Q4 2019 Earnings Call
Moving to the voting fourth quarter and full year earnings call. During the presentation. All participants will be on to listen only mode. Afterward, we will conduct question and answer session.
At that time be able to question you have to press Star then one when you're Touchtone phone.
As a reminder, this call is being webcast and recorded on February 13 2020.
Now, we'll turn the conference call overthrow Posco director of Investor Relations, Sir you may begin.
Thank you very much grid and welcome everyone for fourth quarter full year earnings.
Joining us today, our battle, who feel about holding on wholesale meant that our CFO.
First we started with our fourth quarter on full year highlights followed by let's say, who will discuss our financial results.
Immediately after we will open the call for questions from analysts.
Oh Holdings' financial reports have been prepared in accordance with international financial reporting standards.
Today's call will discuss non <unk> financial measures.
A reconciliation of the Niobrara <unk> financial measures can be found in the earnings release, Chubb and posted in the company's website <unk> Dot com.
In addition, our discussion will contain forward looking statement not limited to historical facts.
Reflect the company's current beliefs expectations and or intentions regarding future events unreasonable.
These forward looking statements involve risk and uncertainties that could cause actual results to differ materially on our based on assumptions are subject to change.
Many of these risks and uncertainties started is causing our annual reports filed with the FCC.
I would like to turn the call over to our CEO Mr. Battle <unk>.
Thank you wrote.
Good morning tool and thanks for participating in our fourth quarter earnings call.
First I want to recognize Oliver coworkers for their efforts during the year.
Their own going dedication and commitment keep us at the forefront of Latin American aviation.
Today, we're proud to report strong fourth quarter and full year resold.
Despite the mis revenue opportunity, that's where all the operational and financial drag created by the prolonged Max rounding.
We're also pleased to report we're seeing good booking trends.
And despite potential headwinds are encouraged by that prospects for 2020.
Among the main highlights for the quarter.
And your traffic decreased only 1.7% year over year on a capacity the kind of 4.6%.
This resulted in an 85.3% load factor.
2.5 percentage points higher year over year.
Yields came in at 12.5 cents or 6% higher than in the fourth quarter of 28 <unk>.
You did revenue or Rassam increased 8.9% year over year to 11.1 cents.
On the cost side.
Our cost them.
Excluding the noncash impairment charge came in at 9.3 cents.
Excluding fuel.
Our adjusted unit costs came in at 6.6 cents.
Or 6.4% higher year over year.
Due mainly to reduce capacity I'm cost inefficiencies associated with it maxi drawn the.
<unk> costs increased expenses related to the stronger revenue performance.
Operating margin excluding space right.
Came in at 15.7%.
On the operational front.
Well Berlin deliberate and on time performance of 91.9% I'm not completion factor of 99.8%.
<unk> industry, leading resold.
Now turning to remain highlights for the school year 29 pm.
Unit revenues increased 3.9% year over year.
10.8 cents.
Driven by 2% increasing you.
Any 1.4 percentage point increase in load factor.
We achieved our goal of an incremental $20 million thing I'd say the re revenues.
And by the expansion of our biggest policy to the entire and Edwards and continued growth of Connectmiles.
I, just a CASM ex fuel.
I mean at 6.3 cents.
Which was mainly affected by the problem Max grown thing.
But still among the lowest for a full service hurdling.
Our abrasion operating margin excluding special items came in at a solid 16.1% for the year.
We started flights to find anybody will sort of them growing to 80 destinations cdthirty three countries, a north central South America and the Caribbean.
And strengthening our position as the most complete and convenient hop in Latin America.
We continue to lean how's development over I keep tools, including our outbound web checking tools, which received excellent reviews from our passengers.
And on the operational front, we've delivered an on time performance of 92% I were recently recognized.
I feel like that for the seven consecutive year at the most sometime early on in Latin America and by all E. G. As the second most sometime early in the world.
I'd like to take this opportunity to recognize or more than 9000 employees for everything they do to deliver a world class probably experience for our customers.
Turning now for expectations for 2020.
Only two months ago during our Investor day in Panama. We this cost her 2020 plan under a very different set of assumptions.
The Max was projected to be flying again in Q1 of 2020, and we were expecting to receive 14 Max aircraft during the year.
Under that scenario, we're planning for a 5% capacity expansion.
And then accelerated replacement of Orenburg fleet.
It now looks like the Max won't probably going to the second half of 2020.
Oh boy won't be able to deliver the number of Max <unk>, we were expecting to here.
That being the case.
We have reduce or a capacity growth were 2020.
I will have to slow down the embraer transition with most of your <unk> no living leaving in 2021.
On a more positive note.
Fuel prices are lower than in 2019. So this continues its just certainly help our results for the year.
We're also seeing a good demand environment in the region.
Which started booking curves and positive view in the first quarter.
However, it's still early in the year I felt we supposed to will provide detailed update on our guidance and assumptions for the year.
Turning now to where most important 2020 initiative.
We will progressively move into the new terminal at our hope I took woman or put in Panama, which will positively impact or a brief operating efficiency and passenger experience.
We continue with implementation of the for logic pad.
To enable merchandising on distribution capabilities across all channels.
I don't expect rollout basic economy fares by the second half of the year.
We can go street has been upgraded to 737 800.
And they will get a 50 aircraft based in Panama towards the end of year.
Finally.
Even though we have not settle on a compensation scheme with Boeing I would like to reassure you Gotta, we're working together with them and expect to be fairly compensated.
To summarize.
We're seeing a good demand environment and expect good results for the first quarter of 20 swing.
We're reducing our capacity assumptions for the year, given the prolong Max Randy.
Our team continues to deliver world leading operational resource.
We continue looking for efficiencies and savings with the goal of a further reducing unit cost.
We also continue focusing on revenue opportunity, including ancillary initiatives are aimed at strengthening or resold.
Lastly.
Roast coffee minutes ever in our business model and our financial strength.
We continue delivering a great product, leading unit cost and strong margins, making up the best position to consistently deliver industry leading resold.
No well turn it over to will say, who will go over or financials in more detail.
Thank you Ben it'll good morning, everyone and thanks for being with us today.
Once again I'd like to join paid only acknowledging are great Cooper team for all their achievements during a challenging year.
I'll start by going over a four year highlights.
Okay, Mexicali grounding reduced our capacity by 2.7% year over year.
Our load factor came in 1.4 percentage points higher at 85.3%, which combined with a 2% increasing yields resulted in a unit revenue improvement of 3.9%.
10.8 cents.
Clean fuel one special items, our unit costs came in at 6.3 cents, which is maybe higher year over year due to the capacity reductions in additional costs and inefficiencies associated with them actually ground.
Excluding special items, mainly the Embraer fleet impairment, our operating margin improved 3.1 percentage points to 16.1%.
We continue delivering a world class products and were once again recognize as the most on time early Latin America and second most on time early in the world.
Reported net income for full year 2019 came in at $247 million, which translates to earnings per share $5.81.
Excluding special items, mainly the noncash impairment charge of $89.3 million generated after we decided to sell the remainder apart Embraer 190 fleet.
Adjusted net income came in at $336.3 million, which translates to an underlying net margin of 12.4% where adjusted earnings for sure $7 a 92 cents.
21.6% higher than be adjusted net income of $376.7 million, where adjusted earnings per share $6, a 52 cents in 28.
Now turning to our fourth quarter results.
Given the Max rounding, we reduced our capacity by 4.6% year over year, where revenue passenger miles decreased only 1.7% year over year. This resulted in a consolidated load factor of 85.3%.
2.5 percentage point increase versus Q4 2018.
Yes, we're also stronger coming in 6% above last year at 12.5 cents. A result, any unit revenues of 11.1 cents, 8.9% higher year over year.
Sadly the revenues increased 3.9% year over year to $681.9 million, despite the 4.6% capacity contraction.
On the expense night, excluding special items, our fourth quarter operating expenses decreased 3.2% Uri year on the 4.6% capacity decrease which resulted in our adjusted cost per available seat mile increasing 1.4% to 9.3 cents.
For the quarter, our effective on fuel price averaged $2 in 16 cents per gallon a decrease of 9.2% versus the $2.38 per gallon that we average in Q4 2018.
Adjusted unit costs, excluding fuel came in 6.4 person higher year over year from 6.2 cents in Q4 2018 to 6.6 cents in this quarter.
This increase is mainly associated with the capacity declined year over year, driven mostly by the next grounding play some pressure in several more costly specifically aircraft ownership maintenance salaries wages and benefits and airport related expenses.
Adjusted operating earnings for the quarter came in 72% higher at $107.1 million, resulting in adjusted operating margin of 15.7% 6.2 percentage points higher than the 9.5% generated in Q4 2018.
Excluding special items, the fourth quarter generated a net non operating expense of $9.4 million compared to a net nonoperating expense a $14 million reporting Q4, 2018, mainly as a result of a foreign currency gain of $2.4 million realized in Q4 2018.
Compared to a 6.8 million dollar loss in Q4, 2018, offset by a 5.3 million dollar interest expense charge in Q4 2018 related to a reduction in discount rate utilize for the calculation of the provision for future lease return conditions.
In terms of net results the quarter generated a net profit of $2.7 million or EPS of six cents compared to a loss per share of $3.67 in Q4 2018.
Excluding special items, mainly the 89.3 million darn noncash impairment charge related to the 190 feet in Q4, 2018 and at $188.6 million noncash impairment charge, and then 11.4 million dollar foreign currency adjustment in Q4 Twinkie 18, adjusted net income came in.
$92.1 million.
And then just had net margin of 13.5% or $2.17 per share compared to one dollar and four cents per share in Q4 2080.
Turning to the balance sheet, we closed the quarter with a very strong financial position assets totaled $4.3 billion owner's equity totaled 1.9 doing doors, our debt plus our lease liabilities totaled $1.4 billion and our least liability adjusted net debt to EBITDA ratio came in a see real 0.5 times.
One of the strongest in the industry.
Keep in mind that we'd be adoption of the leasing Spender I Forest 16 Route 29 team, we have adjusted the net debt by including the least liability lines from our balance sheet.
We closed the quarter with approximately $1.1 billion in that more than 60% of which is fixed with a blended rate, including fixed and floating rate debt of approximately 3.1%.
During the year, we reduced our debt balance by almost $300 million.
In regards to cash short and long term investments gross order would close to $985 million, an increase of $124 million for the year.
Our year end cash balance represents approximately 36% of last 12 months revenues.
I'm also pleased to announce that our board of directors approved a quarterly dividend of 80 cents per share for the year twentytwenty corresponding to our dividend policy or 40% of prior years adjusted net income.
The first quarterly dividend will be paid to Mark on March 13 to all shareholders record as of February 28.
Finally, I wanted to share an update of one of our most important projects during our Investor day back in December we laid out a plan to reach sub six unit cost by 2021.
You might remember one of the components of that plan was replacing or Embraer 190 feet with a higher gauge lower unit cost Max aircraft during Twentytwenty, Andy early part of 2021.
We're working with that and assume reentry into sort of either service of the Max during Q1 Twentytwenty.
Special mention since then there has been a significant revision to the Max returned to service timeline and that's up now we have removed the Max from our scale until the end of August.
We continue working with our sub six plan, but it is now here's some of these important fleet transition event will slip into the latter part of Twentytwenty one.
So to summarize we delivered solid financial and operational results for the fourth quarter and for the full year, despite facing significant drag in our cost structure due to the next week roundly.
Our network continues being the most convenient for travel within the Americas with World class operational indicators.
We continue delivering are leading unit cost and are working on our sub six initiatives.
We have one of the strongest balance sheets in industry and we continue to return value to our shareholders.
Today, we're also providing guidance for Twentytwenty based on our operating plan and expectations, where travel demand for the year.
Given the latest Max we turn to various assumptions, we now expect our capacity growth in terms of asms to be approximately 1%.
And given the lower fuel curve for the year, we are increasing our operating margin range to 18% to 20%.
Our twentytwenty full year guidance is based on the following assumptions load factor of approximately 85% RASM of approximately 10.9 cents CASM ex fuel of approximately 6.3 cents and a lower effect a few price per gallon, including 27 cents of into plant expenses of approximately one dollar and.
85 cents.
Thank you and with that we'll open the call some questions.
Thank you.
And as a reminder, ladies and gentlemen, if you would like to ask a question, we'll need to press star one on your telephone.
Withdraw your question. Please press the pound key.
Please standby we've compiled the Q when a roster.
And our first question comes from the amount of savvy sit with Raymond James Your line is no.
Hey, good morning.
I'm just.
A little bit more I'm, hoping for color on the how you're thinking about the fleet I know, there's a lot of uncertainty here, but just what the current plan STM related she is kinda <unk>, how many max's that you will have this year I'm guessing you'll be able to on ground I Wonder if you can provide how many Boeing has built and and.
Yeah. Its storing says I'm guessing those you can get back in the air relatively quickly just.
It's probably a little bit more on what the current fantasy EM.
Hi, Savi. This is a here. So we have currently six Max is that are a part here in Panama as you know I've already part of our fleet and then a we have their seven Max is that have been built by going that are pending to be the labor that are we're build last year.
And that are that are Stuart.
Ah I swore planned for the year assumes that a throughout the latter part of a year, we would get delivery of of up to those seven aircraft and then we are assuming that the first and were a will depart the fleet in September and you will be around three aircraft that will departing and.
In 20 or 20, so for a net growth of around four planes or for the year.
That's helpful. I have it just curious I know when we read them yesterday, the thinking was.
Yeah, maybe takes about a month or two one max's recertified to kind of get back in the air is now that there is kind of us in a training requirement that I know you have this them just does that elongate how long it takes two to kind of get back or <unk> and he can I have revised thoughts on I'm just kind of.
The gap between recertification and being able to return to service.
Hi, sorry, just pager here. It. So so first just to who build than what the whole say just said Oh six being what we what we are.
Expecting but there's no certainty that what we're gonna get from Boeing yet I don't think boring knows themselves. So we we don't have any certain being how many aircraft. We're gonna get in terms of at the time it'll take us put them back in the air it should be.
Less than than a month, maybe two to three weeks.
And the training should not be an issue because we continue preening or pilots in the Mac stimulator. So.
It should be very easy to get them back I mean, my new though we do not know all the new requirements, but they are perficient into Maxine relayed running the Max aircraft, we have not stopped doing that.
That's helpful.
Thanks Terry.
Thank you next question comes from the line of Duane Pfennigwerth with Evercore. Your line is now open.
Hey, thanks.
Just on a on wind go can you give us a sense and apologize if you said it but.
Well, what's what's the headwind to cope was sort of system profitability from Columbia.
What what are the margins look like relative to two system margins.
Well we.
We don't really a share margins by by market.
Hey, but I can give you kind of directionally some indication of how when was doing single had.
ER positive.
29 team it had quite a good year. It. They now have there for truck or 77, 800, we have obligations or feed from the seven hunger through the 800.
And we see when goal I stopped positive force, although it's still only about 3% for for this year should be around 3% over I sense. So it's not like it's going up yeah.
I I big very significant impact.
Yep.
But I think that the fact that we're growing it and it's a very strategic.
A brand that we haven't product that were there were going out and it will grow by I think about 30% for the year given the update so it's a very you know it's very important part of I think the overall corpus ready.
How would you characterize kind of Columbia domestic aftermarket me out outside of the things that you're doing too.
Self-help and profit improvement from a network perspective et cetera, how would you characterize kind.
Kind of Columbia domestic is it getting better.
Columbia domestically domestic is highly competitive it's a highly competitive market.
And we can go I would say, it's more Columbia International Colombia Regional International and Leisure route and we do have domestic service, but we're not a big player in the domestic market.
Thanks, and then just lastly, with respect to basic economy is as I think about Copa and your.
Very strong competitive position in in the hub.
Why does be why is basic economy, a priority for you and how much is this how much is I'd have to do what sort of product alignment with your your partners versus you know or a real need. Thanks. Thanks for taking the questions guys.
Okay, it's an opportunity it may be more than a need a but we do compete against or length from all over the place we compete against legacy carriers against low cost carriers, and some cagrs or kind of in the middle and in many cases, we compete with very low fares.
Hey, where we offer the whole Copa full service product, but charge fares are very competitive with lccs or whomever. We're competing again. So it basic economy is done I mean, I I was to compete much better and extract more revenue from that those passengers. So it's an opportunity that.
That we've been giving up for lack of that proper assistance, but that's going to change a towards the middle of this year.
Okay, great. Thank you.
Thank you.
And our next question comes from them one of Michael Linenberg.
The Deutsche Bank Your line is no.
Oh, Hey, Thanks, Hey, I'm. Good morning, everyone. So just a couple here. So I guess, you're at 14 anyone Ninetys now and you'll have threed that leave this year.
If when based on now this current plan, where you're only gonna grow 1%. This year when does the last 190 leave the company property as if the current plan and how does that compare to the phase out of the one ninetys that you were contemplating back in December at your Investor Day.
Yeah, Mike we are assuming that last one <unk> and the latter part of Twentytwenty, one so call it in ER and the fourth quarter or 2021 at whereas before we had eight a., leaving during the second quarter 2021. So it's been shifted you could argue.
Especially by the amount of time that the Max returned to service has been delayed.
Okay. That's that's helpful. And then just looking at your CASM Guide for 2026, three you know you're flat versus 2019, which is actually quite good given that you're only gonna grow 1% capacity wise under the prior plan when you were considering 5%.
Gross what was the trajectory of of CASM ex was it was it six to six one I presume. It was about six cents, we're trying to get there we're trying to get below that by 2021.
Can you just talked about how that has shifted with the change of plant.
Yeah, Hey, we were we were in a.
Mr trajectory to achieve our sub six I plan on Mike and definitely the the lesser number of at Sam's that we're deploying in 28 went through a lesser growth. It seems that we're deploying him and 20 to 20.
Then the delay our sort of our road map into into sub sake. So so that's I think I would say that that's.
Essentially how we see it.
So it would've been a lower than where it is today. Although of course, we have to say that as well you know the fact that we're spreading out the exit of you. When I was also are eating out anything in that sense, because we've got a lot of patients either in terms of ER.
Hey, can we kind of aircraft are being being shifted from Q1 I just like to so that that eight in it little bit, but it was offset by the by the Laureus and growth.
Okay, Great and then just one last quick one here you know obviously, we're watching everything that's going on in China do you have a sense of like the China contribution to the Panama economy or even like the can now when you think about yeah, the amount of throughput and how much of it actually represents trade from China do you have any pack.
It is it 2020, 5% of the Panamanian economy is directly slashing directly tied to CAD to Chinese commerce any any thoughts on that thanks, and thanks for taking my questions.
Yeah, well, a Chinese commerce it wasn't.
It won't have a direct effect in terms that the Panama is not an expert economy at least not.
We're not manufactured goods for commodities were mostly a service and international service economy.
But I believe China is the number one user of the Panama Canal, if I'm not mistaken. So they can now could see a drop in revenue if is that China trade with the world is reduced.
Hey, I don't think it's gonna have.
A significant impact in the revenue said he doesn't matter what we've heard it so far but they are they number one users of the canal.
Okay and then they can now is obviously a big part of your right.
Maybe what I'm getting.
It is a very important part of our service economy, So, but I did but again I. It we don't trade that in March.
I would try now we are services economy is so so we shouldn't <unk>, we should not to have that that a big have an impact but yeah. They revenues of the canal could be affected.
Okay, Okay, great. Thanks, everyone good quarter.
Hi, Thanks.
Thank you and our next question comes from the line of Hunter Okay.
Wolfe Research your line is now.
Hey, everybody good morning.
Morning.
Hey, Joe do you have a preferred outcome on this a sabre fair logics anti trust trial here in the U.S. you mentioned, obviously your work with fair logics platform and your history with Sabre I'm wondering if you have a dog and that fight.
That was one question, we were not expecting [laughter], so so and.
I want to come in and much about that you know that's important in the U.S. and I think I think it's probably better.
If I don't see anything public, but we obviously want to I mean work, we're trying for both sabre and for logic.
I think were good trying to both of them.
And we won an open flexible it competitive market.
How are the key is how that protected how's that are paying more than that and.
Who owns whom what voters, obviously, if favor owning for logic <unk> Dod what I, just said I'd really rather I wouldn't be a good thing for us or or anything. So I would say that's exactly what's happening that's up to a courts I guess the aside it yeah.
Well I appreciate you getting their teller, given the legal proceedings, thanks for that Pedro and then.
When I look at your utilization it was down I think 5% last year, but stage length was only down two and a half. So why was utilization down. So much how are you able to keep CASM down by the way with that and I guess the real question is.
Is there a sort of a.
An opportunity here on the CASM side that might that we've had been sort of underappreciating or that you might be being conservative about event that you dial back utilization off again once the network and the fleet is sort of at normal run rate again. Thanks Hunter, Yes. It will say definitely aircraft and we station was down because of the maxus in the aircraft.
Syndication numbers that we publish we are taking into account the six part airplanes that we had for the majority of 2019, so definitely okay.
Yeah. So that's all in a those numbers are all.
Yeah that went yeah, yeah, and so we absolutely when once the Max situation is resolved.
We will have significant opportunities for reducing our costs further without a doubt and that's what that's great perfect. Thank everybody appreciate it.
Thank you.
Thank you.
Next question comes from the line of Helane Becker with Cowen Your line is now.
Hi, everybody. Thanks for the time, so I just have a couple of questions.
One of the questions is you know with respect to I'm getting to sub six cents.
Non fuel CASM by the end of next year should we really think about that is kind of the into 2022 or is there a way to catch up it is Max deliveries start later this year.
Helane.
So let me recap because yeah, we in our investor They discussed our plan to reach sub six so the plan had four components to it one was the exit of the 190 fleet. The second was a second Max nine configuration more dense configuration on the Max on on a subset of the Max nine aircraft.
There were receiving a third was a century seven 800 Densification program that we will start and fourth our overall savings initiatives. So out of those four initiatives two of them are affected by the revised Max schedule, which is the exit of the you won 90 fleet and the second Max.
Nine Ah configuration.
I would say that the sub six plan will probably be or you know in place by the end of the year I had this time because of the delaying the deliveries I don't think that will achieve a sub six for the entirety of 2021 is we are as we mentioned in.
Our in our Investor day, but I think that by the latter part of 2021 have you looked at it kind of take a picture of the last part of 2021, I think thats certainly.
Doable of course, assuming that the Max situation solves itself and and I think we also have to mention something at federal mentioned earlier is that there's still somewhat of uncertainty in terms what did that live stream of Max aircraft is going to be even after the returned to service in terms of how many airplanes boring, we'll be able to deliver.
Monthly.
Okay. That's very helpful actually Jose because the other part of the question really is that.
The Densification program, which you talked about.
You know at Investor Day, and you talked about earlier today, you know are you intending to postpone or delay any part of that well you read from access to calm because would you have too many aircraft out of service out once.
I think it could be I mean, it could be that we have to adjust some of the scale. Although a portion of the densification is gonna be performed dueling scheduled maintenance will be aircrafts happier already down for a C check and you performed so it isn't really that somehow you you are at parking.
Airplanes.
Out of it now the other component of Densification was the second Max nine configuration right more dense Max I configuration and that could be delayed that's why that's the reason why I focused on ER and brought 190 and a second Max.
Configuration as the one items that were more than eight well they tend to be signed 800.
Densification I would say that will probably proceed as planned.
Okay and then just.
[laughter], one other things that I've seen a lot.
It's been some pressure.
And not you guys, but.
John Service to London, I mean, there's you know right now there's one stop service to London over various cities, including Madrid in Amsterdam, but you know.
There I know the government would like to see non stop service. Although that's a relatively small market is is that something that you would you know trying to encourage with some of the but some of your.
Your international partners.
Yeah, Okay, It's Pedro and then no number partner.
How are you know none of our partners for London or or UK based its own think I don't think any of them would fly London, Panama nonstop, but I do think it's an interesting market. It's an important business market. It's a London, it's a financial incentive center so its Panama.
And also Pan am I think would be an attractive a destination for passenger from the UK and from England. It. So I can understand our government is pushing for that service.
Okay, but again I don't think it would be one of our partners serving it.
Okay and then finally my last question is the trends on in yield to say that started in the fourth quarter have they continued into the first quarter.
Yes, Yeah, we're seeing a good good trends in terms of first quarter, so far a system wide.
Great. Thank you again, let me say just saying when it comes for Q1 of last year were still you know there's really last year, we're still in a recovery mode in the region, but yeah. It is the trends are positive for Q1.
Okay. That's hugely helpful. Thanks, guys appreciate the time.
Struggling.
Thank you.
And our next question comes from the line.
Cheerio.
Right.
Yes. Your line is open.
Yeah, Hi, everyone. Thanks, very much further parts of it in a couple of questions here on our side.
First a if you could provide us some color on demand and supply.
By region, So where does this is strong demand is coming from.
If I've yet to holding capacity reduction in Colombia is helping somehow.
Depreciation and Japan is a strong despite the Brazilian depreciation.
Maybe lastly, if Argentina demand is getting wars or as you feeds to stable.
A little bites could provide some color on on on demand and supply.
For the regions would be great. That's the first question. Thank you.
Okay. So this is Pedro here in Oh, right to answer and then then let Jose if feeling.
Anything but in general I would say that would that capacity is stable, we're not seen a rapid capacity growth or actually not much capacity growth overall in the first quarter there always some exceptions.
Hey from especially from North America.
Big coming south, but pretty much stable not a lot of capacity rose in the first quarter in terms of demand.
Overall, most of our market look fine look healthy.
Maybe Chile is the one that is down.
Versus versus the year before so we see more weakness in Chile. The rest look okay, I'm I'm, even Argentina looks okay. Obviously, it's not what it used to be but it was weak a year ago. The same quarter. So so this quarters not a very difficult comp.
And as well and just a little color to Argentina.
In the market has taken out some capacity from from there. So that has aided a little bit. So there's there's been the <unk> Q1, 2020, or skew 120, 19, there's less deployment of seats in the market double digit yeah, yeah double digit capacity out of that market, including including ourselves.
Yeah.
Sounds great what about I've, yet to hold is reduction in Capex in Colombia is it's helping somehow.
Well I would say that it.
It hasn't made that much of a difference was.
In the sense that the capacity they take it they've picking out what's not capacity. We competed again, it's mostly capacity in Central America.
I'm, Peru that did not overlap on March.
And some of the capacity they've added it's in bullet that which competes a little bit more against all.
Okay. So net net maybe.
Even or maybe a little bit more competition, but but again not a significant impact.
Perfect you ever care that Joe and my second question is on buying pumping station.
If it's again I am sure as a gained income statement and maybe the expected timing.
And if so is it included ended 2000 and plan to guidance.
And when you first of all of its very early in the process in our discussions with Boeing and you know these are.
Discussions that are for confidential nature and we.
We expect to be fairly compensated.
And no there isn't any assumption in our guidance related to a anything related to the Max or compensation from one yeah, we're not 100% sure how we would be booked when did happen from an accounting from accounting perspective, yeah.
Birkner, thanks, so much.
Thank you.
Thank you and our next question comes from a lot of Dan Mckenzie with Buckingham Research. Your line is now.
Yeah. Thanks.
Question actually is a good segue into one of my questions and that was with respect to the Imbursement.
Any initial thoughts on how you might use the cash or would it just be aircraft discounts or could it potentially be used for capital returns. Just wondering if you have any initial thoughts.
Yeah, Hi, Dan and not really we try not to spend the money before we habit and.
But no we have not a thought of that or there's nothing there that we can share to be honest yep.
In Arizona.
Question on putting the Max was back in there I think earlier you mentioned you can do in two to three weeks and I guess you know I'm wondering does that mean that you know a one year booking window might be you know consolidated to a two week booking window to fill the planes or.
Do you simply means that they really put back as spares and then I guess just related to I'm wondering what 2021 growth might look like once you get the Max is back up and running.
Okay. So I'll answer the first part of the question in the six Max's we have grown bid.
Our open for sale you can boot on those flights. After September 1st So we have cancelled. This line of go six Max's until the end of August of this year, but the remaining schedule. Its open. So so if we're sure that it's going after.
Hi, again sometime before September the first you know the bookings coupon happening so it won't be a short booking curve that Max is that have not been delivered since we do not know when they will be delivered goes for not available for bookings so.
This flight or the schedule that those those boxes would fly is not open for booking and there we have to work with boring and when we have some certainty on the delivery date, then we will open them up for booking.
It will it I mean whats right for make that booking windoor.
Long as we can.
Dan in terms of 2021 is of course very early on and you know I think I want to highlight something in our sleep Len.
Came in and of course, it the 2021 growth depends a lot on what the delivery stream ultimately ends up being for the for the Max aircraft that we have.
So it's premature yet to determine what it will be but the one thing I wanted to highlight is that we have.
Still a lot of.
Flexibility in our fleet in terms of a lease return airplanes that for which we have extension options and other type of flexibility measures that we could have to adjust our capacity to members of how see demand at that moment.
Understood, Okay, I get squeeze one last one in here I.
I think once upon a time, we were looking for 10% growth or double digit growth in 2020 of course that was reduced to five in today, one and I guess the question is.
You know for the first quarter here you know how much revenue management friction is there [noise] in the revenue outlook from demand that might have been revenue managed differently. So yeah. It seems to me the advanced bookings might be a bigger per cent of the business or bookings on the books than you might have otherwise wanted it so I'm just wondering to what.
Actually is diluting you know RASM relative to what it might have otherwise that.
Well I think that you know.
One thing that I would say Oh I'll answer that and then they just answer in a couple ways. One is that our Q1 is looking.
Positive in terms of of rising, but I, but you know certainly I think they would've had the additional capacity I think or whatever we would have probably growing earnings a award. This time periods. So yeah. I think that we are there are some opportunities in terms of our of our earnings that would it would have been here. If we would have had the.
The additional capacity deployed during the period, Yeah. I mean, the short answer is we need we need goes we're paying back flying and we're giving up revenue opportunity and profit opportunities by not having or a complete fleet, but we're managing as best as we can would what do we have.
Understood. Okay. Thanks for the time again.
Thank you Dan I can.
Thank you and our next question comes from them on a Bruno Amorim with Goldman Sachs. Your line is now.
Hi, good morning, everyone. So I have three questions. The first one is a follow up on Argentina, I remember a few quarters ago, you have mentioned batch.
He took some time for you'll be able to grow as much as you want to the American Gina and now you are pulling back some capacity of course because of democracy farm until the question is a you know heavy when the market that just a couple possibly to a point where the markets. It's profitable or you. Just you are kind of strategic allocation.
For when the markets come back. The second question is on the growth prospects looking more medium long term.
Couple of years would have been discussing recovery margins from the losing 2018, but now according to your guidance you could deliver margins very seamless to the historical average and maybe even better in 2021.
We've been boxes in the fleet during the full year. So is it fair to say that phone calls and 21 on the warrants the company would be back to growth mode and you know what do you believe would be to sustainable pace of growth then and lastly, a quick question on one of the guidance you have raised.
The range for EBIT margin by around two percentage points, which can be fully explained by the lower fuel prices, but on top of that a there is also something I got your views on the on the timing of the Max's So lots of fashion you know the negative impact.
In fact on the guidance from democracy have been delayed so those are the three questions. Thank you.
So let me try to answer a few of those questions. This Pedro and then then let's say can kinda back me up it. So we have reduced a capacity a little bit over 11% at them versus the same quarter the year before in Argentina.
And and we're doing better than what we would have otherwise been doing and I would say overall Argentina it.
It into black and not in the red, but but is not doing greater fourth because yields are way down and and so it's not what it used to be but I think we're on track as the economy norm or like this is that happens. We're on track to you know vsan decent that perform.
In Argentina, but it is not great right now, we've we try not to sure on her router per market.
And results or or or performance, but but its a.
You know is what it is yields were still down on I'm not grable, it's the capacity reductions have.
Have held in terms of growth rate going forward, we don't want to get ahead of ourselves.
Hey, Bugs me 2019, and 2020 were not normal years.
With this where years, where we could have done much better than flat growth or negative growth like last year I mean everything continues.
Developing the way it is right now the markets continued strengthening and getting back to normal a growth should be much better in 2021 years to calm, but again, we don't want to get ahead of ourselves and you know again, we keep a lot of flexibility in our fleet plan Bruno. So therefore, we are able to adjust our capacity.
With a relatively short a.
Timeframe to adjusted to to where demand is and you know you have to go back to saying that in Latin America Air travel demand is expected to grow at around 6% for a year for the next 20 years, so that we keep.
I'll close eye on that and we have a lot of flexibility in our fleet.
And the final question that you had related to our guidance, yes, our operating margin guidance that we just issued is mostly driven by fuel fuel.
Curve is a is down a recently so therefore that that's what's driving the majority of the growth in and you had margin.
Yeah, and you know what he talked about some Max Cross anyway. This this guidance and this is 6.3 cents a unit cost assumption assumes and unproductive six aircraft that we have for the majority of a year that carries cost related to ownership and salaries of maintenance that are associated with these.
ER aircraft that I've been park, then there will be part for up until the end of August. So yes, there is a drag somewhat in there in terms of.
Have a unit costs associated with that.
Okay. Thanks, so much.
Thanks.
Thank you and our next question comes from the line of Stephen Trent with Citi. Your line is now open.
Yeah, Thanks, very much everybody and thanks for taking my questions. Just so one or two for me. The first is could you or remind US you know where we are with respect to you know the joint business agreement.
You know that you guys or could be pursuing with United and I'll be alianca and they'd be as a rule.
And then second question.
[noise], if you could refresh my memory.
You are extension into the new terminal.
Tocumen what that means in terms of jet bridges, you know and maybe some potential increasing traffic movement. So thank you. Thanks a lot.
Hi, Stephen it's Pedro.
Pedro the JV is still there and and I think the three airline United I've Yanking Copa are still very much interested in fighting the JV and I think it's an important tool which would be good for passengers good for the market and good for the Irving So.
The intent is still to file sometime this year, but everything that has happened if we have mentioned before.
I'd Bianca and the whole thing would a beginning of young can you might as many United everything that's going on has delayed the filing of the paper work, but it should happen sometime this year when I'm I'm not certain right now.
Hi, Steve in terms of T. too.
You know right now the expectation is for you to to be fully operational during the latter part of Q3 of this year.
And ER, but not so now there's about I want to say about 25% of the gates that our operational and so there is a partial operation of the number of gates at the airport and that's where it will be the next steps are for the rest of the gates would be open and for the passenger service areas.
Ticket counters and arrivals area too to become operation.
Oh, Okay, I'll I'll leave it there that's very helpful. Thanks Gents.
Thanks, Steve Thank you Sir.
Thank you and we'd love a follow up question from line of Leandro Somar Kona.
With credit Suisse. Your line is now.
Thank you, Okay, hi, everyone, sorry, I got disconnected I don't know if the already answered the question, but Im just it's just a follow up question on the boring compensation. Yeah. I know you already mentioned there is not much update to disclose it but I was wondering what would be they expect.
<unk> some of this type of compensation and if it does gosh compensation a a celebration fleet the real deliveries maintain then source terabytes. Thank you for taking my question.
Yeah, Yeah, we we don't want to comment on that right now because the discussions are going on.
And no real rather keep that for when its official.
Thank you and our last follow up question comes from the line of savvy <unk> with Raymond James Your line is now open.
If your line is on you please UN mute.
Hi, sorry about that thank you.
I don't know honestly I'm just.
They are kind of plan that was shot of them. That's today there a couple 800 retirements.
They kinda just push to 2021, that's kind of pushed out further and also just on Max as we think about 2021 is there kind of upper limit on how many aircraft that you can take delivery of in there or if Boeing can deliver would you look at that time fully catch up by the end of 2021.
So something on that one we executed on flexibility that we haven't plants are we extended those are eight hundreds I wear departing and the latter part of this year and they were extended for beyond 2021, and a in terms of the number of aircraft I believe we can take the real issue you know I think that it will depend first of all on.
Our expectation for demand and for for growth and you know the flexibility and execution. So we happened to our plan and then Muslim your question that it comes into play is what is boring capability for delivering airplanes, depending on what the FAA, how that process et cetera. So.
It's still Oh, sorry, I would say adult two main drivers.
In terms of how many airplanes.
Can be delivered.
Make sense and just on the E 190, Yeah. There were some return costs are those return cost showing up this year or do they do those get pushed out to next year and as they kind of think about the puts and takes in next year's that cost. That's some of them. Some of that are going to show up in 2021, yeah. It because there are related to the aircraft or two to the individual.
Correct.
Got it thank you.
Thanks, a lot bank. Thank you and this concludes today's question and answer session or when I like to tend to call back to Petro hubris for any closing remarks.
Okay. Thank you. Thank you all and this concludes our earnings call. Thank you for being with us.
And thank you for your continued support have a great. They have a great 2020. Thank you.
Ladies and gentlemen, thank you for your participation that concludes today's presentation. You may disconnect have a wonderful day.
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