管理層發言
Hello, everyone, and welcome to Azul's Second Quarter Earnings Conference Call. My name is Zach and I will be your operator for today. This event is being recorded. I will now provide instructions to participants on how to ask questions. I would like to turn the presentation over to Thais Haberli, Head of Investor Relations. Please proceed, Thais.
Thank you, Zach, and welcome all to Azul's second quarter earnings call. The results that we announced last night, the audio of this call and the slides that we reference are available on our IR website. I'd like to caution you regarding our forward-looking statements. Any matters discussed today that are not historical facts, particularly comments regarding the company's future plans, objectives and expected performance, constitute forward-looking statements. These statements are based on a range of assumptions that the company believes are reasonable, but are subject to uncertainties and risks that are discussed in detail in our CPM and SEC filings. Also, during the course of the call, we will discuss non-IFRS performance measures, which should not be considered in isolation. Presenters today will be John Rodgerson, our CEO; and Antonio Garcia, our CFO. Abhi Shah, the President of Azul Group, is also here for the Q&A session. With that, I will turn the call over to John.
Thank you, Thais. Welcome, everyone, and thank you for joining us today. We are pleased to present Azul's second quarter 2026 results. The quarter reflects the continued execution of our plan and the decisive actions we have taken to navigate higher fuel prices, protect liquidity and build a stronger, more resilient company positioned for long-term success. As we go through the presentation, we'll focus on operational reliability and customer experience, disciplined capacity and revenue management, liquidity and deleveraging and the initiatives positioning Azul for sustainable value creation. In response to higher fuel prices, we proactively reduced capacity to protect cash and profitability. This is disciplined. It reflects our commitment to align capacity with profitable demand in creating long-term value. This shows a clear change in mindset and acting in a responsible way to the macro changes. At the same time, we continued with our fleet transition as we removed several widebody aircraft from our operation and we will restore our international capacity throughout this year. By year-end, we expect to have only one ACMI remaining and a significant step towards a more reliable international operation operated with Azul aircraft and our own crew members. Our operational performance is the best in the region. As you will see on the next slide, Azul was the most on-time airline in Brazil in April, June and July and the most on-time airline in Latin America in July. We maintain the #1 position month-to-date. This matters because reliability is a key driver of customer satisfaction, loyalty and customer selection. The improvement is also reflected in our NPS, which increased 26 points in 2026. A better travel experience strengthens customer loyalty, supports premium demand and reduces the cost of operational disruptions. Together, these improvements reinforce our ability to capture premium revenue through our focus on high-yield customers, enhanced customer experience and differentiated products. This is how Azul grows revenue while maintaining disciplined capacity. It all starts with the customers. Reliable operations enhance customer experience translating to stronger yields and disciplined capacity converts demand into profitability and cash generation. Together, they position Azul to navigate volatility and create sustainable long-term value. Moving to Slide 4. Our on-time performance reached 87.7% in July, making Azul the most on-time airline in Latin America. This follows leading performance in Brazil in April, June and July demonstrating the consistency of a great operation. This directly translates to our NPS, which increased 26 points since December 2025. This reflects the direct impact of restoring fleet reliability, reducing operational disruptions and enhancing the overall customer experience. Improving reliability is not only the right thing to do for our customers, but also a key driver of loyalty, premium demand and higher yields. One example of this is our co-branded credit card, which just hit a record of over 1 million holders this quarter. Behind these improvements are our crew members. Azul's service culture remains one of our most important competitive advantages. By focusing on operational reliability and customer experience, our teams are reinforcing the foundation of Azul and leading us to greater profitability. On Slide 5, you can see our crew members in action. I want to pause here and especially thank them for their dedication, passion and commitment. These qualities make Azul unique and bolster our customer-centric culture, operational excellence and differentiated travel experience. This is a competitive advantage that cannot be replicated simply by investing in aircraft. It is built by our people every day. Our product also reinforces this differentiation. Azul operates the most modern and efficient fleet. Our Embraer aircraft are equipped with seat-back entertainment, live television and WiFi providing customers with a differentiated experience even on domestic flights. Combined with our service culture, this product advantage strengthens loyalty and supports our premium positioning. We have the best operational performance, the best hard product and the best people in the business, all of that while maintaining the lowest unit cost in the region. With that, I'll turn it over to Antonio, who will walk you through our second quarter results.
Well, thank you, John. Good morning, everyone. Before discussing the results, I would also like to recognize our crew members for their dedication, passion and commitment to our customers. Their focus on safety, service and operational excellence is driving improvements in reliability and customer experience that differentiate Azul. Our people are the foundation of our culture and give us the confidence in our ability to execute our long-term plan. Turning to our second quarter results on Slide 6. The metrics shown here underscore both the resilience of our business model and the effectiveness of our strategy. We reported operating revenue of BRL 5 billion in the second quarter, a second-quarter record supported by healthy demand, disciplined capacity management, strong high-yield revenue and continuous growth in our business units. RASK increased 12.7% year-over-year to a record for the second quarter of BRL 0.4341. Adjusted EBITDA reached BRL 510 million representing a 10.2% margin. We delivered the results in the weakest quarter season-wise while also managing the significant 61% increase in fuel prices. We ended the quarter with immediate liquidity of BRL 3.7 billion equivalent to 16.6% of the last 12 months revenue. These results delivered during a challenging quarter are exactly what we committed to our investors during the restructuring: a disciplined airline with a stronger balance sheet and a clear path to cash generation and the ability to create value long term. On Slide 7, highlights the resilience of our business model. Revenue increased 0.7% year-over-year, while capacity declined 10.6% reflecting the disciplined capacity allocation and price actions designed to align with profitable demand and partially mitigate higher fuel prices. Higher fares, strong yields and solid contribution from our business units supported both recorded revenue and recorded unit revenue with RASK increasing 12.7% year-over-year. On Slide 8, you can see how Azul responded actively to higher fuel prices. We proactively implemented additional capacity reductions through our plan to protect liquidity and remain focused on long-term value creation. This was not reactive; just to repeat, this is discipline. Capacity declined 10.6% in the quarter. This figure represents a combination of our restructuring plan capacity and further actions taken as fuel price increased. This proactive action enabled Azul to align capacity with profitable demand, preserve liquidity and strengthen long-term financial performance. While total capacity declined, at the same time, premium revenue increased 12% versus last year. This reflects our ability to capture higher quality demand through four key actions: prioritizing high-yield customers, enhancing customer experience, introducing differentiated premium products and concentrating capacity on routes with a stronger premium demand. Our strategy is clear: prioritize revenue quality over volume. This ongoing mix shift supports strong yields and enables Azul to sustain RASK growth while maintaining disciplined capacity. Now on to Slide 9, let me address another important part of our strategy, our business units. These businesses diversify our revenue base, support premium revenues and enhance the resilience of Azul's broader ecosystem. In second quarter '26, average fares increased 9.5% year-over-year while our business units continued to contribute more than 20% of RASK reinforcing their growing importance to Azul's business model and long-term value creation. Fidelidade, Viagens, Logistics, Conecta, TechOps and Media are much more than just ancillary revenues. They are strategic units with differentiated business models, diversified revenue streams and attractive cash flow cycles. Together, these businesses create a more diversified and balanced revenue profile, strengthening Azul's ability to navigate volatile periods and generate value beyond the network. As shown on Slide 10, fuel prices have remained high and volatile reinforcing the importance of our flexible fleet, disciplined capacity management, dynamic pricing and diversified business units and strong cash management practices. Fuel remains a primary external variable affecting our profitability. Given the continued uncertainty around fuel prices and the broader macro environment, Azul is not providing full year guidance for 2026 at this time. We are focused on our long-term strategy. Turning to cost. Slide 11 shows CASK at BRL 0.4480 in the quarter, 26% higher year-over-year primarily reflecting the 61.8% increase in fuel cost per liter. However, Azul continues to maintain the lowest CASK in the region demonstrating our structural cost advantage and the benefit of the restructuring. CASK ex fuel increased 12% mainly reflecting temporary actions: reduction in capacity, pilot retention plan and training, higher sales incentives to match market dynamics. I'd like to highlight that a meaningful portion of the increase reflects the temporary fixed-cost deleverage as fixed costs were allocated over a smaller ASK base. This is not a structural deterioration of our cost base; it's the opposite. We are confident that as fleet availability stabilizes and capacity progressively resumes, this temporary deleverage should be reduced or diminished. The resulting dilution and fixed costs combined with our structural cost initiatives and more modern fleet should strengthen operating leverage and support the normalization of CASK over time. Moving to Slide 12. As you can see, the impact of fuel prices on EBITDA in second quarter '26 in a year-over-year comparison: fuel represented an approximate BRL 749 million headwind compared with second quarter '25. Through disciplined capacity management and price action, Azul recaptured 60% of its impact contributing approximately BRL 448 million to EBITDA. This performance was achieved even in a challenging operating environment with higher fuel prices and the historically weakest seasonal period in Brazil affecting demand and profitability. As a result, Azul delivered BRL 510 million in EBITDA in the quarter demonstrating the resilience of our business model and our ability to respond to changes in market conditions. Looking ahead, we expect much higher EBITDA levels in the second half of the year. Turning to Slide 13. Let me walk you through the recurring free cash flow: it was nearly breakeven in the quarter. This is a meaningful achievement considering the seasonally weaker period and substantially higher fuel price and lower capacity. Please keep in mind that we continue to clean up the remaining commitments from the restructuring process. During the quarter, Azul paid BRL 794 million in nonrecurring items related to restructuring and normalization of deferred obligations. This payment will decline materially over time reducing our cash outflows and supporting stronger free cash flow generation. Our strengthened liquidity position also enabled us to reduce advances on credit card receivables during the quarter, supporting lower financial costs and greater financial flexibility. As Azul restores its fleet and resumes capacity in line with the restructuring plan, air traffic liability should increase as bookings continue to grow. This growth represents a source of working capital and should provide additional support to operating cash flow as capacity and revenue recover. Delivering near breakeven recurring free cash flow during one of the most challenging periods in Brazil for a Brazilian carrier while absorbing significant transition-related cash outflows demonstrated the effectiveness of our restructuring. As nonrecurring payments decline and capacity normalizes, Azul expects cash flow generation to strengthen further. On Slide 14, you can see that Azul ended the quarter with BRL 3.7 billion immediate liquidity as expected. Total debt declined by approximately BRL 13 billion year-over-year reaching BRL 21.4 billion reflecting successful completion of our restructuring. Leverage measured using immediate liquidity improved to 2.8x, 2.3x lower than second quarter last year. This substantial improvement in our balance sheet demonstrates the effectiveness of our restructuring and provides Azul the financial flexibility to navigate near-term volatility while continuing its delevering journey. Now let me detail our debt maturity schedule. Slide 15 shows the amortization profile of our loans and financial obligations. Azul has no material debt maturity before 2031 with the exit financing representing the only significant remaining obligation and its repayment concentrated in that year. This provides approximately five years of visibility, materially reducing refinance risk and giving us the flexibility to pursue strategic opportunities while generating the cash required to address this obligation. In addition, our restructuring permanently reduced interest payments by more than 50%, further strengthening our ability to generate consistent free cash flow and deleverage over time. Just to finalize. In addition, we recently achieved an important milestone by obtaining approval of both FGE and FNAC facilities as shown in Slide 16. These programs together provide up to BRL 4.6 billion of long-term financing at attractive rates. Combined with our existing liquidity, these facilities provide additional financial flexibility throughout this transitional year and support continued execution of our strategic plan. It is important to highlight we only had BRL 1.1 billion in government-backed finance in our restructuring business. The approval of BRL 4.6 billion reflects the confidence in Azul's underlying business fundamentals. We expect to access these lines in third quarter or fourth quarter 2026. With that, I will turn the call back to John. Thank you very much.
Thank you, Antonio. Moving to Slide 17. As we look ahead, Azul is entering a new phase. Our operation is the best in Latin America, our balance sheet is reset and our strategy remains firmly focused on long-term value creation. Operationally, we will continue improving efficiency through higher utilization and greater reliability and lower operational disruptions. Today, 100% of our E2 aircraft are flying as is our A320 aircraft. And we are restoring our international operations while reducing our ACMI exposure, positioning Azul for more reliable international operation, increasingly supported by Azul's aircraft and its own crew members. Our international recovery will be completed by stronger partnerships with leading global carriers. The recent expansion of our codeshare partnership with JetBlue increases connectivity beyond our U.S. gateways, allowing us to offer customers access to additional destinations while improving the profitability and capital efficiency of our international network. Financially, our priorities remain clear: preserve liquidity, enhance cash generation and continue deleveraging. As our restructuring-related obligations decline, our nonrecurring cash outflow should progressively normalize further supporting free cash flow generation. We will pursue profitable growth through disciplined capacity allocation, deploying aircraft where they generate the highest returns and leveraging strategic partnerships where they create greater network value. By improving service quality, restoring international connectivity and attracting more premium customers; Azul will continue strengthening the competitive advantages that differentiate us. On Slide 18, you can see that our objectives align with our Board's strategic priorities. We are targeting leverage below 1.5x and a 150% increase in market cap by 2029. Achieving these objectives requires sustained, rational and profitable growth, consistent free cash flow generation and disciplined investment and continued deleveraging. We have the right strategy, a stronger operational foundation and the financial flexibility to execute. As we move forward, we are confident in our ability to deliver stronger results, generate sustained cash flow and create long-term value for our shareholders. I want to once again thank our crew members, partners, investors and customers for their support and trust in Azul. With that, Antonio, Abhi and I are available to take your questions as I turn the call over to the operator.
分析師問答
I will now open the call for questions. The first question will come from Andre Ferreira, sell-side analyst from Bradesco BBI.
Congrats on the work you've been doing in the past few years. I want to touch base on two topics here. First on the CASK ex-fuel, which increased this quarter. It was mainly personnel, marketing and maintenance. Just wanted to get some more color on the incentives given in terms of personnel and marketing and also some more color on maintenance. What should the year-on-year delta look like for the rest of the year? And the second question on the levered free cash flow: around BRL 80 million negative, but it was then affected by the nonrecurring items.
Just quickly to address the salary-related measures. I think obviously those pilots are key and strategic to us. We put in place some guarantees to ensure our pilots were fairly compensated as we took our flying down. We experienced a technical difficulty during that response.
Just following the market in terms of corporate customers and attracting high-yield customers: these customers book indirectly. So we have to go through travel agencies and corporate travel agencies and make sure that we're partnering in a positive way with these corporate travel agencies to make sure that we get not just our fair share, but what we should be getting in terms of corporate and high-yield revenue. So it was very much aligned with our revenue targets and our ability to increase RASK this quarter and, most importantly, our ability to keep increasing RASK as the fuel curve evolves.
Andre, Antonio speaking here. In regards to your question about those temporary measures, I would say something around BRL 100 million that should not repeat in the next year, for example, because we are talking about temporary measures, especially on the salary side. And when you asked about the levered free cash flow, the line was broken. Could you repeat your question?
Yes. On the levered free cash flow, it was affected by the nonrecurring — close to BRL 800 million in nonrecurring payments related to Chapter 11. Just wanted to know if there are any other tail payments left for 3Q and 4Q?
Yes. Andre, thanks for the question. We already performed two-thirds of the payments in Q1 and Q2. If the remaining one-third is going to outflow between Q3 and Q4, then we should be very clean from 2027 onwards.
Okay. Perfect. And just very quick, the first part, which was John commenting on the personnel, it got cut off. I'm not sure if only for our team here.
Let me just repeat. Pilots are strategic to our business and when we cut capacity like we did, that significantly impacts their pay. So we put in place retention and bonus measures for them while they weren't getting the full amount of their typical flying, and that helps us maintain our pilot population as we now look to grow in the back half of the year. As we replace our widebody fleet and move away from ACMI, we have a significant amount of training. It was about short-term pilot retention and we feel good about where we are right now. What we did was effective for us and that will normalize as we go into the third and the fourth quarter.
The next question will come from Guilherme Mendes, sell-side analyst at JPMorgan.
On the fee recapture strategy, first congrats, the 60% in the second quarter seems pretty impressive. But can you walk us through the strategy for the second half of the year? How have you been seeing demand evolving and the price elasticity on corporate and leisure segments? And the second one is more of a follow-up on the guidance or not providing the guidance. Just want to understand the rationale of not providing this short-term third quarter guidance and for the year.
Yes. Overall, we are in a really good place right now as an industry, I would say. As you know, second quarter is the weakest quarter and the biggest aggravating effect was the World Cup; it was a massive distraction in Brazil and impacted June flown revenue and impacted June bookings as well. Now we are coming out of that World Cup winter break. We've seen really good momentum in the first couple of weeks of August both on the revenue side, on the volume side and the average fare side. I think the industry has done a really positive job of preparing the table for the next nine months, which is our best seasonality. So I think we've put ourselves in a really good place overall. I see resilient demand on the agency side. On the corporate side, probably the highest ever corporate fares in the history of Brazil are what customers are paying right now. And the volumes are good and the revenue is good. If you remember on the previous call, I mentioned that leisure demand, which is our direct channels—the site and the app—initially was waning when fares jumped in the March and April timeframe, the first reaction to the war. Now we are seeing that demand recovering as well. So we are probably having our best B2C week this year in the last six months easily. So I think momentum is good. Good seasonality going forward is very helpful. The industry has been very disciplined overall; I think doing all of the right things. And again our capacity posture is very helpful in allowing us to be aggressive and make sure that we're able to recapture the fuel. As we showed you, there's a new spike in the fuel curve going forward. So what we did is not enough and this work has to keep going to make sure that we're now able to recover this fuel spike going forward as well.
If I could just add, it's a premium game. I want to reiterate Azul's hubs: we have 80% of the markets. We're the only ones that fly many of these routes and that helps Abhi get the revenue where it needs to be. We think we're being the rational competitors in the market and the most disciplined around capacity. We are seeing a lot of additional capacity coming in from our competitors, but we are going to stay the course and do the right thing for our business. As it relates to guidance this year, the fuel curve keeps moving 10% one week to the next and it's about building credibility and pointing investors to the long-term strategy of Azul. We are on plan for where we need to be as we go into 2027, 2028 and 2029 and that's why we want to point investors there. We feel very good about our third quarter as it is coming in right now, but we just don't think there's value in providing guidance as the fuel curve continues to bounce around as much as it has.
Guilherme, this is Antonio speaking here. We'd love to give guidance. But if we would do this, we would fail today. With this parabolic behavior in the fuel price, you never know what's going to happen tomorrow. So let's have a little bit of patience, but the picture for the second quarter is much, much better as I said in my speech.
The next question will be from Gabriel Rezende, sell-side analyst at Itau BBA.
I just wanted to follow up a little bit on your comment regarding fuel prices, specifically on how the company is managing tariff increases looking into the second half of the year. I understand it's a big challenge. Everyone is being surprised by how much volatility we are seeing day to day. But just trying to understand what the company and perhaps what the sector is trying to do when managing tariff increases looking into the second half of the year considering that the sector does seem rational and companies are trying to pass through this higher fuel inflation. What perhaps can we expect for profitability looking into the second half of the year due to this high volatility environment? Also, could you comment a little bit more on the company's premium strategy targeting these more premium customers? What are the main advantages the company sees in targeting these customers—whether it's perhaps competition, less sensitivity to price increases, higher margins, or other factors that incentivize the company to seek those customers?
Gabriel, I can start and John can jump in. The industry is trying to maximize revenue, so that's the #1 priority and that has extreme urgency given the way the fuel curve is behaving. As I mentioned, we're seeing really good discipline on the fare side and I think that given the seasonality now over the next six to nine months, customer behavior will be very positive. Our capacity discipline helps us because we have less capacity and can be more selective in the type of demand we take. We don't have to be aggressive on volumes like some competitors that are growing more. That allows us to be a lot more selective. Our network advantage: we have over 200 nonstop routes, and only about 18 of them are super competitive where all three airlines are flying. We have a large majority of share on many of these routes. So our network position continues to be privileged. The market is maintaining overall discipline. We also have the added benefit of our capacity plan, which allows us to be even more resilient. The corporate customer is very favorable right now. We're seeing strong dynamics in that sector and, for the first time since the war began, a really positive behavior from the B2C direct customers as well, which points to strong seasonality for the second half. This aligns with our premium initiatives. Our credit card is, we think, by far the largest mix of premium credit cards with Infinity, Skyline and Platinum. That brings us a large proportion of customers in our universe. We launched two new tiers in our loyalty program this year, delivering benefits like 24-hour concierge service, airport service and same-day changes that our customers enjoy and that provide more stickiness to our network. In addition, our vacations business provides a strong cross-sell opportunity. Not every customer is a corporate customer, but nearly all customers are leisure customers at some point, and that allows strong cross-sell within the Azul universe. Growing this premium population allows us to increase revenue across the entire business.
A couple points to highlight on that. On capacity, some competitors planned capacity assuming the war would end; many will rethink capacity into the third quarter. We feel very good about the disciplined approach we made, working closely with our Board. Regarding premium customers, it comes down to having a great operation and we have the best operation in Latin America right now. Over the last four or five years Azul lost a little bit of its glow because we were fighting for survival. Azul is now back. We're investing in product and customers. You're seeing a significant improvement in our NPS scores and the glow come back on the faces of our crew members as they deliver great service daily. Operational reliability is really important. There are customers in Brazil that fly us over 100 times a year. Being the most on-time airline matters to them. Having the best product with WiFi and television onboard, and having the best network that Abhi built over 18 years—most destinations, most connectivity and focus on our hubs in Campinas, Confins and Recife—are all important to driving premium revenue.
The next question will come from Michael Linenberg, sell-side analyst at Deutsche Bank.
Let me apologize; I was on different systems. A couple of questions. First, when we go back to liquidity as a percent of last 12 months' revenue, Antonio, can you remind us what is the right range for you? You were at just over 16% or just under 17%. As we think about the back half of the year and incorporating your expectation that EBITDA should be a lot better in the back half, if we incorporate that and the over BRL 400 million of debt payments as well as the nonrecurring cash flow charges, where should liquidity be by the end of the year? And again what's the right long-term range that you guys are aiming for? Second, Abhi, you mentioned you were feeling good about how the September quarter is coming in now. Can you give us a sense how much of September is booked now? And maybe an early read for December bookings and what booked yields you're currently seeing for September?
Thanks, Mike. A normal liquidity percent should be around 20% and basically means today we are confident through the end of this year. We have access to government financial lines which give us even more than we need. That's why I'd say we should be above 20% by the end of this year on the last 12 months' revenue.
I also want to remind everybody that American Airlines financing is not yet funded; we're still going through the antitrust process. The technical team has approved it and our expectation is that it should get approved in the third quarter as well. That will be another enhancement to liquidity as we move.
Mike, the level of liquidity we have today had been expected. Forget about the fuel price reduction—we were expecting higher payments pre- and post-Chapter 11. That happens. We were planning to access those lines in Q2, which didn't happen, and also American moved to Q3 or Q4. But I would say we are confident to be above 20% to end this year from the revenue side.
Okay. Great. And then just my second question. Abhi, you made the comment you were feeling very good about how the September quarter is coming in now. Can you give us a sense like how much of September is booked now? And maybe even an early read, how much of December would be booked? It's probably pretty low—maybe 10% to 15%. Also, what are the booked yields that you're currently seeing for the September quarter—just getting a better sense of how revenue is trending?
The booking curve has come in especially as fares have gone up and the agencies are overachieving in that sense. More than 50% of our revenue is inside 21 days, so bookings are very close-in, which is good in terms of filling available seats at higher yields, but it also creates a lot of nervous afternoons and evenings because you have to look closely at what's going to happen. We also have to remember that year-over-year for 3Q and 4Q, last year from July onwards we implemented a new network with significant capacity cuts. Last year our third quarter was 16% above second quarter; fourth quarter was 21% above second quarter. So we're now on a higher base and managing on top of that. We're absolutely seeing higher yields going into September and October. Fourth quarter is very low booked—maybe 15% to 20%—but we're managing close-in on a much higher base. It's close-in demand and it's a bit white-knuckle, but we feel very good about how the industry is positioned and, given our capacity posture, how we are positioned.
Mike, I also want to highlight the international side: our second quarter international was down 25% year-over-year as expected during the fleet transition, and more than 50% of our customers flew on non-Azul metal internationally. As we reintroduce and relaunch our international product over the next two quarters, that will significantly improve results and also improve the booking curve since international traffic is booked much farther out. When we tell customers they're going to fly on our aircraft with a great product, we expect strong improvements.
John and Abhi, is the close-in booking behavior just because fares are so high and people are taking a wait-and-see approach, perhaps hoping for some fare relief if fuel prices come down? What's the main driver for that?
Definitely on the B2C side on the direct channels, we saw a wait-and-see approach and now we're starting to see that customer come back strongly. The corporate channel remains steadier because much of our network is unique and corporate customers have fewer choices. If I look at competitive markets' pricing versus where we are alone pricing, the competitive markets since March have had six oscillations up and down and now we're back on an upward trend again. Our margin is a straighter line upward. So you have that dynamic where our market position and direct channels are starting to recover and the more price-sensitive leisure customers are returning for the first time since the war.
The next question will come from Savanthi (Savi) Syth, sell-side analyst at Raymond James.
I was just wondering if you could remind me again what you're expecting in terms of fleet over the next 12 to 18 months. And just preliminarily, I know international should start growing again next year, but how are you thinking about capacity between domestic and international through the next 12 to 18 months?
On the fleet side, in the restructuring we simplified the forward fleet. We have three more E2s this year and next year five E2s on the domestic side. On the international side, we're reoptimizing our fleet. We have received one A320neo so far this year; the next one is delayed but is expected in the October-November timeframe. We are also getting replacement A330ceo aircraft: one is flying, another is on its way and there should be three more plus two more, replacing the widebody fleet, getting to 12 widebody aircraft by the end of this year. That's our baseline fleet. Essentially, five E2s per year is all until 2029.
Savi, to add: Q2 was the bottom and we'll get operating leverage as we move forward. We may be slightly down year-over-year in the near term, but remember second quarter was down 10% year-over-year—substantially down. For the first time in over four years all of our E2s are flying because the GTF problem has been resolved and all of our A320s will be flying. So with the existing fleet we can produce more ASKs, which is great for operating leverage because we're not adding balance-sheet leverage. We will be cautious and be the most disciplined airline in capacity deployment.
Following up, you mentioned less reliance on ACMI. How should we think about utilization of the fleet as we go forward? Where has it been and where could it be?
We're flying the A320 fleet pretty much as much as we can. There are a couple of conflicting forces: fuel prices and utilization. Utilization increases by flying nights and weekends and stretching the day, but those times typically have lower unit revenues. So we must balance stretching operations with current fuel prices, which is why utilization dipped in 2Q and is now starting to come up with seasonality. The A320s are flying pretty much as much as we can; E2s as well. We have fewer E1s in the fleet by design so E2s pick up some shorter-haul network which brings utilization down a touch. Our metrics are approximately: E2s 11.5–12 hours; A320s pushing 14 hours; A321s pushing 15 hours.
The next question comes from Jens Spiess, sell-side analyst at Morgan Stanley.
Two questions. One is a follow-up on the crew incentive program: will that remain in place as capacity stays relatively close to existing levels or was it a one-time item? Secondly, on the booking curve, you mentioned many bookings are closer to the date of travel: doesn't that also help in fuel recapture? Any indication of how much fuel recapture completion you expect in the next few quarters would be appreciated.
Yes, on the booking curve: you're right, the close-in bookings leave more seats to be filled at better fares, which is a positive for recapture. On fuel recapture, it depends on the fuel curve. If the fuel curve three weeks ago had held, we were probably at 90% recapture by the end of the year. With the new spike in the fuel curve, we're around 60% at the moment.
As for the pilot salary retention, we expect that to normalize over the next couple of quarters. It was designed to ensure pilots weren't hurt by the reduction in capacity and to make sure we retain our great pilots.
The next question comes from Hamed Khorsand, sell-side analyst at BWS Financial.
How are you scaling capacity back? Is it going to come back all in Q4 or is there a timeline for how you expect capacity to come back?
Capacity will come back over the next several quarters, especially as the international fleet comes in over the next six months. You will see 3Q still negative year-over-year but less negative than 2Q. You will start to see around zero in fourth quarter and then positive low single digits into 2027. It will take time as aircraft enter service. We are happy that the entire E2 fleet is flying again and we should be at zero A320 AOGs in the next 15 to 30 days for the first time in many years. Combined with 3 to 5 E2s per year, you'll see an inflection over the next couple of quarters.
The next question from Lucas Barbosa, sell-side analyst at Santander, was submitted in writing. The question: can you walk us through your expectations of supply increase for the whole domestic market in the second half of 2026 and 2027? Is competition adding significant capacity and how much can that impact pricing?
This data is public and anyone can pull the schedules. What we see is GOL around 12%–15% domestic capacity growth and LatAm kind of in the high single digits right now. We did see them cut a bit in second quarter when fuel first spiked, but with the recent spike in fuel I haven't seen broad cuts for the second half. It could have an effect on pricing and that's why we remain disciplined and responsible in our posture.
We'll now go to the closing remarks. John, please provide the closing remarks.
I want to thank everybody and especially the Azul team for all the work. We look forward to meeting with you. I know we have several calls set up over the next couple of days and Antonio will be in New York in early September, so we'll have the opportunity to speak with many of you. We appreciate your support and look forward to having a great third quarter.
Thank you. This concludes Azul's conference call for today. Thank you very much for your participation and have a good day.