're only going see that in the second quarter of next year. We're going to the high-season now, which kind of go through February. And so I think, second quarter of next year will be a test of that. In terms of how, each company and the industry and how we all manage through that and that'll be a function of what the demand environment is in the second quarter of next year.

But recently, and I say recently, last couple of weeks, last maybe as much as two months, there has been a lot of leading indicators that are showing a pickup in domestic market demand in Brazil and a lot of sectors, retail, real estate, retail banking, things like that, which you guys also look at. And, obviously it's early days on that, Brazil is also making a lot of progress on say the the Brazilian government is making a lot of progress on what they've been promising in terms of reforms and so there's more positive indicators currently than have been maybe in the first half of this year.

But our perspective on that is, especially six months out, I mean, we're matching our capacity growth with what's going on in demand. It's the largest airline in Brazil. We're the biggest determinant of that. We don't manage our business based on market share, we manage it based on sustainable growth, self finance growth, earnings growth, things like that. And that's how we're thinking about it at this company. That's what I say on that.

On your second question, on the company what was said, previously on the -- on our maintenance work, a large portion of what we do on the maintenance side is done with Delta TechOps. And, one of the effects of the unwinding of our partnership there, will give us much more flexibility to bid out those that business, to other maintenance providers and give us a little bit more flexibility to negotiate better than our terms.

And, but I'll see, Delta TechOps has been an important partner for us on the maintenance of our CFM engines, if I'm not mistaken, the last numbers that I looked at on Delta TechOps, we were the largest customer of Delta TechOps in terms of the amount of annual revenues we generate for that business. And so, I think I expect that they would continue to be a supplier of ours, but we wouldn't necessarily have the same, constraints on us vis-a-vis seeking other deals given the large volume of a business that we have every year out in the market, which is going to continue for the next couple of years.

We've also, I mean, we're not in the engine maintenance business, but we are also, continuing to invest in our own maintenance business, which is focused mostly on airframes and is also now providing services to third parties.

We have clients in our portfolio now, including leasing companies that are doing maintenance with us in our area, in our 1.6 million square foot maintenance center. And, in the [indiscernible] engines we still have to a third party, our engine maintenance, but at the same time we're also advancing, in terms of developing our own stand-alone, MRO facility, which is already generating revenues. We're certified by the FAA to maintain a variety of aircraft. And we're also, pursuing that.

I think the way to think about that as you think about GOL is that we're going to have more flexibility to maximize the economics we have on what is still our largest capex item for a year. And so that will not be present this year but could be present in our numbers next year as we will define what we're doing regarding the unwinding of that, partnership, in the coming period.

Rogerio Araujo -- UBS -- Analyst

Pretty clear. Thanks very much Richard and Kaki.

Operator

[Operator Instructions] Today's next question comes from Petr Grishchenko of Barclays, please go ahead.

Petr Grishchenko -- Barclays -- Analyst

Hi. Good afternoon gentlemen and thanks for taking my question. I mean obviously a lot of them were already answered. So I guess I would just follow-up Delta LATAM partnership. So the way it seems you evaluated the partnership from revenue standpoint, obviously it was not very significant, but I guess one would argue that, Delta played a much more important role, particularly during downturn. And I guess the loan maturing next August, I believe, is a good example for that.

So I, from a creditor standpoint, I think there's much bigger significance of a partnership beyond just the percentage of revenue. So with that, I just wanted to understand, is it fair to say that you're looking for a partner or at least considering entering new partnership. And if so, if you can give us any, time and expectations, it'll be, greatly helpful.

Richard Lark -- Chief Financial Officer

Sure, Petr. But just to just understand, what do you mean from a creditor perspective? What, maybe a little bit more, just so I understand that I answer the question. What do you mean from a creditor perspective?

Petr Grishchenko -- Barclays -- Analyst

Well, during the last recession, clearly Delta provided some support for the company. And as I mentioned they used $200 million loan, that they guaranteed a while back is example for that.

Richard Lark -- Chief Financial Officer

You're just specifically talking about the term loan where, we raised money from U.S., high yield investors at a cost of 6.5% per year with the Delta, co-signing where Delta got the guarantee of Smiles, shares and counter guarantee. That's what you're referring to.

Petr Grishchenko -- Barclays -- Analyst

Precisely.

Richard Lark -- Chief Financial Officer

Okay. Well if you say, you see our bonds today are trading at near 6.5%, GOLs unsecured bonds and on those we're paying probably about 325 basis points over Delta risk. And those investors, they are not co-investors. I mean, we don't even, those are Delta. Those are, if you will, high-grade, investment grade U.S. investors who don't invest in GOL, don't invest in high yield bonds, they're not really part of our capital structure. And we paid a significant commitment fee, to Delta on that. And so that's why, our plan is to -- it amortizes next year in August, that's the maturity.

It's called part of February and we've already worked to reserve the cash to get rid of that because that has a significant negative impact on our earnings. And, I don't, see why you would view that as a negative, but I think what your question is if we would be, because it's that kind of, that's not, let's say that's not what we would be looking at in commercial, partner credit support. That's not what we'd be looking for.

I think, as Kaki was saying as well we're focused on maximizing our revenues and profitability and, we've got the largest network in Brazil with a lot of complimentarity connectivity and synergies with a variety of partners. You see, we continued to announce, co-chairs and Interlines, almost every month. We've got, close to 90 now. And, it's a commercial issue.

In terms of strategic partners, no, I mean, we have nothing, planned in that respect. Nor is it, does it really play into our strengths in terms of what we can offer to potential partners at this point? And so, and I don't think from a creditor perspective as you're saying, that would come into the box as a positive in name only, in that respect. I think, from our perspective it would have to be based on specific strategic reasons to do that, which can take a while to develop and take a long term would not be necessarily a short term component.

As you know, our space, our larger space, which is South America is also going through a bit of a reorganization in terms of how the alliances are communicating with South America and that's kind of working progress. And, I don't know if you want to comment, talk about anything on that. The very separate issue is, the commercial, the maintenance, and what we might do strategically are really separate issues. We have a network today, which is generating over 6% of our revenues from close to 90 co-chairs and airlines.

And, in the case of American United, we're already working with them on an Interline basis, for a while. And, I think we're going to, continue to pursue that. I think specifically what you're referring to when, there are a lot of ways back in 2015 that when GOL, very responsibly, when the economy contracted 3.5% in 2015 and then ended up contracting another 3.5% in 2016. In the third quarter of 2015, GOL developed a plan to reduce the size of its assets in balance sheet and sold nine aircraft, returned another 20. Took 29 aircraft out of the fleet in a six month period and it needed some short term liquidity, to do that. A majority of it came from, our controlling shareholder family. And then a small portion of that came out of that from Delta in terms of the equity capital that was put in the company back in October of last year.

But the main support, came out of the controlling shareholder and Delta as a partner, teamed up with the Constantino family and help out with that. And definitely, provided a lot of, support in their experience of having gone through a rightsizing awhile ago. And that had huge value in what GOL was doing in terms of navigating that really tough environment. And they provided the co-signing along with our holding company on the term loan. And so that was an enormous help to get liquidity into the company that time and all that liquidity, the equity that came in about 150 million bucks, as well as the$300 million term loan and some other things that was used to kind of get the wheel going to, in addition to the nine aircraft, that GOL sold out of its own equity.

That whole pot was used to, downsize the company, if you will, very early on in the cycle. I mean, really, if you think of it, it was, very at the beginning of that trough. Now we have some other, companies that we know of, they didn't do it, that are doing it now, arguably three years late and some didn't make it. And so that was an enormous help. It came from a shareholder perspective, in very much in a partnership way at that time that helped, effect that downsizing. But, GOL today is, generating, positive, not just operating cash flow, net cash flow, but also there's some cash to equity there. As you saw this year up until, September, we've advertised a close to a billion reals of debt. We've got about R$4 billion of cash on the balance sheet.

And so all this is kind of within this plan to, get us to the appropriate capital structure, which we are at right now, which should improve over the next couple of years given the cycle. But in the bigger picture, I think the company today is very well prepared for the next part of the cycle, which is more of a secular growth cycle. And then I think, you know, three, four years from now, I think that question you're asking is perhaps a more, more relevant question in terms of how prepared, we are in terms of balance sheet competitivity to deal with what you know, will be the next down cycle at some point four or five, six years from now and so on.

But at this point in time, we have more reasons to just focus more on operations and on the other side of our fleet transformation and then potentially, see what we may or may not want to do in terms of participating in any strategic work, in Brazil or a larger work, in the South American region. But that's how I would kind of contextualize that to you in terms of how we're thinking. That's kind of how we're thinking about it today. But I think there still are some other pieces to -- of the puzzle to kind of evolve over the course of next year.

I think before it becomes clearer on things like industry structure and competition and things like that. So we're not running in any external direction at this point in time. We're just focused on operations, on balance sheet, on everything that we've been talking about in trying to prepare the company the best we can right now for next -- to take advantage of next year, in terms of growth, fleet transformation, international expansion and things along those lines.

Petr Grishchenko -- Barclays -- Analyst

Great. Thanks for a very comprehensive response. Just to follow-up on one thing, you mentioned, the maturity, the loan matured in next year, did I get it right? Are you basically ruling out, like tapping the bond market, other local or international to refinance that or are you just, what you're saying is you'd just not going to raise debt in the basically first half of next year. I'm just want to a little bit better understand your high

Richard Lark -- Chief Financial Officer

Good question. That's a good question. We have the cash resources if we wanted to exercise the call in February next year and do that with cash and affect a -- not just a gross debt, but a net debt reduction, we can do it if we want. So, specifically as relates to the term loan? No, we would not be raising any, we're not be refinancing that. No.

Currently as we said today, we have no plans to be doing anything in the fixed income markets next year, either in dollars, in yen, in euros or in reals. No plans to do that because we have to have use of proceeds to do that. It's not just about raising cash. If we're going to raise cash, increase cash on the balance sheet, it would be through non-fixed income mechanisms such as internal test generation or equity.

And we don't have any plans to raise equity and so most of our cash building up is going to be coming from internal operations. Having said that, I mean, as an airline, you're always, and as a CFO of an airline, part of my job is always to be looking at ways to reduce the cost to capital, improve the balance sheet. And so we're always monitoring opportunities. I think the convertible bond we issued this year was an example of that.

For us it was an equity transaction with some additional cash on the balance sheet. It was a way of monetizing the volatility in our stocks, and creating a new source of capital for the company. So those kinds of things we're always looking at. But really right now we have no plans, specifically, but we have to be always kind of looking at ways to improve our balance sheet strength and financial flexibility.

And so we're always looking at things along those lines. But right now, no, we have no plans. And so the plan of the term loan would be within our policies, which is in terms of what we want to have in terms of maximum leverage, WAC optimization and liquidity measures. Everything is got to be done in the context of that. And so whatever we do, of course, it's not going to put the company in a constrained liquidity situation. And so, based on our plans and so on, you can expect that we're going to continue to maintain or improve our credit ratios because as, we have an objective from a WAC optimization perspective, getting the company back to a BB minus in the near term.

And so that's going to guide us on how we approach capital structure and how we do, what will effectively end up being the last major piece of liability management that we've been doing over the last three years.

Once we get on the other side of the term loan, now the next fixed maturity in U.S dollars is 2025, which is the bonds we have, trading outstanding, which are trading, a little over 6.5% in the market. And as you know, also we've been, we're almost finalized, within the next year, we'll be finalized with advertising our Brazilian real debentures. It was like just a comment on that, Brazilian interest rates also are at record lows.

It really doesn't exist, a true high yield, fixed income capital market, unsecured for unsecured issues in Brazil. And so it doesn't exist for us. The opportunity to links it out on maturities, in the local markets capital markets, for us and for companies like us in Brazil, non-investment grade, it really only exists the bank market and which are short term maturities, for us maximum three years.

So, even though, our Brazilian real bar and -- cost today is around 6.5% in real, versus around 6% in dollars overall. This is not a viable market for us to be buying long-term U.S. dollar denominated aircraft assets financed in a long-term market in Brazil. That market doesn't exist. If it were to develop, if the Brazilian fixed income capital market were to develop over the next year or two, that is something we could potentially look at. But right now it doesn't exist, so we're not looking at it.

Rogerio Araujo -- UBS -- Analyst

Got it. Thank you very much. And best of luck to you guys.

Operator

And our next question today comes from Lucas Barbosa of Morgan Stanley. Please go ahead.

Lucas Barbosa -- Morgan Stanley -- Analyst

Hey, good morning Kakinoff and Rich, thanks for taking my question and congratulations on the results. I just wanted to check-in if there's any developments on a potential incorporation of SMILES and the overall corporate restructuring, if you have any color on timing and potential structures, that will be great. Thank you.

Richard Lark -- Chief Financial Officer

Sure. What was the second part of the question, sorry. What structures?

Lucas Barbosa -- Morgan Stanley -- Analyst

I wanted to know if you have any color on timing or any potential structures that you will be thinking on incorporating SMILES.

Richard Lark -- Chief Financial Officer

Yes. Okay. As it relates to that, OK. Well, yes, I mean, our attention is to affect the take-in of that. We're in the process of that. The SMILES board and their governance there has been working on a variety of issues over the last couple of months and so really have no news on it today. As soon as we have news, we would communicate that. But we're basically at this point, kind of in a no holding pattern here, awaiting, discussions that are happening at the SMILES board level.

We would like to move forward on that. But we have to wait, for now for some of the, discussions that are happening at that level. And so I have nothing to say on that at this point in time, but our intention continued the same for the same reasons.

It's very important, for the -- for -- it's not just a question of cash flow and results optimization, but it's really a question of long terms competitivity, and the maintenance and improvement of not just the value of the GOL product, but also the SMILES product. It's very important that, we move forward on that. But as soon as we have any news on that we would communicate that.

But I don't expect it's going to be in the short term here. Given what we're waiting on from the -- the SMILES has to finalize before we can move forward on what we want to do.

Lucas Barbosa -- Morgan Stanley -- Analyst

That makes a lot of sense. Thank you very much.

Paulo Kakinoff -- Chief Executive Officer

Thank you.

Operator

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

Paulo Kakinoff -- Chief Executive Officer

Okay, ladies and gentlemen, I hope you found our presentation and the Q&A session helpful. Our investor relations team is available to speak with you as needed. So thank you all very much. Have a nice day. Bye-bye.

Operator

[Operator Closing Remarks]

Duration: 88 minutes

Call participants:

Paulo Kakinoff -- Chief Executive Officer

Richard Lark -- Chief Financial Officer

Duane Pfennigwerth -- Evercore ISI -- Analyst

Michael Linenberg -- Deutsche Bank -- Analyst

Dan McKenzie -- Buckingham Research -- Analyst

Savi Syth -- Raymond James -- Analyst

Stephen Trent -- Citi -- Analyst

Rogerio Araujo -- UBS -- Analyst

Petr Grishchenko -- Barclays -- Analyst

Lucas Barbosa -- Morgan Stanley -- Analyst

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