Logo of jester cap with thought bubble.

Image source: The Motley Fool.

GOL Linhas Aéreas Inteligentes S.A (NYSE:GOL)
Q1 2021 Earnings Call
Apr 30, 2021, 9:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to the GOL Airlines First Quarter 2021 Results Conference Call. This call is being recorded [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. [Operator Instructions] 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, I will hand it over to Mr. Paulo Kakinoff. Please go ahead.

Paulo Sergio Kakinoff -- President and Chief Executive Officer

Good morning, ladies and gentlemen, and welcome to GOL Airlines Earnings Call. I am Paulo Kakinoff, Chief Executive Officer; and I'm joined by Richard Lark, our Chief Financial Officer. This morning, we released our first quarter figures. Also, we made available on GOL's Investor Relations website three videos with the results presentation, financial review and preliminary Q&A.

We hope everyone has watched them as we will now only make a few brief considerations and then move to your questions. The first quarter '21 was marked by three relevant trends for GOL's resumption of growth going forward. The first one is the shareholders' approval of the merger of our operating subsidiaries, GLA and Smiles, at the March 24 extraordinary general meeting. The merger is expected to provide operating and financial synergies in excess of BRL400 million per year, mainly through more dynamic management of the inventory of seats, unification of marketing initiatives, optimization of yield management and greater tax efficiencies. There is high potential to generate value for the integrated entities as well as maximizing the competitive performance.

The transaction will be self-financed through Smiles on cash generation, and it has significant benefits when considering the potential operational, financial and tax synergies that were not available in the configuration as separate companies. Another important trend was our management of the second wave of the COVID-19 pandemic in Brazil, which reached its peak at the end of March. We maintained the necessary agility to adjust the our supply according to fluctuations in demand. Fortunately, we are already seeing a promising decline in the second wave of COVID-19 cases with a corresponding resumption in ticket sales over the last few weeks. Based on the experience of airlines in the United States and the United Kingdom, countries that are more advanced than Brazil in the rollout of vaccines, we expect the national program for immunization to positively impact the normalization of demand for air travel in Brazil.

The third important trend this quarter was the reinforcement of the company's long-term commitment to sustainability. This is a key component in combating the effects of the pandemic and is a strategic driver for proprietary and growth of the business going forward. GOL remains committed to being a leader in sustainability and is focused on reaching at 0 carbon emissions by 2050. Recently, we increased the transparency of goals ESG reporting, including detailed information using SASB and TCFD metrics as well as projections. With that, I'm going to hand you over to Richard, who is going to take us through some additional highlights and update on the second quarter 2021.

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

Thanks, Kaki. In the first quarter of '21, GOL's adjusted EBIT totaled BRL208 million, corresponding to a margin of 13.3%, which shows the restoration of the operating margins necessary to support business growth. Adjusted EBITDA reached BRL354 million. With a margin of 22.6%, reflecting the company's successful sustainability efforts in balancing supply and demand. As a result of a rapid response in adapting our capacity to demand levels, we went from cash consumption during the months of January and February, two, a breakeven of cash inflows and outflows in March, closing the first quarter of 2021 with BRL1.8 billion in liquidity.

The net debt ratio, excluding exchangeable notes and perpetual bonds to adjusted LTM EBITDA is 11.4 times on March 31, 2021, representing the lowest leverage among peers. Even in an atypical year, our company stands out among a few airlines in the world that has -- more than BRL4.1 billion of debt since the beginning of 2020, through its disciplined liquidity management and extraction of value from current assets. Our current capacity planning scenario assumes a 39% reduction in the second quarter of 2021 compared to the first quarter of 2021. Operations are currently at between 185 to 200 flights per day, using 47 aircraft, which is 4 times greater when compared to the essential network of April 2020.

After returning one leased, B737-800 aircraft in the first quarter of 2021, GOL plans to return another five aircraft in the second quarter of 2021. From the beginning of this crisis, until the end of April 2021, our company has decreased its fleet by 17 leased Boeing 737 aircraft as well as reduced our 737 MAX deliveries scheduled for 2021 to 2022 by 33 planes. For the second quarter of 2021, the company expects to operate an average of 63 aircraft while maintaining personnel costs in their reduced position between 40% to 50% of pre pandemic levels. Having converted a significant portion of GOL's fixed payroll and fleet costs into variable costs, we believe we are well positioned to expand the company's leadership in unit cost. GOL expects to end June 2021 with around BRL4.2 billion in liquidity after the Smiles reincorporation and the full amortization of its main short-term debt. Now I would like to return to Kakinoff.

Paulo Sergio Kakinoff -- President and Chief Executive Officer

Thanks, Rich. Despite the quiet celebration for GOL's anniversary, given the current circumstances, we could not forget to register again our sincere thanks to our customers, partners, shareholders and, in particular, to our team of Eagles for the company's remarkable trajectory over these 24 unforgettable years full of achievements and celebrations. We know that challenges will always exist, but we will continue to provide this essential service to Brazilians with our utmost dedication, whether for leisure travel, business or more recently in the transport of health professionals and distribution of vaccines. We reiterate our confidence as we have done over the past 12 months that GOL is emerging stronger and even more resilient as markets normalize. We remain and stand committed to the diligent management of our balance sheet and our operations throughout the recovery. Now I would like to initiate the Q&A session.

Questions and Answers:

Operator

[Operator Instructions] And the first question comes from Stephen Trent with Citibank.

Stephen Trent -- Citigroup -- Analyst

Just two quick ones from me actually. Could you refresh memory one, if GOL is still doing any engine maintenance with Delta TechOps? And 2, any color on external customer flow maybe for later this year or next year with GOL Aerotech? I know you guys have various codeshares cooking with American Airlines and others.

Paulo Sergio Kakinoff -- President and Chief Executive Officer

Stephen, Kakinoff. Actually, Delta TechOps is among our, our MRO supplier. So we are still -- have business with them, and we might remain so. I think that the highest possible diversity of suppliers, the bass is the price we can get. So we still have business and probably will continue to do. And regarding Aerotech, I think that this pandemic. This is possibly one of the most positive outcomes of this pandemic. I mean the Aerotech structure and our low-cost translated into most attractive MRO services, price make us even more attractive to some important airline players. Therefore, we have been already requested by new customers to send our price proposal, and I believe that we're going to have a considerable amount of new clients to our MRO facilities.

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

Remember -- sorry, just a couple with that number. Our GOL Aerotech, which already does third-party services is focused on air frames. It doesn't have the capability to do the heavy engine maintenance. And so our focus there is airframe maintenance, not the heavy engine overall.

Operator

The next question comes from Mike Linenberg with Deutsche Bank.

Michael John Linenberg -- Deutsche Bank AG -- Analyst

Just a couple here. Rich, can you just walk us through to sort of bridge your liquidity at March quarter end, BRL1.8 billion. You're going to end at BRL4.2 billion. And we saw the announcement yesterday of the rights offering. So presumably, that's in there. You talked about a Smiles piece. I'm also focused on -- or trying to get a better feel for how you're thinking about the build in the air traffic liability, presumably, tickets, for travel for July and August, showing up by June quarter end. If you could just sort of tease out the different pieces and what's driving what? That would be great.

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

Yes. Sure. Thanks for that question. Yes. Well, first, the rights offering is not included in those numbers. I think it's important to get that out there. Part of it is because that is included -- there is the, both the credit accretive and the earnings accretive use of proceeds from that, credit accretive related to credit accretive liability management and continued deleveraging and then also acquisition of aircraft. And we would -- we're not going to add that liquidity and keep expensive liabilities.

On the bridge there going from the BRL four billion to the BRL4.2 billion is basically because of increase in accounts -- customer accounts receivable and forward bookings, like as where we are right now is in the trough of the trough, if you will. April for us normally is the lowest seasonal month. Normally, obviously, that's the normal trough and is a trough on top of that because of the second wave. And so basically, running through that for you quickly, Smiles on a consolidated basis, we paid a dividend out of Smiles of BRL0.5 billion, that's -- that went out in April. If you take that scenario that we've articulated for you with the reincorporation of Smiles, that would be use of around BRL300 million. But we can hit that separately. But that would be the, the assumption there of BRL300 million in the scenarios that we're looking at there.

We can talk about that separately. Then there is the -- let's say, tale of the Delta loan. We have around $25 million or so still outstanding on the Delta loan, and so that goes out in the quarter. And then there is some small effects on working capital. Those are kind of the outflows. Then there's cash generation -- in this cash generation at the -- at our Smiles subsidiary of around BRL300 million to BRL400 million. Then let's say, capital raising that we expect to be doing in the Q2 related to a recap on our 2026 senior notes. And then there is receivables growth in there of BRL200 million to BRL300 million. And so that's basically the bridge to the BRL4.2 billion. If you were to include that BRL0.5 billion of the capital increase, that BRL4.2 billion would be around BRL4.7 billion.

Now in addition to that, let me just kind of throw in there. That does not include that number, which is cash, receivables and deposits, which we have access to. That does not include our unencumbered assets. Which are not where we have leverage capacity. In our existing secured financing for spare parts and IP. Then there's the IP of Smiles, and there's also recent accounts receivable, which we can also factor. So it represents effective leverage. If you were to take that BRL4.2 billion and add the financial portion of our unencumbered assets, spare parts, GOL IP, Smiles IP and the increase in receivables that number would go to about BRL7.7 billion of total potential liquidity sources, including the unencumbered assets, which is around a BRL2.1 billion increase over where we were at the end of the Q1. Because if you take the BRL four billion in total liquidity at the end of the Q1, and you add in just the spare parts and GOL IP because we didn't have access to the Smiles IP and there was no increase in receivables.

That number, in terms of the total financial is about BRL5.6 billion. And so that BRL5.6 billion at the end of Q1, goes to BRL1.7 billion at the end of Q2. And part of that is also related to where we are in the recovery of the second wave, we -- if you look in the rearview mirror, we had the last 15 days of January, through February, and you can see some of the data in the presentation we provided to you guys on the slide. Well that's in the rearview mirror now. We're now -- we've been now in the last two or three weeks, and we'll probably -- maybe Kaki can comment on this. Addition of that is related to the increase in sales that we're experiencing now as we yeah,

Paulo Sergio Kakinoff -- President and Chief Executive Officer

Yes, Mike, actually, we have been supplied to to keep our free, let's say, conservative approach toward the pandemic development. I mean, that's the winning strategy that has made us go through the dessert crossing, protecting our company and making ourselves able to alongside with every stakeholder to protect the company's future. So therefore, we have shared with you a pretty conservative guidance. Since this pandemic started. But it's also important to highlight that already for three weeks, we have -- know this, a quite considerable booking curve increased in a rate of 10% per week -- 10% growth per week. And it shows that we might emulate the same demand recovery that we have seen in the United States for the domestic market. We have quite comparable characteristics. I mean the country size, the robust domestic market and believe that once. I mean, third quarter last year and the fourth quarter, we had recovered. We have resumed the pre COVID-19 demand in a very sustainable way. And then came this second wave, but the biggest difference now is the vaccination.

I mean having the vaccines available. You possibly know that we have spent a considerable amount of our time in supporting the central government to acquire additional shops, I mean, to buy more and more vaccines. And the government has been successful so far, considering that we have already constructed 532 million shots for this year, which is enough to even 117% of the Brazilian patients considering that everyone will take the vaccine. And now also this immunization, the national immunization program curve is wrapping up. So I think that we have considerable chances to emulate the same behavior we have seen in the United States. And actually, this is what we are seeing at the moment, considering the forward booking curve.

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

And then just to cover, just real quick. I know you didn't -- sorry, Michael. There is a lot on here because part of the walk-through liquidity relates like this because, again, we're -- as we're kind of been saying like we need to cover about BRL0.5 billion of accounts receivable that we lost because of the pandemic. That's kind of what we're missing right now. We start to get the recovery on that now, those numbers that we gave on the roughly BRL one billion of revenues for the Q2 do not consider what Kaki was just talking about. We're seeing higher growth in that. Obviously, we need to get a couple more weeks into it before we -- before we're going to adjust at all our operating liability planning. But the -- what's interested for the Q2 considers May up slightly over where we are in April. But at this point, it's looking like it's going to be higher. Very, sorry, go back to you.

Michael John Linenberg -- Deutsche Bank AG -- Analyst

Yes. No, that's -- look, what Kaki said about vaccinations clearly reassuring. And I know Brazil has actually a strong history in that area with respect to like Zika and malaria. So the rollout, I think, will go well. Just one. Rich, back to just quickly on just two items that you mentioned. You talked about a Q2 recap on bonds. Just what were the notes? What was the series? Did you say 2016? I didn't?

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

No, no, no. As you know, in December, we created this secured financing program. We deposited around $900 million of collateral in there, and we did an initial $200 million capital raise there.

Michael John Linenberg -- Deutsche Bank AG -- Analyst

So it's an add-on.

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

That's going to be like -- that's going to be our -- that matures in -- matures in mid 2026. And so that is...

Michael John Linenberg -- Deutsche Bank AG -- Analyst

You're adding on to that.

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

And that's our secret weapon. That's our secret weapon to go back to -- to go back to whenever we need to put in some additional liquidity for -- again, for credit accretive or earnings accretive use of proceeds, it's not going to be used for operations. But we have that -- the reason I'm saying that, Michael, is that we specifically avoided doing schizophrenic capital raisings during the last 12 months. I think the announcement last night on the equity investment in the controlling shareholder is an example of that. It's the right time for that to be coming in right now. And also with this program that we set up, we have significant borrowing capacity. We had $400 million of additional borrowing capacity on that. That trades in the market, it's there. It's perfected. And that's our proprietary. And so...

Michael John Linenberg -- Deutsche Bank AG -- Analyst

You said $400 million?

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

And managing our business, we think.

Michael John Linenberg -- Deutsche Bank AG -- Analyst

You said $400 million?

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

We have additional borrowing capacity their rollout yeah, Yes. We have a bad connection, I apologize.

Michael John Linenberg -- Deutsche Bank AG -- Analyst

Yes, every time you say the number, you cut out. You cut out every time you say the number. What is the additional borrowing capacity? Is it $400 million?

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

With collateral, we have been there or minus phone call and we have $300 million to $400 million of additional financing capacity in the secured program.

Michael John Linenberg -- Deutsche Bank AG -- Analyst

Great. Great. Well, listen, this is great. It's reassuring that it's -- the rights offering is not in the liquidity numbers. So we know there's upside there.

Operator

The next question comes from Dan McKenzie with Seaport Global Securities.

Daniel J. McKenzie -- Seaport Global Securities -- Analyst

Congrats on all the initiatives here this morning of the transactions. Couple of questions. One, I'm wondering if you can just add some more color around the Smiles transaction. So the $400 million synergies highlight in the release, what are the timing of these synergies, are they immediate? Do they ramp up, say, over several quarters? And then how do they break down revenues versus costs? And then just finally on this, I'm wondering if you can just share with the final mix of equity versus cash that was opted by the Smiles shareholders?

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

Yes, sure, Dan. Actually, let me start with the second thing. The next week is the end of the withdrawal rights period then there is -- by the end of May, there's the choice period where minorities will pick between two options. One option is 80% cash, 20% stock. And then the other option is vice versa, 80% stock, 20% cash. And that decision will be made by roughly the end of May. And then the -- then there's the operation component phase of the Brazilian Stock Exchange and the actual closing and liquidation would be on June 23. So there's almost still two months ahead on that.

Now we also -- what we kind of put in the presentation, I realize many of you guys might have not had time to look at that yet. But if you look at pages 22 to 25 of the videos that are on the GOL website, we gave you guys a lot of granularity on that, but I'll summarize it for you now. We -- structurally, there are many funds that when you give an option of stock, their obligated fiduciary wise to take the maximum stock component and so based on what we know for our process with the minorities during the take in process structural as well as what's been indicated to us. We know that around 70% are going to be taking the more stock option. And so in that scenario, with 70% taking the more stock option that would be BRL537 million required for the cash component, and then the dilution on what would be 7.8%. Now if the base takes the maximum more stock option, 100% taking the more stock option, that would then require BRL301 million of cash usage and would be 9.9% dilution.

Where the GOL price is trading today, it's pretty much trading at say, rational financial breakeven where economically rational decisions would result in taking 100% of minority shareholders taking the more stock option. Obviously, there's still six or seven weeks between now and the the liquidation. So there's an option component in there, given the volatility of the GOL stock. But if the GOL stock stays where it is or increases above where it is today, it's likely that we would see 100% taking the more stock option. And that's why I said in the previous answer that we're assuming that there's going to be, on a consolidated basis of BRL300 million cash outflow to the -- to Smiles minorities. And the implicit goal local PN stock price used in that for the dilution calculation is BRL27. So that would be 9.9% dilution at the BRL27. But if you go to page 24 of the presentation we put up there today, you've got scenarios that go between 70% more stock and 30% more cash.

And 100% more stock, 0% more cash, and you can kind of see how that would play out there. So that number is right there. And the estimated end of Q2 cash balance at Smiles is around BRL600 million. So in all of those scenarios, the cash balance at Smiles is -- the liquidity, if you will, at Smiles is more than enough to cover that cash component. That's why we kind of use the phrase. It's kind of self-financing. Now on the synergies, yes, I mean, the estimated NPV of the synergies is BRL2.8 billion. Most of that's going to be realized over a five- year period. The synergies start to be realized as we get the -- the transaction done. So if you will, in July of this year, there's a variety of components there. There is a yield management component, better optimization of yields. There is better cash management component in terms of not having cash trapped earning -- CD rates on cash. We can allocate that more effectively across the group and higher opportunity cost situations. And then there's the tax efficiency component, which is really two-fold.

One is a reduction in the taxes on revenues on the Smiles revenue stream. There's a significant reduction there. And the better utilization of the GOL NOLs but those start this year. And it was approximately -- is potentially around BRL400 million of synergies -- sorry, of incremental additional cash flow, if you will, that can already be realized in the second half of this year. No. I think for all intents and purposes, that's a done deal. And so that will start to get incorporated into the cash flow management of the group. How much we can realize on the tax synergies, part of it's going to be related to the utilization of the NOLs at a group basis and how profitable the overall entities are, you can use approximately BRL400 million of incremental cash generation in the second half of this year.

Daniel J. McKenzie -- Seaport Global Securities -- Analyst

Well, thanks for taking the time to walk through the presentation. Very helpful. Second question here, I am looking at the BRL129 million in the natural amortization of debt from aircraft leases in the quarter. And if I just do some simple math on what that could mean, say, over the coming three years, it looks like GOL could potentially pay down BRL7.5 billion to BRL eight billion of debt. And so that's that's just setting aside debt maturities, just looking at deleveraging that comes from the natural amortization of aircraft leases. And I guess I'm just wondering if you can triangulate that math with how you're thinking about the balance sheet and how you want to manage the balance sheet in a normalized demand environment?

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

Yes. That's at the heart of a lot of what we've been doing. I mean we -- pandemic, which is at a different management focused on much more on cash utilization than margin maximization. We kind of have two guiding directors that we've used to guarantee that we have a unit cost equal to or lower than where we came into the pandemic, and the other was to match -- keep matching asset liabilities. Which will ultimately mean that on a run rate basis in the fourth quarter of this year, we will have a leverage on a run rate basis equal to or lower than when we came into the pandemic. That, for us, from a policy perspective is we generally target in terms of what makes sense for us, meaning how the margins go through the cycle from peak to trough. We work with an average leverage of three times of debt -- of net debt-to-EBITDA and so that's where we'll be on the other side of this normalize and excluding grounded aircraft and excluding the LTM effects of the pandemic. We could start to see on a run rate basis, those statistics again on a run rate, normalized basis, Q4 of this year.

But just a couple of other points there because this is important. And I think we're not necessarily getting a lot of credit for this, people have looked at it. We -- since since the beginning of this year till now, we've amortized over BRL four billion of debt. A portion of that has been returned to investors. Some has been a reduction in other types of that. And so we've continued to do delevering during this crisis. So the problem is not really the -- the numeration is really the denominator, right? The denominator, meaning the LTM EBITDA has kind of collapsed. And so we -- that -- it's hard. That's why that number has gone up to this 11 times using the LTM statistics. Now pre pandemic, we had -- we were kind of scaring it around 2.5 times leverage for the end of 2020, again, pre pandemic at the beginning of last year. But -- and that for us means that we're managing the leverage from peak to trough. We want to kind of be between a two times and a five times from peak to trough in terms of the economic cycle. Obviously, barring pandemics, which aren't part of the normal economic cycle. Now your question on the leases. They've -- you are correct.

They've increased BRL1.5 billion. Part of this is because of the way the IFRS 16 calculations work, but they've increased BRL1.5 billion during the pandemic from a portion of our negotiations then related to deferrals that will be repaid starting in 2022 at a rate of 20% to 30% per year. So that BRL1.5 billion that our company achieved in terms of deferrals will be gradually reduced over a two to three-year period. There's another component to be careful of in -- for those of you looking the FX, the Brazil real is devalued at 30%. And that and also increased our gross lease set by another BRL1.5 billion. It's a different BRL1.5 billion. Now we say that BRL1.5 billion devaluation and then that was offset, and that will be offset by a BRL1.5 billion debt repayment.

And so if you assume that, that FX variation comes back and you combine that with the BRL1.5 billion, specifically on leases, debt repayment. Starting in 2022, 2022, '23, '24 in that -- just that component on the leases is a BRL three billion deleveraging in the next three years, which I think what you've been -- you might be getting at. But so on the lease side, there's BRL three billion. On the other components, we -- big components. I mean the Smiles complex represented for us about $600 million of debt. If you take the term loan B, which became the Delta loan and then the minority interest, that's gone at the end of the second quarter. Probably gone. The only other potential target of our liability management is the Brazilian real insurer that we have outstanding today, which is about BRL600 million, which is -- has a very unproportional unfavorable collateral mechanism today. Because it has the fiduciary assignment of our accounts receivables there.

So that will also be disappearing. But once we've taken care of that, there's really no other liabilities that we would, on a normalized basis change. There are structural liabilities that are part of our business that are always going to be on the right side of the balance sheet, be they the capital markets instrument, which is our secured debt, our unsecured debt and our unsecured convert. Or the working capital facilities we have, which are related to financing working capital and maintenance and things like that. So all those liabilities will stay. We've been rolling those over during the pandemic, but they belong in the capital structure with few exceptions. What has happened again in the world of pandemic.

We haven't had a liability problem. We've had an asset problem. Where we had a significant portion of our current assets wiped out by the pandemic, which is around BRL one billion. And so like, as Kaki was saying, is that as we get the recovery on the revenues, we get back around eventually probably by the third quarter on a normalized basis, around BRL0.5 billion of corporate sales per month. That will translate into additional receivable of somewhere between accounts receivable on our balance sheet of been BRL0.5 billion and BRL one billion. And so once we have the normalized accounts receivable, normalized current assets, and we go back to having 60 days receivable, 60 days payables, that's when our balance sheet will look normalized. But there's not a whole lot we need to do on the non -- on the noncurrent portion of the assets and liabilities.

There's some final pieces there as related to the Smiles complex. As I mentioned, the Term Loan B which was paid BRL300 million in August of last year. And then we had a $250 million loan from Delta, that has pretty much paid off where we are right now. And so if you look at it -- from a big picture basis, the -- we will continue to delever, delever. And I should also say in the Q1 numbers, once you guys unpack it, you'll see that we also delevered in the Q1. If you look at -- if you back out exchange rate effects and look at the Delta loan and the cash effects backing these things out, that's the long answer. But the short answer would be our objective is to return to a three times net leverage, which we believe is sufficient to get our credit rating to a double B. And we already have that latent in what we're doing here right now. You can't see it because of the pandemic effects and also some of the exchange rate effects. So we already have that kind of locked and loaded, if you will, in terms of the work we've done on both the working capital structure as well as the long-term capital structure.

Fortunately, you're probably only going to be able to see once the EBITDA starts to normalize, which is -- will be more of a Q3 and Q4 events. I apologize for the long answer, but I know you're focused on the lease component, but I think I was clear there with the lease component. The negotiations we did focused on NPV positive mark-to-markets, focused on converting what we needed into power by the hour so that we could keep aircraft on the ground without having to return them until the recovery happens. And then deferrals, but deferrals that will match perfectly, not just with the ramp-up, but going in terms of getting back to the three times leverage on the capital structure.

Operator

The next question comes from Matthew Breckenridge with DSC Meridian.

Matthew Breckenridge -- DSC Meridian -- Analyst

All my questions have been answered.

Operator

The next question comes from Savi Syth with Raymond James.

Savanthi Nipunika Syth -- Raymond James & Associates -- Analyst

Could you share how many MAX aircraft do you expect in 2021? And what your thinking might be in 2022 and 2023, at least kind of a high and low estimate? And around that, are you still thinking maybe roughly BRL two million for aircraft in kind of sale-leaseback gain from a cash contribution standpoint?

Paulo Sergio Kakinoff -- President and Chief Executive Officer

Savi, actually, expecting to get between H2 planned more aircraft this and we are, at this moment, discussing with Boeing, how many and how fast we could speed this free to be new process up. I believe that we're going to have interesting news to share with you pretty soon. But you know and everybody knows that we are willing to speed this process as much as we can.

And I think that the negotiations are progressing quite well. And now I think that it's really hard to tell how much we could get through a sales back because the market is -- the market prices are pretty volatile, but we see a clear appetite from the lessor side to support these kind of transactions. So I think that there wouldn't be any kind of bottleneck coming from the lessor side to enabling us to achieve this faster renewal program being implemented.

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

And we also have finance lease mechanisms available for us this year as well. Which combined opportunistically with the aircraft of available in the market, including outside of our existing order, what we know, the approach we have taken is that we want to have additional cash reserve on our balance sheet before we go out and walk-in any finance leases, like we have very attractive long-term financing available for 85% or so of the acquisition price of the aircraft.

We just have to come up with the other 15% of our own equity contribution. Obviously, we can lever that as well. That's something that will definitely be present in the second half of this year as we -- as we get on the other side of the intense focus entirely in operations. But with us, in particular, we want to -- as I do say, we want to accelerate our transformation from the NG to the MAXs as soon as soon as possible.

Savanthi Nipunika Syth -- Raymond James & Associates -- Analyst

That all makes sense. And we'll stay tuned there. Can I quickly follow-up on the -- as you bring back aircraft into the system, should we expect any kind of maintenance catch-up that is related to that? And how much of that might be incremental cash versus being able to use up maintenance reserves that you have already?

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

No. It's not -- it's not -- in our case, it's not required for increasing operations. We have the regular outflow on engine overhauls that we need to do anyway. And then we have the -- so none of that is going to be incremental. What can be incremental to us is if we accelerate the transition from NGs to the MAXs? Because as it relates to the aircraft redelivery process, then we have extra costs and cash outflows as it relates to the redelivery process.

Now we can use some of our noncash current assets of deposits and reserves and other things to cost out those returns. But that for us is not of a high-class problem because if we're accelerating the transition from the NG to the MAXs is because we locked in some attractive acquisitions of aircraft, and then we can generally work out the details with the counterparties on that being a leasing company or whatnot in terms of how we pay, if you will, or finance the aircraft redelivery costs. But what we've been guiding on the capex per quarter is is what we need to kind of be spending here in terms of engine overhauls and so on.

Operator

[Operator Instructions] The next question comes from Victor Mizusaki with Bradesco BBI.

Victor Mizusaki -- Banco Bradesco -- Analyst

I have two questions here. The first one, Richard, you mentioned about the secured bond program. And I mean, basically saying that maybe the competition, new bonds in the second quarter, but why don't we take a look on your release. We now see some targets for ESG. So my question is, is there any plan to maybe issue sustainability-linked bonds in the near term? And the second question is related to the actual rate. I mean, you mentioned that for -- I mean, the guidance for the second quarter, you are not assuming that the capital increase. So I'd like to understand is there anything pending or why did you try to do not include the BRL500 million?

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

I'm sorry, Victor, it was breaking up. Can you repeat the second question?

Victor Mizusaki -- Banco Bradesco -- Analyst

Yes. I mean, the guidance for the second quarter, I mean, the liquidity position you mentioned in the conference call that we are not including the actual rate of BRL500 million. That should be concluded next week. So I'd like to understand is there any reason why did you have to not incorporate this in your guidance?

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

Okay. Number one, that's not correct. You're words that you issued there. Many -- there's a couple of sell-side guys this morning that made a lot of mistakes by, I think, trying to put stuff out quickly. The date that you referred to is the filings with the SEC. Because what we do is we offer -- in Brazil print, the rights are mandatory, like in U.S., they're voluntary. What we do is we always make our pre-emptive rights process available to all of our ADR shareholders, including retail users. So we give our printed rights make it available to everybody.

And so what you referred to there, May seven is not when the capital increase closes, it specifically refers to when the -- those documents are filed with the U.S. authorities because there's that component as well. And so there is a delay there. The capital increase process would be finalized by the end of March -- sorry, by the end of May. And also, what I was trying to say in the previous answer maybe here is that those resources will be used for specific credit accretive and earnings accretive opportunities, most likely in the second quarter. And so it's not necessarily going to change our overall liquidity position. There's an asset coming in, and then there will be a liability going out, if you will, or cash going out. And in the case we use those funds for aircraft acquisition, deposits where we made -- for example, some of the -- the activities with aircraft acquisition, for example, if we go out and spot buy an aircraft today, those aircraft already produced on the ground.

So you really have to make the deposit for the pre-delivery or just pay your equity component. It's not the normal cycle for us, which would be a 12- to 24 month process of gradually making the free delivery deposit. So the main reason it's not in there is that the use of proceeds for equity here, we always match our assets and liabilities. Long-term equity capital has to generate returns appropriate equity capital. And so that -- that is going to be used for highly credit accretive liability management and highly earnings accretive asset acquisition. So that's the main reason on that. In terms of your question on the the -- let's say, a green bond or something like that. We don't have any plans to do that right now. We don't have anything under study. I think it's something we may study in the future.

But in my -- we haven't spent a lot of time looking at that because we've been looking at other types of financings for this company, for this airline. I think if we could generate a benefit out of that, we would do that quite I think for the most part, and I'm speaking a little bit out of ignorance is that versus what we're doing already. I mean, we're already doing -- GOL has been doing ESG related metrics and management for 20 years. This is not anything new for us. What we're doing is providing a lot of more disclosures on it, mainly because investors are requesting us to put more information out there. And many -- we also have good conversations with buy side folks that are raising funds to focus on companies with good ESG initiatives. So we kind of feel like we can access those pools of capital without necessarily slapping an ESG name on something we're already doing. But I said part of it, I was speaking out of ignorance because I have not -- generally, we spent a lot of time studying and preparing these things before we go out and do it.

We have seen companies go out and do these things where they're committing to certain things. But as you can see, we've already committed to things we're doing internally anyway because we think it makes sense, including being net carbon neutral by 2050 and a whole bunch of variety of other types of initiatives, but potentially, but we don't see like any change in our capital access because of what we're doing, I think it tends to be a little bit the opposite. For companies that don't have the proper metrics and goals. One of the more important things is actually have specific goals that you're working toward. You will lose investors in your existing securities. We have many investors that we engage with on ESG metrics that are in our current securities. And if we didn't provide the disclosures that we provide, they wouldn't be able to invest in our current securities that I have to disinvest. And -- but I don't know. I think in our particular case, we have, let's say, more limited tools or say, more limited opportunities.

The tools we have today developed are pretty much the tools that we need. We have equity, which provides the base and finances long-term investments. We have our unsecured bonds. We've got an unsecured bond on a perp, which kind of occupy a level and a capital structure right above that. Part and parcel with that is our unsecured convert structure, which fits in there nicely and allows us to monetize the volatility of our stock and attract a certain type of investor. And then recently, we put on top of that in terms of the capital markets, the secured financing program. So we feel like we kind of have all the right tools to properly finance our assets and all types of cycles. Now whether an ESG bond or a green bond would fit in here, it would depend on the use of proceed sector. I mean, we'd have to have a -- what will be the use of proceeds for that, and that's something that we have to study. Because all of our long-term -- all of our capital markets raising are always use of proceeds driven in terms of where the proceeds are going to be allocated to create value.

And so we'd have to see that. But perhaps there could be something more of a working capital nature because obviously, a lot of what we're doing in ESG is much less related to long-term capital and it's much related to operations, right? It's how we operate our aircraft, how we manage the company. And so perhaps we would look at something from a working capital perspective. But everything we do here has to do through the prism of proper matching of assets liabilities. And any time we've highlighted that is when we get on the wrong side of the balance sheet gets flipped in the wrong direction. And so as I was saying, I think in the answer I gave to Dan, we think that we've got the proper capital structure policy today. That's something we could study. I don't see anything happening in that category this year.

Operator

The next question comes from Guiler Melendez with JPMorgan.

Guiler Melendez -- JPMorgan -- Analyst

Actually is a quick follow-up on the Smiles and the capital increase. Just wanted to better understand the timetable for the transactions. You mentioned that both transactions should be concluded by the end of May. Just wanted to doublecheck if the capital increase should happen after the full incorporation of Smiles? And if not, if the capital increase made by the exchange ratio between Smiles and GOL shares?

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

The answer is no across the board. I mean, I'll just repeat the previous answer. The Smiles trend -- the liquidation of the Smiles transaction would be June 23. The withdrawal right period is next week. The choice in terms of cash and stock is the end of May, that transaction will be finalized by the end of June. And no, the capital increase does not impact anything related to the Smiles taken. If anything, it impacts it in a positive way because investors that made -- that are making -- or made or are making the decision if they want cash or to become a GOL shareholder are effectively getting that for free.

It wasn't something was involved in their decision at the shareholders meeting a little over a month ago. But no, it doesn't affect any of the calculations there. The only thing that affects this calculation was the dividend payment made by Smiles a couple of weeks ago. Where the ex dividend price gets adjusted down by about BRL four as we've explained. Okay. With that, let's flip it back to the operator. In spirit of time and you can close out the call. We have no more questions in the queue.

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 -- Citigroup -- Analyst

Michael John Linenberg -- Deutsche Bank AG -- Analyst

Daniel J. McKenzie -- Seaport Global Securities -- Analyst

Matthew Breckenridge -- DSC Meridian -- Analyst

Savanthi Nipunika Syth -- Raymond James & Associates -- Analyst

Victor Mizusaki -- Banco Bradesco -- Analyst

Guiler Melendez -- JPMorgan -- Analyst

More GOL analysis

All earnings call transcripts

AlphaStreet Logo

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.