Q4 2023 Copa Holdings SA Earnings Call
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Okay.
Speaker Change: Ladies and gentlemen, thank you for standing by and welcome to the Copa Holdings fourth quarter earnings call.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Copa Holdings fourth quarter earnings call. During the presentation, all participants will be in a listen-only mode.
Boy presentation, all participants will be in a listen only mode. Afterwards, we'll conduct a chip.
Operator: Afterward, we'll conduct a question and answer session. At that time, if you have a question, you will press star one one on your touchtone telephone. As a reminder, this call is being webcast and recorded on February 8th, 2024. I will now turn the conference over to Daniel Tapia, Director of Investor Relations. Sir, you may begin.
Speaker Change: Question and answer session at that time, if you have a question you will press star one on your Touchtone telephone.
Speaker Change: As a reminder, this call is being webcast and recorded on February eight 2024, I will now turn the conference over to download a copy out director of Investor Relations. Sir you may begin.
Yeah.
Daniel J. McKenzie: Thank you, Lisa, and welcome everyone to our fourth quarter earnings call. Joining us today are Pedro Heilbron, CEO of Copa Holdings, and Jose Montero, our CFO. First, Pedro will start by going over our fourth 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.
Speaker Change: Thank you Lisa.
Speaker Change: And welcome everyone to our fourth quarter earnings call joining.
Speaker Change: Joining us today our CEO.
Speaker Change: T O combo holdings, and Jose Montero, our CFO.
CEO: I don't want to start by going over our fourth quarter highlights.
Jos Montero: By Jose who will discuss our financial results.
Jos Montero: After we will open the call for questions from analysts.
Jos Montero: Copa Holdings' financial reports have been prepared in accordance with international financial reporting standards.
Daniel J. McKenzie: In today's call, we will discuss non-IFRS financial measures. A reconciliation of the non-IFRS to IFRS financial measures can be found in our earnings release, which has been posted on the company's website, CopaAir.com. Our discussion today will also contain forward-looking statements, not limited to historical facts, that reflect the company's current beliefs, expectations, and intentions regarding future events and results. These forward-looking statements involve risk and uncertainties that could cause actual results to differ materially and are based on assumptions subject to change.
Jos Montero: In today's call, we will discuss non <unk> financial measures.
Jos Montero: Depreciation of the non <unk> financial measures can be found in our earnings release, which has been posted on the company's website Copa com.
Jos Montero: Our discussion today will also contain forward looking statements not limited to historical facts that are in.
Flex the company's current beliefs expectations, and our intentions regarding future events and results.
Jos Montero: These forward looking statements involve risks and uncertainties that could cause actual results to differ materially and are based on assumptions subject to change.
Jos Montero: Many of these are discussed in our annual report filed with the SEC now I would like to turn the call over to our CEO Mr. Pedro <unk>.
Daniel J. McKenzie: Many of these are discussed in our annual report filed with the SBA. Now, I'd like to turn the call over to our CEO, Mr. Pedro Heilbron. Thank you, Daniel.
Pedro: Thank you Danielle.
Pedro Heilbron: Good morning to all, and thanks for participating in our fourth quarter earnings call. 2023 was a very strong year for Copa, as we reported solid financial results. I would like to extend my sincere gratitude to all our co-workers for their commitment to the company and our passengers. As always, they have my deepest respect and admiration.
Pedro: Good morning to all and thanks for participating in our fourth quarter earnings call.
Pedro: 2023, with a very strong year for Copa as we reported solid financial results.
Pedro: I would like to extend my sincere gratitude to all of our coworkers for their commitment to the company and our passengers as always they have my deepest respect and admiration.
Pedro: Thanks to a continued healthy demand environment in the region.
Pedro Heilbron: Thanks to a continued healthy demand environment in the region and our consistent execution in keeping HVO unit costs low and increasing revenues, we were able to deliver industry-leading financial results for the quarter and the year. Here is a summary of the main highlights for Q4. Passenger traffic grew 11.1% compared to the same period in 2022. In line with our capacity growth of 11%, as a result, the load factor for the quarter increased by 0.1 percentage points compared to Q4-22 to 86.7%. Passenger yield came in at $0.14, resulting in unit revenues or RASM of $0.127.
Pedro: And our consistent execution, keeping ex fuel unit costs, LOE and increasing revenues.
Pedro: We were able to deliver industry, leading financial results for the quarter and the year.
Pedro: Summarizing the main highlights for Q4.
Pedro: Passenger traffic grew 11, 1% compared to the same period in 2022.
Pedro: In line with our capacity growth of 11% as a result of the load factor for the quarter increased by <unk>, one percentage points compared to Q4 dollars 22 to 86, 7%.
Pedro: Passenger yield came in at 14%.
Pedro: Resulting in unit revenues or RASM of 12, 7%.
Pedro: Unit costs decreased by six 3% compared to Q4 'twenty two.
Pedro Heilbron: Unit costs decreased by 6.3% compared to Q4'22, mainly driven by a lower jet fuel price and lower sales and distribution costs. Excluding fuel, unit cost or CASM X came in at 6 cents, a 1.6% decrease compared to Q4 2022, and our operating margin for the quarter came in at an industry-leading 23.9%. Now, turning to our main highlights for the full year 2023. Passenger traffic increased by 15.7% compared to 2022.
Pedro: Mainly driven by a lower jet fuel prices and lower sales and distribution costs.
Pedro: Excluding fuel unit costs, our CASM ex came in at six and a one 6% decrease compared to Q4 2022.
Pedro: And our operating margin for the quarter came in at an industry, leading 23, 9%.
Pedro: Now turning to our main highlights for the full year 2023.
Pedro: Passenger traffic increased 15, 7% compared to 2022.
Pedro: While our capacity grew by 13, 4% as a result, our load factor for the year increased one eight percentage points to 86, 8%.
Pedro Heilbron: Well, our capacity grew by 13.4%. As a result, our load factor for the year increased 1.8 percentage points to 86.8%. Unit revenues for RASM increased 3% year-over-year to $12.5 cents, driven by a 1.6% increase in passenger yields and the 1.8 point increase in load factor mentioned before. Castamex fuel came in at $0.6, 0.3% below 2022.
Pedro: Unit revenues for RASM increased 3% year over year to $12 five.
Pedro: Driven by a one 6% increase in passenger yields.
Pedro: The one eight point increase in load factor mentioned before.
Pedro: CASM ex fuel came in at <unk> <unk>.
Pedro: 3% below 2022.
Pedro Heilbron: And operating margin for the year came in at 23.5%. With regard to our network, in 2023, we started serving four new destinations, Austin and Baltimore in the U.S., Mante in Ecuador, and Barticimete in Venezuela. With these additions, we now serve 81 destinations in 32 countries in North, Central, South America, and the Caribbean, as we continue strengthening and solidifying our position as the most complete and convenient connecting hub in Latin America
Pedro: And operating margin for the year came in at 23, 5%.
Pedro: With regards to our network in 2023, we're starting to serving four new destinations are steering in Baltimore in the U S.
Pedro: Monday in Ecuador, Panama, Tc mentioned in Venezuela.
Pedro: With this addition, we now serve 81 destinations in 32 countries in North Central South America and the Caribbean.
Pedro: As we continue strengthening and solid define our position as the most complete and convenient convinced connecting hub in Latin America.
Pedro Heilbron: We were able to significantly increase passenger sales through both our copa.com and direct channels and our new lower-cost NBC travel agency channel and are glad to share that as of today, more than 75% of our total sales are sold via these channels, considerably lowering our distribution costs and reducing our dependency on the traditional GDS channels. To put it in perspective, prior to the launch of our new distribution strategy in September 2022, the percentage of sales through our direct channels was only around 40%. On the operational front, Copa was recently recognized by Cerium for the ninth time as the most on-time airline in Latin America in 2023. In fact, according to Cerium, Copa's own time performance of 89.5% was once again the highest of any carrier in the Americas and among the highest in the world.
Pedro: We were able to significantly increase passenger sales through both our copper dot com and direct channels and our new lower cost MDC travel agency channel.
Pedro: And are glad to share that as of today more than 75% of our total sales are sold.
Pedro: These channels.
Pedro: Suitably lowering our distribution costs and reducing our dependency on the traditional GDS channels to.
Pedro: To put it in perspective prior to the launch of our new distribution strategy in September 2022.
Pedro: As a percentage of sales through our direct channels was only around 40%.
Pedro: On the operational front.
Pedro: Copa was recently recognized by cerium for the ninth time at the most on primarily in Latin America in 2023.
Pedro: In fact, our.
Pedro: Accordingly, with cerium Copa on time performance of 89, 5% was once again, the highest of any carrier in the Americas and.
Pedro: And amongst the highest in the world.
Pedro Heilbron: Additionally... Last year, Copa Holdings received multiple recognitions, for the 8th consecutive year, and the best airline in Central America and the Caribbean, from Apex, which qualified it as a five-star major airline, and from Condé Nast Traveler, which included us as part of the top 15 major airlines, major international airlines, in the Reader's Choice Award for 2023. Turning now to WINGO, during 2023, WINGO focused more on its capacity for domestic markets with the start of six new routes. In Colombia, from Bogotá to Barranquilla, Pereira, and Bucaramanga. From Medelln to Cartagena and Santa Marta. And in Panama, from Panama City to David. Internationally, Wingo launched two new routes during the year, from Bogota to Caracas, Venezuela, and a seasonal route from Cali to Aruba. With these additions, Ringo currently operates 37 routes with service to 23 cities in 11 countries.
Pedro: Additionally.
Pedro: Last year Copa Airlines received multiple recognitions.
Pedro: Such us from Skytrax for the eighth consecutive year.
Pedro: First early in Central America, and the Caribbean.
Pedro: From apex was qualified Copa as a five star major airlines.
Pedro: And from cutting the Nast traveler, which included as part of the top 50 major major.
Pedro: A major international Airlines and their readers choice award for 2023.
Pedro: Turning now to Wingo during 2023, when we will focus more on its capacity.
Pedro: To domestic market was a startup six new routes.
Pedro: In Colombia from Bogota to about around key update Adrian Bucaramanga from Marie took out at the Hilton Santa Monica, adding Panama from Panama City to Debbie.
Pedro: Internationally Wingo 92, new.
Pedro: Two new routes during the year from Bogota to Caracas, Venezuela and <unk>.
Pedro: Seasonal rug from carried through all over.
Pedro: With this addition, Ringo currently operates 37 routes with service to 23 states in 11 countries.
Speaker Change: Now I'll go over our expectations for 2024.
Pedro Heilbron: So now I'll go over our expectations for 2024. As you already know, the grounding of 21 of our 77 Mach 9 aircraft, following the Airworthiness Directive issued by the FAA, impacted our operations from January 6 to January 29. This unexpected disruption forced us to cancel around 20% of our daily flight schedule, which represented more than 1,700 flights. I'm glad to share that, thanks to our team's hard work, commitment, and dedication, we were able to take care of our passengers in the best possible way and, once approved by the FAA, promptly return to operations the grounded planes in a safe and reliable manner. Boeing has been and continues to be an important partner for Copa, and we remain committed to our relationship in the long term. Nonetheless, we hold them accountable for the grounding and its impact on our passengers and our finances, for which we expect to be fairly compensated.
Speaker Change: Our Europe as you already know the grounding of 'twenty, one of our 707 Max nine.
Speaker Change: Following the airworthiness directive issued by the FAA impacted our operations from January six through January 29.
Speaker Change: This unexpected disruption forced us to cancel around 20% of our daily flight schedule, which represented more than 1700 slides.
Speaker Change: I'm glad to share that thanks to our team's hard work.
Pedro: <unk> and dedication we were able to take care of our passengers in the best possible way and once approved by the FAA primarily returned to operations are grounded planes in a safe and reliable manner.
Pedro: <unk> has been and continues to be an important partner for Copa.
Pedro: And we remain committed to our relationship in the long term.
Pedro: Nonetheless, we hold them accountable for the grounding and its impact on our passengers and our financials for which we expect to be fairly compensated.
Pedro: Aside from the impact of the grounding on our Q1 2024 financial and operational results.
Pedro Heilbron: Aside from the impact of the grounding on our Q1 2024 financial and operational results, it seems that this year's 737 MAX deliveries are likely to be further delayed, reducing our estimated capacity growth for the year to approximately 10% from our original expectation of between 12 to 14%. Going forward, we continue to see a healthy demand environment in the region, as we again expect to deliver strong financial results in 2024. Continuing with our network growth plan, this week we announced three new destinations that will start to operate this summer: Raleigh-Durham in the US, Florianopolis in Brazil, and Tulum in Mexico.
Pedro: It seems that this year 737, Max deliveries are likely to be further delayed.
Pedro: Reducing our estimated capacity growth for the year to approximately 10% from our original expectation of between 12% to 14%.
Pedro: Going forward, we continue to see a healthy demand environment in the region.
Pedro: We again expect to deliver strong financial results in 2024.
Pedro: Continuing with our network growth plan. This week, we announced three new destinations that will start to upgrade this summer.
Pedro: Raleigh, Durham, and the U S florianopolis in Brazil and to alumina in Mexico.
Pedro: With this foundation, we will reach to 81 destinations in 32 countries.
Jos Montero: With these additions, we will reach 81 destinations in 32 countries, as we continue to solidify our leadership position as the hub with the most international destinations in Latin America. We believe our business model is as solid and as relevant as ever, and our Hope of the Americas in Panama is the best connecting hub in Latin America, making us the best-positioned airline in our region to consistently deliver industry-leading results. To summarize, we delivered industry-leading first quarter and full year financial results while continuing to grow capacity. We continue to deliver on our cost execution strategy. We continue growing and strengthening our network, the most complete and convenient hub for travel in the Americas. We also continue to see a healthy demand environment in the region and expect to once again deliver strong operating margins in 2024. And, as always, our team continues to deliver world-leading operational results. Now, I'll turn it over to Jose, who will go over our financial results in more detail. Thank you, Pedro. Good morning, everyone.
Pedro: As we've continued to solidify our leadership position as the hub with the most international destinations in Latin America.
Pedro: We believe our business model is solid and as relevant as ever and our hub of the Americas in Panama.
Pedro: Best connecting hub in Latin America.
Pedro: Making us the best positioned airline in our region to consistently deliver industry leading results.
Pedro: To summarize we delivered industry, leading first quarter and full year financial results, while continuing to grow capacity.
Pedro: We continue to deliver on our cost execution strategy.
Pedro: We continue growing and strengthening our network the most complete and convenient hub for travel in the Americas.
Pedro: We also continue to see a healthy demand environment in the region and expect to once again deliver strong operating margins in 2024.
Pedro: And as always our team continues to deliver world leading operational results.
Pedro: Now I'll turn it over to Jose, who will lower our financial results in more detail.
Jos Montero: Thank you Pedro and good morning, everyone. Thanks for being with us today.
Jos Montero: Thanks for being with us today. I'd like to join Pedro in acknowledging our great team for all their efforts in handling the MAX 9 grounding in the best way possible, and, of course, for keeping our passengers and our co-workers safe. Their commitment is key to our success as a company. I will start by going over the main highlights for the full year 2023. Our load factor increased year-over-year by 1.8 percentage points to 86.8%.
Jos Montero: I would like to join data in acknowledging our great team for all their efforts were all handling the Max nine grounding in the best way possible.
Jos Montero: And of course, we're keeping our passengers and our coworkers safe.
Jos Montero: Their commitment is key to our success as a company.
Jos Montero: I will start by going over the main highlights for the full year 2023.
Jos Montero: Our load factor increased year over year by one eight percentage points to 86, 8%.
Jos Montero: The unit revenue has improved by 3% versus 2022, to $0.1225. Mostly driven by a 16% reduction in the average price of jet fuel, our unit cost came in at $9.6 million. 7.1% reduction versus 2022, while our extra unit cost came in at 6 cents, 0.3% lower year-over-year. As a result, our operating margin for the year was 8.3 percentage points higher than in 2022. 23.5. Reporting net income for the full year 2023 came in at $518.2 million, translates to earnings per share of $12.89, including special items, namely a $156.9 million net charge, related mostly to the settlement of the company's convertible notes, closed during the third quarter. Adjusted net income came in at $675.1 million, or adjusted earnings per share of $16.79 million. Now turning to our fourth quarter results, we reported a net profit for the quarter of $191.8 million, or $4.55 per share. Special items, or adjusted net profit, came in at $188.4 million, or $4.47 per share.
Jos Montero: The unit revenues improved by 3% versus 2022 to 12 five.
Pedro: Mainly driven by 16% reduction in the average price of jet fuel our unit cost came in at 96.
Pedro: Seven 1% reduction versus 2022.
Pedro: While our ex fuel unit cost came in at <unk> <unk> three.
Pedro: And 3% lower year over year.
Pedro: The result, our operating margin for the year was eight three percentage points higher than in 2022 at 23, 5%.
Pedro: Reported net income for the full year 2023 came in at $518 2 million, which.
Pedro: Which translates to earnings per share of $12 89.
Pedro: Excluding special items, namely a $156 $9 million net charge related mostly to a settlement of the company's convertible notes, which we closed during the third quarter.
Pedro: Adjusted net income came in at $675 1 million or adjusted earnings per share of $16 79.
Pedro: Now turning to our fourth quarter results, we reported a net profit for the quarter of $191 8 million or.
Pedro: Or $4 55 per share.
Pedro: Excluding special items, our adjusted net profit came in at $188 4 million or $4 47 per.
Pedro: Per share.
Pedro: Fourth quarter special item, consistent with $3 $4 million unrealized mark to market gain related to changes in the value of financial investments.
Jos Montero: The fourth quarter special item consisted of a $3.4 million realized market-to-market gain related to changes in the value of financial investments. We reported a quarterly operating profit of $218.9 million and an operating margin of 23.9%. Capacity came in at 7.2 billion available seat miles, or 11% higher than in Q4 2022. Our load factor came in at 86.7% for the quarter. 21 percentage point increase compared to the same period in 2022, driven by a 7.1% decrease in yields year over year. However, unit revenues came in 7.3% lower versus Q4 2022 at 12.7 cents. Mainly driven by lower jet fuel prices, unit costs were chasm decreased to 9.7 cents or 6.3% lower yearly.
Pedro: We reported a quarterly operating profit of $218 9 million and an operating margin of 23, 9%.
Pedro: Capacity came in at $7 2 billion available seat miles or 11% higher than in Q4 2022.
Pedro: Our load factor came in at 86, 7% for the quarter.
Pedro: One percentage point increase compared to the same period in 2022.
Pedro: Driven by a seven 1% decrease in yields year over year unit revenues came in at seven 3% lower versus Q4 2022 of $12 seven.
Pedro: Mainly driven by lower jet fuel prices unit cost or CASM decreased to nine seven or six 3% lower year over year.
Jos Montero: Finally, our CASM excluding fuel came in at six cents, a 1.6% decrease versus Q4 2022, mainly driven by lower sales and distribution costs due to higher penetration, both direct sales and the lower cost NBC travel agency. We're going to spend some time now discussing our balance sheet and liquidity. As of the end of the fourth quarter, we had assets of close to $5.2 billion.
Pedro: And finally, our CASM, excluding fuel came in at <unk>.
Pedro: One 6% decrease versus Q4 2022.
Pedro: Mainly driven by lower sales and distribution costs due to a higher penetration of both direct sales and the lower cost NBC travel agency channels.
Speaker Change: So let me just spend some time now discussing our balance sheet and liquidity.
Pedro: As of the end of the fourth quarter, we had assets of close to $5 2 billion.
Pedro: As to cash short and long term investments.
Jos Montero: Cash Short and Long-Term Investments. We ended the quarter with over $1.2 billion, which represents 34% of our last 12 months' revenue. And in terms of debt, we ended the quarter with $1.7 billion in debt and lease liabilities and came in with an adjusted net debt to a big debt ratio of 0.5 tons.
Pedro: We ended the quarter with over $1 2 billion, which represents 34% of our last 12 months' revenues.
Pedro: And in terms of debt, we ended the quarter with one $7 billion in debt and lease liabilities and came in with an adjusted net debt to EBITDA ratio.
Pedro: <unk> five times.
Jos Montero: I'm pleased to report that our average cost of debt, which continues to be comprised solely of aircraft-related debt, is currently in the range of 3.5%, with around 70% of our debt being fixed. Turning now to our fleet, during the fourth quarter, we'll receive three Boeing 737 MAX 9. With these additions, our total fleet is now comprised of 68 737-800s, 29 737 MAX 9s, and 9
Pedro: I'm pleased to report that our average cost of debt, which continues to be comprised solely of aircraft related debt is currently in the range of three 5% with around 70% of our debt being fixed.
Pedro: Turning now to our fleet during the fourth quarter, we received three Boeing signed three sand Max Nines with these additions. Our total fleet is now comprised of 68, 3% and 802009 are interesting and Max nines, and 973% and seven hundreds.
Pedro: These figures include $1 seven 800 freighter, and then 97, 3% and eight hundreds operated by window.
Pedro: As for 2024 fleet plan as Pedro mentioned in his remarks deliveries will likely be further delayed in the year.
Pedro: Therefore, we're embedding in our capacity guidance, a preliminary figure of 11 aircraft deliveries for the year 2024.
Jos Montero: These figures include one 737-800 freighter and then nine 737-800s operated by Wingo. As for the 2024 fleet plan, as Pedro mentioned in his remarks, deliveries will likely be further delayed in the year. Therefore, we're embedding in our capacity guidance a preliminary figure of 11 aircraft deliveries for the year 2024. Our current fleet plan calls for receiving 3737 MAX 9's. E737MAX-E, end the year with a total of 117... We have already secured Joko financing for 9 out of these 11 expected deliveries in 2025.
Pedro: Our current fleet plan calls for receiving <unk> Max Nines.
Pedro: 70% of Max Eights to end the year with a total of 117 aircraft.
Pedro: We have already secured joke of financing for nine out of these 11 expected deliveries in 2024.
Pedro: Turning now to the return of value to our shareholders I am pleased to announce that our board of directors has approved a dividend payment in 2024 or $1 61 per share per quarter to be paid in the month of March June September and December subject to board verification each quarter.
Pedro: To highlight that the 2024 dividend payment represents a significant increment year over year versus the dividend paid during 2023.
Jos Montero: Turning now to the return of value to our shareholders, I'm pleased to announce that our Board of Directors has approved a dividend payment in 2024 of $1.61 per share per quarter to be paid in the months of March, June, September, and December, subject to board ratification each quarter. I'd like to highlight that the 2024 dividend payment represents a significant increment year-over-year versus the dividend paid during 2020. The first quarterly payment will be made on March 15th to all shareholders of record as of February 29th.
Pedro: Quarterly payment will be made on March 15th to all shareholders of record as of February 2009.
Pedro: So our outlook you can provide the following guidance for the full year 2024.
Pedro: We expect to increase our capacity and ASM by approximately 10% year over year, and we expect to delivering operating margin within the range of 20.
Pedro: Hello.
Speaker Change: Yes, youre back into the call alright. Thank you.
Speaker Change: So for some reason we got dropped out. So you can tell this is alive and that.
Jos Montero: So our outlook can provide the following guidance for the full year 2024. We expect to increase our capacity in ASMs by approximately 10% year-over-year, and we expect to deliver an operating margin within a range of 20%. Hello. Yes, you're back on the call.
Speaker Change: So I will start again with our outlook part and as part of my prepared remarks, so I'm going to I was talking about our outlook for the year 2024, and I was saying that we expect to increase our capacity and ASM by approximately 10% year over year, and we expect to deliver an operating margin within the range of 23, 21%.
Jos Montero: All right. Thank you. And so, for some reason, we got dropped out. So, you can tell this is live.
Jos Montero: And so, I will start again with our Outlook and as part of my prepared remarks. So, I was talking about our Outlook for the year 2024, and I said that we expect to increase our capacity in ASMs by approximately 10% year-over-year, and we expect to deliver an operating margin within the range of 21% to 23%. We are basing our forecast for the year 2024 on the following assumptions: load factor within the range of 86% to 87%, and unit revenues are within a range of 12.2 cents. Casamex fuel is expected to be in the range of $0.06, and we are expecting an all-in fuel price of $2.85 per gallon.
Jos Montero: <unk>, 23%, we are basing our outlook for the year 2024 on the following assumptions load factor within the range of 86% to 87% unit revenues within a range of $12 two CASM ex fuel to be in the range of six.
Jos Montero: And we are expecting all in fuel price of $2 85 per gallon.
Jos Montero: Our 2024 full year guidance includes the financial impact from the grounding of 21 of Copa's Max 9 aircraft, which took place between January 6 and January 29. Additionally, it accounts for a current estimate of the full year capacity impact due to the MAX 9 grounding coupled with anticipated further aircraft delivery delays throughout the year. It's important to know that our preliminary capacity guidance of approximately 10% is subject to adjustments, pending changes in the aircraft delivery schedule for the remainder of 2024. Thank you. And with that.
Jos Montero: Our 2020 for full year guidance inclusive financial impact from the grounding of 'twenty one of hopeless Max nine aircraft, which took place between January <unk> and January 2019.
Jos Montero: Additionally, it accounts for our current estimate of the full year capacity impact due to the Max nine grounding coupled with anticipated further aircraft delivery delays throughout the year.
Jos Montero: It is important to note that our preliminary capacity guidance of approximately 10%.
Jos Montero: Is subject to adjustments pending changes in the aircraft deliveries scheduled for the remainder of 2024.
Jos Montero: Thank you and with that.
Operator: We're open to call some questions, if we're still here, hopefully. Thank you. As a reminder, if you would like to ask a question, please press star 1-1 on your telephone.
Jos Montero: Rob on the call from question is if we're still here hopefully.
Operator: Thank you as a reminder.
Speaker Change: He would like to ask the questions. Please.
Operator: Please press star one on your telephone.
Speaker Change: One moment.
Savvy Seitz: One moment while we compile the Q&A roster. And our first question today will be from Savvy Seitz of Raymond James. Your line is open. Hey, good morning.
Operator: While we compile the Q&A roster.
Savvy Seitz: And our first question today will be coming from Savi <unk> of Raymond James Your line is open.
Savvy Seitz: Hey, good morning.
Jos Montero: I'm just kind of curious about the... trends you're seeing on the premium seating side versus the economy compared to 2019. I know you've talked in the past about a lot of, you know, ULCCC growth in the region, but I think the kind of mix has changed. And so curious what you're seeing on premium versus economy, fares, and revenue trends. I would say that, in general terms, the entire Rasmussen trend, we're still seeing a very healthy demand environment in the region. However, when you split it down, I think that we're still seeing in the data that we have of customers that are traveling for business purposes that it's still somewhat lower than where it was back in 2019. But it certainly has been supplemented by the other source of travelers that were transporting Leisure VFR, and there's also Business and Leisure, which has also been sort of, I would say, supplementing the business travel that we've seen since the pande And the front cabin is still doing better than, doing better year over year.
Savvy Seitz: I just kind of curious on the.
Jos Montero: Credit trends Youre seeing on the premium seating side, the rest of the economy compared to 2019, I know you've talked in the past about a lot of CPC.
Jos Montero: PCC growth in the region, but I think the kind of the mix has changed so curious what you are seeing on.
Jos Montero: Premium versus economy fares and revenue trends.
Jos Montero: I would say that in general terms the entire train a RASM, we're still seeing a very healthy <unk>.
Jos Montero: That environment in that region.
Jos Montero: However, when you split it down I think they still were seeing.
Jos Montero: And the data we have with customers that are traveling for business purposes. It is still somewhat lower than where it was back in 2019, but it surely has been I'd say supplemented by.
Jos Montero: The other source of travelers that were transporting leisure VFR and there is also a business and leisure that that has also been some I'll say supplementing the business travel that we've seen since the pandemic.
Jos Montero: In the front cabin.
Jos Montero: Still doing better than than doing better year over year, So it's doing better than than a healthy 2022 or it did better in 2023.
Jos Montero: So it's doing better than a healthy 2022, or it will do better in 2023. Thanks. Thank you. And I apologize if I missed this, but you know, how much of the share buyback have you done? And any thoughts on just cash flow this year in terms of what you need for CapEx versus other use cases? Sure, no. Look, during the fourth quarter, we had some activity in the buyback program, but, you know, with the Max situation in January, you know, our priority was mostly in making sure that we got the, you know, fleet back in the air. But for the year, you know, we expect our cash flow to be able to sustain both the dividend and for us to continue buying shares in the $20 million program that we have that is actually...
Speaker Change: Interesting. Thank you.
Jos Montero: Kevin.
Speaker Change: I apologize if I missed this but.
Jos Montero: How much of the share buyback have you done any any thoughts on.
Jos Montero: Just.
Jos Montero: Cash flow this year in terms of connect.
Speaker Change: What you need for Capex versus are there other uses.
Jos Montero: Sure.
Speaker Change: During the fourth quarter.
Jos Montero: Had some.
Speaker Change: Activity in the buyback program Budd.
Jos Montero: With the Max situation in January and our priority was mostly in making sure that we got.
Speaker Change: The fleet back in the air.
Speaker Change: But for the year.
Jos Montero: We expect our cash flow to be able to disable the dividend then for us too.
Speaker Change: And buying shares in the $200 million program that we have that is active.
Jos Montero: I want to say, of course, for the CAPEX, you know, aircraft CAPEX that we have, we have already, as you recalled, our financing of our aircraft is 100% via the JOCOs, and then in terms of maintenance CAPEX and the like, it's probably in the, you know, 150, 180 range, so the cash flow for the year certainly sustains. Thanks to all of our users. Perfect, thank you.
Jos Montero: Thank you our Capex aircrafts.
Jos Montero: Capex that we have we have already as you recall R. R.
Jos Montero: Financing of our aircraft is 100%.
Jos Montero: <unk>.
Jos Montero: And then in terms of maintenance Capex and the like it's probably in the 150 180 range. So so the.
Jos Montero: Cash flow for the year certainly sustained.
Jos Montero: Sustains all of our of our uses of cash.
Jos Montero: Perfect. Thank you.
Operator: One moment for the next question, and our next question will be coming from Ruggiero Arruggio of Bank of America. Your line is open. Yeah. Hey, everyone.
Speaker Change: One moment for the next question.
Ruggiero Arruggio: And our next question will be coming from zero, our Rojo of Bank of America. Your line is open.
Ruggiero Arruggio: Yeah, Hey, everyone. Thanks, a lot for you for the opportunity congratulations for the results.
Ruggiero Arruggio: Thanks a lot for the opportunity. Congratulations on the result. I have a couple here.
Ruggiero Arruggio: A couple here. The first one is on the guidance last quarter in the last quarter call. You guys said that the guidance will depend on external factors, including SKU in capacity from competitors <unk>.
Jos Montero: The first one is on guidance. Last quarter, on the last quarter call, you guys said that guidance would depend on external factors, including fuel and capacity from competitors. The field has been flattish since then, so how about competition? Can you please talk a little bit about how it plays out?
Jos Montero: Has been flattish since then so how about competition can you. Please.
Jos Montero: Talk a little bit about how it would play out.
Pedro Heilbron: New routes and some kind of aggressiveness from any player there? And I think the main idea here is to check whether there's margin guidance that is pretty robust, already includes some capacity expansion from peers or not, or if competition is actually less fierce than expected. That's the first one. Thank you. Yeah, competition is as expected. It hasn't changed from what it was when we gave preliminary guidance a few months ago. Overall, if we put all the competition together in Latin America, the numbers are higher than what we're growing ourselves.
Jos Montero: New routes.
Speaker Change: And I guess.
Speaker Change: Some kind of a question, but a strong any player there.
Speaker Change: Jim I think the main idea here is to check.
Speaker Change: This margin guidance that is pretty robust.
Speaker Change: That includes some capacity expansion from.
Pedro Heilbron: From peers are or are not the arb is competition is actually less <unk> than expected thats. The first one thank you.
Pedro Heilbron: Yes.
Speaker Change: Competition is as expected it hasnt changed from.
Speaker Change: What in Washington, when we gave preliminary guidance.
Speaker Change: A few months ago.
Speaker Change: Overall, if we put all the all the competition together in Latin America.
Speaker Change: The numbers are.
Speaker Change: Abbas what we're growing we're growing ourselves so it's going to be like for like.
Pedro Heilbron: It's going to be like, We're saying 10% capacity growth. The competition altogether is probably growing somewhat 50% mid-double digits, 50% above that. And again, it varies a lot depending on the airline.
Pedro Heilbron: Yes.
Speaker Change: We're saying 10% capacity growth.
Pedro Heilbron: Is it competition altogether is probably growing somewhat 50%.
Speaker Change: Mid double digit 50, 50% above that.
Speaker Change: And again it varies a lot depending on the airline.
Pedro Heilbron: But that's the same we were seeing before, so there hasn't been any change there. And it is included in our guidance for the year. Okay, sounds perfect.
Speaker Change: Same we were seeing before so there hasnt been any change there.
Pedro Heilbron: It is included in our guidance for the year.
Pedro Heilbron: Okay.
Pedro Heilbron: Okay.
Pedro Heilbron: And my second question is regarding margin sustainability. Copa has been operating at a higher margin than historical levels.
Speaker Change: Perfect. Thank you and my second question is regarding margin sustainability copper has been operating at a higher margin than historical levels. One of the reasons is the cost reduction that seems to be sustainable, but maybe the question is and the reason to believe that the industry in the region is also more profitable than <unk>.
Pedro Heilbron: One of the reasons is the cost reduction that seems to be sustainable. But maybe the question is, is there any reason to believe that the industry in the region is also more profitable than pre-COVID or that a margin normalization is to be expected at some point in time? So, what do you guys think about this current higher margin sustainability going forward for Copa? Thank you. So, of course, we're only guiding for 2024, and we're keeping our margin guidance quite high. I would agree that the industry in Latin America is more profitable right now than pre-pandemic. We've always run a very lean and competitive airline, and even more so today than it was before.
Pedro Heilbron: <unk>.
Pedro Heilbron: And that March or that our margin our monetization is to be expected at some point in time.
Pedro Heilbron: So why do you guys think about the current higher margin sustainability going forward for a couple of thank you.
Pedro Heilbron: So of course, we're only guiding for 'twenty 'twenty four.
Pedro Heilbron: We're keeping.
Pedro Heilbron: Our margin guidance.
Pedro Heilbron: Quite high I wouldn't agree that the industry in Latin America is more profitable right now in pre pandemic.
Pedro Heilbron: The I mean.
Pedro Heilbron: We've always run a very lean and competitive airline.
Pedro Heilbron: Even more so today than one who was before.
Pedro Heilbron: We have... We have... controlled our distribution costs and actually reduced them significantly with our direct strategy, our direct connect strategy. So that's been significant. We're also more competitive overhead-wise and taking advantage of the growth in ASMs. And I would say that other airlines in the region, in their case, maybe through Chapter 11 and the like, are also more competitive and are also producing better results overall. Okay, fair enough. Thank you very much. Congratulations again.
Speaker Change: We have we have.
Pedro Heilbron: Controls lower distribution costs, and actually reduce them significantly with our with our direct.
Pedro Heilbron: Strategy or a direct connect strategy.
Pedro Heilbron: So that's been significant we're also more more competitive over hedge wise and taking advantage of the growth.
Pedro Heilbron: <unk>.
Pedro Heilbron: And I would say that all other airlines in the region and their case may be through chapter 11, and the like.
Pedro Heilbron: So.
Pedro Heilbron: More competitive and are also producing better resource overall.
Pedro Heilbron: Sure.
Pedro Heilbron: Sure.
Pedro Heilbron: Okay fair enough. Thank you very much congratulations again, thank you all right.
Operator: Thank you. One moment for our next question, and our next question will be coming from Helane Becker of TV Cow. Your line is open.
Speaker Change: Thank you one moment, Brian next question.
Operator: Okay.
Operator: Yes.
Operator: And our next question will be coming from Helane Becker.
Helane Becker: Of TD Cowen Your line is open.
Helane Becker: Thanks very much. And I have two questions. One is, you guys said you were thinking about or had announced Raleigh-Durham as your next US city. And I'm wondering what the attraction of that market is. Like, how did you pick that market versus other markets that might have had more, more demand? Or is the demand there really high?
Helane Becker: Thanks, very much and so two questions. One is I noticed that you guys said you were thinking about or had announced Raleigh Durham as your next to U.
Helane Becker: U S today and I'm wondering what the attraction of that market is like how did you pick that market versus other markets that might have had more more demand or is the demand there really high.
Speaker Change: Well, we'll see.
Speaker Change: Hey, Sean.
Pedro Heilbron: We have a really good track record of picking markets, and I'm not saying this as bragging or anything, but of all the new markets we have entered in the last 30-plus years, there are only two that we're not currently flying, and that's with the exception of the routes we were flying pre-pandemic and that we have not yet reactivated. So there are still some markets we have not reactivated from pre-pandemic, but that's, as we know, a special situation. But we have a pretty good track record, I think a good track record, and Raleigh-Durham sits in a region of the U.S. that we don't serve very well today. So that part of the southeast U.S. is a growing market. It's a growing region, the tri-city area of Raleigh-Durham. There's more, let's say, an ethnic Latin American population moving to that area also. It has experienced economic growth.
Helane Becker: We have a high head and we have we have a really good track record in picking market.
Pedro Heilbron: I'm, not saying this as bragging or anything but.
Pedro Heilbron: All of the new markets, we have entered in the last 30 plus year years.
Pedro Heilbron: There are only two that we're not currently flying and that with the exception of.
Pedro Heilbron: The routes were flying pre pandemic and we haven't got yet reactivated so theres still some market we have not reactivated from pre pandemic.
Pedro Heilbron: As we know a special situation.
Pedro Heilbron: But we haven't tried to I think a good track record and Raleigh Durham sits in <unk>.
Pedro Heilbron: Regionally the U S that reads on serve very well today.
Pedro Heilbron: So that part of the southeast U S. A.
Pedro Heilbron: It is.
Pedro Heilbron: It's a growing market, it's a growing region.
Pedro Heilbron: Tri City area of Raleigh Durham.
Pedro Heilbron: There is more let's say.
Pedro Heilbron: Latin American population moving into that area also.
Pedro Heilbron: As economic growth. So so so we think that is not well served we will be the first slide from the Raleigh Durham area.
Pedro Heilbron: So we think, and this isn't well served, we will be the first flight from the Raleigh-Durham area, the first direct flight from the Raleigh-Durham area to Latin America. And that's kind of what makes us unique and what allows us to succeed in markets such as this one. Okay, that's really helpful. Thanks, Pedro. And then my other question is on the dividend. I mean, it's such a big increase, and I know that you like to pay out, what, 40% of adjusted pre-tax profits?
Pedro Heilbron: First direct flights from the Raleigh Durham area to Latin America, and that's kind of what makes us unique and one allows us to succeed in markets such as this one.
Speaker Change: Okay. That's really helpful. Thanks, Pedro and then my other question is on the dividend.
Speaker Change: It's such a big increase and.
Speaker Change: Now that you would like to pay out what 40% of adjusted pre tax.
Jos Montero: But did you think about, or did the board think about, you know, a smaller increase and then increasing it during the year? Just kind of trying to get a handle on how you doubled it, how you thought about doubling it? Because, I mean, not that I'm complaining, but it's a big increase.
Speaker Change: But did you think about or did the board think about smaller increase and then increasing during the year.
Jos Montero: Just kind of trying to get a handle on.
Jos Montero: How you doubled how you've thought about doubling yet because.
Jos Montero: I mean, not that I'm complaining.
Jos Montero: Okay.
Jos Montero: <unk> policy is to pay out.
Jos Montero: Our policy is to pay out, as you have well mentioned, 40% of prior years' adjusted netting. And so I think that in respect to that policy, the board did have a very, let's say, detailed discussion about it. But in the end, you know, this is value to the shareholders. That's the primary way where many of us get value from the company. So, therefore, it's an important aspect of the COPA value proposition. And so, in the end, that's... It's a policy of the company, so... And we can afford to pay for it, which is important also.
Jos Montero: Will mentioned, 40% of prior year's adjusted net income.
Jos Montero: So I think that in respect to that policy at board did have a very.
Jos Montero: Let's say detailed discussion about this but in the end.
Jos Montero: <unk> value to the shareholders. That's the primary way, where many of our shoulders get value from the company. So therefore, it's an important aspect of the Copa value proposition and so that's.
Jos Montero: That's a policy of the company so.
Jos Montero: Okay.
Jos Montero: It's important to note.
Jos Montero: Cash-wise and cash flow-wise, the generation of cash that we expect to have sustains this plus the growth of the company, which is the source of the use of cash, of course, it's in, to continue to grow the business. That's very helpful. Okay. Thanks, team. Have a good day.
Jos Montero: Our cash wise and cash flow wise the generation of cash that we expect to have sustained <unk> plus the <unk>.
Jos Montero: Growth of the company when you see our source of.
Jos Montero: Use of cash of course is in is in continuing to grow and grow the business.
Speaker Change: That's very helpful. Okay. Thanks, Steve have a good day.
Dan: Dan here.
Operator: Thank you. One moment for the next question. And our next question will be coming from Pablo Monteverde, of Barclays. Your line is open. Hi, thanks for taking my question. I have a quick question in terms of demand and the macro environment. To what extent do you think that the strong local currencies have helped in the demand to be so resilient? And, of course, if you think that a weaker FX might be a headwind, given that the central banks in the region might lower interest rates this year, I just want to pick your brain on how you see the FX and its direction versus the demand environment for Europe. Thank you. Yeah, hi Pablo.
Speaker Change: Thank you one moment for the next question.
Pablo Monteverde: And our next question will be coming from Pablo Matthew boss.
Pablo Monteverde: Of Barclays. Your line is open.
Operator: Hi.
Pablo Monteverde: Thanks for taking my question I have a quick question in terms of the demand on the microenvironment.
Operator: To what extent do you see that the strong local currencies.
Operator: Pascal and demand to be so resilient.
Pablo Monteverde: And of course, if you think that a weaker effects.
Operator: It'd be a headwind.
Operator: Given that the central banks in the region like lower interest rates this year and I just want to pick your brain on how do you see that the FX.
Operator: Direction versus the demand environment.
Operator: For you Ross Thank you.
Speaker Change: Hi, Paul it's been a positive.
Pablo Monteverde: It's been positive, of course, in terms of generating more traffic, let's say, from South America going north. However, we're well positioned and very well diversified, and if the currency was to weaken in Latin America, meaning a stronger dollar, then I guess we would pull more traffic from the U.S. and more tourists and visitors from the U.S., which is still a growing market with a lot of interest to serve our region. So we sit in the middle of these two trends, and we think one balances the other, and we have been able to succeed with strong and not so strong currencies. Yeah, I would say after the pandemic, the traffic flows that we've seen are much more balanced, Pablo, and so that, I think, has helped in mitigating the impacts of currency. Perfect. It is interesting to hear.
Pablo Monteverde: Of course in terms of generating more traffic, let's say from South America.
Pablo Monteverde: North.
Pablo Monteverde: However, we will position him very well diversified.
Pablo Monteverde: The currency was to weaken in Latin America, meaning a stronger dollar than I guess, we would pull more traffic from the U S and a more tourists and visitors from the U S, which which are which is still a growing market with a lot of interest to serve a region silver. So we sit in the middle of it of its <unk>.
Pablo Monteverde: We're seeing one one balances the other end and we have been able to succeed.
Pablo Monteverde: With strong and not so strong currencies and that was after the pandemic. The traffic flows that we've seen are much more balanced motor lines. So that helped us in mitigating.
Pablo Monteverde: Mitigating the impacts of.
Pablo Monteverde: Currency fluctuations.
Speaker Change: Perfect. Thank you. Thank you.
Jos Montero: Thank you. Thank you. One moment for the next question. And our next question will be coming from Michael Linenberg of Deutsche Bank. Your line is open. Oh yeah, hey, um, good morning everyone.
Michael John Linenberg: Thank you one moment for the next question.
Jos Montero: Yes.
Michael John Linenberg: And our next question will be coming from Michael Lindenberg of Deutsche Bank. Your line is open.
Michael John Linenberg: Yeah, Hey, good morning, everyone.
Michael John Linenberg: Um, just, uh, you know... If you could give me rough numbers, just the impact of the Max nine grounding on the March quarter, I mean, you could even give me margin points or, you know, round numbers in dollars. And as sort of a tie to that, should we, I guess we should assume that you'll probably receive some sort of offset from the OEM in some sort of form over time, which is typically. Mike, look, we're not going to get into the financial details of the Max Impact at this time. You know, there's a pending negotiation with Boeing. However, we do expect to be fully and fairly compensated. Okay. The guidance that we issued includes sort of the, let's say, negative impact of the grounding of the aircraft during the month of January and all the delays that we expect as of now for the rest of the year.
Jos Montero: <unk>.
Jos Montero: Yeah.
Michael John Linenberg: If rough numbers just the impact of the Max nine grounding on the March quarter, I mean, you could even give me margin points or.
Mike: Round numbers and dollars and.
Mike: As sort of a tie to that should we.
Michael John Linenberg: I guess, we should assume that you will probably receive some sort of offset from the OEM in some sort of form over time.
Mike: Which is typically.
Michael John Linenberg: Mike look we're not going to get into the financial details of the Max impact at this time.
Mike: There is a pending negotiation with Boeing.
Michael John Linenberg: However, we do expect to be fully and fairly compensated. Okay. The guidance that we issued includes sort of the let's say negative impact of the grounding.
Michael John Linenberg: The aircrafts during the month of January and the delays that we expect asset now for the rest of the year and the issue with Q1.
Michael John Linenberg: And the issue with Q1 is that, you know, we don't really publish quarterly guidance, so we'll have to leave it at that for now, and I would add Mike Linenberg. January is one of our strongest months of the year, if not the strongest month, so this happened, you know, in the middle of such an important month for us, which is both good and bad, of course, so it's a significant lost opportunity not to have 20 plus percent of our capacity during that month. But at the same time, it's a strong month, so the other 80 percent do very well. Yeah, Should I take it from what you've said, though? You've incurred all of the badness, but any sort of potential offset, Jose, as you sort of alluded to, you know, being fully compensated, that is not in the quarter, right, any sort of offset that you would get over time. It is not in any of our figures.
Mike Linenberg: We don't really publish per quarter guidance. So we will have to leave it at that.
Michael John Linenberg: And I would add Mike Jeff.
Mike Linenberg: January is one of our strongest months of the year, if not the strongest months of this happen.
Mike Linenberg: In the middle of such an important them.
Mike Linenberg: <unk> for us.
Mike Linenberg: Which is a good in a matter of course, so I'm sorry, it's a significant lost opportunity not having 20 plus percent of our capacity during that month, but at the same time, it's a strong model. So the other 80% off very well yeah.
Mike Linenberg: Should I take from what you said that.
Mike Linenberg: You've incurred all of the bad news, but any sort of potential offset.
Mike Linenberg: Jose as you sort of alluded to being fully compensated.
Mike Linenberg: That is not in the corner right any sort of said that you would get over time. It is not in any of our figures that's perfect. Okay, that's actually that that clarifies that.
Jos Montero: That's perfect. Okay, that actually clarifies that. And then my second question, this is kind of an easier one, I guess. Wingo, nine airplanes, but now that you're only going to take 11 instead of 15, I guess Wingo's probably going to stay at nine, or is he going to see some growth this year? Anyway, any color on that, and thanks for taking my questions. Yeah, it seems that for now, Wingo is going to stay as is this year, and I think you put it very well.
Jos Montero: And then my second question this is kind of a.
Jos Montero: Easier one I guess wingo nine airplanes.
Jos Montero: Now that Youre only going to take 11, instead of 15, I guess window is probably likely going to stay at nine or.
Jos Montero: Is when youre going to see some growth this year anyway any color on that and thanks for taking my questions.
Jos Montero: It seems that for now wingo is going to stay as is this year and I think as you put it very well.
Jos Montero: So soar is going to be.
Pedro Heilbron: So it's going to be a difficult year in terms of having additional capacity or planes available, even though they're, you know, their markets are doing quite okay. OK. Thank you. Thanks, Mike.
Jos Montero: A difficult year in terms of having additional capacity or planes available even though there.
Pedro Heilbron: The markets are doing quite okay.
Pedro Heilbron: Okay.
Speaker Change: Thank you thanks, Mike.
Jos Montero: Thank you. One moment for the next question, and the next question will be coming from Stephen Trent of Citi. Your line is open.
Speaker Change: Thank you one moment for the next question.
Jos Montero: And the next question will be coming from Stephen Trent of Citi. Your line is open.
Stephen Trent: Good morning, gentlemen, and thanks very much for your time. I was curious about the first question, you know, if you guys sort of have any broad geographical color on what might be happening to demand, given, you know, what we've seen from some of the U.S. airlines. I know there's been some, a little bit of unrest in Ecuador, and maybe you're not much affected by that at all, but, you know, we'd just love to get the high-level view on that, and thanks so much. Okay. I mean, we are affected by what happens in Ecuador and in other countries, maybe not to an extreme level because most of our market in and out of Ecuador is VFR, and it's business, and it's not that much leisure, so that kind of helps because leisure, as we know, is the one that first stays away when there are disturbances and things like that, which is what has happened in Ecuador. So there is an impact, but not that significant. Overall, most markets in Latin America are okay in terms of our markets and where we do our business. Of course, some are always stronger, many are stable, and a few might be weaker.
Stephen Trent: Good morning, gentlemen, and thanks very much for the time.
Stephen Trent: I was curious on the first question.
Stephen Trent: As you guys sort of have any.
Stephen Trent: Broad geographical color on what might be happening to demand given what we've seen from some of the U S Airlines.
Stephen Trent: There has been some a little bit of unrest in Ecuador, and maybe you're not much affected by that at all but would just love to get the high level view on that thanks, so much.
Speaker Change: Okay. So Tim.
Stephen Trent: I mean, we we.
Stephen Trent: We are affected by what happens in Ecuador.
Stephen Trent: In other countries.
Speaker Change: Maybe not.
Stephen Trent: To an extreme level, because our our most of our marketing and out of Ecuador.
Stephen Trent: <unk> and its business.
Stephen Trent: Not that in March leisure, so that kind of helps.
Stephen Trent: Because leisure is we know the one guidance that first phase our way when when there are this service disturbances and things like that with you what has happened in <unk>.
Stephen Trent: In Ecuador.
Speaker Change: So there is an impact but not that not that significant.
Stephen Trent: Overall, most markets in Latin America are okay in terms of our market.
Speaker Change: Where we do our business.
Stephen Trent: Of course, some are always stronger mainly are stable a few might be weaker. So I would say there is nothing specific to.
Pedro Heilbron: So I would say there's nothing specific to highlight besides the fact that we never give out very specific details on regional demand. Oh, very helpful, Color, Pedro. I appreciate that. And here is just one more from my follow-up. You know, when we look at Gol and Brazil, you know, having some financial issues, I'm assuming this really doesn't have much of an impact on you guys at all, you know, given, I think you may do some sort of limited code share with them, but, you know, does it create opportunities? And, you know, to the extent that, Is there any pullback from them on the international side, you know, maybe it's Yeah, it doesn't really have much impact either way, but we do co-share with Gold in Brazil, and we also have a frequent flyer relationship called reciprocity.
Pedro Heilbron: To highlight this.
Pedro Heilbron: <unk> is the fact that we never give out very specific details.
Pedro Heilbron: On regional demand.
Pedro Heilbron: Very helpful color Pedro I appreciate that.
Pedro Heilbron: And just one more from me.
Pedro Heilbron: My follow up.
Pedro Heilbron: When we look at.
Pedro Heilbron: Our goal in Brazil.
Pedro Heilbron: Having some.
Pedro Heilbron: Financial issues.
Pedro Heilbron: I'm, assuming this really doesn't have much of an impact on you guys at all.
Pedro Heilbron: Given I think you may do with some sort of limited codeshare with them, but does it create opportunities and to the extent that.
Pedro Heilbron: Yes.
Pedro Heilbron: Pull back from them on the international side.
Pedro Heilbron: Maybe it's not much of a as.
Pedro Heilbron: As you guys, yes, it doesn't really have.
Pedro Heilbron: Much impact either way, but we do Codeshare would go in.
Pedro Heilbron: In Brazil, and we also have a frequent flyer relationship reciprocity.
Pedro Heilbron: So Gold operating in a complete and healthy way is positive for us, and we expect that to be the case. But we're not direct competitors, so there's basically no overlap, so there's no impact from that side. Okay, very helpful, gentlemen. Thanks so much.
Color: Sure So gold operating in a in a complete and healthy way, it's positive for us and we expect that to be to be the case, but we're not direct competitors. So so so.
Pedro Heilbron: Yes, there is basically no overlap so there is no impact from that side.
Pedro Heilbron: Okay Super helpful gentlemen, thanks, so much thank you Steve.
Operator: Thank you. One moment for the next question, and our next question will be coming from Bruno Amorim of GS. Your line is open.
Bruno Amorim: Thank you one moment to the next question.
Operator: And our next question will be coming from Bruno Amorim.
Bruno Amorim: <unk> Your line is open.
Bruno Amorim: Hi, Thank you for taking my question I have a follow up on the outlook for this year are related to the guidance as well, but more specifically related to the pricing environment now.
Bruno Amorim: Hi, thank you for taking my question. I have a follow-up on the outlook for this year related to the guidance as well, but more specifically related to the pricing environment now. You are guiding for unit revenues, you know, somehow below what we saw in the fourth quarter. Even if we are just looking at seasonality, it seems that you're guiding for lower unit revenues this year versus what we saw at the end of 2023. So, you know, it would be great to understand the rationale behind that. Is it, you know, the result of some slight pressure on the competitive side, or are you being conservative? You know, how do you get to this conclusion that unit revenues will fall, even if slightly, this year? Thank you so much. Yeah, Bruno, I would say there are three main components.
Bruno Amorim: You are guiding for unit revenues.
Bruno Amorim: Somehow below what we saw in the fourth quarter, even if we adjust for seasonality. It seems that you're guiding for lower unit revenue this year versus what we saw in the end of 2023, so just it.
Bruno Amorim: It would be great to understand the rationale behind that is it.
Bruno Amorim: Sure.
Bruno Amorim: The result of some slight pressure on the competitive side or are you being conservative.
Bruno Amorim: How do you get to this conclusion that unit revenues.
Speaker Change: Fall, even if as lightly during <unk> you. Thank you so much yeah, Bruno I would say there's three.
Speaker Change: Three main components I mean in most of this.
Jos Montero: I mean, and most of this is related to the max grounding. So the 12.2 cent RASM guidance includes the effects of January of 2024. And then, in addition to that, let's say the length of haul for the year 2024 is slightly higher than what we expected it to be, slightly higher than in 2023. So there's a little bit of an impact there.
Jos Montero: Yes.
Jos Montero: Is related to the Max grounding until the 12, 2% RASM guidance includes the effects.
Jos Montero: Of.
Jos Montero: January of 2024, and then in addition to that.
Jos Montero: Let's say length of haul.
Jos Montero: For the year 2024, slightly higher than what we expected to be slightly higher than in 2023 stores a little bit of a.
Jos Montero: Impact there and then finally, yes, we are in a lower fuel environment for the year versus 2023, and it's been a competitive environment too and we are growing in double digits right for the full year. So there is a little bit of an impact there, but I would say the majority of the RASM.
Jos Montero: And then finally, yeah, well, we are in a lower fuel environment for the year versus 2023 in a competitive environment, too, and we are growing in double digits, right, for the full year. So there is a little bit of an impact there. But I would say the majority of the RASM impact when you compare it year over year is related also to the fact that the guidance for 2024 has the max effect.
Jos Montero: When you compare it year over year is related also to the fact that the guidance for 'twenty four has the Max effect.
Speaker Change: Thank you May I, just ask for a quick follow up can you. Please clarify.
Bruno Amorim: Thank you. May I just ask for a quick follow-up? Can you please clarify? How would the max groundings affect unit revenues?
Speaker Change: How would the Max groundings affect you in its revenues and.
Pedro Heilbron: And, you know, couldn't we also think of, you know, more groundings and eventually more delays on the production of new aircraft, which was kind of the marginal news over the past few months to be kind of a positive from a, you know, capacity, or, you know, supply and demand dynamics. I'll go first and I'll let José talk about the unit revenue part, but embedded in our guidance is the expectation of further delivery delays. Due to the max rounding, we have a few max 9s we're expecting this month, which we're not sure when we're going to get, and we're also expecting delays on the other max 8s we are receiving this year, and we have reduced the number of aircraft from the numbers in our preliminary guidance last year to 11 deliveries this year, but we still have that risk of even more delays, so that's still up in the air, I would say.
Speaker Change: Couldn't we also sink.
Jose: Think of <unk>.
Pedro Heilbron: Groundings and eventually more delays on the production of new aircraft, which was kind of the margin on yields over the past few months should be kind of a positive from.
Pedro Heilbron: Capacity.
Jose: Supply and demand dynamics.
Pedro Heilbron: I'll go first and then I'll, let Jose talk about the unit revenue.
Jose: In part, but embedded in our guidance.
Pedro Heilbron: Is the expectation of further delivery delays.
Pedro Heilbron: Due to the Max grounding we have.
Pedro Heilbron: Few Max nine were expecting this month, which we're not sure when we're going to get.
Pedro Heilbron: Yes.
Pedro Heilbron: We're also expecting delays on the older Max as we were we are receiving this year and we have reduced the number of aircrafts from what we.
Pedro Heilbron: From the numbers and our preliminary preliminary guidance last year to 11 deliveries this year, but we still have that risk of of even more delayed.
Pedro Heilbron: It's still up in the year I would say.
Jos Montero: Yeah, and Bruno, in terms of the impact on RASA, it's because we had to close out flights, we had to, you know, cancel flights, and we were not able to sell the last remaining seats on many of our flights because we had to re-accommodate passengers. So that's where that impact occurs in a month that is very, very strong. That makes sense. Thank you very much. Thank you.
Jose: Yes, and we're going in terms of the impact on <unk>, because we had to closeout flights canceled.
Jos Montero: Cancel flights and we were not able to sell.
Jos Montero: The last remaining seats on many of our flights because we had to re accommodate passengers so that's where that impact.
Jos Montero: In a month that is very very strong for us.
Speaker Change: That makes sense. Thank you very much.
Speaker Change: Thank you.
Speaker Change: One moment and our final question.
Operator: And our final question. For today, we'll be coming from Duane Pfennigwerth of Evercore. Your line is open.
Duane Pfennigwerth: For the day will be coming from Duane <unk> of Evercore. Your line is open.
Duane Pfennigwerth: Hey, thanks. I appreciate the time. And nice job. So just on your 2024 unit revenue guidance, it is well ahead of what we were estimating. How do you think about the trajectory over the course of the year? I mean, I assume you're influenced by what you have visibility into, which is, which is the earlier part of the year, but maybe just the big picture.
Speaker Change: Hey, Thanks, I appreciate the time.
Duane Pfennigwerth: And nice job. So just on your 2024 unit revenue guidance.
Duane Pfennigwerth: It is well ahead of what we were estimating.
Duane Pfennigwerth: How do you think about the trajectory over the course of the year.
Duane Pfennigwerth: Assume.
Duane Pfennigwerth: Youre influenced by what you have visibility into which is which is the early part of the year, but maybe just big picture.
Jos Montero: How are you thinking about the kind of first half versus second half change implied in the guidance? Sure, Duane, and I'd say that there's a little bit of noise in the first half of RASM because of the MACS, again, going back to the MACS issue, but I would say that it's more, I would say, more robust in the second half of the year than in the first half. There's also some seasonality involved there, but there's, I would say, more, let's say, higher levels of RASM in the second half than in the first, but of course, limited visibility in the second half of the year in terms of how ultimately demand behaves, but that's kind of how we're seeing it right now.
Duane Pfennigwerth: How are you thinking about kind of first half versus second half.
Jos Montero: <unk> implied in the guidance.
Speaker Change: Sure Duane.
Jos Montero: I'd say that the there's a little bit of noise in the first half RASM because of the Max again going back to the Max issue, but so I would say that it's more I'd say more robust towards the second half of the year than in the first half. There's also some seasonality involved there, but there's I would say.
Jos Montero: Moreover, more let's say.
Jos Montero: Higher level of RASM in the second half on that first.
Jos Montero: And but of course limited visibility into the second half of the year in terms of how ultimately demand.
Jos Montero: So that's kind of how we're seeing right now.
Pedro Heilbron: Thank you. Okay, and then maybe just a longer-term question, you know, from time to time, there are kind of airport infrastructure projects that can be gating factors for your growth. Can you just speak in, in, you know, broad strokes, you know, how much headroom do you have with your current gating, you know, footprint? And as we look out, you know, two, three years down the road, are there other projects that we're going to need to see happen? You know, when will airport constraints be an issue for you? If, at all?
Jos Montero: Okay.
Pedro Heilbron: Yes.
Pedro Heilbron: Okay, and then maybe just.
Pedro Heilbron: Longer term question from time to time there are.
Pedro Heilbron: Kind of airport infrastructure projects that can be gating factors on your growth can you just speak in broad strokes, how much headroom do you have.
Pedro Heilbron: With your current Gaydon footprint.
Pedro Heilbron: Foot print and as we look out two three years down the road.
Pedro Heilbron: Are there other projects that we're going to need to see happen when when will airport constraints be an issue for you. If you if at all.
Pedro Heilbron: Right? Yeah, well, if we continue growing at the pace we hope to continue growing, there will be infrastructure limitations, eventually, let's say three, in the three to five year timeframe, but there are a lot of initiatives the airport authority can adopt to fix that and increase capacity, you know, beyond that term for the next 10 years. So we have the data; we're working with consultants to update it, and it's very doable. So we believe that the next government will have that top of their agenda. And again, it's not it's not significant what needs to be done; the investments are not, you know, very manageable.
Speaker Change: Alright, yeah.
Pedro Heilbron: If we continue growing at the pace, we hope to continue growing there will be infrastructure limitations have entered that phase III.
Pedro Heilbron: The three to five year.
Pedro Heilbron: Timeframe, but there are a lot of initiatives.
Pedro Heilbron: The Airport authority Ken Ken.
Pedro Heilbron: Adopted.
Pedro Heilbron: To fix that and increased capacity.
Pedro Heilbron: Beyond that term for the next 10 years or so.
Pedro Heilbron: We have the data we're working with wood.
Pedro Heilbron: <unk>.
Pedro Heilbron: To update it.
Pedro Heilbron: And it's very doable. So we believe that the next government, we will have that top under agenda.
Pedro Heilbron: It is not significant what needs to be done the investments or not.
Pedro Heilbron: Our very manageable and we could extend the capacity of the airport for many years.
Pedro Heilbron: And we could extend the capacity of the airport for many years. And Panama has had a track record of investing in airport infrastructure over the years, so we expect that to continue going forward as well. Yeah, and not always, like, exactly infrastructure. Some of it is just managing the airspace and how the airport structures its takeoffs and landings and all of that, but there are also opportunities with taxiways and fast exits and things like that.
Pedro Heilbron: Panama has had a track record of investing in.
Pedro Heilbron: It's airport.
Pedro Heilbron: Infrastructure over the year. So we expect that to continue going forward as well and not always.
Pedro Heilbron: Exactly infrastructure some of it is just managing the aerospace.
Pedro Heilbron: And how are the airports structure.
Pedro Heilbron: Cogs and landing them and all of that but there's also.
Pedro Heilbron: There are also opportunities with taxi ways and faster exited and things like that too so.
Pedro Heilbron: So it's... Yeah. Yeah. It's a very doable list of opportunities. Okay, well, we're airline analysts, so three to five years is, you know, an eternity from now. You might as well have said a hundred. It doesn't sound like an issue, so thank you for the answers.
Pedro Heilbron: It's a very doable list of opportunities.
Pedro Heilbron: Okay.
Speaker Change: Our airline analysts so three years to five years is an eternity from now you might as well have said 100, it doesn't sound like it doesn't sound like an issue. So thank you for the thank you for the answers.
Pedro Heilbron: All right, Duane, thank you. Thank you. This concludes the Q&A session. I would like to turn the call back over to Pedro.
Speaker Change: Alright, thank you.
Pedro Heilbron: Okay.
Pedro Heilbron: Thank you. This concludes our Q&A session I would like to turn the call back over to Pedro.
Pedro Heilbron: Yeah, before the closing remarks. Thank you very much and thanks to all for participating in this call. I'm going to summarize a few things that, I mean, maybe we didn't go over all of them, but it's important when we think about Copa's performance and high operating margins, and we got at least one call from some of you, I mean, more than one question related to our margins and our performance, and so I just want to summarize a few things which And this is something that we've been working on and building over the years. It's not an overnight success; we're not an overnight sensation or anything like that.
Pedro Heilbron: Yes for closing remarks.
Speaker Change: Thank you very much.
Speaker Change: And thanks to all for participating in this call.
Speaker Change: I want to add.
Pedro Heilbron: Summarize a few things that I mean, maybe within a go over all of them, but it is important than win win.
Pedro Heilbron: When we think and we've talked about about corpus performance and high operating margins and we've got at least one call.
Pedro Heilbron: From from some of you I mean more than one.
Pedro Heilbron: Question related to our margins and our performance.
Pedro Heilbron: So I just want to summarize a few things, which I think are very very important them.
Pedro Heilbron: We're a full service carrier very low CASM ex and <unk>.
Pedro Heilbron: It's something that we've been working at in building over the years. It is not an overnight, we're not an overnight sensation or anything like that.
Pedro Heilbron: This is hard work for many years, but we're also always coming up with new things. And the new thing now, which we talked about in the call, is our distribution cost. We've been able to get our distribution cost way down, especially what used to be a burden, which were the GDS costs. So not only do we now have control over our sales channel, but at a much, much better cost. And that makes us more competitive. It allows for better margins.
Pedro Heilbron: Hard work for many years and we're also always coming up with new things and menu thing now, which we've talked about in the call is our distribution costs.
Pedro Heilbron: Being able to get our distribution cost way down, especially.
Pedro Heilbron: What used to be a burden, which were the GBS cost.
Pedro Heilbron: So not only do we have no control over our sales channel.
Pedro Heilbron: March much better cost and that makes us more competitive it allows for better margins.
Pedro Heilbron: We also have a very strong and efficient network, which we continue to build and strengthen. A very reliable product that clients want to fly with the best on-time performance in all of America. And on the revenue side, we keep growing our ancillary revenues. With the right technology, much of it developed in-house, we're in a really good and strong competitive position to weather the ups and downs of this industry and continue to have success. Well, as Duane said, you know, we don't have to talk about five years and beyond, but for the next few years, for sure, we're in a great position.
Pedro Heilbron: So have a very strong and efficient network, which we continue to build and strengthen.
Pedro Heilbron: Very reliable product.
Pedro Heilbron: <unk> wanted to fly with the best on time performance in all of America.
Pedro Heilbron: And on the revenue side.
Pedro Heilbron: Keep growing our ancillary revenues.
Pedro Heilbron: The right technology.
Pedro Heilbron: March 5th developed in house. So we're in a really good and strong competitive position to weather the ups and downs of this industry.
Pedro Heilbron: Continue having success with.
Pedro Heilbron: As Wayne said.
Pedro Heilbron: We don't have to talk about five years and beyond but for the next few years for sure. We're in a great position so anyway.
Pedro Heilbron: So anyway, this concludes our earnings call. Thank you for being with us, and thank you for your continuous support. Have a great day, and we'll see you next time. Thank you. Ladies and gentlemen, thank you for your participation. This concludes the presentation. You may disconnect, and have a wonderful day. P.O. C.E.O. P.O.
Pedro Heilbron: This concludes our earnings call. Thank you for being with US and thank you for your continued support have a great day and we'll see you next time. Thank you.
Pedro Heilbron: Ladies and gentlemen, thank you for your participation. This concludes the presentation you may disconnect and have a wonderful day.
Pedro Heilbron: Okay.
Pedro Heilbron: Okay.
Speaker Change: [music] okay.
Pedro Heilbron: Yes.
Pedro Heilbron: [music].