Q2 2021 Copa Holdings SA Earnings Call
[music].
Yeah.
And welcome everyone to our second quarter earnings call.
Joining us today are available.
<unk> CEO of Copa Holdings, and Jose Montero, our CFO.
First.
Pedro will start by going over our second quarter highlights followed by Jose who will discuss our financial results.
Immediately after we will open the call for questions from analysts.
Copa Holdings financial reports have been prepared in accordance with international financial reporting standards.
In today's call, we will discuss non <unk> financial measures.
A reconciliation of the non Ifr ask Dubai financial.
<unk> financial measures can be found in our earnings release, which has been posted on the company's website Copa com.
Our discussion today will also contain forward looking statements not limited to historical facts that reflect the company's current beliefs expectations and our intentions regarding future events and results.
These forward looking statements involve risks and uncertainties that could cause actual results to differ materially and are based on assumptions subject to change.
Many of these are discussed in our annual report filed with the SEC.
Now I'd like to turn the call over to our CEO Mr. Pedro here.
Thank you Danielle.
Good morning to all and thanks for participating in our second quarter earnings call.
Before we begin I'd like to thank all of our coworkers for their commitment to the company and recognize their continuous efforts and dedication.
Copa at the forefront of Latin America on aviation.
To them I saw my utmost respect and admiration.
As many of you know.
The only possible I decided to take on a new professional challenge on left the company earlier last month.
We're very grateful for the more than 15 years of outstanding work he'd dedicated to Copa.
I would also like to take the opportunity to welcome Daniel <unk>, our new director of Investor Relations.
It has over 12 years of experience with the company in many areas, including airports scheduling and most recently fleet on network planning, we're very confident in Daniels ability to lead our Investor Relations group.
As you May remember.
In our last earnings call, we discussed 2 day bridging seems happening in Latin America.
On the 1 hand, some countries, including Panama, we're experiencing a downward trend in infection rate, which led to fewer travel restrictions on an improved demand environment.
On the other hand.
Several other countries continue to struggle with the virus, which led many of them to redeem post air travel restrictions on or new held requirements.
Shipping demand for international travel.
As of today, the story has not changed much.
Due to increasing COVID-19 cases, several countries have maintained and in some cases increased travel restrictions, which has affected our ability to reinstate capacity.
On the other hand Mark.
Markets without significant restrictions, mainly <unk> from the U S and searched on leisure destinations have continued to recover.
Each has allowed us to increase capacity quarter over quarter, while also growing load factor.
In the month of June we successfully transition our hub on the Americas in Panama back to a 6 bank connecting structure, which enables cost efficiency and lets us continue adding back frequencies and destinations Mauro.
Moreover, we started to reactivate some of the aircraft tend to temporary storage during 2020.
Going forward.
We assume ongoing vaccination efforts will have a positive effect on COVID-19 infection rates in the region.
Which we expect will lead to relaxation of travel restrictions on a faster demand recovery supporting the capacity deployment for the second half of the year.
Now I'll highlight some of our second quarter results.
In terms of capacity, we reached 48% of second quarter 2019 ASM.
<unk> to 39% in the first quarter.
Load factor came in at 77%, which is an improvement of 8 percentage points compared to the first quarter.
Revenue increased by 64% over the previous quarter to $304 million.
As a result of the additional capacity higher load factors on improved yields.
The additional capacity also allowed us to reduce our ex fuel CASM.
From 8.5% in Q1 to 7.6%.
In Q2.
We reported an operating profit of $8.7 million in the quarter.
Excluding a $10.4 million per passenger revenue adjustments. The company would have reported an operating loss of $1.7 million.
Cash accretion averaged $21 million per month, which was better than our expectations, primarily due to stronger sales in the quarter.
We ended the quarter with a cash balance of $1.3 billion.
And total liquidity of over 1.6 billion.
In terms of our operations.
And despite the complexity imposed by the multiple biosafety protocols. We're pleased to report on on time performance of 92% for the quarter on a flight completion factor of 99, 5%, which again places us amongst the best in the World and it's a true Testament to our <unk>.
<unk> continuous commitment to providing a world class product toward passengers.
Turning now to window, we can report on its now operating 677.800 compared to the tour it operated pre pandemic.
During the second quarter.
<unk> continued its regional expansion with new flights.
Panamax to San Jose Costa Rica from Bogota to Lima, Peru, and since Q1, it's been operating more capacity than in 2019.
To finalize it.
Like to reaffirm that we have a proven and strong business model, which is based on operating the best and most convenient network for intra Latin America travel from over half of the Americas, leveraging Panama's advantageous geographic position was the region's lowest unit cost for a full service carrier best on time performance.
Formats on strongest balance sheet moving forward the company expects that its hub of the Americas will be on even more valuable source of strategic advantage.
Now I'll turn it over to Jose who will go over our financial results in more detail.
Thank you Pedro good morning, everyone I hope that year on year families are safe and doing well thanks for joining us today.
I would like to join Pedro in acknowledging our great Copa team for all their efforts and great spirit.
The months of the pandemic.
I'll start by going over our second quarter results are.
Our capacity came in at $2.9 billion available seat miles.
On to about 48% of the capacity operated during the second quarter of 2019.
Load factor came in at an average of 77 per cent for the quarter.
We reported a net profit of 28.
And $1 million.
Or <unk> 66 per share.
Excluding special items, we would've reported a net loss of $16.2 million or a loss of 38 per share.
Special items for the quarter are comprised mainly of on unrealized mark to market gain of $33.9 million.
Related to the company's convertible notes issued in 2020 and $10.4 million in revenues related to underground ticket.
Correspond to sales made during 2019 and early 2020.
We reported a quarterly operating profit, which came in at $8.7 million.
On an adjusted basis, not including the $10.4 million Unredeemed ticket revenues, we had an adjusted operating loss of $1.7 million for the quarter.
It's worth noting that we achieved this result, while operating at 48% of our pre COVID-19 capacity.
Unit costs, excluding fuel for the second quarter came in better than the first quarter at 7.6 per ASM.
By quarter over quarter capacity growth as well as our continued focus on maintaining the sales team during the past year.
We continue with our cost savings initiatives.
And we are targeting to achieve our unit cost below <unk> once we reach 100% of our pre COVID-19 capacity.
Aside from our cost performance, our operating results for the quarter were driven primarily by our yields.
11, 9% on an underlying basis came in 1% better than those in Q2.2019.
We also achieved cash accretion of approximately $21 million per month for the quarter, which is ahead of our expectation and driven mainly by increased sales during the period as well as some timing on operational cash outflows.
As a reminder for cash accretion measure we exclude all extraordinary proceeds from asset sales, but include Capex and the payment of our financial obligations.
I'm going to spend some time now discussing our balance sheet on liquidity.
So at the end of the second quarter net assets.
Close to $4.1 billion, and our cash short and long term investments and then a $1.3 billion.
We also ended the quarter with an aggregate amount of $345 million in Unutilized committed credit facilities.
<unk> added to our cash brought our total liquidity to more than $1.6 billion.
In terms of debt, we ended the quarter with $1.6 billion in debt and lease liabilities similar levels to the ones reported for the end of the first quarter.
Turning now to our fleet during the second quarter, we finalized the sale on delivery of 3 Embraer 190, <unk> and in the month of July and we delivered the last remaining Embraer 190 aircrafts on our fleet.
During the month of July we also entered into an agreement for the sale of $6.737, 7 hundreds and decided to keeping our fleet. The remaining 6.777 hundreds.
<unk> ended the second quarter with 81 aircraft 68, 7 interest of 813, 7% on Max 9 indeed.
And these figures include our century 7.8 hundreds that were sent to temporary storage during 2020.
During the fourth quarter, we expect to receive 2 more cemetery side on Max Nines and <unk>.
<unk>, we're now keeping the 6.737 7 hundreds we expect to end the year with a total of 89 aircraft.
As for our outlook for the rest of 2021, we're still in an uncertain and unpredictable.
On predictable demand on operating environment.
As such we will not be providing full year guidance.
However, based on preliminary results for the month of July.
Current state on the demand environment and air travel restrictions that can provide the following outlook for the third quarter of 2021.
We expect capacity to be approximately 17% of Q3.2019 levels at about $4.5 billion Asn's realm.
Revenues to be approximately 58% on Q2.2019 levels at about $415 million.
We expect our CASM ex fuel to be approximately $6.6.
A decrease of 14% versus the second quarter.
Given these operating assumptions and all in fuel price of $2.15 per gallon as well as the incremental capex that we will incur in during the quarter to reactivate our fleet.
We expect to be cash neutral for the third quarter.
Thank you and with that we'll open the call to some questions.
Thank you as a reminder, if you'd like to ask an audio question. Please press star followed by the number 1 on your telephone keypad. Once again that is star 1 to ask a question.
And your first question is from the line of Duane <unk> with Evercore ISI.
Hey, Good morning, guys. This is actually Ray Wong on for Duane.
You had mentioned significant travel restrictions being a major indicator for demand recovery, specifically, some bright spots in leisure into the U S. Along those lines what percent of your markets are you open to any countries in your network have a vaccine requirement and could you provide some specificity for countries that have or don't have significant travel restrictions in place.
Okay. This is Pedro here good morning.
I don't think I have the exact.
Percentage of numbers per our numbers, but pretty much every market has some sort of travel restriction.
It might be as simple as providing.
On antigen or PCR test X hours before travelling negative test of course in most countries have that restriction, a few like Mexico, and Brazil zone, but the risks pretty much have it all.
Others have quarantine restrictions.
Like Chile for example.
On where we get.
The most affected is when countries are restricting the number of price that could happening in Argentina to the whole industry on a fuel.
Other markets also restricting capacity.
So it's hard to pinpoint, but but the open markets like Brazil, Mexico day.
U S for most origins not for all its not open for Brazil, as we know.
But those markets at some Caribbean Islands like the Dominican Republic, those markets are seeing a factor recuperation or recovery than the ones that have.
How youre restrictions that would ask.
Would be expected.
That's helpful. Thanks, and just from my follow up as you look across your network, where do you see longer term structural competitive capacity shifts whether it would be.
Higher or lower.
Competitive competitor capacity.
In the longer term.
Yes.
What do you see net.
Sure.
When you see other competitors across your network restructuring et cetera going through.
On the harsher times now.
Yes.
Don't really see.
There are a number of our main competitors restructuring restructuring under chapter 11, but we expect them to.
To come out of chapter 11, with a network that it won't be much different to what they have before force. We don't know we don't know for sure. We haven't seen the restructuring plans, but we're not expecting major shifts there if any and then there's new competition of course.
From new and existing carriers are adding capacity throughout.
Other region. So we expect to see more competition in the future, but no major capacity shifts that I can think of.
On the only thing that I ask that.
The hub on.
Post Covid world on hub still carries.
Quite a bit of uniqueness and.
He has a lot of strength in terms of.
It's more on market that we serve and so therefore, I think that we're well positioned even on their increased.
A competitor influx of of some of the low cost carriers in the region and some other capacity from the U S day realities at the hubs still competes on on markets that cannot be served.
Very well on on a point to point basis.
Actually the average day.
Thank you Ray.
Your next question is from the line of Stephen Trent with Citi.
Good morning, gentlemen, and thanks very much for taking my question.
I'm curious.
Kevin.
What we've seen with the.
Kind of slower business travel in the Americas, I've had 1 or 2 industry contacts mentioned that.
They know our plans by specific businesses to try to launch business passenger only type services.
I'm wondering if you guys have even seen anything like this or assets, we're talking about.
Per Tigers here, just love to get your take on that.
Yes, well our part of the World.
Might be different to others the distances are shorter.
Not everywhere, but in many markets on.
In our case, we're operating mainly narrow bodies. So so we're not of course, we've seen corporate travel.
Slowdown I would say that corporate travel and our network is about 50%.
What was pre pandemic.
Recovering a lot slower than VFR and leisure that in some markets, it's getting close to pre pandemic and what we've heard for a lot of our accounts is that they will start traveling after the summer.
But I'm sure that will depend on the virus also.
Planning to make any major changes.
Got it.
2 targeted at specific market, we've always been.
Is almost evenly split amongst leisure VFR on corporate and have a product that can cater to all 3 segments, but what we know is that going forward there will be more at least for a few years until corporate fully recovers there'll be.
More.
<unk> towards leisure and VFR, So, we're making sure our costs are going to be lower than than before so we can have the same success.
Even if there's a little bit more pressure on yields.
Okay very helpful Pedro and as a quick follow up.
Could you refresh my memory.
Panama itself I know that the Panama has been allowing.
In transit passengers to capacity airport with no problems, but for foreigners arriving.
And in Panama could you just remind me.
What kind of if they have a quarantine requirements or anything like that.
There is there is no.
No requirements other than a negative test 772 hours before travel for most passengers from Europe, Latin America, and the U S. However, certain high risk countries, mostly from South America and a few from from Europe.
Have to provide the negative test plus another test on arrival and then a 3 day acquiring team.
Sure.
No.
1 other listed hotels, however that that is about to change if the passenger via writing passenger from a high risk concrete has been negative per cluster is fully vaccinated then it will do away with the 3 day quarantine.
All.
Very helpful. Pedro I'll, let someone else ask a question. Thank you. Thank.
I guess, Dan Thanks, Dave.
Your next question is from the line of Hunter Keay with Wolfe Research.
Hey, good morning, everybody.
Good morning.
Pedro.
Sometimes I know airlines collab.
Collaborate on on safety and operational issues or have you.
Seen from either from a far or through conversations with your U S airline counterparts about any lessons learned that you might consider as you contemplate restarting operations just to ensure that you don't incur some of the same issues operationally that we're seeing up here happening in the states right now.
We have obviously.
Now.
Guiding to 70% of pre pandemic capacity in Q3.
So we've been Spooling up since Q1 actually since Q4.
Last year, we've been doing it gradually.
However between Q2 and Q3, we're going to be growing 50% in a sense. So it's going to be like our fastest.
Redeployment of capacity, but we've had a few quarters.
To get it done correctly.
As you've seen from our on time performance.
At 92% in Q2, and even higher in Q1.
We haven't lost assets and coming back with the capacity and we're not cooperating with others, which is your specific question, but we have paid a lot of attention and we have to talk to our industry groups on rehab to talk to some of our peers and your net that were closest to it.
From the very beginning.
But not right now okay.
Okay. Thank you and then Jose.
Sorry for the modeling question, but it could be a nice little factor here I'm kind of curious about ASM per gallon you had a low stage length is on.
Under 1200 miles.
Obviously, you got rid of the you on <unk>, but as you think about the Max is coming in are you on 90 day, you're going to be able to keep these ASM per gallon above.
83, or it can be taken them, even higher over the next 2 to 3 years.
Yeah, I think the trend.
Max has.
The fuel performance that is around 13% better than the 800.
On a per ASM basis. So therefore, you can certainly assume that the Max coming into the fleet that there'll be an improvement in the ASM per gallon figure that we will be seeing over the next several.
Next several.
Lunches, that's more macro.
So we had the Max right now represents on.
Most.
20 per cent of the fleet. So it will become more and more important as time passes on where Mexico, maybe quickly and the other thing is that you have to also moderate on a going forward basis.
And if I got you on Ags are gone.
That also AIDS in the field.
We're seeing individuals.
This is a sustainable level here going forward you think.
Yes. Thank.
Thank you.
Okay.
So we had on next question.
Alejandro <unk> with credit Suisse.
Thank you Tycho at Oracle's hit on me and.
Thank you for the call.
A quick question on the unitary costs.
What are your expectations in terms of cash.
Ex fuel.
As long as capacity continues to recover.
I mean do you believe there might be some structural sales.
Moving.
Cost savings once capacity fully recover on the word.
Both of these structural cost savings may come from.
Yes, how to handle it.
As you saw first of all we are providing.
On the.
Our guidance for Q3 at $6.6.
Which is getting very close to our 2019.
Cash and that's only at 70% of our 2019.
Passenger so it is getting close to the levels that we had pre pandemic.
Our expectation as I mentioned in my prepared remarks is that we.
We'll achieve catch on in below <unk>.
And that is below where we were in 2019 pandemic by the time that we reach.
100% of capacity and where does that come from.
We've been first of all last year with last year, we worked exceedingly hard in.
Renegotiating our contracts with suppliers.
With Counterparties that we do business with.
We have been very.
Adam about about the fleet.
The changes that we've made.
That provides quite a bit of.
Savings as well on a per ASM basis.
And we continue on with that and I mean, we will continue with our sales plans.
In terms of.
Looking for further efficiencies.
Contracts.
Our systems.
And overhead we are a leaner organization that will.
A year ago. So it's all about that and we are confident that.
We get back to a 100% we will achieve CASM that will be less than 6%.
Okay. Thank you and just a second question if I may.
On the.
The tissue on I mean, what was the rationale behind the decision on keeping the remaining 6.
737.700.
Yeah, Alejandro I would say that that <unk>.
Recent number 1 is.
When we started experiencing a factor capacity recovery or demand recovery than what we expected earlier in the year. So that was number 1.
Number 2 is that those aircrafts well first of all their own and paid for.
Not very expensive so the per seat cost it's equivalent to the 800 on at the same time. They have the same grid reliability of the rest of the fleet. So the cost of keeping those aircrafts, even if it was.
As insurance is nothing.
On the cost of being short aircraft could be very high. So we're just hedging our bets flexibility for us.
Thanks.
Okay got it. Thank you so much guys. Thank.
Thank you Adam.
Your next question is from the line of Savi <unk> with Raymond James.
Hey, good morning, and just on your revenue guidance.
<unk> significant kind of yield compression in <unk>.
Compared to Q2, given that you're a year with 2 year capacity is kind of improving by 22 points on a sequential basis, but your revenue is not improving.
Pinpoint is that just a function of you're bringing back a lot of capacity and your interest.
<unk> net.
Because you pay on moving from kind of a seasonally weak ticket at <unk> I was wondering why that was.
Yes, sorry, so this will stay here in EMEA.
You know very well.
And there we are adding 50% of capacity Q3 versus Q2 was peddled alluded to earlier traffic.
In that same line. So it is indeed yields we are seeing that.
With a ramp up of capacity and there is a GAAP.
2.
It was simply too too.
Allow ourselves to grow why I would say that this is not about a quarter, it's about rebuilding the hub and.
And we believe that.
The ramp up of the of the hub and maintaining its frequency and destinations is very important and sort of on the future development of it. So it is sort of like a transitional quarter, but.
But we are seeing that indeed, there is a yield.
Reduction on a per cent basis, especially during the latter part of the quarter.
Especially in the latter part of your quarter and you know what we'll make adjustments.
On the capacity if required.
We are being very flexible on the way that we are putting out our capacity forward.
From an and.
The justice.
Just as a little bit and pay channel.
And then talking about competition, but I was wondering.
Just 1 on Valera, they've talked about expanding to northern South America in the medium term and deploying like aged 18 to 22 aircraft there.
From Mexico, Costa Rica rests on the Doc just wondering you talked about on the small market that you serve maybe that's the answer here, but just how and what day.
To what extent will Copa would be able to defend against.
Potential excursion and from the large tier market.
Yeah, well, yeah, Savi Pedro here.
You provided part of the answer.
We have many competitors.
We've seen growth since the pandemic started from both legacy legacy Airlines from the U S. Lcc's from the U S from Latin America et cetera.
So that's not non.
Not new news.
On user are kind of been repeating.
For the past few months and we're focusing on on what makes makes US successful, which is 1 is keeping our costs as low as possible.
As Jose mentioned, we're planning to come out of the pandemic, hopefully a pandemic and 1 day, but we're hoping that when we are back at 100%, we're going to be at below <unk> cash them and we're going to be at pre pandemic cash when we reach 80%.
Which that should not be.
Too far from from now we're also connecting small markets the strength of our hub is that we connect.
Over 70% of our markets are markets are too small to be able to serve be served non stop.
Correctly, that's not going to change after the pandemic at least not for a while and it's also hard.
To stimulate traffic in many markets.
Intra Latin America, not only because of the effects of the markets, where because of the how high the airport fees and taxes are so before you start charging a penny per.
<unk> has to pay quite on.
Large amounts of money, so it's hard to stimulate new traffic with those kind of costs.
Costs were also have were part of a strong alliance with United and on Star Alliance. So we think we have other pieces in place.
To remain successful.
Even though we do expect more competitive more competition from from many others.
Makes sense I appreciate it thank you.
Thank you sorry.
The next question is from the line of Pablo <unk> Cvs of Barclays.
Hi, good morning, Thanks for taking my question.
Just on.
Kind of a follow up on the first question.
If you were to estimate how capacity recovery was among leisure and VFR.
What would it be your best guess.
And.
And kind of a related question to that 1 to what extent.
Do you see net vaccination tourism cope demand over the quarter. Thank you.
Okay.
Yeah, well I'll start.
I will start by saying per.
Hello.
But what we're seeing right now in terms of the breakdown.
On the type of demand that we have is that yes, it's being driven by VFR and say that the VFR is almost half of the traffic that we're seeing and then followed by I'm sorry on leisure sorry, leisure, there's about half a little bit less than half and leisure and followed by VFR about with about a third and and then and as Pedro mentioned.
Before business travel is down I want to say past versus where it was before the pandemic. So.
It now represents mainly <unk>.
15% to 20% of our of our total traffic.
The break down that we're seeing right now but of course again.
The pandemic has taught us that.
If things change.
Over time. So this is.
Picture that we have vessels today.
And in terms of vaccine tourism to the U S. It's obviously impossible for us to know the reasons people travel for.
But there was an increase in <unk> from the.
U S traffic, sometimes towards the end of April.
When vaccines were kind of openly available in the U S.
On that obviously led us to believe that.
1 thing is tied to the order.
And we're seeing a slowdown right now.
It's more vaccines are available on the Latin American countries.
As people get vaccinated in other setting initial rush and we expect that to continue slowing down.
But as you know we have a very strong network that is not dependent on 1 particular market or 1 particular sector. So we will keep on rebuilding our network and leveraging those strengths.
Yeah.
Sure.
Okay perfect. Thank you very much thank.
Thank you Bob.
Your next question is from the line of Bert <unk> with Stifel.
Hey, good morning, and thank you for the time.
As a follow up to Hunter's question.
Hey, good morning, what is your current upper limit on capacity if all countries reopened the day restrictions fully removed what percent of your 2019 capacity could you fly and how should we think about your capacity over the next few quarters. If things remain as they are today, clearly I know youre, not giving a guide beyond <unk>, but.
If we were to assume that nothing changed is it fair to say that you would continue to add capacity from here. Thanks.
Yeah, So Pedro here.
If we compare to pre pandemic militates, who.
2019.
We were by the end of 2019, we were operating 96 aircrafts and we had 102, but that included 6 Max 9 which we're not operating.
Around it as we know so so by 2019 by the end of 2019, we operated 96 ask.
Copa Holdings by the end of 2021 we will have 89 ask Copa holdings, we might still have a few on the desert, which we have to reactivate, but that will that can happen.
In the first part of 2022, and then we have we have 5 more.
Max 9 deliveries in 'twenty 'twenty 2 so that's going on that's going to take US to we also have lease returns, which will have to decide how many we went on a return on non we're guiding now that will we will renew some of those load leases.
And then our aircrafts are of higher gauge because we've sold the Embraer 198.
So we're operating mostly 8.
800, <unk> and Max 9 so much higher engage than then.
Then on.
On the Embraer. So shortly some time right now we will not be at 100%, but we can be in the high <unk>.
By the end of this year on some time towards the second half of 2022, we could be close to 100% in India on.
And in terms of cost.
Sure.
We're not providing guidance for the.
The fourth quarter.
If.
We are in.
Demand trends.
Go on in the way that we expect them to our unit cost for the fourth quarter could be in the low 6% range.
Okay. Thanks.
Very helpful. Maybe just along the same vein can you just give us an update on how you're thinking about your fleet longer term you had a I wish I could find it. So you had a good chart on 1 of your investor presentations that sort of showed 2 lines on going up and down and just sort of highlighted your fleet flexibility, which is clearly at a nice lever to be able to pull during the pandemic.
Demand seems to be proving pretty resilient are you starting to refocus maybe on your longer term growth.
Thanks again for the questions.
Yes, so we're still cautious because.
It's something we've learned is that this virus is unpredictable.
And even the people that know don't really know that much on to it happened. So we're being very cautious but at the same time, we've been reactivating our aircraft, bringing them back from the day sort of a much faster pace than what we expected.
Earlier in the year on we're even talking to boring right now to see if we can move forward. Some Max 9 deliveries. So we're in those discussions right now and we have the flexibility of over 20 lift N G.
<unk> coming due in the next 3 to 4 years, so that gives us we could bring forward Max nines, we could.
Renew and <unk> or return on <unk>.
Moving to retain a lot of flexibility in the next 3 years and we hope to have enough capacity to grow.
Above the ASM levels, we've had in pre pandemic.
Thank you.
Thank you Greg.
Your next question is from the line of Dan Mckenzie with Seaport Global.
Yeah, Hey, Thanks. Good morning, guys couple of questions here. So first question really ties to the vaccine rollout across your network. The countries you serve versus the expectation for business travel to recover.
So I think every country has got a different vaccine rollout of course.
If you were to take some kind of average of the various rollouts I'm just wondering what that expectation for when your markets would be fully vaccinated as it.
Early 2022, Brazil by year end, but for the whole network in early 2022 or is it into 2022 or does it really tie to an earlier question.
On time mid next year, and then related to that vaccine rollout.
What is the expectation as business travel recover ahead of that rollout or is it.
Coincide with it or leg. It what are your what can you share along those lines.
So.
Then I'll take Pedro will take the first shot at it and then I'll, let Jose.
Back me up.
In Panama for example, we think that by the month of September So a month from now.
Anyone that wants a vaccine will have access to a vaccine.
We are at about 80%.
I'm, sorry, 40% vaccinated right now, but the vaccines are coming in at a very fast paced on a weekly basis.
And I think in a month anyone that wants to get vaccinated will be able to get vaccinated. It seems to be going that way also in Colombia.
From what we know and it's just gaining steam in most countries in Latin America. So I would hope that by the end of the year. So by the end of the fourth quarter.
On the countries will be vaccinated to the degree that.
On the.
The population wants to get vaccinated.
And in terms of corporate travel coming back so we've heard from some of the major accounts that they'll start traveling.
After the summer, but we know that it won't be in the same.
At the same rate than before and the same percentage of pre pandemic.
Also Latin America is made up of a lot of small companies and regional multi multimedia Latin American companies and I think those are going to start traveling probably sooner than the larger.
International or U S corporations, but we cannot really predict exactly how that's going to play out and I would just add Dan that the.
Traveler that travels on Copa.
There's a big component there are small business owners or people, who work for very small companies and we believe as Pedro mentioned that those folks will get back on the air.
In the shorter term then that's sort of the big corporate accounts.
Yes.
That makes sense, so that ties to I guess my second question here.
And it's really kind of a 2 pronged question. It kind of gets back to I think an earlier question Savi is just on the yield expectation for the third quarter I'm just wondering if you can.
US understand what really happened in the second quarter, where yields initially weaker and then the stronger towards the end and how does that tie to the third quarter. I mean, if corporate travel comes back it sounds like that might not be embedded into the.
Third quarter revenue outlook, and then kind of related to that are there any countries in Latin America.
Looking to Europe as a model for how to open silver acquiring a vaccine passport potentially as a way to bypass testing in <unk>.
Yes, I will take with it for the third quarter and first of all the new store in the second quarter was.
I think it was mostly towards the latter part of the second quarter more than that in the beginning and.
As a function on several items that was as Pedro mentioned before there is some vaccine tourism to the U S. But also there was.
I think in an opening of certain.
The country started to open and especially on the Caribbean and Mexico.
That created I think that bump in demand that we saw and it was mostly again during the latter part of the second quarter on what we're seeing right now is on in the third quarter specifically.
Part of its headquarters, where we're seeing that there is a little bit of a yoga.
Important thing here. However is also that we're putting in.
Quite a bit of additional capacity into the third quarter. So I think it's not necessarily a story of weakness, but rather.
We are adding capacity into our network.
To build this network back.
And I think thats.
I think the story related to.
What we're seeing in the third quarter right now.
And then Europe as a model for opening Latin America, requiring any countries looking at requiring a vaccine passport.
It's been talked about quite a bit there are trials going on with that yes, that's probable path.
But no.
<unk> has made that decision yet I will not be so price. However, if some of that happened, especially as the digital passports get try it out and are proven to be a good method of opening up a good way of opening up but no 1 has announced that yet.
Thanks for the time guys.
Thank you and back to them.
And your final question will come from the line of Mike Lindenberg with Deutsche Bank.
Oh, Hey.
Hey, everybody.
Pedro you later on response to <unk>.
Alejandro <unk> question earlier about holding on to the 6.737 7 hundreds.
You gave 2 reasons and I actually thought that maybe a third reason was that maybe you recognize the importance of having some some smaller gauge airplanes around.
You had mentioned the strength of.
On the Panama hub and the reliance on small markets I'm, just curious it but it sounds like that wasn't a consideration or you may be actually potentially looking down the road at maybe a smaller getting each airplane.
Thoughts on that.
So it's an interesting question it was not a consideration however.
6.7 hundreds are going to fly a network.
Made up of the smaller the thinner route so those.
The aircraft are going to upgrade where before we had exclusively.
190, operating and that actually adds to the value of staying with the 700.
Okay makes sense and then how about with respect to bigger airplanes I mean, your largest airplane is from that.
<unk> 9 and yet I was actually surprised to see that you're flying.
Miami, Panama, Panama on Miami, I think Youre doing now 9 round trips, which pre Covid I can't even think day I mean, I think around the holidays you got from high non trips.
But you do have a bit of Wingtip flying where you have planes going out within minutes of each other so it would suggest that the 8 hundreds theyre not big enough and I'm not telling you to go buy an $83.50, or 787 would you consider Max 9 number 1 number 2 tied to that.
There's a lot you hear talk about a lot of broken itineraries and I think when I looked throughout South America Latin America, there's been a significant pull down in service.
Namely by some other carriers that are going through restructuring we've seen a lot of itineraries that have completely disappeared and it does seem like that Copa is in a very good position to maintain those itineraries, maybe not on a non stop basis, but on a 1 stop basis of our Panama and I'm. Just curious if you are picking up some of that share because again.
I almost thought I had to do with double take to see how much frequency that you are running between Miami and Panama on now and I suspect that that's not everybody who wants to go to Miami or Panama City, you are taking a lot of passengers into South America, because the service isn't there because of the pandemic so sort of a 2 pronged question about the 737 Max.
10 <unk>.
Share that you may have picked up in the meantime, because of the struggles of.
Competitors in your region. Thank you answering my questions.
Yes, so Mike a lot of.
A lot of stuff in your question on.
Sorry.
<unk>.
We have.
Okay.
Okay.
We think of larger gauge aircraft dynamics of FID.
In the past and you know us well, we try to keep things as simple as possible. So we can have a simple single fleet as much as possible right. Now we are a 737, operator exclusively 700 receiver 7 mainly AMG 810 Max.
Max 9%, it's a very simple other pilot commonality.
<unk> thing.
And sometimes we sacrifice.
The ideal aircraft or the ideal gauge in a few markets.
In exchange for having that better fleet for the whole network and we're going to keep keep that mentality and if the Max 10 is something we're going to bring in it needs to make sense in more than just 1 route more than just Miami et cetera, we would rather run.
Wing tips on some markets.
Knowing that facilitates that having a single narrow body very efficient fleet. So that's kind of what we're waiting I'll always.
The commonality simplicity versus the ideal aircraft for each market, which is hard to do and Thats also going on right any future decision about a smaller gauge aircraft, which was your first question net same philosophy is going to ask.
In terms of the broken itineraries, where we are we're in a recovery mode ourselves. So we're rebuilding our network.
On our <unk> band connectivity, which started late.
Late in June so so.
We'll take advantage of any opportunities that fit that that single hub model.
But we are in that recovery mode mode. So I cannot say.
That were taken full advantage of everything.
We know that a lot of that service will be covered when some of the other carriers come out of their own restructuring so.
So we also want to be.
<unk> about that.
Okay very good thanks Pedro thanks.
Thanks, everyone. Thank.
Thank you Mike.
Yes.
There are no further questions at this time.
Okay.
So thank you all this concludes our earnings call. Thank you for participating. Thank you for your continued support and have a great day and a great rest of the week to you next time.
Ladies and gentlemen, thank you for your participation. This concludes the presentation. You may now disconnect and have a wonderful day.
Okay.
Okay.