AZUL S.A.
March 31, 2021
Unaudited Interim Condensed
Consolidated Financial Statements
Content
Unaudited interim consolidated statements of financial position | 3 |
Unaudited interim consolidated statements of operations | 5 |
Unaudited interim consolidated statements of comprehensive loss | 6 |
Unaudited interim consolidated statements of changes in equity | 7 |
Unaudited interim consolidated statements of cash flows | 8 |
Notes to the unaudited interim condensed consolidated financial statements | 9 |
AZUL S.A. Unaudited interim consolidated statements of financial position March 31, 2021 (unaudited) and December 31, 2020 (In thousands of Brazilian reais – R$) |
Assets | Note | March 31, 2021 | December 31, 2020 |
Current assets | |||
Cash and cash equivalents | 5 | 2,275,430 | 3,064,815 |
Short-term investments | 6 | 10,624 | 91,819 |
Accounts receivable | 7 | 865,604 | 875,382 |
Aircraft sublease receivables | 8 | 153,316 | 123,455 |
Inventories | 9 | 454,160 | 402,587 |
Security deposits and maintenance reserves | 10 | 275,294 | 318,460 |
Taxes recoverable | 11 | 137,280 | 133,706 |
Derivative financial instruments | 19 | 83,861 | 79,216 |
Prepaid expenses | 12 | 148,122 | 136,350 |
Other current assets | 159,082 | 191,633 | |
Total current assets | 4,562,773 | 5,417,423 | |
Non-current assets | |||
Long-term investments | 6 | 903,318 | 854,462 |
Aircraft sublease receivables | 8 | 220,861 | 189,482 |
Security deposits and maintenance reserves | 10 | 1,574,623 | 1,235,582 |
Derivative financial instruments | 19 | 263,339 | 349,093 |
Prepaid expenses | 12 | 17,165 | 18,192 |
Other non-current assets | 184,540 | 149,508 | |
Property and equipment | 14 | 1,805,059 | 1,799,706 |
Right-of-use assets | 14 | 4,473,909 | 4,610,741 |
Intangible assets | 15 | 1,186,866 | 1,170,268 |
Total non-current assets | 10,629,680 | 10,377,034 | |
Total assets | 15,192,453 | 15,794,457 |
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
3 |
AZUL S.A. Unaudited interim consolidated statements of financial position March 31, 2021 (unaudited) and December 31, 2020 (In thousands of Brazilian reais – R$) |
Liabilities and equity | Note | March 31, 2021 | December 31, 2020 |
Current liabilities | |||
Loans and financing | 16 | 524,508 | 858,332 |
Lease liabilities | 17 | 3,005,412 | 2,272,349 |
Accounts payable | 18 | 2,026,304 | 2,238,668 |
Accounts payable – supplier finance | 360,467 | 157,801 | |
Air traffic liability | 20 | 2,308,888 | 2,488,872 |
Reimbursement to customers | 237,833 | 221,342 | |
Salaries, wages and benefits | 413,167 | 400,371 | |
Insurance premiums payable | 63,079 | 52,427 | |
Taxes payable | 59,518 | 55,260 | |
Federal tax installment payment program | 13,292 | 13,358 | |
Derivative financial instruments | 19 | 116,296 | 173,769 |
Provisions | 21 | 859,746 | 853,810 |
Other current liabilities | 262,964 | 426,272 | |
Total current liabilities | 10,251,474 | 10,212,631 | |
Non-current liabilities | |||
Loans and financing | 16 | 7,254,058 | 6,502,182 |
Lease liabilities | 17 | 11,134,687 | 10,248,463 |
Accounts payable | 18 | 593,524 | 323,059 |
Derivative financial instruments | 19 | 180,794 | 247,265 |
Federal tax installment payment program | 105,521 | 108,519 | |
Provisions | 21 | 2,260,444 | 1,988,665 |
Other non-current liabilities | 320,781 | 312,423 | |
Total non-current liabilities | 21,849,809 | 19,730,576 | |
Equity | 23 | ||
Issued capital | 2,266,992 | 2,246,367 | |
Advance for future capital increase | 22,320 | 20,625 | |
Capital reserve | 1,953,738 | 1,947,887 | |
Treasury shares | (14,807) | (13,182) | |
Other comprehensive income | 655 | 655 | |
Accumulated losses | (21,137,728) | (18,351,102) | |
(16,908,830) | (14,148,750) | ||
Total liabilities and equity | 15,192,453 | 15,794,457 |
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
4 |
AZUL S.A. Unaudited interim consolidated statements of operations Three-month periods ended March 31, 2021 and 2020 (In thousands of Brazilian reais – R$, except basic and diluted loss per share) |
Three-month periods ended March 31, | |||
Note | 2021 | 2020 | |
Passenger revenue | 1,597,642 | 2,653,419 | |
Cargo and other revenue | 228,180 | 149,256 | |
Net revenue | 26 | 1,825,822 | 2,802,675 |
Operating expenses | |||
Aircraft fuel | (597,666) | (764,310) | |
Salaries, wages and benefits | (414,520) | (478,077) | |
Landing fees | (149,343) | (201,907) | |
Traffic and customer servicing | (86,665) | (135,202) | |
Sales and marketing | (86,070) | (109,419) | |
Maintenance materials and repairs | (93,885) | (140,709) | |
Depreciation and amortization | (343,749) | (480,665) | |
Other operating expenses, net | (299,865) | (333,587) | |
(2,071,763) | (2,643,876) | ||
Operating profit (loss) | (245,941) | 158,799 | |
Financial income | 27 | 25,349 | 12,887 |
Financial expenses | 27 | (915,152) | (438,470) |
Derivative financial instruments, net | 19 | 78,172 | (1,281,616) |
Foreign currency exchange, net | 27 | (1,727,760) | (4,233,800) |
(2,539,391) | (5,940,999) | ||
Result from related party transactions, net | (1,294) | (618,517) | |
Loss before income tax and social contribution | (2,786,626) | (6,400,717) | |
Current income tax and social contribution | 13 | - | (13,016) |
Deferred income tax and social contribution | 13 | - | 263,106 |
Loss for the period | (2,786,626) | (6,150,627) | |
Basic loss per common share - R$ | 24 | (0.11) | (0.24) |
Diluted loss per common share - R$ | 24 | (0.11) | (0.24) |
Basic loss per preferred share - R$ | 24 | (8.08) | (17.98) |
Diluted loss per preferred share - R$ | 24 | (8.08) | (17.98) |
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
5 |
AZUL S.A. Unaudited interim consolidated statements of comprehensive loss Three-month periods ended March 31, 2021 and 2020 (In thousands of Brazilian reais – R$) |
Three-month periods ended March 31, | ||
2021 | 2020 | |
Net loss | (2,786,626) | (6,150,627) |
Other comprehensive income (loss) that may be reclassified to profit or loss in subsequent periods: | ||
Cash flow hedges | - | 17,052 |
Total comprehensive loss for the period | (2,786,626) | (6,133,575) |
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
6 |
AZUL S.A. Unaudited interim consolidated statements of changes in equity Three-month periods ended March 31, 2021 and 2020 (In thousands of Brazilian reais – R$) |
Description | Note | Issued capital | Treasury shares | Capital reserve | Other comprehensive income | Accumulated losses | Total | |
At December 31, 2019 | 2,243,215 | (15,565) | 1,928,830 | (159,261) | (7,516,393) | (3,519,174) | ||
Net loss | - | - | - | - | (6,150,627) | (6,150,627) | ||
Cash flow hedge | - | - | - | 17,052 | - | 17,052 | ||
Total comprehensive loss | - | - | - | 17,052 | (6,150,627) | (6,133,575) | ||
Share-based payment | 25 | 1,860 | - | 4,166 | - | - | 6,026 | |
At March 31, 2020 | 2,245,075 | (15,565) | 1,932,996 | (142,209) | (13,667,020) | (9,646,723) | ||
Description | Note | Issued capital | Advance for future capital increase | Treasury shares | Capital reserve | Other comprehensive income | Accumulated losses | Total |
At December 31, 2020 | 2,246,367 | 20,625 | (13,182) | 1,947,887 | 655 | (18,351,102) | (14,148,750) | |
Net loss | - | - | - | - | - | (2,786,626) | (2,786,626) | |
Total comprehensive loss | - | - | - | - | - | (2,786,626) | (2,786,626) | |
Share buyback | 23 | - | - | (1,625) | - | - | - | (1,625) |
Share-based payment | 25 | 20,625 | 1,695 | - | 5,851 | - | - | 28,171 |
At March 31, 2021 | 2,266,992 | 22,320 | (14,807) | 1,953,738 | 655 | (21,137,728) | (16,908,830) |
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
7 |
AZUL S.A. Unaudited interim consolidated statements of cash flows Three-month periods ended March 31, 2021 and 2020 (In thousands of Brazilian reais – R$) |
Three-month periods ended March 31, | |||
2021 | 2020 | ||
Cash flows from operating activities | |||
Net loss | (2,786,626) | (6,150,627) | |
Reconciliation of non-cash items: | |||
Depreciation and amortization | 343,749 | 480,665 | |
Unrealized derivative results | (78,172) | 1,248,956 | |
Share-based payment | 5,851 | 4,166 | |
Exchange differences, net | 1,726,369 | 4,225,402 | |
Interest income (expenses) on assets and liabilities | 824,932 | 373,898 | |
Related parties | - | 599,197 | |
Deferred income tax and social contribution | - | (263,106) | |
Provisions | 3,869 | 43,665 | |
Sale and leaseback | (22,736) | - | |
Result from modification of lease contracts | (13,102) | - | |
Proceeds from sale and/or disposal of property and equipment and intangible assets | 9,994 | 41,265 | |
Adjusted net loss (profit) | 14,128 | 603,481 | |
Changes in operating assets and liabilities | |||
Accounts receivable | 10,886 | 254,085 | |
Aircraft sublease receivables | 4,122 | (65,407) | |
Inventories | (53,038) | (36,832) | |
Security deposits and maintenance reserves | (148,475) | (84,568) | |
Prepaid expenses | (10,745) | (52,422) | |
Taxes recoverable | (3,201) | 970 | |
Other assets | (2,480) | (7,743) | |
Rights and obligations with derivatives | (18,696) | (322,182) | |
Accounts payable | 347,787 | 632,780 | |
Accounts payable – supplier finance | (156,883) | (150,267) | |
Reimbursement to customers | 13,185 | - | |
Salaries, accruals and payroll charges | 12,796 | 25,862 | |
Insurance premiums payable | 10,652 | (11,816) | |
Taxes payable | 4,258 | (4,389) | |
Federal installment payment program | (2,437) | (2,103) | |
Air traffic liability | (179,984) | (401,162) | |
Accrual for tax, civil and labor risks | (29,663) | (35,927) | |
Other liabilities | (134,947) | (15,811) | |
Interest paid | (35,901) | (283,317) | |
Income tax and social contribution paid | - | (304) | |
Net cash provided by (used in) operating activities | (358,636) | 42,928 | |
Cash flows from investing activities | |||
Short-term investments | |||
Acquisition of short-term investments | (75,044) | (924,728) | |
Redemption of short-term investments | 156,486 | 245,534 | |
Payment for acquisition of subsidiary | (20,000) | - | |
Acquisition of intangible assets | (41,573) | (26,211) | |
Acquisition of property and equipment | (176,301) | (222,587) | |
Net cash provided by (used) in investing activities | (156,432) | (927,992) | |
Cash flows from financing activities | |||
Loans and financing | |||
Proceeds | 4,750 | - | |
Repayment | (53,090) | (25,132) | |
Lease payment | (290,963) | (148,302) | |
Proceeds from sale and leaseback | 21,256 | 5,801 | |
Advance for future capital increase | 22,320 | - | |
Capital increase due to exercise of stock options | - | 1,860 | |
Treasury shares | (1,625) | - | |
Net cash provided by (used in) financing activities | (297,352) | (165,773) | |
Exchange rate changes on cash and cash equivalents | 23,035 | (67,807) | |
Decrease in cash and cash equivalents | (789,385) | (1,118,644) | |
Cash and cash equivalents at the beginning of the period | 3,064,815 | 1,647,880 | |
Cash and cash equivalents at the end of the period | 2,275,430 | 529,236 |
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
8 |
AZUL S.A. Notes to the unaudited interim condensed consolidated financial statements March 31, 2021 (In thousands of Brazilian reais – R$, unless otherwise indicated) |
1 | OPERATIONS |
Azul S.A. (“Azul” or “Company”) is a corporation governed by its By-laws, as per Law No. 6,404/76 and by the corporate governance level 2 listing regulation of B3 S.A. �� Brasil, Bolsa, Balcão (“B3”). The Company was incorporated on January 3, 2008, and its core business comprises the operation of regular and non-regular airline passenger services, cargo or mail, passenger charter, provision of maintenance and hangarage services for aircraft, engines, parts and pieces, aircraft acquisition and lease, development of frequent-flyer programs, development of related activities and equity holding in other companies.
The Company carries out its activities through its subsidiaries, mainly Azul Linhas Aéreas Brasileiras S.A. (“ALAB”), which holds authorization from government authorities to operate as an airline.
The Company’s shares are traded on B3 and on the New York Stock Exchange (“NYSE”) under tickers AZUL4 and AZUL, respectively.
The Company is headquartered at Avenida Marcos Penteado de Ulhôa Rodrigues, 939, 8th floor, in the city of Barueri, state of São Paulo, Brazil.
1.1 Structure
The Company’s organization structure of March 31, 2021 is as follows:
9 |
AZUL S.A. Notes to the unaudited interim condensed consolidated financial statements March 31, 2021 (In thousands of Brazilian reais – R$, unless otherwise indicated) | |
The table below lists the operational activities in which its subsidiaries are engaged, as well as the changes in ownership that occurred in the period.
% equity interest | |||||
Company | Type of investment | Main activity | Country | March 31, 2021 | December 31, 2020 |
TudoAzul S.A. | Direct | Frequent-flyer program | Brazil | 100.00% | 100.00% |
AZUL Linhas Aéreas Brasileiras S.A. | Direct | Airline operations | Brazil | 100.00% | 100.00% |
Azul Conecta Ltda. | Indirect | Airline operations | Brazil | 100.00% | 100.00% |
ATS Viagens e Turismo Ltda. | Indirect | Package holidays | Brazil | 99.90% | 99.90% |
Fundo Safira | Indirect | Exclusive investment fund | Brazil | 100.00% | 100.00% |
Cruzeiro Participações S.A | Indirect | Holding of equity interests in other companies | Brazil | 99.90% | 99.90% |
Azul Investments LLP | Indirect | Funding | USA | 100.00% | 100.00% |
Azul SOL LLC | Indirect | Aircraft financing | USA | 100.00% | 100.00% |
Azul Finance LLC | Indirect | Aircraft financing | USA | 100.00% | 100.00% |
Azul Finance 2 LLC | Indirect | Aircraft financing | USA | 100.00% | 100.00% |
Blue Sabiá LLC | Indirect | Aircraft financing | USA | 100.00% | 100.00% |
Canela Investments LLC | Indirect | Aircraft financing | USA | 100.00% | 100.00% |
Canela Turbo Three LLC | Indirect | Aircraft financing | USA | 100.00% | 100.00% |
Azul Saíra LLC | Indirect | Aircraft financing | USA | 100.00% | 100.00% |
1.2 | Impacts of the COVID-19 pandemic |
Management has been closely monitoring the developments related to the COVID-19 pandemic and the second wave that hit Brazil since the second half of February 2020, when several cities began to adopt stricter restrictive measures with the closing of bars, restaurants, supermarkets and non-essential shops, in order to encourage social distancing.
These measures caused a sharp rise of the U.S. dollar against the Brazilian real and a new slowdown in the economy which consequently affected the demand for passenger air transport, which was experiencing a visible growth. However, despite this scenario, during the three months ended March 31, 2021, demand remained at the same levels as the end of 2020, and Brazil still appears as one of the countries with the best recovery in the aviation market.
In view of the uncertainties of the impacts and duration of the second wave of COVID-19, management once again adopted austerity measures to preserve cash, especially through the postponement of lease and suppliers payments, freezing of contracts, suspension of unessential projects and the continuous search for cost-cutting opportunities.
The Company continues to prioritize the well-being and health of its crew and customers and help Brazil to face this crisis by offering free transportation of vaccines and medical equipment such as respirators and intubation cubes to the cities in our network.
10 |
AZUL S.A. Notes to the unaudited interim condensed consolidated financial statements March 31, 2021 (In thousands of Brazilian reais – R$, unless otherwise indicated) | |
1.3 | Capital structure and net working capital |
On March 31, 2021, the Company had a negative equity position of R$16,908,830 (negative equity position of R$14,148,750 on December 31, 2020). The variation in the balance is mainly due to the devaluation of 9.6% of the Brazilian real against the U.S. dollar in the three-month period ended March 31, 2021, from R$5.1967 to R$5.6973, which significantly impacted the Company's results in the foreign currency exchange, net in the amount of R$1,727,760, recorded in the financial result, and increased fuel, maintenance and interest expenses with U.S. dollar-denominated leases.
Accordingly, the consolidated net working capital presented a variation of R$893,493, reaching a negative position of R$5,688,701 on March 31, 2021 (negative of R$4,795,208 on December 31, 2020). The variation in the balance is substantially related to the increase in lease liabilities mainly due to the 9.6% devaluation of the Brazilian real against the U.S. dollar.
The Company's management has taken several actions to obtain additional sources of liquidity, together with measures to contain non-essential operating expenses and cash outflows.
Such actions have proven to be efficient to withstand the economic slowdown presented due to the COVID-19 pandemic and its second wave.
Management continuously monitors the effects of the crisis and will continue to adopt measures to strengthen its cash position.
Management also evaluated and concluded that the Company is in a position to continue its operations and comply with its obligations, according to the contracted maturities. This assessment is based on the Company's business plan, approved by the Board of Directors on December 10, 2020, which in turn includes planned future actions, macroeconomic and aviation sector assumptions, such as: recovery in demand, exchange rate and fuel price estimations.
Based on this conclusion, these interim condensed consolidated financial statements were prepared based on the going concern assumption.
1.4 | Seasonality |
The Company's operating revenues depend substantially on the general volume of passenger and cargo traffic, which is subject to seasonal changes. Our passenger revenues are generally higher during the summer and winter holidays, in January and July, respectively, and in the last two weeks of December, which corresponds to the holiday season. Considering the distribution of fixed costs, this seasonality tends to cause variations in operating results between the quarters of the fiscal year.
2. | BUSINESS COMBINATION |
On May 14, 2020, the Company completed the acquisition of all shares of Azul Conecta Ltda. (“Azul Conecta”), previously denominated Two Táxi Aéreo Ltda. The transaction was approved without restrictions by the Brazilian Antitrust Authority (“CADE”) on March 27, 2020. On April 30, 2020, through a power of attorney, the Company assumed control of Azul Conecta, therefore, the transfer of control occurred before the closing date mentioned above, in accordance with IFRS 3 – Business Combinations.
11 |
AZUL S.A. Notes to the unaudited interim condensed consolidated financial statements March 31, 2021 (In thousands of Brazilian reais – R$, unless otherwise indicated) | |
At that time, Azul Conecta offered regular passenger and cargo services to 39 destinations in Brazil, of which only seven were served by Azul. The acquired company also had 14 daily departures and arrival times on the auxiliary runway at the Congonhas airport, the country's main domestic terminal. Its fleet consisted of 17 own aircraft, model Cessna Caravan, a single-engine regional turboprop with a capacity for nine passengers.
The total nominal amount of the transaction was R$123,000. Payment will be made in up to 30 monthly installments, ranging from R$3,000 to R$10,000, subject to certain contractual and market conditions, and a final payment of up to R$30 million, which will be kept deposited in a bank account as a guarantee in favor of the Company for a specified period.
This acquisition generated a goodwill of R$57,446 initially allocated to the line item “Goodwill for expected future profitability” in the interim condensed consolidated financial statements. The conclusion of the allocation of fair value of the assets acquired and liabilities assumed will be completed within next quarter.
Description | Fair value of assets and liabilities | |
Assets | ||
Cash and cash equivalents | 3,971 | |
Accounts receivable | 3,637 | |
Inventories | 1,624 | |
Taxes recoverable | 1,399 | |
Other assets | 458 | |
Property and equipment (a) | 74,205 | |
85,294 | ||
Liabilities | ||
Loans and financing | (16,540) | |
Accounts payable | (5,764) | |
Salaries, accruals and payroll charges | (2,707) | |
Taxes payable | (824) | |
Provision for tax, civil and labor risks (b) | (1,687) | |
Other liabilities | (650) | |
(28,172) | ||
Net assets acquired | 57,122 | |
Consideration at present value | 114,568 | |
Goodwill for expected future profitability | 57,446 | |
Cash flows | ||
Net cash acquired with subsidiary | 3,971 | |
Payments incurred for acquisition of subsidiary | (62,684) | |
Net cash flow from acquisition | (58,713) |
(a) | The Company carried out the fair value measurement of property and equipment based on conditions at the acquisition date. The fair value adjustment recognized in this line item amounts to R$56,820. |
(b) | The Company recognized R$500 fair value from possible contingencies. |
12 |
AZUL S.A. Notes to the unaudited interim condensed consolidated financial statements March 31, 2021 (In thousands of Brazilian reais – R$, unless otherwise indicated) | |
3. | DECLARATION OF MANAGEMENT, BASIS FOR PREPARATION AND PRESENTATION OF THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
The Company's interim condensed consolidated financial statements have been prepared in accordance with International Financial Reporting Standard No. 34 – Interim Financial Reporting (“IAS 34”).
The Company’s interim condensed consolidated financial statements have been prepared based in Brazilian Reais (“R$”) as a functional and presentation currency and are expressed in thousands of reais, unless otherwise indicated. Items disclosed in other currencies are also presented in thousands when applicable.
The preparation of the Company's interim condensed consolidated financial statements requires Management to make judgments, use estimates and adopt assumptions that affect the reported amounts of revenues, expenses, assets and liabilities. However, the uncertainty related to these judgments, assumptions and estimates can lead to results that require a significant adjustment to the carrying amount of certain assets and liabilities in future years.
The Company reviews its judgments, estimates, and assumptions on an ongoing basis. When preparing this interim condensed consolidated financial statements, management used disclosure criteria considering regulatory aspects and the relevance of the transactions to understand the changes in the Company’s economic and financial position and its performance since the end of the year ended December 31, 2020, as well as the update of relevant information included in the annual consolidated financial statements as of and for the year ended December 31, 2020.
Management confirms that all relevant information specific to the interim condensed consolidated financial statements, and only such information, is being evidenced and corresponds to that used by Management when carrying out its business activities.
The interim condensed consolidated financial statements have been prepared based on the historical cost, except for the following material items recognized in the statements of financial position.
· | Short-term investments classified as cash and cash equivalents; |
· | Short-term investments comprising mainly exclusive investment funds, measured at fair value; |
· | Derivative financial instruments; and |
· | Loans and financing – conversion rights. |
The approval and authorization for the issuance of these interim condensed consolidated financial statements took place at the Board of Directors' meeting held on May 3, 2021.
4. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
The interim condensed consolidated financial statements presented herein were prepared based on policies, accounting practices and estimate calculation methods adopted and presented in detail in the annual consolidated financial statements for the year ended December 31, 2020 and should be read in conjunction with those financial statements.
13 |
AZUL S.A. Notes to the unaudited interim condensed consolidated financial statements March 31, 2021 (In thousands of Brazilian reais – R$, unless otherwise indicated) | |
4.1 New accounting standards and interpretations adopted for the period
On March 31, 2021, the IASB extended for one year, that is until June 30, 2022, the application of the practical expedient of IFRS 16, as a result of benefit granted to lessees (“lease concessions”) as a result of the COVID-19 pandemic.
4.2 New accounting standards and pronouncements not yet adopted
There are no other standards and interpretations issued and not yet adopted that, in Management’s opinion, may have a significant impact on the results of operations or financial position disclosed by the Company.
4.3 Foreign currency transactions
Foreign currency transactions are recorded at the exchange rate in effect at the date the transactions take place. Monetary assets and liabilities denominated in foreign currency are calculated based on the foreign exchange rate in effect at the reporting date, and any difference resulting from currency translation is recorded under the line item “Foreign currency exchange, net” in the statements of operations.
The exchange rates in Brazilian reais at the date of these interim condensed consolidated financial statements are as follows:
Final rate | Average rate | ||||
Description | March 31, 2021 | December 31, 2020 | March 31, 2021 | December 31, 2020 | |
U.S. dollar | 5.6973 | 5.1967 | 5.6461 | 5.1578 | |
Euro | 6.6915 | 6.3779 | 6.7188 | 5.8989 |
5. | CASH AND CASH EQUIVALENTS |
Description | Effective interest rate p.a. | March 31, 2021 | December 31, 2020 |
Cash and bank deposits | 493,995 | 465,054 | |
Cash equivalents | |||
Bank Deposit Certificate - CDB | 0.22% | 1,757,144 | 2,216,592 |
Repurchase agreements | 0.22% | 23,340 | 361,183 |
Exclusive investment funds | 1.93% | 951 | 21,986 |
2,275,430 | 3,064,815 |
14 |
AZUL S.A. Notes to the unaudited interim condensed consolidated financial statements March 31, 2021 (In thousands of Brazilian reais – R$, unless otherwise indicated) | |
6. | SHORT- AND LONG-TERM INVESTMENTS |
Description | Effective interest rate p.a. | March 31, 2021 | December 31, 2020 |
Exclusive investment funds | 1.93% | 2,263 | 62,972 |
Investment funds | 0.01% | 8,361 | 28,847 |
TAP Bond | 7.50% | 903,318 | 854,462 |
913,942 | 946,281 | ||
Current | 10,624 | 91,819 | |
Non-current | 903,318 | 854,462 |
Investment funds comprise Brazilian government bonds, bank notes, CDBs and debentures issued by companies with a risk rating between AAA and A+. Brazilian government bonds comprise National Treasury Bills (“LTN”), Financial Treasury Bills (“LFT”) and National Treasury Notes (“NTN”).
7. | ACCOUNTS RECEIVABLE |
Description | March 31, 2021 | December 31, 2020 |
Local currency | ||
Credit card companies | 383,311 | 394,895 |
Cargo and travel agencies | 145,199 | 146,854 |
Azul Viagens | 69,778 | 56,870 |
TudoAzul Program | 73,545 | 65,522 |
Other | 28,819 | 52,713 |
Total local currency | 700,652 | 716,854 |
Foreign currency | ||
Credit card companies | 7,303 | 8,927 |
Maintenance reserves | 129,797 | 112,170 |
Airline partner companies | 11,971 | 24,910 |
Insurance | 8,125 | 7,150 |
Other | 23,943 | 21,502 |
Total foreign currency | 181,139 | 174,659 |
Total | 881,791 | 891,513 |
Allowance for expected credit losses | (16,187) | (16,131) |
Total net | 865,604 | 875,382 |
15 |
AZUL S.A. Notes to the unaudited interim condensed consolidated financial statements March 31, 2021 (In thousands of Brazilian reais – R$, unless otherwise indicated) | |
The breakdown of accounts receivable by maturity, net of allowance for expected losses, is as follows:
Description | March 31, 2021 | December 31, 2020 |
Not past due | 701,688 | 743,715 |
Past due | 163,916 | 131,667 |
Total | 865,604 | 875,382 |
The changes in the allowance for expected losses is as follows:
Description | March 31, 2021 | December 31, 2020 |
Balances at the beginning of the period | (16,131) | (14,716) |
Business combination - Azul Conecta | - | (380) |
(Additions) reversals | (131) | (3,205) |
Write-off of uncollectible amounts | 75 | 2,170 |
Balances at the end of the period | (16,187) | (16,131) |
8. | AIRCRAFT SUBLEASE RECEIVABLES |
Description | March 31, 2021 | December 31, 2020 |
2021 | 155,827 | 142,932 |
2022 | 74,023 | 62,547 |
2023 | 80,354 | 65,040 |
2024 | 80,516 | 65,188 |
2025 | 47,208 | 34,789 |
After 2025 | 4,708 | 1,994 |
Gross lease receivables | 442,636 | 372,490 |
Accrued interest | (68,459) | (59,553) |
Net lease receivables | 374,177 | 312,937 |
Current | 153,316 | 123,455 |
Non-current | 220,861 | 189,482 |
As of March 31, 2021, the amount of R$71,757 was past due. No allowance was established as the Company’s cash comprises amounts referring to security deposits advanced by the sub-lessor, and therefore there is a low expectation of non-realization of such assets.
16 |
AZUL S.A. Notes to the unaudited interim condensed consolidated financial statements March 31, 2021 (In thousands of Brazilian reais – R$, unless otherwise indicated) | |
9. | INVENTORIES |
Description | March 31, 2021 | December 31, 2020 |
Maintenance parts and materials | 495,522 | 442,161 |
Flight attendance and uniforms | 9,256 | 9,579 |
Provision for loss on inventories | (50,618) | (49,153) |
Total net | 454,160 | 402,587 |
Set out below is the changes in the provision for loss on inventories:
Description | March 31, 2021 | December 31, 2020 |
Balances at the beginning of the period | (49,153) | (33,727) |
Additions | (2,050) | (16,438) |
Write-offs | 585 | 1,012 |
Balances at the end of the period | (50,618) | (49,153) |
10. | SECURITY DEPOSITS AND MAINTENANCE RESERVES |
The changes in the security deposits and maintenance reserves for the three-month period ended March 31, 2021 is as follows:
Consolidated | |||
Description | Maintenance reserves | Security deposits | Total |
Balances at December 31, 2020 | 1,321,646 | 232,396 | 1,554,042 |
Additions | 169,197 | 39,020 | 208,217 |
Write-offs | (5,740) | - | (5,740) |
Reimbursements | (47,979) | (9,003) | (56,982) |
Exchange differences | 130,513 | 19,867 | 150,380 |
Balances at March 31, 2021 | 1,567,637 | 282,280 | 1,849,917 |
Current | 275,294 | - | 275,294 |
Non-current | 1,292,343 | 282,280 | 1,574,623 |
17 |
AZUL S.A. Notes to the unaudited interim condensed consolidated financial statements March 31, 2021 (In thousands of Brazilian reais – R$, unless otherwise indicated) | |
11. | TAXES RECOVERABLE |
Description | March 31, 2021 | December 31, 2020 |
IRPJ and CSSL | 13,949 | 4,443 |
Withholding income tax | 21,417 | 3,470 |
PIS and COFINS | 95,273 | 123,005 |
ICMS | 5,943 | 1,765 |
INSS | 698 | 519 |
Other taxes | - | 504 |
137,280 | 133,706 |
12. | PREPAID EXPENSES |
Description | March 31, 2021 | December 31, 2020 |
Insurances premiums | 49,566 | 49,428 |
Expenses with leased aircraft and engines | 27,028 | 28,351 |
Guarantee commission | 64,269 | 40,678 |
Other | 24,424 | 36,085 |
Total | 165,287 | 154,542 |
Current | 148,122 | 136,350 |
Non-current | 17,165 | 18,192 |
13 | DEFERRED TAXES |
13.1 Reconciliation of deferred tax assets (liabilities)
Description | December 31, 2020 | Result | March 31, 2021 | |
Temporary differences | ||||
Fair value of TAP Bond | (26,132) | 229 | (25,903) | |
Financial instruments | (121,960) | 45,523 | (76,437) | |
Deferred revenue TudoAzul program | (117,540) | (9,557) | (127,097) | |
Depreciation of aircraft and engines | (53,182) | 49,865 | (3,317) | |
Temporary differences assets (*) | 318,814 | (86,060) | 232,754 | |
- | - | - |
(*) Deferred taxes assets recognized up in the limit of the deferred taxes liabilities recognized.
18 |
AZUL S.A. Notes to the unaudited interim condensed consolidated financial statements March 31, 2021 (In thousands of Brazilian reais – R$, unless otherwise indicated) | |
13.2 | Reconciliation of the effective income tax rate |
Three-month periods ended March 31, | ||
Description | 2021 | 2020 |
Loss before income tax and social contribution | (2,786,626) | (6,400,717) |
Combined nominal tax rate | 34% | 34% |
Taxes calculated at nominal rates | 947,453 | 2,176,244 |
Adjustments to determine the effective rate | ||
Profits from investments not taxed abroad | (3,694) | (26,278) |
Share of profit (loss) of subsidiaries | - | - |
(Unrecorded) benefit on tax losses and temporary differences | (950,303) | (1,956,039) |
Permanent differences | 6,906 | 22,100 |
Other | (362) | 34,063 |
- | 250,090 | |
Current income tax and social contribution | - | (13,016) |
Deferred income tax and social contribution | - | 263,106 |
Income tax and social contribution credit (expense) | - | 250,090 |
Effective rate | 0% | 4% |
The Company offsets tax assets and liabilities if, and only if, it has a legal right to offset such assets and liabilities when they are levied on the same legal entity and collected by the same tax authority.
The Company has tax losses carryforward with no expiration to offset 30% of future taxable profits, as follows:
Description | March 31, 2021 | December 31, 2020 |
Tax loss and negative social contribution base, net | 6,805,985 | 5,751,867 |
Tax loss (25%) | 1,701,496 | 1,437,967 |
Negative social contribution base (9%) | 612,539 | 517,668 |
19 |
AZUL S.A. Notes to the unaudited interim condensed consolidated financial statements March 31, 2021 (In thousands of Brazilian reais – R$, unless otherwise indicated) | |
14. | PROPERTY AND EQUIPMENT AND RIGHT-OF-USE ASSETS |
14.1 | PROPERTY AND EQUIPMENT |
Description | Weighted average rate (p.a.) | December 31, 2020 | Acquisitions | Disposals/ write-offs | Transfers | March 31, 2021 |
Cost | ||||||
Aircraft and engines | 2,297,661 | 146,646 | (102,999) | 310 | 2,341,618 | |
Buildings and leasehold improvements | 485,247 | 3,198 | (3) | - | 488,442 | |
Equipment and facilities | 181,094 | 3,564 | (187) | - | 184,471 | |
Other | 28,008 | 266 | - | - | 28,274 | |
Construction in progress | 33,630 | 18,077 | - | (807) | 50,900 | |
Advance payments for acquisition of aircraft | 91,944 | - | - | - | 91,944 | |
3,117,584 | 171,751 | (103,189) | (497) | 3,185,649 | ||
Depreciation | ||||||
Aircraft and engines | 8% | (624,736) | (48,060) | 2,277 | - | (670,519) |
Buildings and leasehold improvements | 9% | (128,761) | (11,101) | - | - | (139,862) |
Equipment and facilities | 12% | (107,917) | (5,210) | 86 | - | (113,041) |
Other | 10% | (19,606) | (704) | - | - | (20,310) |
(881,020) | (65,075) | 2,363 | - | (943,732) | ||
Property and equipment | 2,236,564 | 106,676 | (100,826) | (497) | 2,241,917 | |
Impairment | (436,858) | - | - | - | (436,858) | |
Total property and equipment, net | 1,799,706 | 106,676 | (100,826) | (497) | 1,805,059 |
14.2 | RIGHT-OF-USE ASSETS |
Description | Weighted average rate (p.a.) | December 31, 2020 | Acquisitions | Disposals/ write-offs | Contractual changes | Transfers | March 31, 2021 |
Cost | |||||||
Aircraft | 9,575,376 | - | - | 8,561 | - | 9,583,937 | |
Engines and simulators | 528,310 | 63,877 | - | 11,241 | - | 603,428 | |
Restoration of aircraft and engines | 597,011 | - | - | - | - | 597,011 | |
Maintenance of aircraft and engines | 1,414,507 | 38,260 | (9,287) | - | 497 | 1,443,977 | |
Properties | 114,167 | - | - | - | - | 114,167 | |
Other | 30,435 | 1,361 | - | - | - | 31,796 | |
12,259,806 | 103,498 | (9,287) | 19,802 | 497 | 12,374,316 | ||
Depreciation | |||||||
Aircraft | 6% | (5,498,615) | (141,800) | - | - | - | (5,640,415) |
Engines and simulators | 13% | (264,613) | (16,795) | - | - | - | (281,408) |
Restoration of aircraft and engines | 10% | (182,861) | (15,479) | - | - | - | (198,340) |
Maintenance of aircraft and engines | 22% | (892,325) | (76,911) | 2,852 | - | - | (966,384) |
Properties | 8% | (74,607) | (2,349) | - | - | - | (76,956) |
Other | 11% | (29,429) | (860) | - | - | - | (30,289) |
(6,942,450) | (254,194) | 2,852 | - | - | (7,193,792) | ||
Right-of-use assets | 5,317,356 | (150,696) | (6,435) | 19,802 | 497 | 5,180,524 | |
Impairment | (706,615) | - | - | - | - | (706,615) | |
Right-of-use assets, net | 4,610,741 | (150,696) | (6,435) | 19,802 | 497 | 4,473,909 |
During the three-month period ended March 31, 2021, the Company carried out a sale and leaseback transaction for two of its own engines. The gain related to this operation corresponds to the amount of R$22,736, recognized in “Other operating expenses, net”.
20 |
AZUL S.A. Notes to the unaudited interim condensed consolidated financial statements March 31, 2021 (In thousands of Brazilian reais – R$, unless otherwise indicated) | |
During the three-month period ended March 31, 2021, due to aircraft and engine lease agreements, in accordance with IFRS 16 – Leases, it was necessary to remeasure the lease liabilities through a revised discount rate, resulting in an increase in the lease liabilities at present value by R$6,700, with a corresponding entry in the amount of R$ 19,802 in the right-of-use assets and the difference, a gain of R$13,102, was recognized in “Other operating expenses, net”.
15 | INTANGIBLE ASSETS |
Breakdown and the changes in the intangible assets:
Description | Weighted average rate (p.a.) | December 31, 2020 | Acquisitions | Disposals/ write-offs | March 31, 2021 |
Cost | |||||
Goodwill for expected future profitability (a) | - | 810,948 | - | - | 810,948 |
Airport operating license (b) | - | 82,196 | - | - | 82,196 |
Software | - | 593,334 | 41,573 | (244) | 634,663 |
1,486,478 | 41,573 | (244) | 1,527,807 | ||
Amortization | |||||
Software | 17% | (316,210) | (24,853) | 122 | (340,941) |
(316,210) | (24,853) | 122 | (340,941) | ||
Total intangible assets, net | 1,170,268 | 16,720 | (122) | 1,186,866 |
(a) | Goodwill for expected future profitability, in the amounts of R$753,502 and R$57,446, arises from the acquisitions of Tudo Azul S.A. in 2012 and Azul Conecta in 2020, respectively, and refers to the consideration transferred, less the fair value of assets acquired and liabilities assumed, net. |
(b) | As part of the allocation of the purchase price for the acquisition of Tudo Azul S.A., the Company recognized the value of operating licenses for certain airports, which has an indefinite useful life. |
21 |
AZUL S.A. Notes to the unaudited interim condensed consolidated financial statements March 31, 2021 (In thousands of Brazilian reais – R$, unless otherwise indicated) | |
16 | LOANS AND FINANCING |
16.1 Changes in loans and financing
Description | Nominal rate p.a. | Maturity | December 31, 2020 | Proceeds | Variation of conversion right | Payment of principal | Payment of interest | Interest incurred | Exchange differences | Amortized cost | March 31, 2021 |
In foreign currency – US$ | |||||||||||
Working capital | 1% to 5.9% | Oct/24 | 2,236,844 | - | - | - | - | 33,791 | 216,102 | 1,740 | 2,488,477 |
Convertible debentures (a) | 6.0% to 7.5% | Oct/25 | 2,419,704 | - | (54,032) | - | - | 54,062 | 101,352 | 894 | 2,521,980 |
Aircraft and engines | 4.0% to 6.0% Libor 3M + 2.6% | Mar/29 | 1,084,705 | - | - | (7,618) | (2,283) | 14,386 | 105,630 | 1,027 | 1,195,847 |
In local currency – R$ | |||||||||||
Working capital | 5.0% to 10.7% CDI + 2% to 6% TLP + 5% | Dec/23 | 776,481 | 7,217 | - | (35,250) | (24,989) | 9,595 | - | 188 | 733,242 |
Debentures | CDI + 3% | Dec/23 | 690,904 | - | - | - | - | 8,852 | - | 1,335 | 701,091 |
Aircraft and engines | 6,0% to 6,5% Selic + 2.8% to 5.5% TLP + 5% | May/25 | 151,876 | - | - | (12,689) | (3,153) | 1,854 | - | 41 | 137,929 |
Total in R$ | 7,360,514 | 7,217 | (54,032) | (55,557) | (30,425) | 122,540 | 423,084 | 5,225 | 7,778,566 | ||
Current liabilities | 858,332 | 524,508 | |||||||||
Non-current liabilities | 6,502,182 | 7,254,058 |
(a) | The balance contains the conversion right in the amount of R$1,411,967 (as of December 31, 2020 – R$1,465,999). |
22 |
AZUL S.A. Notes to the unaudited interim condensed consolidated financial statements March 31, 2021 (In thousands of Brazilian reais – R$, unless otherwise indicated) | |
16.2 | Schedule of amortization of long-term loans and financing |
Description | March 31, 2021 | December 31, 2020 |
2022 | 841,765 | 743,137 |
2023 | 1,251,368 | 914,343 |
2024 | 2,467,614 | 2,264,451 |
2025 | 2,662,262 | 2,551,701 |
After 2025 | 31,049 | 28,550 |
7,254,058 | 6,502,182 |
16.3 Covenants
The Company has restrictive covenants in some of its financing contracts, as disclosed in the annual consolidated financial statements as of and for the year ended December 31, 2020.
On March 31, 2021, the Company obtained a waiver for the United States International Development Finance Corporation (“DFC”) in relations to Guarantor’s Covenants for the periods ending on March 31, 2021, June 30, 2021, September 30, 2021 and December 31, 2021 and therefore, the related debt remains classified in these interim condensed consolidated financial statements according to the maturity established by the financing agreement.
16.4 Other
On March 31, 2021, the Company concluded the renegotiation of its working capital obligation with the DFC, which resulted in the obtaining of a new payment flow, where the short-term debt was extended, and therefore, transferred to the long term. Such negotiation did not result in the extinction of debt instruments, in accordance with IFRS 9.
23 |
AZUL S.A. Notes to the unaudited interim condensed consolidated financial statements March 31, 2021 (In thousands of Brazilian reais – R$, unless otherwise indicated) | |
17 | LEASE LIABILITIES |
17.1 Changes in lease liabilities
Description | Average payment term in years | Weighted average rate | December 31, 2020 | Additions | Contractual modifications | Payments | Interest incurred | Exchange differences | March 31, 2021 |
Lease without purchase option: | |||||||||
Aircraft and engines | 8.06 | 22.19% | 11,663,143 | 66,429 | (31,500) | (286,818) | 609,114 | 1,138,807 | 13,159,175 |
Other | 2.05 | 8.18% | 57,278 | 1,361 | - | (5,897) | 1,120 | 95 | 53,957 |
Lease with purchase option: | |||||||||
Aircraft and engines | 5.29 | 11.91% | 800,391 | - | 38,200 | (14,908) | 23,650 | 79,634 | 926,967 |
Total in R$ | 12,520,812 | 67,790 | 6,700 | (307,623) | 633,884 | 1,218,536 | 14,140,099 | ||
Current liabilities | 2,272,349 | 3,005,412 | |||||||
Non-current liabilities | 10,248,463 | 11,134,687 |
24 |
AZUL S.A. Notes to the unaudited interim condensed consolidated financial statements March 31, 2021 (In thousands of Brazilian reais – R$, unless otherwise indicated) | |
17.2 Schedule of lease amortization
Description | March 31, 2021 | December 31, 2020 |
2021 | 2,412,899 | 2,498,180 |
2022 | 3,511,020 | 3,206,765 |
2023 | 3,987,266 | 3,641,808 |
2024 | 3,954,735 | 3,610,754 |
2025 | 3,313,200 | 3,011,683 |
After 2025 | 12,325,843 | 11,199,380 |
Minimum lease payment | 29,504,963 | 27,168,570 |
Financial charges | (15,364,864) | (14,647,758) |
Present value of minimum lease payments | 14,140,099 | 12,520,812 |
During the three-month period ended March 31, 2021, due to aircraft and engine lease agreements, in accordance with IFRS 16 – Leases, it was necessary to remeasure the lease liabilities through a revised discount rate, resulting in an increase in lease liabilities at present value by R$6,700, with a corresponding entry in the amount of R$19,802 in the right-of-use assets and the difference, a gain of R$13,102, was recognized in “Other operating expenses, net”.
18 ACCOUNTS PAYABLE
Description | March 31, 2021 | December 31, 2020 |
Accounts payable – local currency | 1,701,805 | 1,612,933 |
Accounts payable – foreign currency | 918,023 | 948,794 |
2,619,828 | 2,561,727 | |
Current | 2,026,304 | 2,238,668 |
Non-current | 593,524 | 323,059 |
25 |
AZUL S.A. Notes to the unaudited interim condensed consolidated financial statements March 31, 2021 (In thousands of Brazilian reais – R$, unless otherwise indicated) | |
19 | DERIVATIVE FINANCIAL INSTRUMENTS |
Derivatives not designated as hedge | |||||||
Changes in fair value | Options - foreign currency | Interest rate swap | Forward - Fuel | Forward - foreign currency | Conversion right (debentures) | Total | |
Rights (obligations) with derivatives at December 31, 2020 | 8,947 | (269,491) | (81,274) | 349,093 | (1,465,999) | (1,458,724) | |
Gains (losses) recognized in result | (6,573) | 135,945 | 21,267 | (126,499) | 54,032 | 78,172 | |
(Receipt) payment in cash | 1,410 | 983 | 16,302 | - | - | 18,695 | |
Rights (obligations) with derivatives at March 31, 2021 | 3,784 | (132,563) | (43,705) | 222,594 | (1,411,967) | (1,361,857) | |
Rights with derivative financial instruments | 3,784 | 120,822 | - | 222,594 | - | 347,200 | |
Obligations with derivative financial instruments | - | (253,385) | (43,705) | - | - | (297,090) | |
Loans and financing (embedded in convertible debentures) | - | - | - | - | (1,411,967) | (1,411,967) | |
3,784 | (132,563) | (43,705) | 222,594 | (1,411,967) | (1,361,857) |
26 |
AZUL S.A. Notes to the unaudited interim condensed consolidated financial statements March 31, 2021 (In thousands of Brazilian reais – R$, unless otherwise indicated) | |
20 AIR TRAFFIC LIABILITY
Description | March 31, 2021 | December 31, 2020 |
Cargo and passenger air traffic liability | 1,366,364 | 1,550,579 |
Azul Viagens | 163,920 | 183,061 |
TudoAzul Program | 778,604 | 755,232 |
2,308,888 | 2,488,872 |
The air traffic liability balances are presented net of passenger revenue breakage and the TudoAzul program, corresponding to R$373,815 on March 31, 2021 (R$ 372,534 on December 31, 2020).
21 PROVISIONS
Description | Provisions for return of aircraft and engines | Provision for tax, civil and labor risks | Provision for onerous contract | Provision for post-employment benefit | Total |
Balance at December 31, 2020 | 1,336,186 | 155,814 | 1,340,522 | 9,953 | 2,842,475 |
Addition of provision | - | 30,436 | 27,131 | 53 | 57,620 |
Write-offs and/or payments | (29,621) | (29,663) | (33,763) | - | (93,047) |
Interest incurred | 14,676 | - | 43,454 | 185 | 58,315 |
Exchange differences | 128,991 | - | 125,836 | - | 254,827 |
Balance at March 31, 2021 | 1,450,232 | 156,587 | 1,503,180 | 10,191 | 3,120,190 |
Current | 119,509 | - | 740,237 | - | 859,746 |
Non-current | 1,330,723 | 156,587 | 762,943 | 10,191 | 2,260,444 |
21.1 Provision for tax, civil and labor risks
The Company and its subsidiaries are parties to legal and administrative proceedings.
The Company’s Management believes that the provision for tax, civil and labor risks is sufficient to cover probable losses on legal and administrative proceedings. The balances of the proceedings with estimates of probable and possible losses are shown below:
Probable losses | Possible losses | |||
Description | March 31, 2021 | December 31, 2020 | March 31, 2021 | December 31, 2020 |
Tax | 2,863 | 2,858 | 157,803 | 154,640 |
Civil | 102,241 | 104,915 | 48,869 | 43,347 |
Labor | 51,483 | 48,041 | 113,235 | 114,524 |
156,587 | 155,814 | 319,907 | 312,511 |
27 |
AZUL S.A. Notes to the unaudited interim condensed consolidated financial statements March 31, 2021 (In thousands of Brazilian reais – R$, unless otherwise indicated) | |
21.2 Provision for post-employment benefit
The Company offers to employees a health care plan that, as a result of complying with current legislation, generates post-employment benefit obligations. The changes of actuarial liabilities related to the post-employment benefit, prepared based on an actuarial report, are presented below:
March 31, 2021 | December 31, 2020 | |
Actuarial liabilities at the beginning of the period | 9,953 | - |
Current services costs recognized in profit or loss | 53 | 9,921 |
Cost of interest recognized in profit or loss | 185 | 687 |
Effect of change in financial assumptions | - | (962) |
Effect of plan experience | - | 307 |
Actuarial liabilities at the end of the period | 10,191 | 9,953 |
Actuarial assumptions | ||
Weighted average of assumptions to determine the defined benefit obligation | ||
Nominal discount rate p.a. | 7.43% | |
Actual discount rate p.a. | 3.80% | |
Estimated inflation rate in the long term p.a. | 3.50% | |
HCCTR – Average nominal inflation rate p.a. | 6.60% | |
HCCTR – Actual nominal inflation rate p.a. | 3.00% | |
Mortality table | AT-2000 downrated by 10% |
22 RELATED-PARTY TRANSACTIONS
22.1 Compensation of key management personnel
Key management personnel comprise directors, officers and members of the Executive Committee. The compensation and charges paid or payable for services are shown below:
Three-month periods ended March 31, | ||
Description | 2021 | 2020 |
Salaries and charges | 6,592 | 4,310 |
Share-based payment plan (a) | 10,111 | 3,403 |
16,703 | 7,713 |
(a) | Considers stock option plans, restricted shares and phantom shares. The effect on the result referring to the phantom shares is based on the variation of the Company's share value, which is updated at each reporting period, and does not represent a cash outflow in the current year, with a forecast for settlement in up to eight years. |
22.2 Guarantees and pledges granted by the Company
The Company has granted guarantees on rental properties for some of its executives and the total amount involved is not significant.
28 |
AZUL S.A. Notes to the unaudited interim condensed consolidated financial statements March 31, 2021 (In thousands of Brazilian reais – R$, unless otherwise indicated) | |
22.3 | Technology service sharing contract |
On January 1, 2013, the Company entered into a contract with Águia Branca Participações S.A., one of its shareholders, for the sharing of information technology resources for an indefinite period. The total amount of services acquired during the three-month period ended March 31, 2021 was R$13 (R$51 on December 31, 2020), recorded in “Other operating expenses, net” in the statement of operations. As of March 31, 2021, there were no amounts to be paid as a result of this transaction.
22.4 | Ticket sales contract |
On March 26, 2018, the Company entered into a ticket sales contract with Caprioli Turismo Ltda., a travel agency owned by the Caprioli family (which holds an indirect interest in the Company through TRIP former shareholders), whereby Caprioli Turismo Ltda. is granted a R$20 credit line for the purchase and resale of tickets for flights operated by the Company. This credit line is guaranteed by a non-interest bearing promissory note in the same amount payable.
22.5 | Sublease of aircraft receivable |
In December 2019, the Company signed a letter of intent for the sublease of up to 28 aircraft to the Breeze Aviation Group (“Breeze”), an airline founded by the controlling shareholder of Azul, headquartered in the United States. The transaction was voted and approved by 97% of the Azul's shareholders at the Extraordinary General Meeting held on March 2, 2020. Following good corporate practices, the controlling shareholder did not participate in the voting.
The Company sub-leased two aircraft to Breeze and recorded a balance receivable of R$50,939.
22.6 | Indemnities |
As of March 31, 2021, the Company has recorded a balance receivable from former shareholders of TRIP S.A. (actually denominated TudoAzul S.A.) in the amount of R$39,339 (R$39,339 as on December 31, 2020). This balance refers to the reimbursement of expenses with legal proceedings originating prior to the merger between the companies and is recorded in “Other non-current assets”.
23 EQUITY
23.1 | Issued capital |
Quantity | |||
Description | Company’s capital | Common shares | Preferred shares |
At March 31, 2021 | 2,266,992 | 928,965,058 | 333,549,383 |
At December 31, 2020 | 2,246,367 | 928,965,058 | 331,644,724 |
As established in the Company’s By-laws, each common share is entitled to one vote. Preferred shares of any class do not have voting rights, however they do provide their holders:
29 |
AZUL S.A. Notes to the unaudited interim condensed consolidated financial statements March 31, 2021 (In thousands of Brazilian reais – R$, unless otherwise indicated) | |
· | Capital repayment priority; |
· | The right to be included in a public offer for the purchase of shares, due to the transfer of control of the Company, under the same conditions and for a price per share equivalent to 75 times the price per share paid to the controlling shareholder; |
· | The right to receive amounts equivalent to 75 times the price per common share after the division of the remaining assets among the shareholders; and |
· | The right to receive dividends equal to 75 times the amount paid to each common share. |
The Company’s shareholding structure is presented below:
March 31, 2021 | December 31, 2020 | |||||
Shareholder | Common shares | Preferred shares | % economic participation | Common shares | Preferred shares | % economic participation |
David Neeleman | 67.0% | 1.7% | 4.0% | 67.0% | 1.2% | 3.5% |
Trip shareholders (a) | 33.0% | 5.5% | 6.5% | 33.0% | 5.5% | 6.5% |
United Airlines Inc | - | 8.1% | 7.8% | - | 8.1% | 7.8% |
Blackrock | 5.1% | 4.9% | - | 5.1% | 1.3% | |
Capital Research Global Investors | - | 10.6% | 10.2% | 5.1% | 1.3% | |
Other | - | 69.0% | 77.5% | - | 74.9% | 79.4% |
Treasury shares | - | 0.1% | 0.1% | - | 0.1% | 0.1% |
Total | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% |
(a) This refers to Trip Participações S.A., Trip Investimentos Ltda. and Rio Novo Locações Ltda.
The Company is authorized, by resolution of the Board of Directors, to increase the issued capital regardless of any amendments to its By-laws, with the issue of up to 104,949,010 preferred shares. The Board of Directors will set the conditions for the issue, including price and payment term.
23.2 | Treasury shares |
Changes in treasury shares:
Description | Number of shares | R$ | |
At December 31, 2020 | 265,461 | 13,182 | |
Acquisition | 47,000 | 1,625 | |
At March 31, 2021 | 312,461 | 14,807 |
30 |
AZUL S.A. Notes to the unaudited interim condensed consolidated financial statements March 31, 2021 (In thousands of Brazilian reais – R$, unless otherwise indicated) | |
24 LOSS PER SHARE
Although there are differences between common and preferred shares as to voting and preemptive rights in the event of liquidation, the Company's preferred shares do not grant the right to receive fixed dividends. Preferred shares have economic power and the right to receive dividends 75 times greater than common shares. Accordingly, the Company considers that the economic power of preferred shares is greater than that of common shares. Therefore, the profit or loss for the period attributable to the controlling shareholders is allocated proportionally in relation to the total economic participation of the amount of common and preferred shares.
Basic earnings (loss) per share are calculated by dividing the profit or loss for the period attributable to the Company's controlling shareholders by the weighted average number of all classes of shares outstanding during the period.
Diluted earnings (loss) per share are calculated by adjusting the weighted average number of shares outstanding by instruments potentially convertible into shares. However, due to the losses reported in the three-month periods ended March 31, 2021 and 2020, these instruments issued by the Company have a non-dilutive effect and therefore were not considered in the total number of shares outstanding to determine the diluted loss per share.
Three-month periods ended March 31, | ||
Description | 2021 | 2020 |
Numerator | ||
Net loss for the period | (2,786,626) | (6,150,627) |
Denominator | ||
Weighted average number of common shares | 928,965,058 | 928,965,058 |
Weighted average number of preferred shares | 332,283,182 | 329,670,399 |
75 preferred shares (*) | 75 | 75 |
Weighted average number of equivalents preferred shares (*) | 344,669,382 | 342,056,600 |
Weighted average number of equivalents common shares (*) | 25,850,203,683 | 25,654,244,983 |
Weighted average number of shares outstanding and presumed conversions | 61,234,191 | 8,666,493 |
Weighted average number of shares that would have been issued at average market price | 3,237,450 | 5,997,809 |
Basic loss per common share | (0.11) | (0.24) |
Diluted loss per common share | (0.11) | (0.24) |
Basic loss per preferred share | (8.08) | (17.98) |
Diluted loss per preferred share | (8.08) | (17.98) |
(*) | This refers to the participation in the value of the Company's total equity, calculated as if all 928,965,058 common shares had been converted into 12,386,200 preferred shares at the conversion ratio of 75 common shares for each preferred share. |
(**) | This refers to the participation in the value of the Company's total equity, calculated as if the weighted average of preferred shares had been converted into common shares at the conversion ratio of 75 common shares for each 1 preferred share. |
25 SHARE-BASED PAYMENT
The conditions of the share-based payment plans granted to the Company's executives were detailed in the consolidated financial statements for the year ended December 31, 2020 and have not changed in the three-month period ended March 31, 2021.
31 |
AZUL S.A. Notes to the unaudited interim condensed consolidated financial statements March 31, 2021 (In thousands of Brazilian reais – R$, unless otherwise indicated) | |
25.1 | Stock option plan |
Changes in the stock option plan during the three-month period ended March 31, 2021:
Description | Number of shares |
At December 31, 2020 | 6,108,210 |
Exercised (a) | (1,904,659) |
At March 31, 2021 | 4,203,551 |
Number of exercisable options at: | |
At March 31, 2021 | 2,122,701 |
At December 31, 2020 | 2,158,658 |
(a) | The exercise of 1,904,659 shares corresponds to the amount of R$22,320. |
The expense recognized in the statement of operations corresponding to the stock option plan for the three-month period ended March 31, 2021 was R$1,525 (R$2,429 for the three-month period ended March 31, 2020).
25.2 | Restricted stock option plan |
The were no changes in the restricted stock option plan during the three-month period ended March 31, 2021.
Description | Number of shares |
At December 31, 2020 | 1,653,005 |
At March 31, 2021 | 1,653,005 |
The expense recognized in the statement of operations corresponding to the restricted stock option plan for the three-month period ended March 31, 2021 was R$4,326 (R$1,737 for the three-month period ended March 31, 2020).
25.3 | Phantom shares |
Changes in the phantom shares plan during the three-month period ended March 31, 2021:
Description | Total outstanding |
At December 31, 2020 | 4,857,041 |
Settled | (1,270) |
At March 31, 2021 | 4,855,771 |
The expense recognized in the statement of operations corresponding to the phantom shares for the three-month period ended March 31, 2021 was R$6,975 (R$2,131 for the three-month period ended March 31, 2020). As of March 31, 2021, the total obligation related to the phantom shares plan is R$69,320 (R$62,351 as of December 31, 2020).
32 |
AZUL S.A. Notes to the unaudited interim condensed consolidated financial statements March 31, 2021 (In thousands of Brazilian reais – R$, unless otherwise indicated) | |
26 | NET REVENUE |
Three-month periods ended March, 31 | ||
Description | 2021 | 2020 |
Sales revenue | ||
Passenger service | 1,650,069 | 2,726,259 |
Cargo transport and other revenue | 258,900 | 167,679 |
Gross revenue | 1,908,969 | 2,893,938 |
Taxes levied | ||
Passenger service | (52,427) | (72,840) |
Cargo transport and other revenue | (30,720) | (18,423) |
Total taxes | (83,147) | (91,263) |
Net revenue | 1,825,822 | 2,802,675 |
Revenues by geographical location are as follows:
Three-month periods ended March, 31 | ||
Description | 2021 | 2020 |
Domestic revenue | 1,678,529 | 2,198,313 |
Foreign revenue | 147,293 | 604,362 |
Net revenue | 1,825,822 | 2,802,675 |
27 | FINANCIAL RESULT |
Three-month periods ended March, 31 | ||
Description | 2021 | 2020 |
Financial income | ||
Interest on short and long-term investments | 18,026 | 2,826 |
Sublease receivable | 6,850 | 7,495 |
Other | 473 | 2,566 |
25,349 | 12,887 | |
Financial expenses | ||
Interest on loans | (68,478) | (54,584) |
Interest on lease | (633,884) | (265,766) |
Interest on convertible debentures | (54,062) | - |
Interest on factoring of credit card receivables | (6,431) | (8,404) |
Interest on provisions | (58,315) | (47,489) |
Interest and fines on other operations | (48,039) | (42,040) |
Guarantee commission | (17,066) | (5,565) |
Borrowing cost | (5,225) | (3,810) |
Other | (23,652) | (10,812) |
(915,152) | (438,470) | |
Derivative financial instruments, net | 78,172 | (1,281,616) |
Foreign currency exchange, net | (1,727,760) | (4,233,800) |
Financial result, net | (2,539,391) | (5,940,999) |
33 |
AZUL S.A. Notes to the unaudited interim condensed consolidated financial statements March 31, 2021 (In thousands of Brazilian reais – R$, unless otherwise indicated) | |
28 | FINANCIAL INSTRUMENTS AND RISK MANAGEMENT |
Operating activities expose the Company and its subsidiaries to financial market risks related to fuel prices, foreign exchange rates, interest rates, credit and liquidity. Such risks can be mitigated through the use of swaps, futures and options, in the oil, U.S. dollar and interest market.
The Company's management supervises the monitoring of the market, credit and liquidity risks.
All activities with financial instruments for risk management are carried out by specialists with skill, experience and adequate supervision. It is the Company's policy not to enter into derivative transactions for speculative purposes.
28.1 Accounting classification and fair value hierarchy of financial instruments
The accounting classifications of the Company's consolidated financial instruments and fair value hierarchy as of March 31, 2021 and December 31, 2020 are shown below:
Carrying amount | Fair value | ||||
Description | Level | March 31, 2021 | December 31, 2020 | March 31, 2021 | December 31, 2020 |
Assets | |||||
Cash and cash equivalents | 2 | 2,275,430 | 3,064,815 | 2,275,430 | 3,064,815 |
Short and long-term investments | 2 | 913,942 | 946,281 | 913,942 | 946,281 |
Accounts receivable | - | 865,604 | 875,382 | 865,604 | 875,382 |
Aircraft sublease receivables | - | 374,177 | 312,937 | 374,177 | 312,937 |
Security deposits and maintenance reserves | - | 1,849,917 | 1,554,042 | 1,849,917 | 1,554,042 |
Derivative financial instruments | 2 | 347,200 | 428,309 | 347,200 | 428,309 |
Liabilities | |||||
Loans and financing | - | (6,366,599) | (5,894,515) | (5,833,086) | (5,414,689) |
Loans and financing - conversion right | 2 | (1,411,967) | (1,465,999) | (1,411,967) | (1,465,999) |
Lease liabilities | - | (14,140,099) | (12,520,812) | (14,140,099) | (12,520,812) |
Accounts payable | - | (2,619,828) | (2,561,727) | (2,619,828) | (2,561,727) |
Accounts payable – supplier finance | - | (360,467) | (157,801) | (360,467) | (157,801) |
Reimbursement to customers | - | (237,833) | (221,342) | (237,833) | (221,342) |
Insurance premiums payable | - | (63,079) | (52,427) | (63,079) | (52,427) |
Derivative financial instruments | 2 | (297,090) | (421,034) | (297,090) | (421,034) |
28.2 TAP Bond
On March 14, 2016, the Company acquired the Series A convertible bond issued by Transportes Aéreos Portugueses GSPS S.A - TAP ("TAP Bond") in the amount of € 90 million. The TAP Bond mature in 10 years from their issue, with annual interest of 3.75% until September 20, 2016 and 7.5% in the following years. The accrued interest shall be paid on the maturity date or until the early redemption of the securities, whichever is earlier.
28.3 | Convertible debentures |
On November 12, 2020, the Company concluded the public offering for the distribution of debentures convertible into preferred shares. As required by IFRS 9 – Financial Instruments, the conversion right was measured at fair value through profit or loss as it is an embedded derivative. Accordingly, during the three-month period ended March 31, 2021, due to the change in the share price, a gain of R$54,032 was recognized.
34 |
AZUL S.A. Notes to the unaudited interim condensed consolidated financial statements March 31, 2021 (In thousands of Brazilian reais – R$, unless otherwise indicated) | |
28.4 | Derivative financial instruments |
Derivative financial instruments, and their changes are presented in Note 19 to these interim condensed consolidated financial statements.
28.5 | Market risks |
28.5.1 Interest rate risk
As of March 31, 2021, the Company had swap contracts to hedge against the effect of fluctuations in interest rates on part of payments for finance leases. During the three-month period ended March 31, 2021, the Company recognized a total gain from interest hedge transactions in the amount of R$135,945 (R$157,795 for the three-month period ended March 31, 2020).
28.5.2 Aviation fuel price risk (“QAV”)
The price of aviation fuel may vary depending on the volatility of the price of crude oil and its derivatives. To mitigate losses linked to variations in the fuel market, the Company had, as of March 31, 2021, forward transactions on fuel. During the three-month period ended March 31, 2021, the Company recognized a total gain of R$21,267 (loss of R$1,390,029 for the three-month period ended March 31, 2020)
28.5.3 Foreign currency risk
The foreign currency risk arises from the possibility of unfavorable foreign exchange differences to which the Company's liabilities or cash flows are exposed. The Company constantly monitors the net exposure in foreign currency and evaluates the contracting of derivative transactions, projecting for a maximum period of up to 12 months, and a longer term if deemed appropriate, to minimize its exposure. During the three-month period ended March 31, 2021, the Company recognized a loss of R$133,072 (R$49,383 for the three-month period ended March 31, 2020).
The exposure to exchange differences is as follows:
Exposure to US$ | Exposure to € | |||
Description | March 31, 2021 | December 31, 2020 | March 31, 2021 | December 31, 2020 |
Assets | ||||
Cash and cash equivalents and investments | 256,629 | 262,309 | 903,318 | 854,462 |
Accounts receivable | 166,096 | 232,950 | - | - |
Security deposits and maintenance reserves | 1,814,396 | 1,540,231 | - | - |
Aircraft sublease receivables | 374,177 | 312,937 | - | - |
Derivative rights | 171,853 | 155,920 | - | - |
Other assets | 127,129 | 60,576 | - | - |
Total assets | 2,910,280 | 2,564,923 | 903,318 | 854,462 |
Liabilities | ||||
Accounts payable | (918,023) | (831,429) | - | - |
Loans and financing | (6,206,304) | (5,741,253) | - | - |
Lease liabilities | (14,086,142) | (12,463,426) | - | - |
Derivative obligations | (43,705) | (81,274) | - | - |
Provisions and other liabilities | (3,106,300) | (951,348) | - | - |
Total liabilities | (24,360,474) | (20,068,730) | - | - |
Net exposure | (21,450,194) | (17,503,807) | 903,318 | 854,462 |
Net exposure in foreign currency | (3,764,975) | (3,368,254) | 134,995 | 133,972 |
35 |
AZUL S.A. Notes to the unaudited interim condensed consolidated financial statements March 31, 2021 (In thousands of Brazilian reais – R$, unless otherwise indicated) | |
28.6 Credit risk
Credit risk is inherent to the Company's operating and financial activities, mainly disclosed in cash and cash equivalents, short-term investments, accounts receivable, aircraft sublease receivables, security deposits and maintenance reserves. Financial assets classified as cash and cash equivalents and short-term investments are deposited with counterparties that have a minimum investment grade rating in the assessment made by agencies S&P Global Ratings, Moody's or Fitch (between AAA and A+). The TAP Bond is guaranteed by intellectual property rights and credits related to the TAP mileage program.
Credit limits are established for all customers based on internal classification criteria and the carrying amounts represent the maximum credit risk exposure. The credit quality of the customer is assessed based on an extensive internal credit rating system. Outstanding receivables from customers are frequently monitored by the Company.
Derivative financial instruments are contracted on the over-the-counter market (OTC) from counterparties with a minimum investment grade rating, or on commodities and futures exchanges (B3 and NYMEX), which substantially mitigates credit risk. The Company has an obligation to assess the risks of counterparties in financial instruments and to diversify the exposure periodically.
28.7 Liquidity risk
The maturity schedules of the Company's consolidated financial liabilities as of March 31, 2021 are as follows:
March 31, 2021 | |||||||
Description | Carrying amount | Contractual cash flows | 2021 | 2022 | 2023 | 2024 | After 2025 |
Accounts payable | 2,619,828 | 2,619,828 | 2,026,304 | 203,858 | 286,388 | 84,810 | 18,468 |
Accounts payable – supplier finance | 360,467 | 360,467 | 360,467 | - | - | - | - |
Loans and financing | 7,778,566 | 7,854,811 | 487,098 | 910,321 | 1,277,635 | 2,480,560 | 2,699,197 |
Lease liabilities | 14,140,099 | 29,504,963 | 2,412,899 | 3,511,020 | 3,987,266 | 3,954,735 | 15,639,043 |
Derivative obligations | 297,090 | 297,090 | 116,296 | 40,392 | 73,207 | 67,195 | - |
Reimbursement to customers | 237,833 | 237,833 | 237,833 | - | - | - | - |
25,433,883 | 40,874,992 | 5,640,897 | 4,665,591 | 5,624,496 | 6,587,300 | 18,356,708 |
28.8 Sensitivity analysis of financial instruments
28.8.1 Risk factor: foreign currency variations
As of March 31, 2021, the Company adopted a foreign exchange rate of R$5.6973/US$1.00 and R$6.6915/€1.00, corresponding to the month's closing rate announced by the Central Bank of Brazil as a probable scenario. The table below shows the sensitivity analysis and the effect on the result of the exchange rate fluctuation in the amount exposed of March 31, 2021:
Exposure to US$ | Exposure to € | |||
Description | Rate | March 31, 2021 | Rate | March 31, 2021 |
Net exposure at March 31, 2021 | 5.6973 | (21,450,194) | 6.6915 | 903,318 |
Effect on profit or loss | ||||
Foreign currency devaluation by -50% | 2.8487 | 10,725,097 | 3.3458 | (451,659) |
Foreign currency devaluation by -25% | 4.2730 | 5,362,549 | 5.0186 | (225,830) |
Foreign currency appreciation by 50% | 8.5460 | (10,725,097) | 10.0373 | 451,659 |
Foreign currency appreciation by 25% | 7.1216 | (5,362,549) | 8.3644 | 225,830 |
36 |
AZUL S.A. Notes to the unaudited interim condensed consolidated financial statements March 31, 2021 (In thousands of Brazilian reais – R$, unless otherwise indicated) | |
28.8.2 Risk factor: changes in aviation fuel prices
As of March 31, 2021, the Company has oil derivative contracts to protect future aviation fuel consumption. The probable scenarios used by the Company are the market curves at the March 31, 2021 closing for derivatives that protect the fuel price risk. The table below shows the sensitivity analysis in U.S. dollars of the fluctuation of aviation fuel barrel prices:
Exposure to HOA (a) | ||||
Description | Price (b) | March 31, 2021 | ||
HOA reference price at March 31, 2021 | $178 | (43,705) | ||
Effect on profit or loss | ||||
HOA devaluation by -50% | $89 | (138,164) | ||
HOA devaluation by -25% | $134 | (69,082) | ||
HOA appreciation by 50% | $267 | 137,655 | ||
HOA appreciation by 25% | $223 | 68,879 |
(a) | HOA – Heating Oil |
(b) | Average price in U.S. dollars, per gallon, projected for the next 12 months. |
28.8.3 Risk factor: changes in interest rates
As of March 31, 2021, the Company held financial investments and debts linked to various types of rates. In the sensitivity analysis of non-derivative financial instruments, the impact on annual interest was only considered on positions with values and exposed to such fluctuations, according to the scenarios shown below:
Exposure to CDI rate | Exposure to LIBOR rate | |||
Description | Rate (p.a.) | March 31, 2021 | Rate (p.a.) (a) | March 31, 2021 |
Net exposure at March 31, 2021 | 1.9% | 226,041 | 2.7% | (723,489) |
Effect on profit or loss | ||||
Interest rate devaluation by -50% | 1.0% | (2,107) | 1.3% | 9,445 |
Interest rate devaluation by -25% | 1.4% | (1,054) | 2.0% | 4,722 |
Interest rate appreciation by 50% | 2.9% | 2,107 | 4.0% | (9,445) |
Interest rate appreciation by 25% | 2.4% | 1,054 | 3.4% | (4,722) |
(a) | Weighted rate. |
28.9 Capital management
The Company seeks capital alternatives in order to satisfy its operational needs, aiming at a capital structure that it considers adequate for the financial costs and the maturity dates of funding and its guarantees. The Company continuously monitors its net indebtedness.
37 |
AZUL S.A. Notes to the unaudited interim condensed consolidated financial statements March 31, 2021 (In thousands of Brazilian reais – R$, unless otherwise indicated) | |
29 | NON-CASH TRANSACTIONS |
Description | March 31, 2021 |
Supplier finance (Accounts payable - supplier finance/Accounts payable) | 359,550 |
Sublease (Aircraft sublease receivables/Provisions) | 27,134 |
Property and equipment (Acquisition of property and equipment/Accounts payable) | 33,710 |
Sale and leaseback (Security deposits and maintenance reserves) | 2,760 |
Sale and leaseback (Accounts payable/Sale and leaseback) | 87,762 |
Sale and leaseback (Property and equipment and right-of-use assets/Sale and leaseback) | 65,238 |
Sale and leaseback (Lease liabilities/Sale and leaseback) | (56,606) |
30 COMMITMENTS
30.1 | Aircraft acquisition |
As of March 31, 2021, the Company had contractually assumed the commitment to acquire 131 aircraft, 93 directly from manufacturers and 38 from lessors (132 as of December 31, 2020, 94 directly from manufacturers and 38 from lessors). The related financial disbursements calculated at present value are shown below:
Description | March 31, 2021 | December 31, 2020 |
2021 | 2,202,363 | 1,941,843 |
2022 | 986,529 | 855,247 |
2023 | 655,887 | 565,661 |
2024 | 1,775,757 | 1,533,423 |
2025 | 1,576,005 | 1,351,477 |
After 2025 | 4,675,783 | 3,926,183 |
11,872,324 | 10,173,834 |
30.2 Letters of credit
As of March 31, 2021, the Company issued letters of credit in the amount of US$507 million (US$522 million as of December 31, 2020), equivalent to R$2,891,316 (R$2,713,794 as of December 31, 2020) and R$31,823 (R$38,270 as of December 31, 2020) related to security deposits, maintenance reserves and local guarantees.
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38 |