Q2 2023 Copa Holdings SA Earnings Call
Ladies and gentlemen, thank you for standing by welcome to Copa Holdings second quarter earnings call. During the presentation. All participants will be in a listen only mode. Afterwards, we will conduct a question and answer session to ask a question. During this does she need to press star one on your telephone.
You will then hear an automated message advising you had this raised to withdraw your question. Please press star one one again as a reminder, this call is being webcast and recorded on August 10, 2023, I will now turn the conference over to Daniel <unk> Director of Investor Relations. Sir you May go ahead.
Thank you again.
And welcome everyone to our second quarter earnings call.
Joining us today are better to have their own CEO of Copa Holdings, and Jose Montero our CFO .
First Pedro will start by going over our second quarter highlights.
By Jose who will discuss our financial results.
Immediately after we will open the call for questions from analysts.
What about holding financial reports have been prepared in accordance with international financial reporting standards.
In today's call, we will discuss non ifr financial measures.
A reconciliation of the non ifr as to why your first financial measures can be found in our earnings release, which has been posted on the company's website quote by air Dot 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 S. E C.
I'd like to turn the call over to our CEO , Mr. Pedro Heather.
Thank you Danielle.
Good morning to all and thanks for participating in our second quarter earnings call.
Before we begin.
I would like to extend my sincere gratitude to all of her workers for their commitment to the company. They are continuous efforts and dedication have kept Copa.
Forefront of Latin American aviation to them as always my highest regard conduct duration.
Today, we're pleased to report solid results for the second quarter.
Our unit revenues continued to benefit from a healthy demand environment in the region.
Well our unit costs came in lower year over year, mainly driven by lower jet fuel price and our consistent focus on delivering low ex fuel unit costs.
Among the main highlights for the quarter.
Passenger traffic grew 15, 4%.
In part to the same period in 2022.
Outpacing our capacity growth of 13, 6%.
This resulted in.
In a load factor of 86, 1%, a 1.3 percentage point increase.
<unk> Q2 'twenty two.
Passenger yield came in at 13, 3% or 2% higher than the second quarter of 2022.
Sorting and unit revenues or RASM of 12 strength.
Two 7% increase compared to the second quarter of 2022.
Our unit cost decreased 17%, mostly as a result of a 35, 9% year over year drop in our effective jet fuel prices.
On an ex fuel unit cost basis, we came in at $5.09, almost 1% lower compared to Q2 2022.
As a result.
Our operating margin came in at 24, 1% 18 percentage points higher than in the second quarter of 2022.
On the operational front.
Copa Airlines delivered an on time performance of 91, 6%.
And a completion factor of 99.8%.
Once again the.
The highest in the America and one of the best in the World.
Additionally in July .
Nice was recognized by Skytrax for.
The eighth consecutive year as the.
Best airline in Central America, and the Caribbean.
This award and our leading operational numbers are a testament to our employees' continued focus on our customer satisfaction.
With regards to our network.
We recently announced the start of a new service to bankruptcy metal Venezuela in October of this year with this validation we will serve to 81 destinations in 32 countries in North Central South America, and the Caribbean as we continued strengthening and solid define our position as the most complete and convert.
William hub in Latin America.
Turning now to Wyndham.
In June Wingo continued to optimize its network with the startup of operations to three new domestic Colombia route from Bogota to buy around key upgrade Ada and Bucaramanga.
Additionally, in July started service from Bogota to Caracas, Venezuela, and one seasonal route from colleagues to Aruba with these additions we wish currently operating 35 routes with service to 'twenty three cities in 11 countries.
Now turning to our current expectations for the remainder of the year, we continue to see a healthy demand environment in the region going forward.
And although we're seeing a recent increase in jet fuel prices. We continue to expect strong financial results in 2023.
As always Jose will provide more detail regarding the full year's outlook.
To summarize we.
We delivered solid second quarter results and we continue to see a healthy demand environment in the region.
We continue growing and strengthening our network the most complete and convenient hub for intra Latin America travel.
Burnham was recognized once again by Skytrax as the best airline in Central America, and the Caribbean and as always our team continues to deliver world, leading operational results, while maintaining our cost low.
Lastly, whereas comprehend as ever in our business model, we continue to deliver solid margins and low unit cost, while offering a great product toward passengers, making us the best proficient airline in our region to consistently deliver industry leading results.
Now I will turn it over to Jose who will go over our financial results in more detail.
Thank you Pedro and good morning, everyone. Thanks for being with us today.
I'd like to join Pedro in acknowledging our great team for all their efforts to deliver a world class service to our passengers.
I will start by going over our second quarter results, we reported a net profit for the quarter of $17 $5 million or <unk> 44 per share.
However, excluding special items net profit came in at $154 $5 million or $3 92 per share.
Second quarter special items are comprised of unrealized mark to market loss of $137 $5 million related to accompany these convertible notes.
And a $500000 unrealized mark to market gain related to changes in the value of a financial investment.
We reported a quarterly operating profit of $194 $7 million and an operating margin of 24, 1%.
Capacity came in at $6 8 billion available seat miles.
$13, 6% higher than in Q2 2022.
Our load factor came in at 86, 1% for the quarter, a 1.3 percentage point increase compared to the same period in 2022, while passenger yields increased 2% to $13 three.
As a result of unit revenues came in at 12.
Two 7% higher than in the second quarter of 2022.
Mainly driven by lower jet fuel prices unit cost or CASM decreased 291 cents.
Our 17% lower than our CASM in Q2 2022.
And finally, our CASM, excluding fuel came in at five nine.
At <unk>, 8% decrease versus Q2 2022.
Mainly driven by lower sales and distribution costs due to a higher penetration of both direct sales and the lower cost travel agency channels, which were launched by Copa Airlines in September 2022.
I'm going to spend some time now discussing our balance sheet our liquidity.
So at the end of Q2, we had assets of close to $5 1 billion.
And in terms of cash short and long term investments we ended the quarter with over $1 3 billion, which represents 39, 6% of our last 12 months' revenues.
As to our debt we ended the quarter with $1 8 billion in debt and lease liabilities came.
Came in with an adjusted net debt to EBITDA ratio of 0.5 times.
I'd also like to take some time to discuss the settlement of our convertible notes as.
As we announced last month the company has decided to redeem the four 5% convertible senior notes due in 2025 and.
On September eight 2023 in accordance with the terms of establishing the indenture governing the notes.
The conversion rate has been established to be $21 603 shares for each $1000.
This rate includes an additional point for seven and five one shares related to the event being a make whole fundamental change.
We decided to perform the settlement we had a net share method, whereby we will settle in cash an amount equal to the principal amount of the notes and the remainder is to be settled via the issuance of the corresponding number of shares.
Turning now to our fleet during the second quarter, we received two Boeing 707, Max Nines to end the quarter with a total of 101 aircraft.
In July we received an additional 737 Max nine to bring our total fleet to 102 aircrafts with these additions. Our total fleet is now comprised of 68 737 eight hundreds.
95, 7%, Max Nines, and nine 737 seven hundreds.
These figures include one 737, 800 freighter and the 90 737 eight hundreds operated by Wingo.
Two thirds of our fleet continues to be comprised of owned aircraft and one third of our aircraft are under operating leases.
During the remainder of 2023, we expect to receive five additional aircraft all Boeing seven seven Max Nines to end the year with a total fleet of 107 aircrafts.
As for our 2024 fleet plan Preliminarily next year, we expect to receive 14, 7% Max aircrafts, including two 737, Max Nines and 12 <unk> Max eights.
We've published an update our fleet plan on our Investor Relations website.
I'm also pleased to announce that our board of directors has ratified the third dividend payment of the year of 82 per share to be paid on October 13 to all shareholders of record as of September 2009.
As to our outlook, who can provide the following guidance update for the full year of 2023.
We expect to increase our capacity in <unk> versus 2022 within a range of 12% to 13%.
And we expect to and operating margin within the range of 22% to 24%.
We're basing our outlook on the following assumptions load factor of approximately 86%.
Unit revenues within a range of $12 three gas.
CASM ex fuel to be in the range of <unk> and <unk>.
We're expecting an all in fuel price of $2 95 per gallon.
Given this recent increase in jet fuel prices, we expect to be on the lower side of the 22% to 24% operating margin range.
I'd also like to take this opportunity to assure you that we continue to be focused on our plan to further reduce our unit costs.
Our objective is to obtain a CASM ex fuel within a range of five eight by.
By the year 2025.
And with that we'll open the call to some questions.
Thank you we will now conduct the question and answer session. As a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.
Yeah.
Our first question comes from Savi <unk> from Raymond James.
Hey, good morning.
Can I ask on the on the unit revenue.
Which was below where it is are you seeing any kind of softness to drive that a reduction in our area.
Something else going on given that you know the second quarter came in pretty strong.
Yeah. So I mean, how are you.
You know the operating environment is still very robust.
We had been seeing a drop in fuel prices.
Throughout the second quarter and so there was some movement.
In our forward looking.
Revenues in the coming months.
And Eric.
Your item I think that that of note that we're monitoring closely is that there was.
An increase in competitive capacity.
Year over year.
The double digit range. So all those factors I think were taken into account.
In terms of what the RASM.
It was four is going to be in the second half of the year. Our few spiked over the last couple of weeks. So that's not necessarily true fully captured into our unit revenue guidance given given the sudden movement fuel.
It's still somewhat early for Q4, so we'll monitor it closely but that's how it kind of we're seeing it in the closing.
And I should add savi that bookings are still strong for the second half of the year as far as we can see spillover.
Still a very robust environment.
That's super helpful and if I might on the 2020 fall asleep plan it looks like even though you had some max's slipping you've taken the Max count up and just any early thoughts on.
And how you're thinking about capacity growth into 2024, especially given that your utilization in 2023 is quite strong.
Right. So we're going to receive 14 aircrafts next year.
A few of those moved from from this year, but doesn't make a big difference because moving from December to January doesn't really have an impact in capacity.
Sure.
You can do the math in terms of where it's still not guiding for a capacity growth in 2024, but I think it's.
It's not hard to figure it out given the 14 aircrafts were receiving and next year most are gonna be Max eight.
We're gonna be Max nine and we see demand and we have opportunities for all of those airplanes to fly our.
Our current utilization daily utilization numbers, plus a full year effect of aircrafts that are coming in are still have five aircraft left to be delivered this year. So those are a place most of its.
Their growth is going to show up actually in 2024 as well.
Yes, I think there is I think we're seeing still the environment.
The operating very very very positive way, yes in terms of capacity there should be very healthy growth next year.
Helpful. Thank you.
Our next question comes from Duane <unk> from Evercore ISI.
Hey, Thanks, good morning.
On the convert buyback can you just walk us through how your share count and interest expense are going to change following that buyback.
Maybe talk about some of the reasoning behind why September makes sense to do that.
Yes, Duane I'll start it.
I'll actually start with the second part which is the.
Our reasoning.
First of all since April we've had.
The ability to call.
The convert.
And I think that our calculus is that at this time the economics of the deal worked out for us versus letting a mature.
And then thirdly, I would say you know the board when it when it made sufficient and they simply I.
They wanted to get the pandemic behind us and I think that also influence the decision even though as I mentioned before it from an economic perspective from a financial perspective, it makes sense for us to execute the call.
At this time, even with the with a make whole.
In fact, it et cetera.
I would say that the.
In terms of the accounting wise first first of all.
Electing to settle it via the.
Net share method, whereby we'll pay the principal in cash $350 million in cash and the remainder in.
Shares that ultimately the valuation of that will depend on a 40 day 40 trading any observation period that that ends in.
In the second week of September .
So that will ultimately determine what what ultimately what that ish number issue of shares that we would have coming.
Coming out at that time, the day of the settlement. So that's still pending to be determined and then finally in terms of how it effects.
The interest expense the interest expense will go down by two factors number one of course, the coupon goes our way a four 5% coupon on the 350, but in addition to that there is a portion I will say, maybe it's about a $7 million per quarter.
Figure that was.
<unk>.
Yes.
A portion of our of our of our interest expense that was not noncash that was.
That would basically be Huawei during or after the settlement. So that's basically the way that it will work out.
That's really helpful is there any.
Relationship between this step and what your dividend policy might look like.
Into next year does this make it.
More likely or less likely that you just continue.
Your dividend policy into 2024 based on a look back to 2023 earnings.
I think our policy our dividend policy as I just to restate it is to a distributor.
Distribute 40% of the prior year's adjusted net income and I think that that's that's.
We will continue yes, so the conversion would make no difference.
Okay, that's very clear thank you.
Thank you Duane.
Yes.
Our next question comes from Aglare moment does from J P. Morgan.
Good morning pivotal was yeah. Thanks for taking my question I have two one is on capacity on demand. So if you could split a little bit between leisure VFR incorporate how youre seeing demand.
And I recall on the last conference call you mentioned about the corporate and still not fully picking up so how have you seen that during the second quarter and what are the expectations for the second part of the year.
And the second question is sorry, Peter go ahead, and then I'll ask the.
Second question.
Thanks, So let me shift from question that question, it's regarding a youth management. So you discuss about the unit revenue is just wanted to better understand how do you think about your ability to increase our prices. According to fuel prices. So how fast could you do that I mean, according to competition in the <unk>.
Trends thank you.
Yeah, Okay. So first.
First question.
Business traffic corporate traffic has improved somewhat.
And the last number of months. So the trend is positive, but the numbers are still not much different to what we have shared.
In the recent past were about 40% at leisure.
30% is VFR.
The rest is a combination its business, but its business and incorporate some of the business. We move in the region is not necessarily tied to two corporate accounts. So that I mean, it has improved somewhat but not in a significant way.
The breakdown is similar to what I, just mentioned, which is hasnt changed much.
However, leisure is behaving.
And in a way that.
You can see our result, so so so the managed strong and yields are healthy so so.
We're fine with the way we traffic has developed.
In terms of.
Jim.
Our revenue management and pricing so what we show on Al I'll, Let Jose back me up but what we showed in 2022 was that we were able to cover the increase in jet fuel prices, but it didn't happen right away. It did not happen in the second quarter wing jet fuel it spiked up.
It did happen in the second half of the year.
And this year, we will see about a two to three month delay now of course, our revenue management folks always our pricing too.
I'm not sure where the market could bear but I.
Usually it takes a little bit of a lag between between fuel spikes and win RM catches up.
That's very clear, thank you Pedro and Jose.
Thanks, a lot.
Our next question comes from Stephen Trent from Citi.
Good morning, gentlemen, and thanks very much for taking the time.
Just two quick ones for me.
The first I definitely appreciate the ex fuel CASM.
The guidance out to 2025, and what Youre seeing for this year.
Any high level view.
To what extent window could be.
Maybe a higher weighting of the operations relative to 2022.
Okay.
We don't see that in the short term.
Maybe medium term not sure.
We were still a small small part of our capacity.
And revenues.
Colombia has been a challenging market for all airlines operating in that country. So.
I think.
I don't think we're going to see a lot of growth.
From the Wingo segment, but we have flexibility to I think part of our plan internally is to have a lot of flexibility in terms of how we.
We call.
Got it.
Put out capacity and that is a true branch, but I think in general terms more more of the growth is going to come from the airlines.
Airlines side.
I appreciate that guys.
And just one very quick.
Question, just a follow up to <unk> question, when we think about the RASM.
And consider the amount of up.
Kate you Youre doing well is there any stage links suggested noise.
And the pivot for 2023, RASM just out of curiosity.
Okay.
No.
I would say that there is.
Yes.
That's not that much I mean, there was.
So I would say a little bit.
Actually.
I would say, it's a tab, but its not significant I would say Stephen.
Okay sorry.
Sorry.
And then on what.
What I would add just to read some questions.
We've received that.
A 2022.
Tough comp.
It spiked up I mean RASM.
It was the trend.
It wasn't.
Not 100% typical.
What we saw last year.
After after the pandemic not all demand patterns have been exactly the same as they were before it's getting back to something more more similar to what we're used to.
But last year in a way was a transitional year in capacity and demand in the whole thing. So so the comps are a little bit.
The more difficult in that sense, but I think what's important is that.
Our bookings.
Are still quite strong.
Sure.
Okay very helpful. Thanks, very much guys.
Thanks, a lot.
Yeah.
Our next question comes from Rajeev <unk>.
As you see from Bank of America.
Okay.
Hey, Good morning, Pedro who said thanks for good preclinical congratulations for the results a couple here.
One is just a clarification.
So did you did you say that the whole SKU that is spiking in the past couple of.
Of weeks, it's not fully included in the guidance. So how far would you be from the current oil price curve and also on that on that.
<unk> matter.
What does your guidance implies.
If you consider the current oil price curve would you.
Sorry in the range of 20 to 24.
That's the first thing on our yes. Thank you yes. Thank.
Thank you for allowing me to clarify the fuel guidance that we have is essentially the curve today, what I try to.
<unk> is that they're RASM given that the fuel has increased so quickly. The RASM itself has not been able we have not been able to adjust.
The RASM from an RM perspective over the last couple of weeks, but the fuel as it is in that $2 95 years as we're seeing the full year all in price for us for the entire 2023 with the latest curve.
From earlier in the week.
Sounds great very clear and my second question, if you could give us some information on which which regions or did you see the strongest bookings which are the weakest at this moment maybe.
Maybe always as strong as you say, but can you.
Kind of differ a little bit which ones, you're more excited about and which are not.
No like like you show, there's always you know.
Theres always a region that might be weaker and they take turns is not always the same but across the board is very similar right now.
Sounds good thank you very much.
Thank you <unk>.
Sure.
Our next question comes from Michael Lindbergh from.
Barclays.
Yeah, Hey, it's Mike <unk> from Deutsche Bank.
No of course.
Not a problem.
That was news to me feel like Wow.
Everyone around here, it looks like DB, but anyway.
Okay.
I guess Q2 here.
Later known rate.
Oh I'm always the last to find out about these things so [laughter] anyway.
On your commentary Pedro just around unit revenue you talked about an increase in <unk>.
If capacity you said something along the lines of double digit range are you.
Maybe more specifically is that capacity in and out of Panama city or does that whats youre seeing in some of the markets where you are.
Participate in the connecting flows.
Right. So so.
Yes, so first.
I will say is that.
What has happened is that.
I would say the rest of our peers in Latin America have caught up to the pre pandemic capacity.
I'm, a little bit longer for different reasons, but everybody is caught up now.
No. This is not Panama capacity, there is really no no significant change or no change at all maybe two <unk> panamax capacity.
As we know as you know.
<unk>.
We play in the connecting fields.
So this has to be just with other hubs and also the rig.
One hub capacity in the region.
Okay, and then just just kind of update us when you look at your split today local versus connect are you sort of 40, 60, 45, 55, I always knew that it was pretty evenly split, but but where are you from a local versus connect basis today.
So yes, we're more in the 70 30 range.
So any connecting 30 local.
Okay. That's super helpful. And then just my last question after the convert gets taken out.
Your liquidity will come down and the question is what like when you think about target liquidity, how should we think about it maybe as a percent of LTM revenue.
Maybe how that.
Factors into your.
Leverage ratio of 0.5, what metrics should we sort of think about.
And the longer term both from a liquidity perspective, what's the appropriate amount post pandemic and where we should target from a leverage perspective, thanks for taking my questions.
Yeah.
Mike.
Well first of all I think that leverage.
Essentially be.
The same after the settlement.
And so I think we're comfortable in.
Sort of a very strong position that we have we have a set of investments coming along a lot of aircraft coming in demand capital and so we are we have some commitments coming coming forward and that will be used for growth basically right and then we have the.
Our dividend policy, which is still very good but in terms of total liquidity.
We could end up in the year.
Out of $1 billion.
So that's I think something where we're comfortable with that level for the size of the business and given all the commitments that we have going forward in terms of.
Aircraft aircraft coming our way.
Okay very good thank you.
Thank you Mike.
Okay. Our next question comes from Pablo <unk> from Barclays.
Yes.
Hi.
Thanks for taking my question just how are you.
Okay. So paolo Okay from Barclays.
They swapped swap the firm's paulos alright.
Okay.
Just a question on the comment that you just did.
We had about major passengers being very strong to what extent do you attribute the strength to.
Local currencies appreciating over the first half.
And.
Can we just extrapolate that.
Strong local currency is too strong leisure or was there another fundamental changes in the patterns of demand. Thank you.
Yeah, Pablo I would say I would start by saying that it's been an interesting.
<unk> in terms of our leisure travel dynamic first of all there was a lot of U S origin. Historically of course, we've been more anything bringing people from.
South America to the Caribbean and to North America.
That sort of reversed a little bit after the pandemic.
The strength of the U S dollar.
And now Youre seeing more and more Americans coming south.
That.
With a recent sort of strength of the real and the Colombian peso than youre seeing some of that flow.
Reversing a little bit again, so there is valid we're kind of in a flux sort of moment, where there's a little bit of everything into into the mix of our leisure travelers, which is I think very very good in terms of the sources that we have for demand.
Okay. Thank you.
Mhm.
Our next question comes from Helane Becker from TD Cohen.
Thanks, very much operator, hi team hope all is well so one question I have is.
In terms of connecting traffic.
Kind of a combination of traffic and free.
With the Mexican government, forcing airlines to move from.
You know one airport to another airport with cargo I'm wondering if that creates an opportunity for some of the other airlines that connect freight just shifted their capacity from Mexico City to Panama City, where you would potentially be a beneficiary of that.
Yes, we have.
I have not seen any signs of movement in that direction.
And it's not something that we've given a lot of thought to our freight capacity is also limited.
Limited to the belly of our cargo or passenger aircraft, which is limited on our single 737 freighters. So so.
We don't think we will see any benefit from that if it was to happen.
Okay. That's very helpful. And then I just have one clarification Jose on the fleet plan. You think you said you were going to end this year with.
107 aircraft.
Yes.
Right, Okay, and then next year based on the delivery schedule of 14.
That means.
121 aircraft for next year.
We still have a set of aircrafts that are.
Under lease that are that are.
Some of them could be extended so our plan right now is that there will be a lease airplane that would be returning so our expectation as of today is that we could end the year 2024 with 120 airplanes into it so it would be.
But 2014 deliveries minus one return.
Got it.
But could there be any other lease returns.
Yeah.
No at this time I think it's it could be just this just this one.
Okay, Alright, that's very helpful.
And we could renew we could renew it also yes as I say our view our view as of today is that but it could.
Still we're still relatively flexible in that area.
Alright, well that's really helpful. Thank you.
Thanks.
Yes.
Our next question comes from Daniel Mckenzie from Seaport Global.
Oh, Hey, good morning, Thanks, guys couple of questions on 2024 I'm following up on Wingo, I know, you're not planning to grow it much but how many aircraft are you planning for the next year. It looks like it's about 16% of the seats today and my thought is that wingo as a percent of the overall system.
Could trend down as you grow the mainline.
Well they are operating 90 aircraft.
Right now at the end of the year will be nine out of 107.
And.
It's not that that number could not grow.
Next year it could we have flexibility.
As Jose mentioned.
Budd <unk>.
Could also stay at nine it really depends on how the Colombian market develops and <unk>.
What are the opportunities there, but most of the growth.
Continue beam from Copa Airlines, so yes their share of the total.
We'll come down under that premise, which is what will most likely happen.
Mhm.
Second question here for those of US that don't know all the smaller markets in Latin America I'm Wonder if you just elaborate a little bit on the growth next year.
So just some high level thoughts on mix.
Growth in existing markets versus new markets long haul versus short haul whatever you can share would be great.
Yes, so it's going to be a combination well, it's going to be mostly.
The new frequencies additional frequencies to currently served markets.
And we should also keep in mind that in the last two years.
We've started like eight or nine new routes in the region and some of those.
We'll get more capacity again, plus the markets we've been operating from from before so a lot is going to be most of it is going to be new frequencies plus the full year effect of what we started this year will also impact our capacity growth.
Next year.
And we still believe we'll probably open a few two between two and four.
New destinations.
And there are still a lot of opportunities in the whole continent in the Americas and we're always.
Evaluating.
New markets. We also have nine Sadie from pre pandemic, where we have not restarted service.
So we also have that so we will be restarting service.
To some of the cities that we still haven't gone back to.
From pre pandemic. So we have that we have new destinations and mostly additional frequencies to currently served market. So lots of opportunities as we see it yes.
Yes, good terrific. Thanks Pedro.
Thanks.
And our final question comes from Duane <unk> from Evercore ISI.
Hey, thanks, Thanks for taking the follow up I appreciate it I just wanted to ask you about.
This relationship between fuel prices and.
In fares and what you see competitively.
The timing may have been a little bit off here, but as I remember back in the day.
You had a tremendous ability to offset higher fuel.
And there was a fair bit of fuel.
Fuel surcharge in the mechanism for your competitive fares could you could you just touch on remind us the fuel surcharge mechanism.
If if the same is true today relative to the past thanks.
Yeah. So we no longer do fuel surcharges as such and we are not in a fuel environment or a fuel price environment like we were back in 'twenty or 'twenty one seven.
If I can recall when when fuel surcharges were necessary.
But we have we.
We have priced the fuel increases in the past successfully diagnosing the fair not enough fuel surcharge that that's what happened in 2022 during especially during the second half of 'twenty two.
And we'll see where fuel goes right now and then and then we will try to price it in as much as we can it depends on on competitors also in and what they do of course, we're always very competitive there is more capacity than there was in 2022 as I mentioned before.
For a capacity is pretty much back to pre pandemic levels for all airlines.
So that might play into all of this so.
So thats why.
And the guidance and the detail of the guidance Jose shared we're not getting ahead of ourselves and it's kind of how we see it right now, but we always strive to do better of course.
Yes, okay. Thanks for the thoughts.
Thank you Duane.
To turn the conference back to Pedro Hi, Brian for closing remarks.
Okay. Thank you.
Thank you all this concludes our second quarter earnings call. Thanks for participating and as always thanks for your continuous support have a great day and we'll see you in the next one thank you.
Ladies and gentlemen, thank you for your participation. This concludes the presentation. You may now disconnect and have a wonderful day.
Okay.
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Yeah.
Okay.
Yes.
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