Q4 2020 Copa Holdings SA Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to Copa Holdings fourth quarter earnings call.
During the presentation, all participants will be in a listen only mode.
Afterwards, we will conduct a question and answer session.
At that time, if you have a question you will have to press Star then one on your Touchtone telephone.
As a reminder, this call is being webcast and reported on February 11 2020.
I will now turn the conference call over to Raul Pascual Director of Investor Relations, Sir you may begin.
Thank you Sally and welcome everyone to our fourth quarter earnings call.
Joining us today are pivotal Haven T O of Copa Holdings, and Jose Montero our CFO.
First Pedro will start by going over the actions the company has taken to mitigate the impact from the COVID-19 pandemic.
Followed by Jose, who will discuss our fourth quarter and full year financial results.
Immediately after we will open up the call from questions from analysts.
Copa Holdings financial reports have been prepared in accordance with international financial reporting standard.
On today's call, we will discuss non on here for his financial measures.
A reconciliation of the non I have heard wire from us financial measures can be found in our earnings release, which has been posted on the Companys website Copa com.
Our discussion today will also contain forward looking statements not limited to historical facts.
Reflect the company's current beliefs expectations and our intentions regarding future events on results.
These forward looking statements involve risks and uncertainties that could cause actual results to differ materially on are based on assumptions subject to change.
Many of these are disclosed here on our report filed with the SEC.
Now I'd like to turn the call over to our CEO Mr. Pedro here.
Yeah.
Thank you Roland.
Good morning to all and thanks for participating on our fourth quarter and full year earnings call.
I hope that all of you on your families are doing well on Spain space.
Before we begin I'd like to thank all of our coworkers for their commitment to the company and recognize their continuous efforts and many sacrifices.
During this difficult times.
To them as always my utmost respect and admiration.
It goes without saying.
2020 was the most challenging years the industry has ever faced.
And while we all hope 2021 will be better.
It's going to be a long and twisting road to recovery.
During the year.
<unk> took several actions to strengthen the company and mitigate the impact from the COVID-19 pandemic.
Including.
Tapping into new liquidity sources.
Bracing more than $650 million.
Yeah, a convertible bond issuance and federal secured and unsecured committed credit facility.
Recognizing the severity of this crisis early on and aggressively canceling or deferring our capital expenditures that were deemed non essential.
And immediately began a series of course cost reduction initiatives.
Including contract renegotiations with suppliers.
On a thorough evaluation of our entire cost structure.
Adjusting the company size to better match future capacity over the next few years, while retaining the flexibility to accelerate or slow down our capacity redeployment plan if needed.
Simplifying our fleet by retiring 14, Embraer 190 on 14 700 7700.
Which will eventually lead to a significant improvement in unit costs.
Implementing robust biosafety protocols.
On a simplified onboard product offerings to ensure the safety of our passenger and crew members.
Providing flexibility to our customers by waiving change penalties on offering credits for future travel.
Which led to most passengers keeping their ticket despite the prolonged stoppage of our operations.
And to this day.
We continue implementing new initiatives to mitigate the impact from the pandemic strengthened the company.
And facilitate a safe and efficient travel experience for our passengers.
For instance.
Earlier this month.
Other announced a coordinated effort with the government of Panama on Copa to trial, the new on Yahoo travel past.
A mobile app to growth passenger securely manage their travels in compliance with the Covid testing on org vaccine requirements other destinations.
Panamax. This first concrete who agreed to participate in the trial and Copa the first earning to do so in the Americas.
We believe initiatives like this one are essential to the recovery of international Air travel.
Turning now to our fourth quarter results.
As per the plan communicated in our last earnings call ask.
Virtually no operations and more than five months.
We successfully restarted the hawk into fourth quarter, increasing capacity to 15% on October 28% in November and 39% in December as compared to the same month in 2019.
And ended the year, having restarted service to 51 destination.
Combining our combination of pent up demand on holiday season on VFR travel resulted in a healthy 75% load factor for the quarter.
We were encouraged by the demand patterns, we saw and we're hopeful for this trend to continue into the first quarter of 2021.
As you've heard from other industry reported this is not the case.
Covid cases started spiking throughout the world during December on.
New more aggressive COVID-19 variance have led to additional international travel restrictions on it.
Deteriorating demand environment.
As a matter of fact yesterday, we released our January 2021 traffic figures.
Porting load factors of 63% compared to 75% reported for December 2020.
Wholesale will provide our current outlook for the first quarter, which includes a revised capacity plan.
Our latest revenue assumptions and on updating the cash consumption figures.
Finally, I'd like to reiterate that we have a proven and very strong business model.
Which is based on operating the best and most convenient network for intra Latin America travel from our hop on the America, leveraging panamax advantageous geographic position.
On the region's lowest unit cost for a full service carrier.
The best on time performance on strongest balance sheet.
Moving forward the company expects that its top of the Americas will be on even more valuable source of strategic advantage.
Likely that fewer intra Latin American markets will be able to sustain direct point to point service. So.
So we believe the help on the Americas will be the best positioned to serve this market.
Now I'll turn it over to Jose who will go over our financial results in more detail.
Thank you Pedro and good morning, everyone I hope that you and your families are safe and doing well.
Thanks for being with us today.
I'd like to joined Pedro and acknowledging our great Copa team for all their efforts and great spirit. During these very challenging times.
By going over our full year results.
Eric.
<unk>.
Okay.
And any shutdown of operations.
March until the middle ask.
For the full year came in more than 70% low 2019.
We reported a net loss of $598 $6 million from 2020 from $14 eight per share.
Adjusting for special items.
What are the net loss of $259 5 million $6.07 per share.
Special items for the full year.
$121 $2 million impairment charge from the incentives from incentives from the number of fleets.
I'll ask mark to market loss of $98 7 million loans relate to the company's convertible notes.
$9 1 million volume loss.
Yes.
On an operating basis.
Loss of $469 million.
$226 million when adjusted for special items.
Turning now to the fourth quarter, our capacity came in at $1 7 billion available seat miles.
Amounts to about 27 percentage as a capacity operating income in the fourth quarter of 2019.
We reported a net loss of $168 8 million or $3.
<unk> per share.
Excluding special items.
The net loss of $85 2 million or.
$2 per share.
Special items for the quarter are comprised mainly by unrealized mark to market loss of $80 $1 million from leading to a company from one of his notes.
$4 $4 million from in charge of $73 seven to seven other fee.
In terms of operating results from reported $95 $1 million loss from the quarter.
$91 5 million when excluding special items.
On cash consumption for the fourth quarter came in better than expected.
<unk> was $6 million per month.
In part benefiting from the positive impact of the ramp up sales.
So establishing operations at the settlements on a lower level of payables from variable expenses.
Given the small operational base per quarter.
Our expenses for the quarter reflect some of the savings initiatives gain momentum.
Okay.
However, <unk> expenses from the quarter will show up as part of our Q1 2021 cash outflows given the ramp up in capacity during the latter part of the fourth quarter.
I'm going to spend some time now discussing our balance sheet and liquidity.
So at the end of the fourth quarter, our cash short and long term investments and then at $1 billion.
Also ended the year with an aggregate amount of $305 million Unutilized committed credit facilities.
Got it towards cash equating to more than $1 $3 billion total available.
We expect to continue working on strengthening on liquidity.
On the one.
In fact since the beginning of the year, we have added new credit commitments in the amount of $40 million, bringing our total on drawn committed credit facility from.
$345 billion.
On slide 10, we ended the year with $1 $4 billion organic lease liability.
Turning now to our fleet. According to our fleet plan, we laid out in the last earnings call. During the fourth quarter, we finalized sustainable delivery of five Embraer 190.
I mean, that's up to eight delivered second added 14 aircraft, we discussed on the third party.
Thanks for that deliver the entire who remained key sites June 12 in 'twenty one.
Pleased to report we.
Starting on the operation from Mcafee in December.
Also took delivery of one Neil next line within months.
703 tenant maximize sales a very unique service and performance.
Our net.
We ended the year with 70 560.
68 percentage, we spent 800 net of an accident.
These figures on competitive <unk> 737, eight hundreds.
We will remain temporary storage net trends call from additional new capacity.
During the fourth quarter, we also renegotiated a subset of our aircraft leases expiring during 2021 hour by hour range.
Moving now.
It was 2000 tonnes per ton, we expect to return one leased on a three seven and 800 from solar.
So far in 2020.
We expect free.
Even more importantly any of it.
These were informed that we've received a final commitment from the export import bank of the United States with guarantees.
$329 million from finance lease settlement.
It is important to highlight the descending maximize already manufactured.
We're taking delivery of and that's part of our revised dividend.
<unk>.
I can also reported during the first quarter was signing and compensation, assuming with volume gains from the Max fleet growth.
Turning now to our expectations for 2021 as Bill mentioned, we are still in very uncertain as I'm, putting juul and operating environment.
Such not be providing full year guidance.
However, based on preliminary January results the industry wide slowdown international demand we are experiencing.
Can you provide the following outlook.
First quarter of 2021 compared to the first quarter of 2019.
We expect capacity to be 40% Q1.
In 2019 levels at about $2 6 billion in <unk>.
Net revenues to be in the range of 25% to 30% of Q1 2018 levels at about.
No.
And these operating conditions, we expect on a cash consumption from first quarter to be in the range of $40 to $45 million per month.
Cash consumption as a result, mainly on lower sales expectations for the quarter.
This was a cost impact is on expanding operations.
Working capital changes I mentioned earlier from the ramp up of capacity and we executed during the fourth quarter of 2020.
Given the recent demand trends, we will perform some adjustments in capacity from the second quarter profit.
On the remainder of the year.
Despite a projected increase in cash consumption.
Expect to improve the companys liquidity position during the first quarter net.
Sort of the new credit facility as I mentioned as well as cash inflows, including Canadian repayment and reimbursements and funds from the financing related to work on deliveries proceeds from aircraft sales of <unk>.
Let me close by saying that once this most challenging switching assets.
We believe Copa publicly Amerigas will move the best connecting points travel on the region.
Privileged location, even more efficient business model with lower cost.
On the best in the industry.
Thank you and with that we'll open the call to some questions.
Yes.
At this time I would like to remind everyone to ask a question Chris Star then the number one on your telephone keypad again that is star then the number one on your telephone keypad low.
Pause for just a moment to compile the Q&A roster.
We have our first question coming from the line of Hunter Keay with Wolfe Research. Your line is open.
Hey, good morning, everybody.
Good morning.
Pedro can you give us an update on the current state of travel restrictions in Panama, what changed recently and what's your expectation for the outlook going forward.
Okay. Thank you Hudson.
Panama has not changed for.
More than a few months now panamax requiring.
Neither a either a negative PCR or antigen test within 48 hours of travel.
<unk> travelers can have.
The cash burn or they can take the test at the airport upon arrival.
Travelling to Panama is not is not really a program right now.
And to complement that answer connecting through Panama.
<unk> destiny with price.
Yeah, Okay. Good thanks for that I'm, having a little trouble hearing you Jose I missed a lot of your prepared remarks.
So if you could you had kind of distant could you just tell US have you said anything I'm sorry, if I missed it on your.
Your delivery schedule, what youre expecting.
From Boeing this year and possibly <unk>.
Currently have planned for next year given the settlement was reached.
Yes, sorry, Hunter and where.
We're trying to do some more.
On social distancing here with it.
This is microcap.
That's the reason.
This year, we are in our current fleet plan have a delivery of airplanes maxus.
<unk>.
2021, and when you add too bad debt that we received in December that's a total of nine <unk>.
<unk> to be delivered between December 2020 on full year 2021.
Okay.
And for 2022 were also published a.
Device fleet plan that has five Max's arriving in 2020.
Okay. Thanks, everybody.
Alright.
Okay.
Yeah.
Yes, our next question coming from the line of Helane Becker with Cowen Your line is open.
Thanks, very much operator, hi, gentlemen, thanks.
For the time.
Two questions one is on the mass win.
Have you had any comments from your customers about acceptance of that aircraft has there been any pushback or have you heard anything about how about that.
Hi, Helane.
No no no no negative comments no passenger refusing to fly the airplane.
It's been like just any other aircraft in our fleet no issues whatsoever, even in the few locations, where we've had technical delays no no issues different on a normal supply with a normal 800 Mg which is of course good news.
Okay. That's very helpful. Thank you and then in terms of financing those aircrafts per day on the eight that are coming this year and the five next year have they already been pre financing.
Like Hunter I couldn't hear you well.
You were talking about on the Exim financing.
Yes, sorry, a line on again I apologize for those on the call.
I was working on a separate Mike and so hopefully.
On the Q&A session is going to be a little bit clear.
Exim financing that we have received is for the first seven airplanes.
So all airplanes that are going to be delivered during the Q1 of 2021 and have already been settled.
<unk>.
The airplanes coming in in the latter part of the year. The remaining aircraft that are coming this year are going to be in the latter part of 2021 and those.
Preliminary.
<unk> as well for those but those are probably going to be concluded were finalized during the middle part of this year.
Okay. Thank you.
Thanks very much.
Thank you Ian.
Yes.
Yes.
Okay.
Our next question coming from the line of Diego Gaxiola with Credit Suisse. Your line is open.
Hi, Good morning, and thank you for taking my questions. So my first one is on the <unk> 'twenty cash room rates why was it so low compared to <unk> 20.
Then again on what why do you expect during the first quarter two on.
We even higher than the third quarter of 2020.
Yes.
This is jose here.
There's a couple of points there number one in the fourth quarter. There was a very important ramp up in sales. So the biggest driver of the performance that we saw on the cash burn for the fourth quarter was the ramp up in sales.
Actually moving ahead.
The variable cash outflows that we had during the quarter. So that's the biggest driver of the improvement in the fourth quarter is specifically sales.
There is a portion of the expenses net.
Were accrued during the fourth quarter that.
From a cash point are being settled in the first quarter.
That's also a portion of that $40 million to $45 million.
Estimate that we've put it for the first quarter is carrying on.
On the cash outflows debt that were unique to the fourth quarter because of the fast ramp up in capacity that we had that's about I would say.
On the $40 million to $45 million about $10 million or related to Q4 activities.
And so therefore, when you kind of equate everything Q4 or Q1 of 2021.
On a corrected for it sort of working capital difference it ends up being in the mid <unk>, 30% to $35 million range.
Again, we're providing guidance with debt to sort of.
Burnt movement that we'll see during the first quarter.
And then the other component of Q1 is that there has been more significantly there has been a slowdown in the in the sales of <unk>.
We've seen starting in the middle part of December and into.
The month of January of this year, and so we're seeing that as well and Thats also what explains the difference in the cash consumption estimate that we're providing for Q1 versus Q4 of 2020.
Okay. Thank you.
Very helpful.
If I may just a quick follow up.
Talking about the maintenance expense, how can we think about it in the coming quarters.
David <unk> 'twenty was impacted by some sort of a one time with the aerie growth playing out of long term.
Average where it.
It is a more stabilized.
Leather Laurie how can we think about it.
Yes, there was some one time expenses in the fourth quarter related to <unk>.
Taking the airplanes out of storage, but so there is a portion of it that shows up in our in our expense line, but it wasn't significant.
General terms there is also on our maintenance line in the fourth quarter.
On from accruals that we did related to airplane lease returns.
What was the bigger driver of that again also was.
More of a onetime in that growth as well.
Okay. Thank you very much.
We have our next question coming from the line of Savi <unk> with Raymond James Your line is open.
Hello, everyone.
What I was curious what your 2021 and 2022 gross and net Capex plans were based on what your delivery plans are and then also beyond 2022 do you have flexibility in the deliveries or is that is that six now.
Yes, I can.
You want to start with you I'll start with growth and then you can talk a capex.
So we saw we spoke of.
We are guiding to 40% capacities in the first quarter ask.
Compared to 2019.
For the rest of the year, it's really hard to tell I mean, we could we could use that as a base and depending on how the men.
<unk>, we're going to adjust upwards or downwards and actually for February and March were going to be adjusting downwards.
Due to the slowness in sales that that Jose I alluded to.
And the rest of the year second half of the year, it's hard to tell right now as the vaccines and the vaccination efforts are successful throughout our continent than may be growth will be faster.
And we have the flexibility we have planed to storage, which we can bring back to the operating line.
Fairly quickly on.
And the next two years, we have a combination of new deliveries plus lease explorations that we can we can play with so we feel we have all the flexibility we need in 2021 on 2022.
At Jos.
According to demand, which again, it's changing on hard to predict at least in the short and the.
Medium to long term.
So in terms of Capex the total figure.
They were looking at for 2021, its around $460 million.
And on that I'd say cash which is related mostly to.
Airplane maintenance is around $60 million and in 2002, you can assume that it's around 300 million of which.
Cause again sales 60 million is related to.
Airplane maintenance and there will be a cash capex.
That's helpful.
And does it from my follow up on on a previous question. I was just wondering is there as you saw the demand recover price discount on the Colgate great increasing.
Just.
Are there any kind of regions, where you saw it.
Kind of more strength or weakness.
As a as a guide to how.
We might see is as we get a vaccine levels higher.
Any insights into just kind of regionally, what what we might be important.
Not not really I mean, the larger markets.
Hey, Ken sustained higher capacity there so it was going to be more demand.
And what we've seen so far is a shift to more VFR travel.
And also I should mention that there was a lot of pent up demand.
<unk> on December and most of that was VFR travel.
People needed to get back home go visit their relatives.
At cetera, and there is leisure demand I mean, there is leisure demand growing.
From the big markets in the south to the tourist destinations in the Caribbean on North America. There is some of that I mean, we don't participate in the U S to Mexico market for example, but we know that market. It's more active that no. Other so but it's mostly VFR. However.
Okay.
So that sounds good thank you.
Doug.
We have our next question coming from the line of from area on <unk> with UBS. Your line is open.
Thank you hi from say Hi, Pedro Thanks, a lot for the call.
So a few quick questions here on my side first on the restrictions imposed by the U S.
Our debt is mandatory now, but also what they mentioned about carbon time.
This is in place or will there be sooner carbon tying up seven days mandatory there. So do you expect these to.
So APAC today.
You are you on demand and by how much if that's the case that's my first one on thank you.
Okay. So the only restriction.
Right now.
Flight to the U S.
GAAP required if PCR test net negative cash.
Quarantine restrictions I understand it's just a.
Possibilities.
That has not been decided on.
So far so.
It is not in effect right now and there is no certainty that it will be at.
At any point in time.
The PCR test, we don't see it as having an effect on travel.
The tests are think are widely available right now for passengers.
So so.
And any of our markets I mean that those tests are required in most of our markets right now and we don't see that absolutely.
As the impediment for travelers and same thing with the U S. In terms of what effect. The currington would have hard to tell and that would have an effect for sure, but it's hard for us to get.
How significant it will be.
Okay very clear. Thanks, So a couple of a couple of quick ones as well first on <unk>.
So you said, how many air Max Youre going to receive so also including the aircraft returns what is it going to be our capacity your seat capacity expected from <unk> this year versus pre COVID-19 levels.
And also that the other one is regarding January.
RPM actually.
Significantly.
Came below what our capacity was so east Copa focusing on yields and Thats why we see load factor dropping.
Or was there.
Our huge frustration on the demand even with some stimulation coming from different amounts you could fairs. Thank you right.
So capacity is going to depend on demand.
As we mentioned before so for for January was 40%.
In that range on it's kind of what we're guiding to for the for the first quarter, but the way day Magnus looking right now and we're going to have probably be adjusted downwards on for the rest of the year, it's going to depend on that on demand, which is very hard to predict.
The older than a few months out uneven and even then it's not that easy.
Yes.
We have the fleet as mentioned before in on paper, we could go as high as 80% in terms of ASM to various 2019 and this year, but we know that's not that's not realistic thats not going to happen on next year, we could go even higher but again that's not realistic.
So it's going to be in.
<unk> 40, maybe 50 range percent range, but it depends it depends again on on.
On demand the flexibility we have on in terms of what happened in January.
That were going for yields.
I mean summarizing it very quickly.
Our sales peak in November where revenues peaked in December on our capacity in terms of ASM peak in January so, but but in November we didn't know that.
On the January net debt sales, we're going to slow down in December and.
January we're going to be a little bit loans on.
On capacity because it takes at least on a few months to deploy capacity on even to cut back. We don't we cannot do it overnight, but we are adjusting now youre not that.
New reality roller leaving.
And we learn every day and we always have to be on our toes adjusting capacity.
Up or down depending on how we see demand and also a short term bookings are more significant relevant now than before because they don't come in as expected. Then we have to then think about capacity.
Thanks, so much.
We have our next question coming from the line of Pablo <unk> with Barclays. Your line is open.
Hi, Good morning, Hi, everybody. Thanks for taking my question I have a quick one.
We know that the hops capozzi will be close to pre COVID-19 levels by 2021.
But how do you think that you need revenues might perform this year I mean cutting minded passengers should remain on the weaker side on international restrictions could remain in place.
The next couple of months, how are you playing that capacity increase.
Unit revenue increase.
We will will be great to have more color on that thank you.
Well a rehab.
The reality is that we are as Pedro mentioned in the last answer is that we are really focusing right now the main pass that we're enhancing.
Making sure that our capacity.
It is.
Flexible enough.
And attuned to.
Revenues that we're seeing.
In the market and again, what we're seeing right now is that the entire market in the region.
Had a slowdown.
The first part of the first quarter and so we're making the adjustments in capacity and they're like wait so.
Okay.
<unk> have to be much more I want to stay active in our in our deployment of capacity in the shorter term.
And that's something that we're implementing now.
And so.
Net.
So the revenue GAAP that we're seeing for the first quarter is still pretty significant. It is we're talking about revenues in mid Twenty's total room.
38% of.
2019 levels.
Which is.
You know a very.
Significant.
A reduction versus low reward at the beginning.
Still seeing again a.
Okay quite a bit of a.
Although GAAP versus low versus normality.
But again the important thing is the.
Adjustment of capacity to that.
Okay.
Of course.
On the.
Another quick one on on the cost side do you have any other measures.
That you are considering right now.
Adjusted these new demand environment that we have to.
Think about or probably you already on there.
It took everything on the cost side that you were able to do on right now it's just.
That additional cost of flying.
Should we also followed the cost line.
For 2021, assuming debt demand remains weak.
So look.
In total we came in to.
So the crisis with the lowest cost.
Of our peers in the region and during last year, we took quite a bit of measures renegotiating contracts with most suppliers.
Reducing our IP.
Expenditures maintenance labor et cetera, right. So we.
We did quite a bit of that and that will continue on during 2021 as well.
As I mentioned in the first part of the question. Our main effort right. Now is in capacity deployment management that goes where is the next step is on making sure that our okay. So we don't fly more ASM debt are needed in the market and in terms of additional cost measures right. Now we are in a position of strength and we do.
Move to take drastic actions that could prove costly in the long run. So we have sort of the the luxury of coming in with a strong balance sheet and with a low cost position unless we see that the recovery is taking longer than what we expect day. So then we have another set of Av.
Items that we could do that or that are more aggressive in nature, but we have to be mindful also that we are going to be.
On a year and for a long time on that.
We want to be ready for the recovery as well so it's a balance and that's what we've been doing.
Perfect. Thank you.
Yes.
We have our next question coming from the line of Mike Lindenberg with Deutsche Bank. Your line is open.
Hey, good morning, everyone.
I guess the question probably to Jose and maybe even Pedro you know it seems like you know kind of another error when we're guiding to CASM ex of sub 6% in 2021 and I realize there's a lot of uncertainty as we look out.
Through 2021, but I'm sure that you are you also have a.
Our focus on the longer term picture here and I'm, just curious given the event and the shifting in the fleet on the issues with the Max is a sub 6% CASM ex debt even achievable by say 2023 is that is that being aggressive.
And I guess some questions on that question is that are we back to full capacity by 2023, if not sooner. So I realize it's a longer term range question.
But the hope here is that you are still focused on achieving that sub six said.
Once we get through the pandemic.
Yeah, Mike.
At a very very good and important question and I think that you point out correctly in the sense that more than necessarily a timeframe or a or a particular in months or a year.
Nothing we have to think about it in terms of at what point in terms of our capacity recovery are we at.
That those passenger levels on of course, we.
Yeah.
Think about that quite a bit or are you know returning to sub six cap.
<unk> targets.
Yeah.
I answered the question on a couple of ways, one I think.
We should be able to achieve our sort of pre pandemic cash and figures by the time that we are in about 80% of free COVID-19 capacity, So I think thats, which shows.
How much we've become more efficient throughout.
Profit and there'll be other.
Data point I think it's important.
I think when you look to do the numbers if you're assuming a there are several moving pieces here right. So have you assumed debt.
Dilution is in the mid teens.
We could be break cash breakeven by that moment that we are at about 17% pre COVID-19 capacity. So that's another I think good data point to kind of understand how we're seeing the business in the medium term and how.
Our path to recovery, but absolutely we are focused on on.
On getting back into that track of getting.
So that sort of <unk> of six categories.
In the medium term.
That's great.
And I would add to that you mentioned when you ask when we could be back to those same levels on the I don't think anybody knows.
So we're going on we're not going to try to get that book, but adding to what Jose just said it.
We were at 100% Tomorrow, we would be sub six tomorrow.
You're saying that.
That's helpful. Thanks, and just one quick one here Pedro and this is sort of a follow up to Hunter's question on restrictions I know you addressed panama's restrictions I am curious how your loads.
Third after the U S stepped up its restrictions in the mandatory negative COVID-19 tests within 72 hours of arrival that was January 26, I'm curious how that hit your low and I know during the quarter I believe in Argentina announced that carriers had to cut back their service by 30% to 60%.
So if theres any chance you can just run through a couple of the examples because it does seem like that there was an increase in restrictions in other countries not necessarily Panama or countries that you serve and like in Argentina, I think even today you still run on some days two flights a day and most other carriers don't even sir.
I'm curious about some of the additional restrictions and maybe even how you've seen.
Roads or demand change.
Within hours of those restrictions being announced thank you.
Okay.
Thank you and no. Thank you Mike disaster Hunter's question since you only mentioned Panama.
We answered Panama on ice.
Kind of cross fingers that I could just stay there.
Sure.
So youre right as restrictions are all over the place.
The testing requirement for the U S has not really had an effect at least not noticeable okay.
Because from what I said before it's widely.
Are now widely available so it's not an impediment for people to travel.
And most countries are requiring those tests and you anyway. So that's not really the problem, but I'll give you a few examples of what has happened in the last let's say months on a half which has had on them.
Correct impact.
On our sales on our business and I'll just give you a few examples and Youre right. Argentina is restricting flight we were not restrict debt only because we already had a.
Diminish a reduced schedule.
You had a very reduced schedule in Argentina, only a few flights a week. So we could stay with that sort of for example, where Venezuela flight was cancel for nearly a month due to COVID-19.
Havana, two cuts from like two day leased to three flights a week, which I think has been now reduced to two flights a week only for like more than a month.
Uruguay only on loud.
Residents nationals.
Who had booked before the restrictions so non new sales were allowed for like over a month in Uruguay.
Some countries from other countries imposed new quality.
Teen restrictions.
It's a long list, but when you add it up it had a meaningful impact on its kind of part of what we're seeing right now because many of those restrictions remain in place as we speak.
Yeah.
Yes.
Okay.
Okay.
Yes.
We have our next question coming from the line of day, one Penny work with Evercore ISI. Your line is open.
Hey, Thank you.
Sorry, if you covered this but what were the main drivers of your cash burn improvement relative to the guidance. It was it was far better than what you guided to.
Was it was it all Boeing settlement related or aircraft sales related.
And if not can you comment on on if those contributed.
Duane.
How are you doing.
Yeah.
That's the first thing not to make sure that we define.
The way that we look at the cash burn we look at cash burn.
<unk> from <unk>.
Excluding all any sort of extraordinary.
Items.
Such as the ones that you mentioned so the figure that we publish.
Is purely our operating cash flows and including sort of our debt commitments, our outflows related to it.
Service of our debt.
And thats that aircraft.
Aircraft sales and other sort of extraordinary items are not included in the figures.
That's very important because we're very I want to say that we're very strict with the way that we look at this figure and I think that's very good because it.
Keeps us very very much on top of the business number two debt fourth quarter performance really saw on improving because of the.
The ramp up in sales that we saw we were operating.
We were operating at.
At a very low level at the beginning of the quarter and we ramp up capacity and sales were ahead of that I think as Pedro mentioned before sales were peaking in November.
And so therefore, we had a quite a bit of a ramp up there.
That's what occurred on the difference that we saw in terms of improvement was related mostly to the quick ramp up in sales that we saw.
And the fact that Theres also a minor component there of some of the expenses that were accrued during the fourth quarter actually are going to be settled in cash during the first quarter sales towards like a $10 million.
Switch their debt.
Should have come in in the fourth quarter or response to the fourth quarter.
So again to summarize on again, our cash flow figure.
In the appendix to our earnings release, there is a full reconciliation of our the way that we calculate our cash burn I think is a very fair way.
Correct way of doing it.
Is right there and number two on the other item net it's very important first quarter. However, even with the cash burn that we're reporting of or forecasting or guiding to $40 million to $45 million.
It does not include some of those.
Extraordinary measures.
That occur in terms of financing or cash related to financing activities et cetera. So there we will see an increase in our liquidity at the end of the first quarter.
That is not counted in the cash burn figure that we our guidance.
Sorry, and what would drive that increase in liquidity that you are not that's not included in the cash burn guidance.
Well there are several items. There for example, the financing of aircraft that we have low from the reception on aircraft Theres some debt.
<unk> net debt.
We have.
At Boyne debt when on delivery these deposits basically to get financed.
Sure.
With the excellent financing that we have established their aircraft sales that were performing during the quarter.
Et cetera, so that increased the liquidity on spot on of course, we also increased some of the available credit facilities that we have so all of that builds up on the liquidity book is not counted in within the cash consumption figure that we're bullish.
That's great detail and thank you for that and then maybe maybe just a macro question.
As we contemplate massive fiscal stimulus here in the U S.
How are you thinking about the dollar versus local currencies in Latin America over the balance of 2021 I know historically.
Well, you would sort of be unwilling to to speak to currencies or make a bet in that regard, but how are you thinking about just just a relative.
Pacing on fiscal stimulus and the potential for local currency appreciation as recovery takes hold thanks, thanks for taking the questions.
Well it is still very.
Yeah.
A very volatile situation in the region with the currencies the currencies on the fourth quarter. Appreciate it in general terms most of them most of the big major currencies in Latin America. Appreciate it which is actually helpful for us, but it is still.
It is very hard to sort of predict where they will ultimately end up so again.
Strengthening currencies in the region.
Should improve demand, but still.
I think so.
Barry to the overall.
Governmental restrictions on demand probably on the patterns that are out there.
And in any case I think at this stage.
Somewhat hard to predict where the currency is mind us.
I appreciate the thought it was worth a try thank you very much.
Thanks, a lot.
Okay.
We have our next question coming from the line of Dan Mckenzie with Seaport Global Your line is open.
Oh, Hey, thanks, good morning, guys.
Following up on a prior question I am wondering what level of openness.
Panama or other countries have to say this idea of a COVID-19 travel passport as a way to open up the region.
And so I guess you know what willingness is there by governments to consider it or they consider it considering pardon me.
And if they are is the technology there at airports to to adopt it.
Yes, it's interesting that there are that I know of at least four initiatives.
That I think are quite advanced in terms of coming on we would have travelled path for our health pass, which which in our opinion its going to be very important.
True reopened on two growth to grow.
International Air travel.
For sure so Panama, and we recently announced together with IATA.
On the authorities in Panama.
Debt, Panama and Copa will be part of the trial passed of the new travel past. So this is thats going to happen I think in the month of March next month. Those are those trials are going to start for panamax very much committed to being part of the <unk>.
Probably past and I think that would also include the other troubled path.
<unk> passes that holders or Hilton passes that others are working on so.
This is kind of on all inclusive thing and hopefully they will communicate with each other so we're very much involved.
At this point.
We've talked to some of your others.
Also on Panamax also onboard.
Which are the other three countries Pedro.
Well no no im sorry, not country, but initiatives.
Come on past.
Ibm's working on something also on Accenture and plus <unk>. So those are the at least the forward there might be others, but those other.
For entities that are that I know a lot better working on health practice on travel packages.
Pretty much the same the same objective.
Oh I see.
What are any other countries willing to talk about that at this point in addition to Panama.
Well I've heard of other airlines around the world.
Asia and the Middle East for sure that are working with the government.
I think I think the Emirates, Singapore on probably a few more are working with IATA under national carriers.
You also pilot.
The <unk> travel pass in Asia.
Same thing is happening with the common pass on some of the other initiatives that I mentioned.
Oh I see Okay, I guess I was kind of wondering about Latin America.
But you know if I could a second question here the lie flat seats on the Max.
And it seems like Theres, a lot of pent up revenue potential on those seats as demand normalizes and it seems like it could normalize.
At some point here, maybe I don't know if it's later this year or next year or how youre thinking about the pace of the demand recovery.
But I'm just you know as we kind of think about you know your ability to monetize that revenue is it just as simple as longer haul international markets opening up or.
Are there other steps that you could take to help drive revenue from that that part of the aircraft.
I would say that it's mostly business travel coming back the aircraft will be deployed in.
In our longer market is that's already happening and as we get more and more <unk> was a lie flat seat. It will do more on that so they're going to be.
Mostly serving those markets. So it's about business travel coming back, but something interesting is that.
Growth was rolling on the Max 19th on narrow body.
We have 16 flat seat on board.
Served market that we.
We will not recover to the pre COVID-19 capacity and probably quite a while and I'm not talking just Copa Airlines flying nonstop wide bodies the whole thing.
So it's not that we need the business markets to come all the way, but other ways back to what it used to be.
We can we will we will serve markets that are going to be underserved. So we're feeling for a while.
So we should be able to do well even before then the business travel comes all the way back.
That's perfect. Thanks for the time you guys.
Thanks.
Yes.
We have our next question coming from the line of Stephen Trent with Citi. Your line is open.
Hi, good morning, everybody and thanks for taking my question.
First off I was just curious.
On the travel pass I'm very intrigued.
Is copa actually going too.
I'll have to fork up.
On the investment in that or will this be something covered through Panama and.
Governmental levels.
No we're not we're not investing in the tool. Neither is Panama is this something that IATA is doing on its own and we just agreed to be part of a trial and be well.
One of the first countries on airlines.
Participating in it but but what.
What kind of rate.
Cost distribution, there's going to be in the future, we don't really know.
I'm sure that the different travel on health practice that had been developed we will have to cover its costs, one way or another.
Im not sure that has been determined right now and we're not involved in that process.
Yeah.
Okay Pedro I appreciate that.
And just on a longer term question, if I may when Copa thinks about this.
So on a broader initiative to.
Get carbon emissions in 2015 down debt half of 2005 levels or what have you.
Copa thinking broadly about that.
Carbon capture program certainly the Max is going to help.
U S partners talked about some investment or collaboration collaboration with.
Electric planes and what have you just love to get your thoughts you know higher level, how you're thinking about that longer term.
Yeah. So so we are of course following very closely.
The course here.
Initiative.
Even though Panama gross and fall on their under the threshold.
It forces on implementation.
On the near future.
We're very much involved and reporting our carbon emissions on a yearly basis.
And also very much involved in.
And just thinking about what what are the initiatives that we need to have in place.
To be ready for when this becomes more of a requirement in our country on in the industry in general as you know I'm also part of it.
Alright, you ask us board of Governors on church from media and <unk>.
Okay.
Current and frequent topic of conversation.
But I cannot tell you that we have a specific plan right now.
More than just the reporting on the free can frequent conversations on devaluations of option, but we do not have.
The firm.
As we speak of course with our modern fleet of Max's and 770, <unk> hundred <unk> on our own company a fuel saving initiatives on some other initiatives from the company.
Like solar power.
We're at some of our airports facilities than we do all of that.
Got it.
Does not compensate obviously not even close the courtroom carbon emissions of our on.
On a regular flying so there's more to come there in the future.
Yeah.
Well really appreciate the color Pedro Thank you for that and I Hope you guys and your families are all okay.
Thank you Victor Thank you Steven.
Yeah.
We have our next question from it from the line of Killer Mendez with J P. Morgan Your line is open.
Hey, guys. Good morning, good afternoon, and thanks for taking my question actually two questions. Just first wanted to follow up on the trust of recovery. So you guys mentioned, the VFR has been recovering faster than the other segments. So.
Just help me think on how should we be thinking about yields going forward.
And that's probably a corporate travelers will take longer to recover.
So how should these reflect on yields.
Candidly from the second half of 2021.
And the second question is regarding debt, we've been with Boeing I know determine circumstantial, but if you could just give us some colors in terms of it most of it.
On a cash component phases or its more related to me.
He had agreements on the future receivables on Mark.
That would be very useful tanker day.
Yes, Thank you Darren.
I would say that day.
First of all we're not issuing a full year guidance. So.
I'll cover this more anything but we have in the shorter term in the shorter term we're seeing still.
Significant drops in our yields.
Throughout the networking.
On the 20% range on a year over year basis.
That's something that we're seeing.
At least in the short term.
And I think that the important component of that is that.
There is still a lot of.
Yes.
Variability into the rest of the year on so it's too early to determining where that is going to end up in the remainder of the year.
And I.
I would say.
Now I don't see any particular region being being different or acting in particular way I think they are all in.
In the same range.
In terms of yields and in terms of the Boeing agreement. It is a confidential agreement so.
Yeah.
Leave it there.
Oh, that's perfect. Thank you guys.
Yes.
Okay.
There are no further questions at this time I will now turn the call back over to Pedro hailed loans.
Okay. Thank you.
I just wanted to conclude.
Same debt.
We think we're in a very good position.
In our region and in General terms, we were very proactive in 2020.
Taking some difficult but necessary actions.
To bring down our cost structure to.
To adjust our fleet.
We feel we're hub is the best positioned in the region.
Therefore, what we will for a while.
Reduced market and we also have the right fleet standard Rice was at 737, eight hundreds and <unk> and then Max nine.
So we know.
Times are still a little bit difficult.
Budd.
Shining light at the end of the tunnel with a vaccinating vaccination efforts, which are going to gain speed in the coming months months and weeks for sure.
So anyway. Thanks for thanks for your support and.
We will keep moving in the right direction. This concludes our earnings call.
Have a great day, we'll see you in the next one.
Ladies and gentlemen, thank you for your participation that concludes the presentation. You may now disconnect and have a wonderful day.
Yes.
Okay.
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Yes.
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