Q1 2024 Copa Holdings SA Earnings Call
Ladies and gentlemen, thank you for standing by welcome to Copa Holdings first quarter earnings call. During the presentation. All participants will be in listen only mode. Afterwards, we will conduct a question answer session at that time. If you have a question you have to press Star then one on your Touchtone phone.
As a reminder, this call is being webcast and recorded on May 16, 2020 for now I will turn the conference over to Daniel <unk> Director of Investor Relations. Sir you may begin.
Thank you Marie.
Everyone to our first quarter earnings call.
Today, our CEO of Copa Holdings, and Jose Montero, our CFO.
First, but I don't want to start by going over our first quarter highlights.
Close 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.
Today's call, we will discuss non <unk> financial.
Financial measures.
A reconciliation of the non <unk> financial measures can be found in our earnings release, which has been posted on the company's website called <unk> 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 or intentions regarding future events or results.
These forward looking statements involve risks and uncertainties that could cause actual results to differ materially and are based on assumptions subject to change.
Many of these are discussed in our annual report filed with the SEC now I would like to turn the call over to our CEO, Mr. Ben I don't have it right.
Thank you Danielle.
Good morning to all.
Thanks for participating in our first quarter earnings call.
Before we begin I would like to extend my sincere gratitude to all of our coworkers for their commitment to the company.
There are continuous efforts and dedication have kept co op at the forefront of Latin American aviation to them as always my highest regards.
<unk>.
Once again, we're pleased to report strong financial results.
Despite facing a significant headwind in January with a partial grounding of our 77 Max nine fleet.
We were able to deliver once more industry, leading operating margins, while growing capacity year over year.
These results were driven by continued robust demand environment in the region.
Ability to maintain low ex fuel unit costs.
Among the main highlights for the quarter.
Passenger traffic grew seven 1% compared to the same period in 2023.
Load factor for the quarter came in at 86%.
Passenger yield came in at 43.
Three 8% lower year over year, while you had revenue or RASM came in at $12.05.
Four 6% decrease compared to Q1 'twenty three.
Unit costs decreased by six 9% compared to Q1, 'twenty, three mainly driven by lower fuel aircraft maintenance and distribution costs.
Excluding fuel.
Unit cost or CASM ex came in at $6 one eight.
A 2% decrease compared to Q1 2023.
As a result.
Operating margin for the quarter came in at 24, 2%, one nine percentage points higher than in the first quarter of 2023.
On the operational front.
During the quarter Copa earnings on time performance was again recognized by cerium as the highest of any airline in Latin America.
In fact, copus tier one on time performance, averaging above 90% was the highest of any carrier in the America and amongst the highest in the world.
I would like to take this opportunity to recognize our more than 8000 coworkers, who day in and they will deliver a world class travel experience to our customers and their contributions are key to our success.
Turning now to our network growth plans.
As we mentioned in our previous call. We expect to start three new destinations next month, Raleigh, Durham, and the U S Florianopolis in Brazil, and Peru and Mexico.
I had to comment that early bookings are coming in at healthy levels and we expect this route to have a solid start.
With these additions will serve 85 destinations in 32 countries, Saudi refine our leadership position.
Most international destinations in Latin America.
Turning now to our expectations for the rest of the year.
We continue to see a healthy demand environment in the region.
As you saw in our earnings release published yesterday, we are reaffirming our guidance for the year, which includes an operating margin within the range of 21% to 23%.
Jose will provide more detail during his presentation.
To summarize we delivered industry, leading first quarter financial results.
We continue to deliver on our cost execution strategy.
We will grow to 85 destinations by this summer further strengthening our network the most complete and convenient hub for intra America travel.
We 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.
Finally.
Our business model is solid and as relevant as ever.
And our hub of the Americas in Panama is the best connecting hub in Latin America, I'm, making us the best machine position airline in our region to consistently deliver industry leading 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 and thanks for being with us today.
I'd like to join Pedro in acknowledging our great team for all their efforts to deliver world class service to our passengers.
I will start by going over our first quarter results.
We reported a net profit for the quarter of $176 1 million or $4 19 per share.
These results include the negative impact of approximately $44 million due to the grounding of 'twenty one of the companies born shine through sand Max nine aircraft in January.
And exclude any compensation from Boeing related to the grounding.
We reported a quarterly operating profit of $216 million and an operating margin of 24, 2%.
Capacity came in at $7 1 billion available seat miles or 8% higher than in Q1 2023.
Load factor came in at 86% for the quarter. The 0.7 percentage point decrease compared to the same period in 2023.
Passenger yields decreased by three 8% to 14.
As a result unit revenues came in at $12 five or four 6% lower than in the first quarter of 2023.
Mainly driven by lower jet fuel prices unit cost or CASM decreased to nine five.
Or six 9% lower year over year.
And finally, our CASM, excluding fuel came in at $6 one.
A 2% decrease versus Q1, 2023, mainly driven by lower aircraft maintenance and lower distribution costs as we continue deploying our corporate connect NBC strategy.
Excluding the negative impact on cost and capacity of the partial grounding of our 7% Max nine fee in January the.
The company would have reported and ex fuel CASM of approximately 5.8 cents for the quarter.
I'm going to spend some time now discussing our balance sheet and liquidity.
So at the end of the first quarter, we had assets of close to $5 $2 billion.
As to cash short and long term investments we ended the quarter with over one 1 billion, which represents 32% of our last 12 months' revenues.
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 EBITDA ratio of five times.
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.
Turning now to our fleet. We ended the first quarter with a total fleet of 106 aircrafts comprised of 60, 837, and 802009 <unk> percent Max Nines.
737, seven hundreds.
These figures include one 737 800 freighter and then nine 737 eight hundreds operated by Wingo.
During the first quarter and as part of our ongoing fleet management initiatives, we purchased two of our leased Boeing 700% 800 aircrafts.
With this transaction, we ended the quarter with 73% of our aircraft being one and 27% under operating leases.
As to our current Max delivery schedule. So far in May we have received two additional seven seven Max nines and.
For the remainder of the year, we expect to receive seven additional aircrafts.
One additional signs percent Max nine.
673 sign Max eights to end the year with a total of 115 aircraft.
We have already secured local financing for all of these 2024 deliveries.
In April we signed a confidential agreement with Boeing related to the January grounding.
Following I FRS accounting standards, we expect that the compensation amount will be amortized through the depreciation line in our income statement over the coming four years.
Turning now to our return of value to our shareholders I'm pleased to announce the company will make a second dividend payment for the year of $1 61 per share on June 14th to all shareholders of record as of May 31.
Additionally, during Q1, the company executed approximately $40 million of its share repurchase program.
As to our outlook, we are reaffirming our full year operating margin range guidance of 21% to 23% when our capacity growth in the range of 10%.
We are basing our outlook on the following assumptions load factor of approximately 87%.
Unit revenues were in the range of 12.
CASM ex fuel to be in the range of $5.09.
And we are expecting an all in fuel price of $2 85 per gallon.
Thank you and with that we'll open the call to some of your questions.
Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby will be compared to the Q&A roster.
Our first question comes from the line of Savi Seth of Raymond James Your line is now open.
Hey, good morning.
I was wondering if you could talk about you know the.
The unit revenue.
And your guidance on is kind of ticked down here a little bit.
Just wondering what drove that and how you're thinking about kind of a year over year.
RASM progression over the next few quarters.
Yes, sorry, I'll start and first of all to say that our RASM performance or our outlook of 12 centers still very strong.
Yeah.
Yes.
Very high levels compared to other periods have been at.
In addition to that you know what it's early on in the year. So our visibility for second half of the year is a is limited it's still there's still a lot of water to come down under the bridge and in General terms. You know we are in a competitive environment. So we are we're looking out for that.
Additionally, we have seen a it's kind of like a more technical item, we've seen a little bit of an increase or an increase in direct sales and so as more direct sales have come in there's a slight reduction.
And yields related to the <unk>.
Charge that were not.
Recovering on on tickets are sold indirectly so there's a little bit of that as well and I have to close by saying that our guidance for a year is still in the 21% to 3% range, which is.
Very very strong performance for full year.
Everyone have jumped.
And also.
We're lowering our unit cost guidance, which is also very important because that's something we control better and gives us a better control over our.
Margin performance.
Valid points I guess on that and just to follow up on that call that Pedro.
Is this and then I'll, let Jose was talking about is this a pull forward of what you were expecting and kind of reflected in that five eight.
<unk> target for 2025 or are you thinking is your unit costs are coming in better than than you were thinking.
I think that it's in line with what we guided to.
And our targeted multiyear target of reaching $5 eight by next year. So we're on track for that.
We're very confident and comfortable with our $5 eight target for 2025.
Great. Thank you.
Thank you gentlemen, our next question.
Our next question comes from the line of Duane <unk> of Evercore your.
Your line is now open.
Hey, guys good morning.
Very strong results, especially considering the grounding.
On unit cost.
Obviously theres some noise in the first quarter, but maybe you can just help remind us what are the factors driving improvement.
Improvement in unit cost beyond the first quarter, maybe like normalized unit cost reduction can you just remind us what the maybe 123.
Drivers of that are.
Yes, Duane Great question, and I would say that there is.
The number one item that continues being a.
Great contributor to our reduction in chasm is distribution it continues to be a great story.
And so it's been a great component of our cost execution over the last.
Several quarters, and we expect that to two.
As a continued sort of maturing.
<unk> being a very good contributor to our.
To our to.
So our cost base number two I would say that maintenance Europe last year maintenance, we had a slight.
Slight increase related to.
Engine issues.
That we expect that as being more under control this year and we're getting also some.
Benefits in our maintenance line associated with some of the lease transactions that we perform or buying of leases.
Some of the lease extensions that we've signed and lowering some a return conditions. So that's another item that I think it's of note.
Going forward you remember that we are in the process of densify a portion of our <unk> hundred seven 800 aircraft and we expect that to be also contributed.
Sometime in 2025, so so that will also be.
Contributor to our to our CASM going forward as well Fortunately before and now they are.
Headwinds in certain of our of our cost lines as well.
There's inflationary pressures and costs that are more difficult for us to control such as aerospace.
These are fees in airport charges et cetera.
Takeaway a tad of these.
Movements in and efficiencies that we have achieved but in essence, we are very confident about our cost performance going forward and our track record. So far has been very very good after the pandemic.
And we're also we also keep our overhead costs.
Very tight under control so as we grow capacity their social benefit there sure.
Yeah.
Great. Thanks, Thanks for that and then I guess just conceptually.
How do you approach full year guidance at this time in the year.
As you said Theres a lot of game left to play in in the second half, but if we were just considering.
The results here in the March quarter.
And the outlook that you see right now all else equal does that put upward pressure on that on that range.
Or downward pressure on that range because I agree it's.
It's hard to it's hard to raise 22% to 23% EBIT margins at this point in the year.
Yes, it's early in the year as you well said.
We never roll the dice were always pretty conservative in our in our outlook.
And of course work very hard four for our results to be on the <unk>.
Upper <unk>.
Half of our projections and that's what we're doing right now.
Makes sense. Thank you.
Okay.
Thank you our next question.
Okay.
Our next.
Question comes from the line of <unk> <unk> of Bank of America. Your line is now open.
Hey, everyone. Thanks for the opportunity I have a couple of year.
The first one we noticed some weakness in Latin America and yields for the U S airline this quarter.
That was kind of abuse match on what copper reported if you could please clarify a little bit on the differences up addressable markets.
Between U S Airlines.
And copper.
No.
We're noticing.
This trend of the demand.
Those those address those different addressable why because it would be great.
And I can't make the second questions afterwards, thank you.
Right. Thanks, George area I would say the maybe the bigger difference is that we're extremely strong in intra Latin America.
U S to Latin America, it's important to us.
But were much stronger in intra Latin America.
Plus the U S Airlines are very strong in U S to leisure Caribbean.
On U S to leisure, Mexico, and those are not huge markets for us actually we hardly.
In those markets, we're not playing in those markets. So so so so we have the differences.
And.
Our markets remain quite strong.
Besides the adjustment downward adjustment in Europe.
<unk> revenues, which we have already communicated.
Okay pretty pretty clear thank you.
My second question is regarding the two purchases.
Lisa that crafts that did this quarter.
How many aircrafts are owned by Bye Bye copper right now are unencumbered and.
Is there a trend here can I just continue to happen and why do you keep it.
We used to make to increase the EBITDA cash conversion for the company.
The future if that keeps rising so thats why im Easter said about it but anything you could share would be great. Thank you.
Yes, we.
Two of our aircraft that were under operating leases during the quarter.
We are expecting to be selective or opportunistic in terms of deploying capital that way. We believe the century seven Mg is a great asset to own so we have been.
Negotiations with different other lessors. So see if we can find a deal that is convenient for us in terms of the number of aircraft that we have unencumbered I guess to give you a I think in my prepared remarks, I mentioned that around 73% of our aircraft. Our total fleet of 106 aircraft that are under our own.
And by the company and in terms of the aircraft that are fully.
Unencumbered by by on our fleet is around almost 40 of our aircraft are fully unencumbered so sorry.
Yes.
A bit of a strong.
Position that we have in terms of our fleet.
Okay very clear thanks.
Thanks, so much.
Thank you one moment for our next question.
Our next question comes from the line of Helane Becker of TD Cowen. Your line is now open.
Thanks, very much operator, hi team. Thank you for the time I appreciate it.
And also I appreciate that you guys are conservative, but one question I had was with respect to both.
Boeing delivery delays.
I guess from what you said.
Jose Youre, not really expecting too many because youre thinking of ending the year with 115 aircraft. Just does that include the two you bought off lease.
No not at.
All of that we bought all of these were already in the base. So therefore these are nine deliveries that were getting from point of which we've already received two Max nine so actually we took delivery of one next time yesterday so.
We have another one in our Max nine coming next week and then for the remainder of the year and then ask areas that will receive six <unk> aims to end the year with a 116 days than you.
Thank you Alicia.
Okay. That's that's helpful. Thank you.
And the other question I had was with respect to.
I guess with respect to your demand Youre seeing an 87% load factor, which I think you are forecasting for the quarter and the year as well.
Yeah.
How does the demand.
Look for either.
Panama, South or was in Panama.
Relative to maybe.
It was three or five years ago since it's so much higher than it was back in the in the last decade.
Yes.
Yes.
It's stronger than before and definitely and for example.
Jim.
Tourism.
In Panama is growing at a very healthy double digit rate and that's helping.
The on the Panama traffic of course, our main magnum market as it connectivity.
We provide through our hub of the Americas here, so our bigger markets are connecting.
Up and down.
East and west in a way and most markets remain robust in general terms, even though there's a lot of new capacity.
For a Muslim from other airlines were still guiding to.
Three high load factor, so that tell us something about the.
Strength.
The markets.
Okay. That's really helpful. Thanks pagers, Thanks Jose.
Thanks Helane.
Thank you our next question.
Our next question comes from the line of Alberto Valerio of UBS. Your line is now open.
Okay.
Hi, Good morning was that digital congrats for the results have been strong, but two quick ones.
Our side the first one on tax rates.
Right.
Tax rate this quarter.
So for for the future.
Could you remind us what the dollar.
You can find them.
5%.
Well the connections you guys want to hedge.
That's the <unk>.
Second one about the price.
Quite a few drops.
The guidance you keep the 285.
Just wondering.
<unk> cautions.
For the future.
<unk>.
Do you believe that at this moment.
<unk>.
Please.
You should keep it stable as the.
The guidance thanks.
Great. Thank you two questions alright.
I think for your planning purposes, you could assume that our blended tax rate for the full year 2024 should be in a range of about 14%.
I think the best way to.
To model it.
And financially.
Sorry can you repeat the second question was related to our fuel price assumption.
Yes.
Sure.
So on the guidance you noted that you keep the same from the fourth quarter of Brazil.
But yeah, we are.
We.
Houston.
Fuel price that we see in the forward curve.
And we just simply put it into our guidance. So we don't necessarily take a view on fuel and where is it going to be we don't want to be predictors of fuel prices. So therefore, it is in the way we saw it.
When we were preparing our full year guidance on.
It will.
Varies throughout the year definitely Budd, but thats.
Price, how we looked at in the curve of course that includes as well the realized price during the first quarter.
Perfect. Thank you very much.
Thank you Eduardo.
Thank you Bob women for next question.
Our next question comes from the line of Michael Lindenberg of Deutsche Bank. Your line is now open.
Oh, Hey, good morning, everyone.
Jose I wanted to go back to just on the maintenance line and this is sort of a follow up to <unk> question. When we look at this quarter what was the benefit.
I guess, maybe millions of dollars that you got when you decided to put.
Put the airplanes on balance sheet and take them off lease and the way you answered. His question I got the sense that that this will continue through the year that maybe you're contemplating additional transactions through the year to take whether it's eight hundreds.
Or whatever.
Take them off lease and put them on balance sheet.
Yes, I would say that the best way to model. It from a CASM perspective is that we expect that the chasm maintenance CASM line is going to be kind of flattish.
On a CASM basis.
The four quarters of the year, there as well.
Our reasons, there I would say a number while there is a growth and everything that goes.
Through through throughout the year.
Sure.
Yes, there could be further transactions.
Going forward, okay, so they're and they're good guys they're related to.
Some of the lease extensions that we have performed in prior periods that create.
It's a better return conditions and so that also flows through the P&L through the maintenance line and then there's another component to that that also creates let's say a good guy in the maintenance line in 2024 versus 2023 and is related to engine maintain.
Maintenance as well that we had as you recall last year, all the items with the leap.
And so that some of that is also in there as well so it's a mix of things I would say that that the lease.
Transactions and lease extensions are probably represent about maybe half of the benefit.
Okay.
And the other half is related to engine maintenance on the night.
Speaker Change: Great. That's Super helpful. And then just my second question when we look at your fleet plan.
November of 2023, when you were sort of telling us what you're contemplating for the full year. This is obviously before the door blood.
Youre going to get 15 airplanes and then we went to 11 and now we're at nine and I'm not even sure.
Are we even going to get nine based on.
What we're hearing from other carriers and news coming out of Boeing where was your gross Capex what was the gross Capex plan for 2024, when it was 15 and now that we're at nine.
Where where are we now.
Call. It I guess hundreds of millions of dollars.
The rough number. Thank you thanks for taking my questions.
Right now our estimate for Capex with this fleet plan, our gross Capex is around 700.
Or is that.
Where the original fleet plan it was in excess of $1 billion.
Wonderful.
Speaker Change: Oh please.
Okay.
Lots of dry powder, but now I'm going to let you finish Pedro sorry [laughter].
No it's great rather hear your comments.
But none of what I was going to add is that unrelated to the capex question or maybe it is but.
Most of our growth of our ASM growth. This year is going to come from the full year effect of our growth in 2023, so even as some of our later in the year deliveries get delayed into the following year. It won't have a significant effect on our <unk>.
Perm growth projected for 2004.
And that's kind of the reason why the.
Capacity guidance stayed the same at 10%.
We already were assuming.
A set.
Set of delays on deliveries and very good.
As.
As impactful to the year.
Great great. Thanks, everyone.
Thank you Mike.
For next question.
Our next question comes from the line of Pablo <unk> of course your line is now open.
Hi, guys. Thanks for taking my question just two questions on the <unk>.
It is related to mikes and to make sure that I get the number of the Capex guidance for 2024.
700, but just want to make sure that.
Speaker Change: And my question is.
I wanted to pick your brain on the competitive landscape, some Latin American carriers or putting more capacity.
Although U S carriers are saying there is overcapacity why don't you are over.
What's on.
The competitive environment is moving thank you.
Yes, so our.
Our main competitors in the region.
Named them.
<unk> been growing capacity.
Pes is probably.
Two times and at times three times our own.
But coming.
Out of the pandemic, we grew a lot faster.
All of them so they have they have.
Caught up.
And this past year.
But.
And I also expect we also expect the grille.
Speaker Change: <unk> to slow down.
The year over year.
I would say that the previous growth and so far our load factors remain high.
Im not sure about theirs, but ours remain high so so.
The market has been able to absorb the capacity.
<unk>.
I am expecting.
At least hoping guys.
Capacity growth will be rational and.
Going forward, we are lengthening our region are well managed.
Everybody wants to deliver strong financial results. So that usually means there you've been very rational with capacity, but so far the market has risk.
We responded well.
Yeah.
Thank you Juan for next question.
Okay.
Speaker Change: Sure.
Our next question comes from the line of Daniel Mckenzie of Seaport Global Your line is now open.
Daniel J. McKenzie: Oh, Hey, thanks, guys. Congrats on the stellar first quarter results.
I had a couple of questions here Theyre really focused on sort of the longer term investor from a longer term investor perspective in the first one really just is on growth.
And revenue segmentation and so with respect to growth just how sustainable is growth in.
How are you thinking about the rate growth rate longer term.
And then.
Separately I'm wondering if you could share what percent of the overall revenue is perhaps premium revenue and I know you don't break out corporate.
It's not the question here its just really similar to how U S Airlines are defining it just from a segmentation perspective.
Yeah.
Okay, Hi, Dan.
Give it a shot.
So so.
We're confident that we can sustain.
A growing an ASM growth rate.
Above what Youre seeing right now I mean above the 10% we were planning to grow.
More than 10%, we did not get ultra deliveries, we expected, but we're fine with that.
No issues with that and next year, we should be growing.
Over 10%.
You won't see us growing at 20% or 30%, but growing.
In the some somewhere between the low teens to <unk> to the mid teens.
We can probably stay in that range for a number of years and we see it.
Good opportunities in terms of overall market demand.
New destinations.
So we're pretty confident that we can maintain for a number of years.
Two long term actually a really really healthy.
ASM growth, but you know the way we are just the way we have always run. This airline we always remain flexible to adjust either way the opportunity.
As such that we can grow faster we have means of doing it but we usually cover the downside.
We have a lot of flexibility to cover them cover the downside if things were to slow down we've always done and we've done that effectively.
Kind of the mentality of our board also.
So that flexibility if you report them.
In our planning in terms of revenue segmentation.
<unk>.
Leisure became leisure became.
After the pandemic it became a high quality segment.
In many ways.
As we have Blaine in previous in previous.
Cause our today, our Alicia it's around 40%.
<unk>.
Visiting friends and relatives in the 35% range when business is in the 25 to 20 range depending on the quarter.
So that's kind of the range.
But again leisure is different than before the second segment of leisure that its height.
A little bit more how you are fair.
Yes.
Yes. Thank you that was terrific and then I guess going back to an earlier question. So for those investors again trying to understand the margin outperformance in the current cycle versus the last cycle.
And what are the top three things that are behind that from your perspective, so the 21% to 23% margins today versus 18% to 20% historically is it as simple as pent up demand sort of high value leisure.
Or is it perhaps more structural in nature, just given where your cost structure is so yes. There really is a question just kind of gets down to how longer term investors should think about the business.
Right.
Interesting question.
It allows me to two.
Talk a little bit briefly about how we have to change.
Our company and one of our values as a company is continuously.
Continuous improvement so we're always looking for better ways of doing things. So if we compare the cohorts to date to the pre pandemic copper for example.
We have better unit cost.
Daniel J. McKenzie: We have better revenue management and pricing.
Today, we can sale basic fares that do that.
That don't offer March.
Except as a passenger paid more for it and we can distribute them directly to the customer savings saving significant cost.
On GBM.
And the likes we are a lot more competitive against any other airline business model.
We're also I would say we.
And we have we have.
Dreamliner.
Our network there still.
Our own aimed destinations.
We were flying pre pandemic that we're not trying to right now, but instead, we have like I don't know somewhere between 12 and 14 destinations we were not trying to before so so we're flying for more places would be 85.
By next month, which is five more than what we flew in 2019.
Daniel J. McKenzie: Stronger network better unit cost.
Better better technology better pricing.
Our digital technology. For example, today is mostly developed and owned by US before he was all third party companies. So.
So we have better technology and better cost so.
I guess I could keep on going.
We are a better lineup.
And we're more effective and we're more competitive.
We also have more competition, so we had to be better to be able to deliver the margins. We're delivering we couldnt, we cannot just fit where our arms.
Across to see what would happen.
Okay.
That said that's wonderful thanks for that comprehensive answer Pedro.
Yes, I am sorry for the advertising.
Okay go ahead.
Daniel J. McKenzie: Sure.
Thank you gentlemen for next question.
Our next question comes from the line of Ken Hammer Mendez of Jpmorgan. Your line is now open.
Good morning, Pedro Jose Danielle. Thanks for taking my question. My first one is on capital allocation, we continued to see leverage coming down.
And how should we think about the capital allocation going forward, if any excess of capital should be distributing to dividends and buybacks and if there's an optimal level of leverage that we could consider report this long term growth and profitability going forward.
And the second one is on Colombia, I know, it's relatively small for you, but if you could share.
How wingo is performing and how the competitive environment is in Colombia.
Two airlines, leaving the market last year. Thank you.
So dealer may in terms of capital allocation I would say first that yes, we are.
Balance sheet, certainly right now is a very very strong leverage.
So it's.
It's in a high point and I think we have to be mindful that we have a lot of aircraft coming so we have a lot of.
Capital expenditures that are going to be putting back into the business or the next.
A year and a half.
Our fleet plan that we put in our 20-F for 2025 has around 16 airplanes coming next year. So there. It is a quite a bit of a growth that we will put back into the business over the next.
Several years.
Number two is that we have been very active and return value to our shareholders. This year.
Essentially the board decided to almost doubled the dividend vis vis last year and our policy is as that business continues being successful we'd receive that two to.
To our shareholders, so and we've complemented that as we put out.
Our first quarter.
The results that we also bought back $40 million worth of shares during.
During Q1, so it's a mix of everything first I'd say, putting them back into the company for growth.
And then followed by by the return of value to our shareholders.
In terms of Colombia.
Colombia is a next a very competitive market.
It goes through its waste, but it's always very competitive.
In terms of one of your specific questions capacity today in Colombia is close to 20% domestic Colombia is around 20% higher than before.
When we went into two airlines that failed who are operating.
Daniel J. McKenzie: So even without those two airlines capacity is about 20% higher that includes one new entrant that started I think late last year plus the growth from the incumbents.
When was performing well, maybe it's been better performing airline in Colombia onshore.
But we're keeping capacity flat and wingo. They operated last year nine aircraft and this year. They are operating 90 aircraft 90 737 eight hundreds.
So we don't have ambitious plan.
It's just a very difficult market in general so we would rather keep capacity.
Daniel J. McKenzie: Under control and results.
In a healthy.
C level and.
That's kind of what we're doing with Columbia onward Wingo.
That's very clear thank you Pedro and Jose will have a good day.
Thank you everyone.
Thank you one moment for our next question.
And our last question comes from the line of Jason <unk> of Citi. Your line is now open.
Hey, Thanks for taking my question, Jason dialing in for Stephen Trent. My first question is you're looking at the U S market.
Inflationary pressures pushed CASM ex ultimately 90 level and is likely to continue going forward.
As for Cooper will you executing on the cost side and realizing in terms of such a low CASM next year. Thanks.
Yeah, Jay look.
We of course are cognizant of that.
Yes.
<unk> been going through a significant period of inflation over the last several years.
And we are seeing some of that.
Airport fees handling fees in the U S Hotel room four crews in the U S. All of those have been.
Putting some pressure on our CASM.
Daniel J. McKenzie: In Latin America in general.
Inflation has not been as prevalent as it has been in the United States and therefore, we have not had as much pressure as some of the U S Airlines and in addition to that we've been very active in pursuing I just mentioned.
Better ways to do.
Our own.
Operations, So we've been very active and after a pandemic and just seeking.
Reductions in costs and efficiencies going forward over ahead.
The decisions that we've made.
And distribution strategy maintenance Densification et cetera.
Done a lot over many many.
Swim lanes in order for us to be competitive, but we are seeing some of that.
Jim.
<unk> in the U S, albeit not at the same level as the U S carriers.
Thanks, Yeah. So my second question is how are you able to maintain that 10% capacity guide in spite of the volumes regionally.
Speaker Change: So when you are below 10%.
If I understand your question correctly, it's how is it that we're maintaining our capacity guidance spite of the Boeing delays, yes, 10% assumes the current scenario that we have four aircraft deliveries for the remainder of the year.
And as Pedro mentioned before.
A large portion of our growth for 2024 is just simply the full year effect from 2023 of the capacity that we put in throughout the year 2023.
It's not that much subject to aircraft and aircraft are coming later in the year do not really have that much of an impact if that were to be delayed up until 2020 for 225. So it is.
It is the number that we have right now of 10%.
Well.
Are there changes in the future, we'll see and we'll let the market know.
We're just still very helpful. Congrats on a great quarter.
Thanks, Thank you.
Sure.
Thank you. This concludes our question and answer session I would now like to turn it back to Federal Hill Brown for closing remarks.
Okay. Thank you Sir so thank you all this concludes our first quarter 2024 earnings call.
Thank you for participating.
As always thank you for your continued support and hope you have a great day.
Ladies and gentlemen, thank you for your participation. This concludes the presentation you may disconnect and have a wonderful day.
Speaker Change: Okay.
Okay.
Speaker Change: Okay.
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Okay.
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