Q3 2024 Copa Holdings SA Earnings Call
The End
Speaker Change: Ladies and gentlemen, thank you for standing by. Welcome to COPA Holdings third quarter earnings call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. At that time, if you have a question, you will have to press star 1 1 on your telephone.
Speaker Change: If your question has been answered and you wish to remove yourself from the queue, simply press star 1 1 again. As a reminder, this call is being webcast and recorded on November 21st, 2024. Now I will turn the conference call over to Daniel Tapia, Director of Investor Relations. Sir, you may begin.
Daniel Tapia: Thank you, Jonathan, and welcome, everyone, to our third quarter air news call.
Daniel Tapia: Joining us today are Pedro Heilbron, CEO of Copa Holdings, and Jose Montero, our CFO.
Daniel Tapia: First, Pedro will start by going over our third quarter highlights, followed by Jose, who will discuss our financial results.
Daniel Tapia: Immediately after, we will open the call for questions from analysts.
Daniel Tapia: COPA Holdings financial reports have been prepared in accordance with international financial reporting standards.
Our discussion today will also contain forward-looking statements.
Daniel Tapia: Not limited to historical facts that reflect the company's current beliefs, expectations, and or intentions regarding future events and results.
Daniel Tapia: These forward-looking statements involve risk and uncertainties that could cause actual results to differ materially and are based on assumptions subject to change.
Daniel Tapia: Many of these are discussed in our annual report filed with the SEC.
Speaker Change: Now, I'd like to turn the call over to our CEO, Mr. Pedro Heilbron.
Thank you, Daniel.
Speaker Change: Good morning to all, and thanks for participating in our third quarter earnings call.
First...
I would like to extend my sincere gratitude
Speaker Change: to all of our co-workers for their commitment to the company. Their dedication and hard work have been instrumental in keeping COPA at the forefront of Latin American aviation.
Speaker Change: To them, as always, my highest regards and admiration. We're pleased to once again report solid financial results for the quarter, delivering a strong and industry-leading operating margin of 20.3%.
by our disciplined approach to executing our business strategy.
Speaker Change: including our permanent focus on cost efficiencies, which allow us to continue delivering industry-leading operating margins even with the softer yield environment we have observed over the past 12 months.
Speaker Change: Going forward, our focus on our business strategy and commitment to reducing unit costs remain central to achieving strong financial results and are key to further strengthening COPPA's competitive position in Latin America.
Among the main highlights for Q3...
Capacity increased by 9.5% year-over-year.
Speaker Change: Passenger traffic grew 7.6% compared to the same period in 2023.
Speaker Change: Unit costs, excluding fuel or CASM-X, came in at $0.057, a 1.6% decrease compared to Q3 2023, mainly driven by lower sales and distribution costs.
Speaker Change: Passenger yield came in at 12.2 cents, 8.7% lower year over year, mostly due to the last minute suspension of flights between Panama and Venezuela at the end of July.
Weaker currencies in certain countries in Latin America.
and additional industry capacity in the region.
And load factor came in at 86.2%.
1.6 percentage points lower year-over-year.
Speaker Change: As a result, unit revenues, or RASM, came in at 11 cents, a 10.1% decrease compared to Q3 2023.
Speaker Change: As mentioned before, we've delivered an operating margin of 20.3%. Excluding the impact of the Panama-Venezuela flight suspensions, we estimate that we would have reported an operating margin of 21.2% for the quarter.
Speaker Change: On the operational front, Copa Airlines delivered an on-time performance of 87.3% and a completion factor of 99.6% for the quarter, once again positioning ourselves among the best in the industry.
Regarding our fleet plan
Speaker Change: Due to delays in Boeing's delivery schedule, the arrival of our last two aircraft for the year was postponed by a few months. Nonetheless,
Speaker Change: We still expect to receive two 737 MAX 8 before year end, one at the end of this month and one in December. These two deliveries will bring our fleet to a total of 112 aircraft by the end of the year.
regarding 2025 deliveries.
Speaker Change: Boeing has updated its delivery schedule to account for the recent delays.
Speaker Change: And we now plan to receive 11 Boeing 737 MAX 8s next year to end the year with a fleet of 123 aircraft. This delivery schedule has production ramp-up assumptions that will need to materialize so actual aircraft deliveries could change.
Speaker Change: As you saw in our earnings release issued yesterday, we issued preliminary guidance for 2025 in which we expect to grow our capacity within a range of 7 to 9 percent. Jose will provide more details regarding our preliminary guidance for 2025.
To summarize,
Speaker Change: We again delivered industry-leading financial results for the third quarter. We continue to deliver on our cost execution, which remains key to the company's strategy going forward.
Speaker Change: We expect to grow capacity by high single digits in 2025 and plan to continue strengthening our hub of the Americas in Panama.
Speaker Change: And, as always, our team continues to deliver world-class operational results while providing the consistent and reliable travel experience our passengers expect from us.
Speaker Change: Finally, we firmly believe that our business model remains as robust and relevant as ever and that our hub 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.
Speaker Change: Now I'll turn it over to Jose who will go over our financial results in more detail. Thank you, Pedro. Good morning, everyone. Thanks for being with us today.
Jose Montero: I'd like to join Pedro in acknowledging our great team for all their efforts to deliver a world-class service to our passengers.
Jose Montero: We reported a quarterly operating profit of $173.7 million and an operating margin of 20.3%.
Jose Montero: Capacity came in at 7.8 billion available seat miles, or 9.5% higher than in Q3 2023.
Jose Montero: Low factor came in at 86.2% for the quarter, a 1.6 percentage point decrease compared to the same period in 2023, and our passenger yields decreased by 8.7% to 12.2 cents.
Jose Montero: As a result, unit revenues came in at 11 cents, or 10.1% lower than in the third quarter of 2023.
Jose Montero: Mainly driven by a lower fuel price, unit costs for Kazan decreased to 8.7 cents or 6.2% lower year-over-year.
Jose Montero: QASM excluding fuel came in at 5.7 cents, a 1.6% decrease versus Q3 2023.
Jose Montero: Mainly driven by lower sales and distribution costs as a result of higher penetration of both the direct sales and lower cost NDC trial agency channels, as well as our continued focus in maintaining the rest of our cost low.
Jose Montero: I'm going to spend some time now discussing our balance sheet and liquidity.
Jose Montero: As of the end of the third quarter, we had assets of close to $5.5 billion. As to cash short, long-term investments, we ended the quarter with over $1.3 billion, which represents 36% of our last 12 months' revenues.
Jose Montero: And in terms of debt, we ended the quarter with $1.86 billion in debt and lease liabilities and came in with an adjusted net debt to EBITDA ratio of 0.6 times.
Jose 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 3.4 percent, with around 65 percent of our debt being fixed.
Jose Montero: Turning now to our fleet, during the quarter we received one Boeing 737 MAX 8 aircraft, ending the third quarter with a total fleet of 110 aircraft, comprised of 68 737-800s, 32 737 MAX 9s, 9 737-700s, and one 737 MAX 8.
Jose Montero: These figures include one 737-800 freighter and the nine 737-800s operated by Wingle.
Jose Montero: As to our outlook, we can provide the following guidance update for the full year 2024.
Casamex Fields would be in the range of 5.8 cents.
Jose Montero: And we're expecting an all-in fuel price of $2.67 per gallon.
Jose Montero: In anticipation of 2025, based on the current and preliminary expectations of aircraft deliveries, we're projecting a year-over-year ASM growth of between 7 and 9 percent.
Additionally, we are projecting Casamex Fuel at approximately 5.8 cents.
Jose Montero: As you may recall, this is in line with the Casimix Fuel Target we shared with you back in our 2023 Investor Day.
Jose Montero: So, in summary, we delivered great results for the third quarter. We expect to deliver, once again, leading operating margins for the full year 2024.
Jose Montero: with low unit costs, which continue to strengthen our solid financial position while providing outstanding return of value to our shareholders.
Speaker Change: Thank you, and with that, we'll open the call to some questions.
Speaker Change: Certainly, and our first question for today comes from the line of Savvy Scythe from Raymond James. Your question, please.
Speaker Change: Hey, good morning. If I might, on the revisions that you had for 2024, I was kind of curious if the unit revenue coming down a little bit there is related to Venezuela flight suspensions taking longer, or if you're seeing any other weakness or softness in the market?
Speaker Change: Yeah, this is Pedro here. So yes, in Pardes, Venezuela, it took us a while to redeploy those aircraft.
Speaker Change: We were waiting for a restart date, which hasn't happened yet, so we kept the planes. Plus, it takes a while to start selling a flight and pull it up, so we could not, like, redeploy those aircraft the following day. That's been happening mostly throughout November, some in the December high season. So I would say that probably the bigger...
Speaker Change: Yeah, well in addition to that Savi, you know, we did highlight the Brazil currency or kind of the Brazil revenues coming in Slightly below our expectations. So that's that's also driving the the adjustment that we made
Makes sense.
Speaker Change: And if I might just turn to your 2025 capacity view, we're kind of recognizing that that's preliminary.
Speaker Change: I think before you had, you know, wanted to grow low double digits and
wondering, you know, does demand still support double digits and...
and what's the risk that competitors backfield at.
Speaker Change: And obviously what I'm trying to get here is, you know, is supply tight enough where maybe you're exchanging, you know, lower capacity for higher yield here, or is there a risk that your competitors could backfill that?
Speaker Change: Right, so our ASM guidance is directly related to Boeing deliveries.
So that's what's driving that.
Speaker Change: keeping demand at strong, healthy levels, demand and supply, of course, and also further strengthening our hub in Panama.
That's what I thought, thank you.
Speaker Change: Thank you and our next question comes from the line of Michael Lindbergh from Deutsche Bank. Your question please.
Speaker Change: Oh hey, good morning everyone. I do have a couple here. I guess, for starters, I know one of your competitors in Colombia did indicate that the market was starting to stabilize somewhat and so I'm curious if you can just talk about the competitive situation there. Maybe you're seeing something similar or maybe not.
I'm not sure what they meant by that.
but we tend to be a little bit more.
Speaker Change: to grow with demand and our potential to capture, you know, the piece of that demand that belongs or corresponds to us, so we're very measured.
Speaker Change: and pragmatic about how we grow and how we strengthen the hub. And that's why...
Speaker Change: It should mean, I don't know, a better balance between demand and supply.
Speaker Change: Douglas Goldstein, CFP®, is the director of Profile Investment Services and the host of the Goldstein on Gelt radio show. He is a licensed financial professional both in the U.S. and Israel. Securities offered through Portfolio Resources Group, Inc., Member FINRA, SIPC, MSRB, NFA, SIFMA. Accounts carried by National Financial Services LLC. Member NYSE & SIPC, a Fidelity Investments company. His book Building Wealth in Israel is available in bookstores, on the web, or can be ordered at www.profile-financial.com, or can be ordered at www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Securities offered through Portfolio Resources Group, Inc., Member FINRA, SIPC, MSRB, NFA, SIFMA.
Speaker Change: You know, I thought it was interesting that it, you know, normally once in a while we'll see COPA pull out of a market, right? The market isn't working and for a whole bunch of different reasons, you know, it's kind of a one-off. I thought it was interesting that I think, and you can correct me if I'm wrong, but it looks like you're actually going to be pulling out of two markets. Maybe you've already pulled out of two Mexican markets. One is Tulum.
Speaker Change: and the other is Santa Lucia, the Alternative Mexico City Airport.
Is that, is that a Mexican?
Speaker Change: foreign markets actually the two you mentioned but also Armenia in Colombia and Santiago de los Caballeros in the Dominican Republic so it's four markets we're pulling out temporarily we should be back before the end of next year of 2025 and the reason we're doing that is also tied to a aircraft deliveries so this is a four market
Speaker Change: These are four markets that have an alternative airport around the corner.
I see.
Speaker Change: less than 40 minutes, or on average, 40 minutes away, we have an alternative airport where we fly with many daily frequencies. These are all less than daily markets. So given the delays in aircraft deliveries, there are other markets that do not have the luxury of having, like Paredes 40 minutes from Armenia. In Mexico, the two airports are like 30 or 40 minutes apart. So we're going to deploy that capacity to other markets where we have strong demand.
Speaker Change: and no, not enough aircraft. Well, this other market can be served from the nearby airport and then we should be back by the end of next year. We get the deliveries we're expecting to get.
Speaker Change: So, Pedro, with the fact that you have to pull out of markets because you don't have airplanes and you're getting all these delayed deliveries...
Speaker Change: How should we think about potential compensation or how does it show up in maybe your capex this year and and cash flow? and I don't know if Jose answers that because
Speaker Change: As I see it, you know, not only you have a special relationship with Boeing, you are Boeing's beachhead in Latin America to the extent that I think the last deal that was signed...
Speaker Change: We had the President of the United States and the President of Colombia with you to sign that deal. So, I would think that you would be giving, getting some form of compensation and it's going to just show up and reduce CapEx. Any color on that? Thanks for taking my questions.
Speaker Change: I'll let Jose answer the question, but this particular move that we're talking about, we're doing it...
Jose Montero: to strengthen our bottom line and to better serve our whole network. So there won't be a compensation for those specific actions.
in general, with how that's working.
Jose Montero: contractual relief associated with with this situation but it's you know are the nature of our contracts with Boeing is confidential but you know yeah it would flow through CapEx to a lesser amount of CapEx going forward.
Okay, thanks for taking my questions.
Speaker Change: Thank you, Mike. Thank you, Mike. Thank you. And our next question comes from the line of Duane Fennyworth from Evercore ISI. Your question, please.
Hey, good morning. Thank you.
Duane Fennyworth: on the guidance, you're going to generate, you know, 21, 22% EBIT margins this year.
Duane Fennyworth: which includes the impact of the Max-9 grounding earlier in the year and then obviously the close-in cuts that you had to make to Venezuela. So can you just remind us
Duane Fennyworth: What do you think those two items cost you and just remind us of the sizing of those two impacts combined?
Speaker Change: Well, the Venezuelan impact was probably, I would say, half a point for the full year and the impact of the Boeing grounding, you know, I think we disclosed it to be in the order of about $40 million when it occurred. So that's kind of the...
Speaker Change: kind of the four-year impact of this I think if you can do the math.
Okay, that's great.
Speaker Change: In our industry that that yeah, yeah, it's not like, you know, that it's not simple math But yeah, you have to argue that our 21 to 22 percent a You know results for 2024
to those two aspects, yes, certainly.
Speaker Change: Yeah, I mean it does feel like as we think about next year there's some periods that have some pretty...
Speaker Change: Pretty easy compares, but we'll see. A minor question for you on the interest expense.
Speaker Change: You called out $4 million related to the adjustment of a discount rate for the calculation of leased aircraft that you're going to return.
Speaker Change: Is that a one-timer here in the fourth quarter, or is that something that will kind of stay in the interest expense on a go-forward basis?
Speaker Change: a requirement where you basically are truing up the return conditions.
Speaker Change: with the risk-free rate, basically, that we have. So that the liability that shows up in the balance sheet shows the true value of it at the moment where the balance sheet was established. So therefore, it...
Speaker Change: on a lowering interest rate environment that essentially you have to make an adjustment and
Speaker Change: So in this case is a bad guy. Let's say when the interest come down. There is a higher charge related to that so I mean you could argue that it will kind of from modeling perspective will vary depending on Where you know as interest rates fluctuated it could fluctuate as well
Speaker Change: Okay, and then maybe just to sneak one last one in, you know, a couple of the U.S. carriers have been able to kind of look a little bit further out beyond the fourth quarter into early 2025. You know, the implied fourth quarter here, is that indicative of trends that you see into early first quarter? And listen, understand you don't typically comment on two quarters out, but it just feels like the yield.
Speaker Change: The yield environment feels a little bit different in January, February than what we're seeing here in the fourth quarter.
Speaker Change: I think doing in you know again as you just answer kind of the question in the sense that we don't provide a multi-quarter guidance and we haven't established a guidance for a full year 2025 but I think
Speaker Change: On a, let's say, sequential basis, you could argue that the comps are sort of similar for Q1 versus what's going on in Q4, in terms of on the year-over-year comps, let's say.
Okay, appreciate the thoughts.
Thank you, Duane.
Speaker Change: Thank you and our next question comes from the line of Stephen Trent from Citi. Your question please.
Stephen Trent: Good morning, gentlemen, and thanks very much for taking my questions.
Stephen Trent: There was any other adjustment this quarter, or will you still have essentially the same policy on that provision as we move forward? Thank you.
Speaker Change: Yeah, the last quarter we called out a kind of half a cent impact and the reason why we called it out was because it was a catch-up. We just adjusted the factor that we used for Unredeemed during the second quarter and we decided to...
Speaker Change: to be conservative, and we did it in a way that it captured the entirety of our assumptions or estimates for 2024. So it was kind of like a catch-up that occurred during Q2, and so there was no other item related to that in Q3.
Speaker Change: Great, great, that's it. ...accounting entry related to the quarter, nothing beyond that. That's what I meant to say, Steve.
No, very helpful. I appreciate that, Jose.
Speaker Change: And just one other quick one, you know, when we think about all of the, I mean, not just you, everybody, the supply chain challenges with the OEMs, you know, could you give us a little bit of your high-level thinking, you know, long-term, how you think about optimizing maybe your owned aircraft versus leased aircraft if you've, you know,
Speaker Change: The supply chain stuff has made you think differently about the long-term planning. Thanks.
We're staying with some 700 we were expecting to return.
We have even bought spur engines ahead of time.
were very, very proactive.
Speaker Change: in securing parts in the marketplace, even though we have contracts with OEMs that are supposed to cover us.
and Ani, where have you been doing?
maintenance work, even for engines.
Speaker Change: The program work where we had to send the engines to the MROs in the past, we're doing that with the support of GE. We're doing that in our maintenance base in Panama, also to speed up turnaround times and have more engines in stock. So we're doing, I would say, a gigantic effort versus the easier times before. And we've been able to manage, so we have not affected our operations for lack of parts or lack of engines and aircraft. I would say that the moves that Pedro just alluded to, like the
Speaker Change: Buying of leases and the extent or and you know deciding to maintain the two seven three seven seven hundred I just just are a Testament of the flexibility that we have in our fleet plan as well. So we've Continue executing on the flexibility that we have in our fleet plan
Thank you for watching!
Speaker Change: Really appreciate that, gentlemen, and Jose, I'm not sure if this is your last results call, but if it is, really deeply appreciate it, you know, and I'll miss all of our interactions.
Jose Montero: Thank you very much, Stephen. You have brought it here to my eye. Thanks a lot, and thank you for the partnership. My thanks to you, sir.
Speaker Change: Thank you. And our next question comes from the line of Jen Spees from Morgan Stanley. Your question, please.
Speaker Change: Thank you for watching. Please subscribe. I'll see you next time.
Yes, hello, thank you. I just want to ask...
On the Venezuela situation, you already mentioned...
Speaker Change: about the impact for the full year. I just want you to clarify, was it solely concentrated on the third quarter or is part of the impact also going to be seen in the fourth quarter of this year?
and maybe also on like capital allocation.
Speaker Change: How are you thinking about it going forward? I mean you have extremely solid balance sheet, maybe lower capex due to the delay.
Speaker Change: Are you maybe contemplating some buybacks seeing where the share price currently trading at? I don't know. Any thoughts on that would be very useful. Thank you.
Speaker Change: I'll answer the first question and let Jose take the more difficult second question, as always. Yeah, there will be an impact on Venezuela in the fourth quarter, which would be slightly above half.
0.9 impact we saw in the third quarter.
Thank you.
Yeah, gents, in terms of capital allocation...
Speaker Change: The first thing that we have to, you know, say is that we have a very generous dividend policy, 40% of prior years adjusted net income, which...
Speaker Change: have a very strong dividend yield right now, so that's something that is of importance and of focus for our company.
Speaker Change: We do have a buyback program, a $200 million approved buyback program, which we've executed about a quarter of it so far But in terms of capital allocation, I would say that
for the next year and a half.
Speaker Change: to two years is going to be the majority or the bulk, let's say, of the order that we have with Boeing.
Speaker Change: in terms of aircraft. So I'm truly for 2025, our expectation.
Speaker Change: In fact, CapEx in total is going to be approaching $900 million. That cash CapEx is going to be about $350 million. So there is going to be some CapEx requirements during the year 2025 that we are sort of preparing for, let's say, right now.
Speaker Change: Okay, perfect. Right here. Thank you. Thank you. And our next question comes from the line of Alberto Valerio from UBS. Your question please.
Hi gentlemen, thank you for taking my question.
Alberto Valério: My first one is about the forward guidance, preliminary guidance to 2025. You should take the current oil curve or
Alberto Valério: jet fuel curves and flat yields for next year, we will be reaching something close to 23% margins. My question is, would that margins be recurring and feasible for the future or something that changed from the past?
Alberto Valério: And my second one, if I may, about Argentina. You guys had a big presence in the country in the past. Are you looking to going back there after this change that we have seen lately in the economy? And thank you.
Speaker Change: So I'll start with the second one, Argentina. I'm not sure if I got the full question but Argentina remains a strong market.
Speaker Change: for us, and we have good coverage. We fly to about five cities, and we have a number of daily frequencies to Buenos Aires. And we're, again, as I mentioned at the beginning, we try to deploy the capacity that makes sense for us.
Speaker Change: And we think that's what we have in Argentina, and we're very happy with our flights to Argentina in spite of any other issues that they might be going through.
So that's working well, that market.
Speaker Change: In terms of the first question, I'll let Jose back me up. We are not issuing guidance for 2025, but I'll just say that we have...
Speaker Change: We have industry-leading margins, or at least leading margins in our part of the world. And we're confident that we have the structure in place to continue delivering those results. And as Pedro mentioned, we'll provide our full-year guidance in February.
Speaker Change: And the other aspect is that we are with our lowest or our lower unit cost base right now that we've been able to achieve over the last several years.
Speaker Change: You know, we are simply able to deliver, you know, leading results and not be as dependent on the fluctuations and, you know, the market dynamics. So, you know, we're just simply...
Speaker Change: fundamentally more efficient and able to sustain very very good margins with with our low cost base.
and many more. Thank you. Thank you.
Speaker Change: Thank you. And our next question comes from the line of...
Rahiru Aryushu from Bank of America, your question please
Speaker Change: Hello, Pedro, Jose, thanks for the opportunity. I have one follow-up on yields, if I may. First one, a confirmation, is the guidance imply a full year of restrictions in flights to Venezuela?
and any expectations of operations resuming there?
And the second part of the question is regarding...
Speaker Change: the year-over-year comparison of yields so all else being constant if you could help us to think a little bit about
how the comparable basis is.
Speaker Change: in first half of 24 and second half. So we had currencies devaluating the region.
Speaker Change: and we also had Venezuela stop operations at the end of July. So, any other item that we should take into consideration and what is the expectation for this comparison basis of yields in 2024? Thank you.
Speaker Change: Yeah, so the guidance that we have issued for full year 2024
Speaker Change: includes the Venezuelan impact for the moment or for the period that we have been affected which is effective the end of July of this year.
Speaker Change: So that's what it's embedded in there. Remember that a portion of that capacity was not deployed immediately, so therefore it had an impact on also the flow of the passengers on this.
Speaker Change: And, you know, in terms of 2025, bringing forward the 2025 guidance, we haven't issued any revenue guidance for the year. It's just a preliminary capacity guidance and a CASM-EX-FEW guidance.
Speaker Change: There is, let's say it's embedded in, regardless of what occurs with the aircraft, it would be embedded within that capacity. And in terms of yields for the full year, I would say that for the full year 2024, returning back to 2024,
Speaker Change: In the second half of the year have also been affected by the currency fluctuations that you described specifically in Brazil actually we highlight Brazil because
Speaker Change: There was a drop in the real during the latter part of the second quarter that influenced the sales and the revenues in the third quarter. And that's also...
Speaker Change: Discussed earlier in one of the earlier questions at part of the reason why the the adjustment from 9.5 cents to 11.4 cents in the fourth quarter is also related to the Brazil the continued Brazilian
Speaker Change: It's hard to know. It's an unpredictable situation. I'm confident that we will restart flights. We're flying to five cities over 40 flights per week. We will restart at some point.
Speaker Change: And maybe not this year, it's hard to predict. I would guess that at some point in 2025, but saying if it's in the first quarter or the second quarter, it's hard to tell right now.
Okay, fair enough. Thank you very much.
Thank you.
Speaker Change: Thank you and our next question comes from the line of Daniel McKenzie from Seaport Global. Your question please.
Daniel Mckenzie: So for those investors that are, you know, investing a little longer term, how do we think about the drop-down in 26 and 27? And then just related to that, I'm just wondering if there's an appetite to add more aircraft to Wingo.
Speaker Change: So in 26, I would say it's similar. It's similar in size and of course it is all depending on what the delivery stream is from Boeing to us because our power essentially all the capex is aircraft. So so I would say but I would say preliminarily that in 26, it will be very similar to a 25 capex
Speaker Change: and then 27 probably a tad higher, I mean it depends on ultimately what the delivery stream is. I would say for preliminary modeling perspective for 26 and 27 you could probably model it in a similar level.
Speaker Change: In terms of WINGO, as we get more deliveries next year, we'll give WINGO at least one aircraft, one A800 next year, it's in our fleet plan.
Speaker Change: that we've published, if I'm not mistaken. And they could probably use a few more, but we're all tied.
Speaker Change: of aircraft right now, but they'll get at least one next year.
Speaker Change: Very good. Second question here. I'm wondering if you can unpack 2025 growth. So, you know, premium seat growth versus mainline seat growth. And just given the questions on FX earlier, I'm just wondering how that's shaping your thoughts about where you want to grow.
Speaker Change: So more U.S. flying or, you know, perhaps, you know, more to smaller markets that are underserved. I'm just trying to get a sense of how, you know, the macro backdrop is shaping how you're thinking about the business and growth.
Speaker Change: Yeah, Dan, a couple of things. I'll give you some color on the breakdown of the growth. First of all, the majority of the growth for next year is going to be in full-year effect of service that we started during 2024.
Speaker Change: About two-thirds of the growth is going to be full-year effect.
Speaker Change: And then the remainder is probably going to be, I don't know, order of the remainder is going to be, or 25% of growth is going to be frequencies to markets that we already serve.
Speaker Change: And then a minor portion would be Gage, you know, we're getting
Speaker Change: additional well actually it's a four-year effect of the of the nines that we're getting towards the latter part of this year
Speaker Change: I'm sorry, the year that we got earlier in the year is a full year, effectively, last several max 9s, we have 32 9s that are basically...
Speaker Change: and the remainder of the aircraft are just going to be 8s. So that's basically that. There's also the fact that we're adding seats into our 800s and densifying that's another component of the growth for next year. That will also help our CASM-X in 2025.
Speaker Change: So that's Cage. So new destinations is going to be a minor portion of the growth. You know, just a low single digit of the growth is going to be new destinations. Now, in terms of where we put the growth, we have a lot of options and flexibility, but I would say usually you have to start from a premise that...
Speaker Change: The hub needs balance, so you're always going to balance North of Panama versus South of Panama, so you always want to balance the group.
and of course...
Speaker Change: profitability or potential profitability has a heavy weight on our decisions.
Speaker Change: That's a given. Well, if I could squeeze one final one in here, and that's just, you know, given the growth, the capacity constraints at, you know, Tokoman Airport, how easy is it for other airlines to get access to gates? And, you know, do you have the gates that you need to execute on the growth?
Like him.
Speaker Change: Tucumán is an open airport. It's not slot-controlled, it's not gate-controlled, and it does not...
Speaker Change: There's nothing about Tucumán that stops anyone from from coming in. As we continue growing, the airport is already working on plans to expand its capacity which will be needed in between two and three years from now and there's a lot of low-hanging fruits.
Speaker Change: that they will implement, take advantage of, to increase its capacity. So there are actually no restrictions. There might be some peak moments during the day where the airport might be tight in slots and gates, but that will be improved also.
Thanks for the time you guys, appreciate it.
Speaker Change: Thank you. And our final question for today is a follow-up from the line of Savvy Scythe from Raymond James. Your question please.
Savvy Scythe: Hey, thanks for the follow-up, but just a quick two quick ones first just
Savvy Scythe: on the unit cost guide for 2025. That's impressive, given that you are slowing growth. Sounds like, Jose, you mentioned densification is helping, though I think you're already expecting that. I was curious if you could talk about what's helping you generate that good unit cost execution.
Yeah.
Speaker Change: Well, first of all, yeah, we are facing, like everybody else, there are inflationary pressures out there. You know, airport fees, overflights, airspace costs, et cetera, those are items that put pressure.
Speaker Change: on the 48 737-800s that Copa Airlines operates from an average of 160 to 166 seats. So adding in an additional row.
Speaker Change: In addition to that, it's growth, first of all, you know, the growth helps and the overall growth in capacity that we're guiding to.
Speaker Change: There is still a tapering off of the sales and distribution efforts and initiatives that we're pursuing, so there's a little bit of that, and maintenance also has some opportunities that we're pursuing for next year that should allow us to...
Speaker Change: Keep, you know, mind you that we achieved our 5 or 5.8 cent CASM target a year early. But I think we're hopefully keeping it for next year as well.
Speaker Change: I appreciate that and and then maybe just final question on as you look to transition out any update on the the CFO search and any other kind of thoughts on the management makeup?
Speaker Change: So, I thought for a second that I was going to get away without that question. I was actually, we were like doing high fives here, but of course that was not going to happen.
Sorry about that.
Speaker Change: Okay, savvy. We're prepared. So, well, and I'll take, actually, I don't know if there are more questions, but I'll take this opportunity to
Speaker Change: Recognize Jose on his last earnings call. He's been with COPPA over 30 years. He started in our Operations Control Center.
Speaker Change: then was planning on alliances, then for over 10 years, he's done a great job as CFO of the company with a ton of accomplishments.
Speaker Change: of course like the heart of the pandemic 2020 but and a lot of work goes into those results.
Speaker Change: Jose has done an outstanding job and he has now decided to retire, so he's earned the right and we are actively searching for his replacement internally and externally. We're not ready to announce anything yet.
Speaker Change: We're actively working on that and we also have contingency plans if we were not
ready by January 1st.
Speaker Change: So there's nothing, nothing really new to announce right now in that regard. Yeah, go ahead. Can I say something? Yeah, go ahead. No, thank you for that. But the reality is that there's a team here. You know, it's not like, it's not because of any particular person. So there's a team ongoing that does everything. And, you know, so I think that you have to have the confidence that.
Speaker Change: is indispensable in this particular case and I think we have a very strong team behind.
Speaker Change: in the financial areas and overall in management that will go forward so that's actually part of the
important things that I
Speaker Change: Think about all of course, so we're not we're not dropping the ball at all
Speaker Change: If we did, it would not look good on Jose, so that's not going to happen. We're not going to drop the ball. We have a strong team, so that won't be a weak point. And then in terms of other management changes, we did bring in and we issued a press release. We created a new executive VP position.
Speaker Change: The person that's fitting that position is already here, and his name is Robert Tapia.
Speaker Change: Carré. He comes from Whittier. He was the president at Whittier. Before that, he was a CCO at ECJ. Before that, he was with McKinsey.
Speaker Change: It will allow me to not have to concentrate on so many things every single minute of the day. So he'll help me there.
Speaker Change: and I'll be able to focus on many other things. So, we're basically strengthening the company, strengthening the management team to be even stronger overall going forward.
Speaker Change: And I can appreciate the big shoes to fill, so taking some time makes sense. I appreciate the response.
Thank you so much. Thank you.
Speaker Change: Thank you. This does conclude the question and answer session. I'd now like to hand the program back to Pedro for any further remarks.
Pedro Heilbron: Okay, thank you sir. So thank you all again. Thanks for participating in this earnings call.
Pedro Heilbron: Again, thanks to Jose for his great work at COPPA, this is his last call. I know he's going to miss them, we know that.
Pedro Heilbron: So, maybe he'll make a cameo in the next one, but seriously, thank you all, really. Thank you for your questions, thank you for your participation, and your support, as always. We'll keep on working really hard, like we always do, to continue delivering.
Pedro Heilbron: Strong margins and industry-leading results under any circumstance. So thank you and have a great day. Ladies and gentlemen, thank you for your participation. That concludes the presentation. You may now disconnect and have a wonderful day.