123 Miles: R$2.5 billion spent on advertising may have caused a crisis

R$2.5 billion spent on marketing and advertising may have been one of the reasons that prompted 123 Mile to enter the current financial crisis and file for judicial recovery (RJ). This is what is indicated by the company’s initial technical reports, which are subject to expert examination on behalf of Royal Jordanian. 123milhas has 948 labor creditors and 802,630 subordinate creditors, the vast majority of whom are consumers.

The reports concluded that 123 miles represent the requirements for continuing the judicial recovery process that began at the end of last August. The document was expected as part of the appeal in which, at the request of Banco do Brasil, it was decided to temporarily suspend the procedure.

On Thursday the ninth of this month, Judge Alexandre Victor de Carvalho urged the company and its judicial directors to comment on the content of the previous results. The parties will have ten days to comment on the content of the documents.

The above findings place 123 Miles and Hotmilhas’ marketing expenses at the heart of the crisis that led to the companies’ judicial recovery. According to one opinion, the group “incorrectly” recognized advertising expenses as an asset rather than an expense.

As a result, the companies’ balance sheets showed a positive result and profits were distributed – between 2020 and 2022, 123mil distributed R$29.8 million to its partners.

“If the accounting rule had been properly observed and marketing and advertising expenses had been recognized as expenses, there would not have been a positive result in any of the years analyzed, which would have prevented the implementation of the dividend,” the document records.

According to the report, at 123 miles, marketing expenses were higher than total revenue in 2021 (147% higher) and 2022 (393% higher). At Hotmilhas, advertising expenses reached 85.7% of operating revenues in 2021 and 89.8% of revenues in 2022.

The opinion also makes other observations about the transactions of the 123-mile group. He points out, for example, that forecasting receivables was “relevant” to the companies’ operating cash generation, and these processes were mainly carried out via Banco do Brasil and BTG Pactual.

The technical assessment, which justice will continue to scrutinize, is that companies in the 123 Malhas group can solve their crisis through a recovery procedure, because the goal of judicial recovery is to enable the maintenance of the source of production and the employment of workers and workers. interests of creditors.

Despite pointing to a possible success in judicial recovery, lawyer Gabriel de Brito Silva, who specializes in consumer law, warns that in the 123 Milhas case, “the credibility crisis has gone beyond the financial crisis.”

“Even if companies in recovery are re-established, it will be very difficult to restore confidence and carry out the activity of buying and selling miles, air tickets and accommodation that could be able to cover liabilities worth R$ 2.5 billion, increasing the volume of liabilities.” Home today. If such profits were possible in this area of ​​recovering markets, they would generate $1 billion in profits and grow year over year. This is not what happens.”

(With information from Estadão Conteúdo)

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