Operator: Welcome to the GOL Airlines Second Quarter 2017 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, where the presentation is also available. Participants may view the slides in any order they wish.

The replay will be available shortly after the event is concluded. Those following the presentation via the webcast may post their questions on the platform and their questions will either be answered by the management during this call or by the managed -- 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 Paulo Kakinoff. Please begin.

Paulo Kakinoff: Good afternoon, ladies and gentlemen. Welcome to GOL Airlines Second Quarter '17 Results Presentation. I am Paulo Kakinoff, Chief Executive Officer and I'm joined by Richard Lark, our Chief Financial Officer.

Richard Lark: Good afternoon.

Paulo Kakinoff: This morning, as you saw, we released the quarterly numbers. Slide 2 shows that we had net revenues of BRL2.2 billion in the period, an increase of 7% compared to second quarter 2016. Recurring operating income in the second quarter were BRL37 million, an increase of BRL187 million compared to the same period in 2016. Recurring operating margin was 1.7% in the period, an improvement of 8.8 percentage points.

This is the first second quarter of operating profit for GOL in 7 years. Quarterly recurring EBITDA totaled BRL156 million, margin of 7%, recovering from negative BRL40 million in the second quarter '16 when we got a margin of negative 1.9%. GOL maintained its position as the #1 airline in Brazil with a market share of 36% in 2017, according to the ANAC. The last 4 aircraft of the fleet's rightsizing plan were returned with the fleet reaching the desired size for 2017 of 120 737s, with 116 in operation and the remaining for lease to a company abroad. Net income in the period was a loss of BRL475 million after the Smiles minority interest, representing a net margin of negative 21.2%.

This result had an impaired comparison with same period in 2016, since noncash extraordinary gains recorded in the quarter were BRL779 million while in this quarter 2017, losses with exchange and monetary variation of BRL226 million were recorded, causing a negative effect of BRL1 billion year-over-year. Net cash flow was positive BRL392 million. Operationally, the utilization rate in the quarter increased by 2.7 percentage points to 77.9% and the average yield per passenger increased by 4.8% to BRL0.232 resulting in a RASK of BRL0.214, an increase 10.2% over second quarter '16. Excluding nonrecurring expenses which totaled BRL12 million in the quarter, the total CASK was BRL0.21, an increase of 1.1% when compared to the second quarter last year. The recurring ex-fuel CASK had a reduction of 2%, reaching BRL0.15.

Turning to Slide 3. We see the return impacts of the last 4 aircraft need 2017 fleet plan, where we concluded the adequacy of our capacity, network and bases to adverse economic conditions in Brazil. As a result, we had a decrease of 3% in ASKs and a 5% reduction in the number of flights compared to the same period of 2016. Our current network, launched in May 2016, was restructured to serve higher-yield routes. As already announced, the reconfiguration of the 737-800 next-generation fleet will take place during 2018, increasing the number of seats by 5% from 177 seats to 186 without compromising on comfort.

In the next Slide #4, you can see how focused we're on providing the best customer experience. In addition to maintaining high levels of productivity and profitability, short term results will be driven by the implementation of new technologies and innovations. The #NOVAGOL campaign marks the beginning of a new cycle that combines our expertise with modernity and energy for a new and more effective flight experience. We remain determined to offer the best travel experience with exclusive services to [indiscernible], such as self-checking, new and modern aircraft with eco leather seats and WiFi on board, frequent flights in the main markets, an integrated route system and low fares, also headed by the Brazilians -- the Brazil's, I'm sorry, most on-time service. All this is made possible thanks our dedicated team of employees, who are the key to the company's success, as further detailed on Slide 5.

Our low-cost base remains the financial compared to all other airlines. We have an advantaged single fleet which allows us to retain lower crew costs, better spare parts management and high utilization. Nevertheless, safety always comes first and we maintain our FAA classification as best-in-class maintenance. In addition, we're a leader in the customer experience and continue to expand our onboard WiFi infrastructure currently in 33% of our aircrafts and with expectation to be completed by mid-2018. GOL has the lowest unit cost in Brazil, period.

Where the company operates with presence, market fares are lower, creating the GOL Effect that is incentivizing more customers to fly for the first time. Now before Richard walks us to quarter results, I would like to update you on our 2017 guidance in Slide 6. We plan a small reduction in capacity, around 2% or less; average load factor, between 77% and 79%; CASK ex-fuel, BRL0.14; EBITDA margin, between 12% and 14%; and EBIT margin, between 7% and 9%. Earnings per ADS, after the minority interest in Smiles, are expected to be between $0.57 to $0.78. Leverage measured as net debt over the 12 months EBITDA is expected to be close to 4.2x.

The risk of no attainment are market fares in the fourth quarter, external shocks and competitor capacity growth. With that, I am going to hand you over to Rich, who is going to take us through the quarterly financial presentation. Richard, over to you.

Richard Lark: We'll go. We had a solid June quarter, as you can see on Slide #7.

We achieved recurring EBITDA margin of 7% and recurring operating margin of 1.7%. These numbers exclude about BRL12 million in nonrecurring costs in the second quarter. As Kakinoff already mentioned, this is the first second of operating profit for GOL in 7 years. Our net debt at the end of June was BRL4.9 billion which was down BRL108 million from March 2017. In the quarter, our operations had a 3% reduction in capacity and an increase of 8.5% in passenger revenue per kilometer or PRASK, generating RASK growth of 10.2%.

Turning now to Slide #8. We note that even with the industry environment still difficult in the short term, strong demand for our services continues. Since the launch of our newer route network in May 2016, just over a year ago, we have increased our load factors by about 2 to 3 percentage points. For the second half of 2017, we expect occupancy rates to be around 80%. On Slide #9, you can see that our profitability calculated by EBITDA was positively affected by the 10.2% growth in RASK and a 1.1% increase in the recurring total CASK quarter-over quarter.

In this quarter, nonrecurring expenses were BRL12 million. The recurring ex-fuel CASK was reduced by 2% in the same comparison. As a consequence, our recurring EBITDA increased to BRL156 million in 2Q '17 with a margin 7%, an improvement of BRL196 million compared to the second quarter of 2016. The EBITDA per available seat kilometer increased to BRL0.0138 in this period 2017. Our net financial results for the quarter were negative by BRL425 million, as can be seen on Slide 10.

We had BRL20 million in financial revenues in 2Q '17, offset by BRL425 million in financial expenses, of which BRL226 million were noncash exchange in monetary variations. In the same period of last year, we recorded BRL813 million in the net financial result, of which BRL779 million were exchange rate and monetary variations, also without cash effect. On Slide 11, we detail the change in net income after minority interest of Smiles between the second quarters. And here, it's evident that most of the components of this variation were making positive contributions to improve net income which is a consequence of the company's operational improvement. Part of the loss was exchange variation of BRL1 billion with no cash effect.

That the net accounting result was negative by BRL475 million. We, therefore, reported earnings per share of minus BRL1.37 per share and minus $2.12 per ADS in 2Q '17. Operating cash flow generation was positive by BRL504 million, as can be seen on Slide #12. This operating cash flow margin was 22.6% in the second quarter. Total liquidity at the end of June was BRL1.8 billion, an increase of BRL253 million from the position at the end of March.

Out of the operating cash flow, funds were used in investment activities, BRL110 million; and in financial activities, BRL140 million. In the chart to the left on Slide #13, you can see the evolution for our total liquidity for the second quarter. We had BRL1.8 billion in cash, cash equivalents and accounts receivable at the end of the June quarter. In the chart on the right, you can check out the evolution of our net debt and expected leverage over the last 12 months EBITDA which excluding the perpetual bonds which are equity-like. In relation to the LTM, EBITDA improved to 4.2x leverage.

The average maturity of our long term debt in this quarter, excluding aircraft financial leasings and non-maturity debt, was 3.2 years and we have no significant short term debt maturities. 22% of our debt is real-dominated with an average interest rate of 13.4%, while 78% of the debt is dollar-denominated, with an average interest rate of 7.6%. Ever since GOL went public in 2004, we've been working with -- to help investors better understand the drivers that affect our company. As such, we're always bringing new and innovative ideas to the market. Therefore, on Slide #14, we show interesting methodology for measuring shareholder value gap.

The iQ Value Index methodology applies market cap and target prices from the sell-side analyst average vis-à-vis the current market price. Adding the most recent net debt, it's calculated the company's current and actual EV to EBITDA multiple which is the iQVI. If the comparisons of the iQVIs of 2 companies shows the value gap between them. For example, the current value gap between Ryanair and GOL is 44%. GOL's average daily trading volume was $5 million on the NYSE and BRL24 million on the B3 during 2Q '17, representing growth of 123% and 83%, respectively, compared to the same period in 2016.

And to conclude today's presentation, I'd like to review our fleet plan on Slide #15. We completed the process of returning the last 4 aircraft during the second quarter '17. We currently operate a fleet of 120 Boeing 737 NG aircraft, of which we operate with 116 in operations and the other 4 are in subleasing facilities outside of Brazil. In 2017, we will maintain a current fleet size at approximately the current level. And in 2018, we will resume growth and begin aircraft replacement with the delivery of our first 5 Boeing 737 MAX 8 aircraft.

With that, back to Kakinoff for questions.

Paulo Kakinoff: Thanks, Richard. And before opening the floor for audience questions, we received by e-mail 500 questions from investors and analysts this morning. I would like to summarize them and reply for the benefit of all. A comment for others, we will read the questions we receive and we will answer them with a few support slides where applicable.

Unidentified

Company Representative: That [indiscernible] that you implemented last year in June? And how is it performing?

Paulo Kakinoff: In June, we implemented our light fare which is a discounted fare for passengers traveling without luggage. This has been very well accepted by customers, so much so that about 7% opt for this cheaper fare. This has reinforced the GOL mission of popularizing air transportation services in Brazil which is part of our purpose since our inception 2001. We invested heavily in communication and training and the result is exceeding expectations so far. Unidentified

Company Representative: Operating cash flow generation was positive by BRL504 million in the quarter.

What should we expect for the second half?

Richard Lark: The second quarter operating cash generation was significant at BRL504 million, as we said and reflects our efforts to rightsize our fleet and increase operating profitability. GOL's team, operations and partners have contributed all to the improvement in the company's cash position. We also reduced our most expensive debt by over BRL100 million in the quarter. We expect that in the second half, we'll continue to see a recovery in the corporate market -- the corporate sales market. And as GOL is the leader in that segment in Brazil in the business segment, we expect our cash position will continue to improve.

Unidentified

Company Representative: Can you comment about your expectations for yield and PRASK trend in the second half?

Paulo Kakinoff: We're confident that the scenario of expected economic recovery, coupled with passenger demand growth, usual for the second half, will be captured in the revenues. The return of the corporate clients, responsible for about 70% of our revenue, is also relevant to PRASK since the segment is price inelastic. We're looking to improve the mix between corporate and leisure even further. Unidentified

Company Representative: On ancillary revenue spend, what are the main drivers for its growth?

Paulo Kakinoff: We expect an improvement in cargo unit prices for the second half. Also, we're working on increasing onboard sales and leveraging our GOL+ Conforto seats.

Unidentified

Company Representative: And are you planning any equity follow on?

Richard Lark: No, we have no plans to tap the capital markets at this time. Our liquidity is increasing and we have over BRL500 million of additional liquidity sources if needed, as mentioned in the previous quarter's conference call. In addition, the profile of our debt has been restructured so that we have no significant short term maturities and our debt maturities are scheduled over the next 7 years, matched with our cash flows.

Paulo Kakinoff: And now I would like the operator to open the floor for further questions of today's call.

Operator: [Operator Instructions].

The first question comes from Duane Pfennigwerth with Evercore ISI.

Duane Pfennigwerth: Just on the second half expected recovery in corporate, I wonder if you could expand on that comment a little bit. And specifically did you see any of that in the current quarter? Or was it more driven by leisure strength? And what gives you confidence that you're going to see improvement in the second half?

Paulo Kakinoff: Duane, this is Kakinoff here. Actually, you have. By the end of the second quarter, we saw acceleration in the demand for the both types of customers, leisure and corporate ones.

So we strongly believe that the combination of this recovery in the demand and some positive output coming out of the economic scenario can really pave the roads to better yields in the fourth quarter. So it seems to be a kind of a new trend.

Richard Lark: Yes and just comp end of your question, Duane, there, on the leisure side, that's going to be helped by this reduction in Brazilian interest rates which are now in single digits and kind of on their way to an 8% range which is going to act as a positive stimulus on the market as a whole but also disproportionately on the leisure segment also.

Duane Pfennigwerth: And then just for my second question. Any early thoughts on fleet growth or ASK growth in 2018? And correspondingly, thoughts on sort of the direction of your nonfuel cost structure.

Richard Lark: Yes, sure. On fleet growth, our plan is to basically grow at Brazilian GDP. And our current structure which is a combination of owned and leased aircraft, basically allows us to vary fleet growth between 0% -- or I should say, ASK growth between 0% and 7% over the medium term. Next year, we plan to bump up by one aircraft to 121 by the end of the year and then to 124 by the end of '19. But that ASK growth to come out of that, in that plan, we expect to be about 3% per year on average over the next 5 years.

And -- but I think the important point with our fleet plan today, we can kind of vary between 0% and 7% on ASK growth in terms of the flexibility we have with lessors and with Boeing on our order for 120 MAX. But our plan is to kind of follow GDP growth which we expect to be around 2% or 3%. So that's what you should expect out of future ASK growth, including next year.

Paulo Kakinoff: [Indiscernible] important than that, [indiscernible] is the GOL fleet plan, is that we're much more focused in anticipating or accelerating the new technology to be implemented. I'm talking about the 737 MAX, then really increasing the fleet.

So I believe -- we strongly believe that by renewing our fleet, bringing the 737 MAX as we can, we'll be able to expand our market by reaching new destinations. At the same time, we will reduce fuel consumption considering that the new plane is really more efficient than the 737 NG which is already best in it's category.

Richard Lark: In terms of -- you're asking about nonfuel CASK. Obviously, on the fuel side, just to mention, obviously, we do expect significant increase in fuel costs next year based on expectations for a combination of oil price and exchange rate. But on the fuel costs -- I'm sorry, on the nonfuel cost, the key driver is going to be our work on the aircraft utilization side.

As you saw, we're up above 11 hours in Q2 which is the lowest quarter seasonally. Because then he pick them up in July and we're flying -- we flew which is the peak of the year. We flew close to 14 hours a day of utilization for that month in the peak season. And that, combined with the arrival of the MAX is -- in July of next year, the first MAX, is going to be a key driver on our ex-fuel CASK, everything else isolated and frozen out. So with that, in terms of our ability to drive increasing productivity with the MAX aircraft and our utilization, including the Brazilian inflation that we have to absorb which is on the order of 4% to 5% on the cost side on Brazil inflation, at this point, we're look at a 0% growth in ex-fuel CASK for next year.

So basically offsetting the -- the productivity gains are basically offset by Brazilian inflation for the most part.

Operator: The next question comes from Mike Linenberg with Deutsche Bank.

Michael Linenberg: Two questions here. One of it relates to the appropriate level of cash relative to LTM sales. If we sort of push aside the accounts receivable and just look at sort of your most liquid form of cash, you can include the restricted cash as well, you're at 7% prior quarter.

You're now at 9%. Where does that number need to be that gives you comfort? Is it 15%? Does it have to be in the high teens? Can you just -- can you talk about that?

Richard Lark: Obviously, as you know with an airline, you never have enough cash. That's what we've all learned over the years, right? So on the credit side, there's some methodologies on the credit side that kind of arbitrarily say that 20% is a good number. The issue with Brazil is, we have a very high interest rate in Brazil, so very high cost of carry on that. And as we have a -- as an airline, we have a leverage balance sheet, the good leverage is in dollars and the more expensive leverage in reals.

Now with that said, we're working on a -- we're focused on getting our leverage first to roughly this 4x financial leverage on a EBITDA basis by the end of the year and we're on track to do that, as you can see, beyond that will be building of cash above that. We don't plan on reducing the leverage below that because it's a good structural debt. It's basically aircraft-related debt and for us, aircraft debt is good debt. That's what produces our revenues. And so it's going to be slow going, kind of a very boring quarter-to quarter improvement on cash.

I mean, we improved by almost BRL300 million in the worst seasonal quarter of the year. We think that those changes in our operations, the network and our, let's call it, our working capital and our CapEx, I mean, there's structural changes that were made. And so we think we can retain that kind of gradual increase in cash over the next couple of quarters. But -- and so, we don't have a target in terms of cash to total revenues, nor are we going to target anything there. But operationally, we're at a cash level now that permits us to operate.

Another point that I was trying to highlight is, we have other sources of liquidity which we're currently not using which are on the order of a minimum BRL500 million which would product cash balance at around 23% of total net revenues, if we were to execute those liquidity mechanisms. But they have an interest cost and we'd like to keep that Interest cost savings with our shareholders and not with a counterparty. So the way I define -- the way we manage the business today, we roughly have between 20% and 25% of total revenues in liquidity mechanisms which is more than enough for us to run our business comfortably here going forward. So beyond balance sheet cash, but what you see how we define in terms of cash and accounts receivable and we keep those cash amounts and receivables so that we save on interest cost, that's just going to show a gradual improvement over the next couple of quarters until we get to a point where we think about other uses for that cash, other than just debt pay down. And so don't expect to see us doing anything drastic there.

And part of it, as I said, is we're already at a number that internally in terms of how we manage the business, we're already above a 20% number in terms of our total liquidity to net revenues which meets all the cosmetic requirements that we have with things like the rating agencies or other indicators that we like to look at. So -- but going back to the first thing I said, we're always going to be looking at ways to increase cash. And to some point, it's going to take a while. On some point, ultimate target is going to end up be moving to return on capital mechanisms and cash to equity. And so the ultimate goal is for us to get back to basically have cash left over for equity which in the short term, next year, we'll be building a cash cushion.

And then maybe in the future, years from now, maybe never, have some kind of distribution coming out to shareholders. But it's way too early to be talking about that. But we're on the right track. We still have some improvement to do. But from a liquidity mechanism, being able to meet our operating and financial obligations, we're more than covered.

And also as I mentioned, we have no significant short term -- we have BRL700 million of debt maturities over the next 12 months which is a very comfortable position vis-à-vis our current cash generation. And finally, we're now in -- the next 3 quarters are fairly good quarters for us. Q3 is a very good quarter. Q4 is a decent quarter, as is Q1. And so from a cash flow perspective, in terms of supply demand, we're also looking at a pretty good stretch here over the next 3 quarters.

Michael Linenberg: Okay, good. And then -- that's helpful, Rich. And then just another quick one just the guidance. You do provide a per ADS and per local share range? Does that include the non-op FX charge? Is that running through that? Because presumably, given where the interest -- excuse me, where the exchange rate is right now, we may see a complete reversal of that in the September quarter. So are you running that through? Or should we exclude that in getting to that range?

Richard Lark: Well, that's fully loaded.

I mean, that is reflecting what our -- the time of that guidance, that reflects what our assumptions were for fuel prices, for oil prices and exchange rates. So that's fully loading, including nonrecurring. And it's important, that's after the minority interest and that's also -- so it's designed to -- we think that's a metric that we'd like the analysts in the market to use. So we're going to be [indiscernible] on that, helping people understand that. And no, you said, obviously, we have Q3, Q4, there is a -- the exchange rate and what's going on with the Brazilian economy and so on.

It's looking like we have a chance maybe to be under BRL3 by the end of the year. And so that will take back a lot of that exchange rate variation. Now as we say, we highlight the exchange rate variation, but it's noncash. And I think in terms of how you look at it, you should work with that and eliminate it. But this includes all tax, nonrecurring and exchange rate effects.

Operator: The next question comes from Savi Syth with Raymond James.

Savanthi Syth: On the fleet side, is the plan still to kind of expand the seats to 186? And what's the kind of latest update on that?

Paulo Kakinoff: Well, the [indiscernible] is going to be expanded from the current 177 to 186. We have planned to replace the exact planes. We [indiscernible], those are the old ones and thicker, compromising on comfort by brand-new ones. So you'll be able to expand the productivity and the number of seats per plane without compromising in comfort, as I mentioned it before.

We will start that process in the beginning of the next year and we're supposed to be ready by June, July next year.

Richard Lark: Yes, the [indiscernible] thing. I mean, one of the reasons that, that is permitted is the reconfiguration of the interiors of the aircraft with leather seats which allows us to increase the reconfiguration without changing the pitch. So it's still carrying the 34-inch pitch in the first part of the plane, when the rest of the plane also stays what it is. And so that is one of the key configurations.

And then also, just to kind of mention as well, is that together with that is the retrofit on the WiFi in Brazil. Our goal is to basically the only company in Brazil that is retrofitting its aircraft with WiFi. So all that's kind of happening between now and the second half of next year which allows us to, at the same time, reconfigure the entire fleet for the 186, including the NGs which will then match the MAXs that are already geared up to be coming out of the assembly line in Seattle in July of next year.

Paulo Kakinoff: So [indiscernible] fleet, we will also offer [indiscernible] economy classes, the traditional one, hanging from 30 to 30.5 inches; the GOL+ comfort, 34 in the first rows. And all of them equipped with in-seat power, leather seats and WiFi.

Savanthi Syth: Got it. All right. And actually, touching on that, so just 2 questions on the demand. Appreciate the color on demand. One, is it an acceleration in demand that you're seeing into the second half? It sounds like it, definitely on the leisure side.

I was just curious on the business side as well. And two, just given the investment that you've made in kind of improving the quality of the product here and maybe some of your competitors going the other way, are you still seeing kind of your corporate share expanding here? And how much more room do you think there is to go there?

Paulo Kakinoff: As mentioned before, Savi, the corporate demand has recovered in a lower pace then the leisure travelers, but the trend is positive. It's pretty much related to the economic performance. And we do see in almost every segment, among the business travelers, a positive trend to the second quarter. It's still too early to measure it and to use into our guidance any kind of variation in comparison to what we have already delivered as a guidance.

But it -- the signs are quite positive.

Richard Lark: And our guidance is roughly 0% GDP growth through the end of the year. That's our view. And as you know, the corporate demand in Brazil is a little over 2x elastic to GDP. So that will be the first to expand significantly to the extent with this real GDP growth through the end of the year.

That's why we always kind of highlight in terms of the guidance with -- on the back end, fourth quarter specifically, that there's BRL100 million to BRL200 million there that relates to the economic side of the equation, including overall 0% assumption for GDP growth. That's not in the upside there, because we're not, frankly, we're not seeing it yet in terms of the actual GDP. Obviously, the expectations are that we all get perhaps as high as 2.5% GDP growth. Those expectations kind of from the research community and so on, but we're not seeing that yet at the street level in terms of passenger demand.

Savanthi Syth: Got it.

And any thoughts on just the -- kind of continuing to gain share because your product is kind of getting better and better, especially compared to competitors'.

Paulo Kakinoff: Well, in the corporate market, we have achieved market share -- or fair market share and we have only 1/4 of our fleet renewed offering, such equipment as we mentioned before, the WiFi and leather seats, so on and so forth. Considering that it has simultaneously increased our NPS, too and the business travelers are pretty much sensitive to that, we believe that we can expand our market share in the corporate segment. We're about to receive the final figures -- or the second quarter's figures from ABRACORP and our expectation is really to lead in both aspects, revenue share and number of tickets sold considering that the fleet is only 1/4 dedicated to this business travelers. Once they are highly appreciating the new equipment that we have built into our aircraft, I think that there is a clear potential to increase this market share by having a larger business traveler preference to travel with us.

Richard Lark: Yes, we have the -- in terms of the reconfiguration of the route network last year, we have the most attractive route network for business travelers. We dominate the main business airports and we have the highest punctuality. And those are the key drivers of the business traveler. They want the frequencies and the punctuality and that's basically our wheelhouse today in terms of how our aircraft are configured in on the network, where that's the main reason why were #1 in the market today.

Operator: [Operator Instructions].

Our next question comes from Stephen Trent with Citi.

Stephen Trent: First, I was just curious, looking at the cash flow from ops in the quarter, they seem to have come from 3 specific lines and I believe other assets, transportation commitments and interest expense on debt and leases. Just trying to understand, to what extent some of that was related to aircraft returns? And what specific adjustments occurred as that was practically -- those were the 3 largest contributors.

Richard Lark: So the main source, obviously, is the operating EBITDA. EBITDA around BRL160 million was around half of the total net cash flow on the operating side.

On the working capital side, we have worked to increase our average payment terms with suppliers, the partners in the GOL ecosystem which allows us to generate over another BRL100 million of cash flow on a run rate basis. And then, the final, kind of major component was optimization of our CapEx specifically and our aircraft -- our aeronautical CapEx. We've using the PDP financing mechanisms and sale leasebacks to reduce debt and also have been working with our partners on the maintenance side as we're still going through a lot of heavy maintenance. And so we're -- been able to kind of optimize that. And so most of that kind of comes from the ecosystem.

In terms of the actual cash effects, those are the main sources, about half being operational and that was really driven by the increase in PRASK on the EBITDA side plus a little bit on the aircraft utilization and then optimization of the working capital -- CapEx. I think also, on things -- the Q2 is from a cash flow perspective, obviously, seasonality-wise, is below us. But as we're looking at a pretty good Q3, in terms of volumes pickup, a pretty good July, you have those effects in there where the sales that happened in June are related to the transportation that's going to be happening in July. And that's why you see the effects on receivables and air traffic -- the ATL, the air traffic liability, that really affects what's happening in July, because sales in June are going to basically produce the transportation in July. And July is the biggest travel month, first or second, depending on what happens in January.

But generally, July is the big travel month for us in terms of the -- it's the school vacations and the winter down here and a lot of traveling's happening. And so those effects kind of go in there also with what's been happening on the revenue side. But those are the main effects on that, as I just highlighted.

Stephen Trent: Okay and I appreciate the color, Rich. And I was also curious, when I think about what might be the long term run rate in cash investing? So once you're out of the crisis in Brazil and we get back to normal level of expenditure and investment in the business, is my guess that 2015 and 2016 are not the normalized levels? And any thoughts on what long term run rate we should see, annual investment in your fleet.

Richard Lark: Well, right now, '17, '18, is all -- we're not going to have any on the aircraft side. And most of our investment right now is on -- it's about in that roughly BRL600 million of CapEx that's happening. It's 2/3 engine maintenance. We're basically zeroing out the engines in our portfolio. That'll end next year.

And that will drop down kind of a little bit next year and a little -- and then get back to more normalized level in 2019 on the engine side. The retrofit on the WiFi which is the other 1/3 of that CapEx, that ends by mid-second semester of next year. So they also kind of phases out. So those -- that number, that roughly BRL600 million per year on that component, the more normalized level would be somewhere between BRL200 million and BRL300 million. Because we've got about 2 to 3 percentage points in there which has happened over a 5-year period, of which we're now on year 3 -- year 3.5 related to the upgrades on the WiFi to retrofit the whole fleet.

We mentioned it a little bit in there, for the retrofit on the leather seats on the aircraft. And then the main component has been the engine maintenance. And there's no aircraft CapEx in there this year -- or next year because of it's sale leasebacks and the PDPs. 2019, yes, we will start to get a portion of those aircraft coming in on the MAX order will be acquired at least -- by at least 50%. And that will start to show up in -- with the PDP deposits and then, eventually, the finance leases.

In 2019, all the accounting and IFRS is going to shift to finance lease, meaning all the operating leases, also, are going to be accounted for as finance leases. So in 2019, there's going to be some accounting changes which will show -- which will impact depreciation and so on. And so I kind of want to hold off on giving more specific numbers for 2019 until we get a greater view on the accounting effects. But those numbers are going to come down a bit. On the current CapEx, it's going to get cut more or less in half which means we'll have another BRL300 million per year versus positive, versus what we've been spending today.

And then in 2019, we'll start to phase in the acquisition CapEx on the aircraft. But it's not significant, because we're going to have a gradual transition there. So net-net, it's going to be reducing CapEx over the next 2 years down to kind of like a BRL300 million year level and then 2020, it'll start to ramp up again. And also, I think the important thing on the CapEx, over 80% of it refinanced with pretty low cost financing sources, either with Exim Bank guarantee or supplier financing, that allows us to finance all of that CapEx which is pretty much dollar CapEx, at rates below 5% annual interest rates. And so it really doesn't generate a big outflow on cash flow.

And on the aircraft side, it creates equity value over the 12-year period that we do the aircraft mortgages. So that's actually a positive in terms of value creation. The aircraft acquisition activity for us has only created value over time. Now we're just finishing now the first order that the company did, the 120 NGs, of which a portion of those were acquired. That cycle has terminated as of last year.

And next year, we start the new cycle on the MAX order. So we're pretty excited about getting back to that aircraft-acquisition mode which creates equity value for shareholders over the long term.

Operator: Excuse me. This concludes today's question-and-answer session. Would like to invite Mr.

Kakinoff to proceed with his closing remarks. Please go ahead, sir.

Paulo Kakinoff: 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.

Operator: This concludes the GOL Airlines conference call for today. Thank you very much for your participation and have a nice day.