Q3 2025 Copa Holdings SA Earnings Call
Speaker #1: Afterwards, we will conduct a question-and-answer session. At that time, if you have a question, you will need to press star 11 on your touch-tone telephone.
Speaker #1: As a reminder, this call is being webcast and recorded on November 20, 2025. I will now turn the conference over to Daniel Tapia, Director of Investor Relations.
Speaker #1: Sir, you may
Speaker #1: begin. Thank you,
Speaker #2: Michelle, and welcome everyone to our third quarter earnings call. Joining me today are Pedro Heilbron, CEO of Copa Holdings, and Peter Donkersrud, our CFO.
Speaker #2: Pedro will begin with an overview of our third-quarter highlights, followed by Peter, who will walk us through the financial results. After that, we'll open the call for questions from analysts.
Speaker #2: Copa Holdings' financial reports have been prepared in accordance with International Financial Reporting Standards. In today's call, we will discuss non-IFRS financial measures, which are reconciled to IFRS figures and are earnings release available on our website, copaair.com.
Speaker #2: 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 and results.
Speaker #2: These forward-looking statements involve risks and uncertainties that could cause actual results to defer materially and are based on assumptions subject to change. Many of these are discussed in our annual report filed with the SEC.
Speaker #2: With that, I'll turn the call over to our CEO, Mr. Pedro
Speaker #2: Heilbron. Thank you,
Speaker #3: Daniel. Good morning and thank you for joining us today. Before we begin, I want to thank all our coworkers across the organization, as always, their dedication and hard work are instrumental in our financial and operational success.
Speaker #3: Copa delivered another strong quarter, reinforcing the strength of our business model and our competitive advantages in Latin America. During the quarter, we achieved industry-leading profitability with an operating margin of 23.2%, up 2.9 percentage points year-over-year, and a net margin of 19%, up 1.9 percentage points year-over-year.
Speaker #3: These results are driven by our continued focus on cost discipline and a healthy demand environment in the region. A key highlight for the quarter was that capacity in ASMs increased 5.8% compared to Q3 2024.
Speaker #3: Load factor increased by 1.8 percentage points to 88%. Passenger yields came in 2.6% lower year over year. Unit revenues or RASM increased 1% to 11.1 cents compared to Q3 '24.
Speaker #3: And unit costs or CASM decreased 2.7% to 8.5 cents compared to Q3 '24, while CASM excluding fuel decreased 0.8% to 5.6 cents. Operationally, Copa Airlines delivered an on-time performance of 89.7% and a flight completion factor of 99.8%, maintaining our position among the best in the industry.
Speaker #3: During the quarter, we started flights to Salta and Tucumán in Argentina and, as mentioned in our previous call, in the next few months, we expect to add service to Los Cabos, Mexico, Puerto Plata, and Santiago in the Dominican Republic, and Salvador, Bahia in Brazil, further strengthening our position as the most complete and convenient connecting hub for travel in the Americas.
Speaker #3: With regards to our fleet, during the quarter, we took delivery of five 737 MAX 8 aircraft. We added a second Boeing 737-800 freighter under an operating lease, and Copa transferred an aircraft to Wingo, growing its fleet to 10 Boeing 737-800 NGs.
Speaker #3: We closed the quarter with 121 aircraft, and we have since incorporated two additional MAX 123 8s, bringing our fleet to aircraft. We expect to receive one more MAX 8 before year-end, finishing 2025 with 124 aircraft.
Speaker #3: For 2026, we anticipate adding eight more 737 MAX 8s, two of which we previously expected to in December to receive in December 2025, ending 2026 with a total projected fleet of 132 aircraft.
Speaker #3: To conclude, in the third quarter, we again reported strong operational and financial results. Going forward, our guidance demonstrates confidence in our future performance driven by healthy demand in the region and the strength of our business model, which consists of the best geographic position with our hub of the Americas in Panama, structurally low unit cost, and a strong balance sheet, and a passenger-friendly product with industry-leading on-time performance.
Speaker #3: Our focus in this pillar enables us to consistently deliver industry-leading results. Now, I'll turn the call over to Peter, who will walk us through the financials in more detail.
Speaker #2: Thank you, Pedro. And good morning to all. I'd like to start by reinforcing Pedro's recognition of our team's continued dedication to achieving industry-leading performance.
Speaker #2: Let me provide some detail on our financial results for the quarter. Net profit came in at $173 million, or $4.20 per share, compared to $146 million, or $3.50 per share, in the third quarter of 2024.
Speaker #2: Representing a year-over-year increase of 18.7% and 20.1%, respectively. Operating income reached 212 million dollars, or year-over-year. 22.2% higher And an industry-leading 22.2 higher year-over-year.
Speaker #2: operating margin of 23.2%, 2.9 percentage points higher than the third quarter, 2024. On the cost side, CASM decreased 2.7% year-over-year to 8.5 cents, driven primarily by lower fuel, cost, and maintenance expense.
Speaker #2: CASM, excluding fuel, came in at 5.6 cents, down 0.8% compared to third quarter, 2024. This figure reflects a realized gain from engine exchange transactions and a benefit related to the extension of one lease aircraft.
Speaker #2: Regarding our balance sheet, we ended the quarter with 1.3 billion dollars in cash, short-term and long-term investments, representing 38% of the last 12-month revenues.
Speaker #2: Further demonstrating our financial strength and flexibility, we also have approximately $600 million in pre-delivery deposits for future unencumbered aircraft. Total debt stood at $2.2 billion, entirely related to aircraft financing.
Speaker #2: Our adjusted net debt to EBITDA ratio came in at 0.7 times, and our average cost of debt continues to be 3.5%. Regarding the return of value to our shareholders, I'm pleased to announce that Copa Holdings will make its fourth dividend payment of the year of $1.61 per share on December 1st.
Speaker #2: 15 to all shareholders of record as of December outlook, we remain As for our 2025 confident in our full-year performance. We are reaffirming our guidance and narrowing the operating margin range to the upper end, now expected between 22% and 23%.
Speaker #2: With a full-year capacity growth projected at approximately 8%. This outlook reflects a healthy demand environment in the region, as well as our continued cost discipline.
Speaker #2: Our outlook is based on the following assumptions. Load factor of approximately 87%. RASM of approximately 11.2 cents. Exfuel CASM of approximately 5.8 cents. And an all-in fuel price of $2.40 per gallon.
Speaker #2: Looking ahead to 2026, we preliminarily expect full-year ASM capacity growth in the range between 11 to 13 percent, with an exfuel CASM in the range of 5.7 to 5.8 cents.
Speaker #2: To conclude, we remain confident that our proven business model, robust balance sheet, and disciplined execution provide a solid foundation to continue delivering consistent growth, strong financial results, and industry-leading margins.
Speaker #2: Finally, I'd like to remind everyone that our Investor Day will take place at the New York Stock Exchange on December 11th at 11:00 AM Eastern Time.
Speaker #2: We look forward to sharing more about our company during this event. Thank you, and we'll now open the call for questions from the audience.
Speaker #2: analysts. Thank you.
Speaker #1: As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.
Speaker #1: One moment as we compile our Q&A roster. Our first question will come from the line of Savvy Fifth with Raymond James. Your line is open.
Speaker #1: Please go
Speaker #1: ahead. Hey, good morning,
Speaker #3: Everyone, could you talk a little bit about the timing and nature of the kind of COVID and the credit card renewal that you noted in Q3?
Speaker #3: And just about the opportunity that you see in loyalty in
Speaker #3: general? Yeah.
Speaker #4: Yes. Thank you, Savvy. And yes, we had a renewal of our Visa agreement during the third quarter, and that's part of what you see in 86%.
Speaker #4: We cannot disclose too much on that due to the confidentiality of the deal. But if we take that out, the growth of the loyalty program would have been similar to the second quarter that was over 30% growth year-over-year.
Speaker #3: Great. Is this anything around the loyalty program initiatives? Was that just kind of a normal renewal? Any other kind of thoughts on how that program can kind of contribute in the future?
Speaker #4: Yeah. So it's an important growth, 30% year-over-year over a small basis. We continue to grow. The program is maturing. We expect the program to continue to grow.
Speaker #4: There's a lot of new non-air partners in the program. And we expect the program to continue maturing and to continue growing at a decent rate going forward.
Speaker #4: And it's one of the priorities that we have for the coming years. So the 30% growth, I mean, it's over a smaller base. We expect that growth to continue.
Speaker #4: And slightly going down as the program matures.
Speaker #3: Got it. And if I can ask just a clarification question on the growth next year, could you tell me the 11% to 13%, how much of that is kind of gauge stage versus...
Speaker #3: fee? Yeah.
Speaker #4: So the full-year growth that we are projecting between 11% to 13%, I would first say that half of that growth comes from the full-year effect of the backloaded aircraft that we received this year.
Speaker #4: Of the other half, I would say of that 50%, 40 percentage points of that will come from adding frequencies to current destinations. And then the other 10% will come from adding new dots on the map.
Speaker #4: Some of them Pedro alluded to during his intervention. That's more or less the breakdown of our 11 to 13 percent growth in ASM for next
Speaker #4: year. Understood.
Speaker #3: Thank
Speaker #3: you. Thank
Speaker #1: You. And one moment for our next question. Our next question comes from the line of Michael Lindenberg with Deutsche Bank. Your line is open.
Speaker #1: Please go
Speaker #1: ahead. Yeah.
Speaker #5: I just, Peter, maybe to pick up on Savvy's question on that growth for next year, if sort of half of it is just the annualization of 2025 and then another large chunk of that remaining half, 40 points as frequencies.
Speaker #5: As we see that type of growth, what is the view on unit revenue trends? Normally, when we see a step up in growth, we tend to see pressure, especially when you move into new markets.
Speaker #5: But it seems like if you're just focused on really strengthening what is already a strong position in the region, we should assume that unit revenue next year could be maybe somewhat flattish.
Speaker #5: What any thoughts on that or how you think about it for
Speaker #5: 2026?
Speaker #6: Hi, Mike. Pedro
Speaker #5: Hey, Pedro. here.
Speaker #6: Yeah. So I think in a way you helped us answer the question. I mean, we're not giving yet guidance on unit revenues. But you're right.
Speaker #6: Most of the growth comes either full-year effect or from adding frequencies. And of course, we're adding those frequencies in high-demand routes. When we average 88% for a quarter, like we did in Q3, that means that many, many routes, many markets are above 90%.
Speaker #6: And that's where we're adding frequencies. So the impact on unit revenues should be much less than when we would expect from double-digit ASM growth.
Speaker #5: Great. And then just a second question. Since it is frequencies, when we look at the number of gates at Panama City and how full up you are, and the number of banks, where are you when we think about banks and connectivity?
Speaker #5: I see some markets like you have eight flights a day to Miami. You have 10 flights to Bogota. I recall where it was two banks, three banks, four banks.
Speaker #5: How many defined banks are you do you have today? And how much actually additional room do you have to add these additional frequencies? Because presumably, they're all in and out of Panama City.
Speaker #5: Where do you when do you start topping off or where do you start running out of connecting banks? Thanks for taking my
Speaker #5: question. Yeah.
Speaker #6: Pedro here again. Mike. And so, two things I'll say. First, is that the airport is already working on its next phase of expansion. They're coming out with bids by the end of this year or early next year to expand the new T2 terminal and also to do some work on the taxiways and runways.
Speaker #6: One of those contracts has already been assigned. Additionally, our Civil Aviation Authority is also bidding for a redesign of the airspace. All of this is expected to happen in the next three to four years.
Speaker #6: And it's going to be done in a very pragmatic, I would say, way that's going to be very good for the airport and for our hub.
Speaker #6: So we're really happy with that. In terms of frequencies, we're running six defined banks today, six. Our first arrivals are in at 6:00 in the morning.
Speaker #6: And our last departures are nearly at 11:00 PM. We do run wingtips, sometimes even triple wingtips, at certain times of the day. For example, early in the morning, we'll run wingtips to the Caribbean, to Miami, and places like that.
Speaker #6: And, depending on the banks, we might run wingtips to maybe South America and other points. So there's still, with this new phase of expansion, that we're very, very involved with the airport authorities in the design.
Speaker #6: Even though there's an international institution that is very involved, we're going to have plenty of room to add wingtips if needed, or even if it comes to adding banks; there will be room for that also.
Speaker #5: Great. Thanks, Pedro.
Speaker #1: Thank you. And one moment for our next question. Our next question comes from the line of Dwayne Finningworth with Evercore ISI. Your line is open.
Speaker #1: Please go ahead.
Speaker #7: Hi. Thank you for taking my questions. This is Jake Gunning on for Dwayne. To ask the question about next year a little differently, not looking for guidance, but could you maybe talk about how your preliminary thoughts on 2026 margins and earnings have changed over the last quarter?
Speaker #6: Yeah. I think Pedro again. They haven't really changed. I mean, in terms of our what we expect for unit cost, unit revenues, etc., we are kind of in the same place.
Speaker #6: Maybe the only wildcard is what happens to fuel. And we've seen in the last few weeks an increase in the crack spread for jet fuel.
Speaker #6: But that could change again in the next two weeks, and it has a lot to do with the conflict in Russia, and mainly that, and a few other reasons.
Speaker #6: So I would say that that's the only wildcard. And we haven't modeled how yields would react to that when jet fuel is higher. Usually, there's more pressure for everyone to adjust fares.
Speaker #6: But we haven't really modeled that.
Speaker #7: Okay. Thank you. And then, given the really healthy leverage, is there any debate or discussion on leaning more heavily into share buybacks versus?
Speaker #6: Yeah. So, Peter now, and thank you for the question. I'm going to tell a little bit about all the capital allocation plan that we have.
Speaker #6: And basically, we have, after this year, around 46 or 47 planes pending delivery. From the order book we have, and given the fact that we are performing as well as at 88% load factors with very decent margins, one of our top priorities right now is to continue reinvesting in the business.
Speaker #6: We believe the business can continue delivering healthy margins as it grows. So that's one of our priorities for the capital allocation. And secondly, of course, we'll continue returning value to our shareholders as part of our capital allocation plan.
Speaker #6: And we have two ways to do that. One is our dividend policy that, as you know, it's 40% of last year's net income. We will maintain that dividend policy and maintain those quarterly payments.
Speaker #6: And then the second is we have a buyback and share buyback program open that was approved by the board. It was approved for $200 million, and we have executed half of it.
Speaker #6: And we'll continue executing the other half on an opportunistic basis. We don't have an end date for the plan. We would just continue doing it when we see the opportunity to do
Speaker #6: so. Great.
Speaker #7: Thank you.
Speaker #1: Thank you. And one moment for our next question. Our next question comes from the line of Philippe Nielsen with Citi. Your line is open.
Speaker #1: Please go
Speaker #1: ahead. Hey.
Speaker #8: Hi, everyone. Thanks for the good morning or afternoon, and thanks for taking my question. I have two questions on Casamax. Looking at this year, you're continuing to guide to $0.058 and just trying to understand what are the moving parts after this quarter's one-off positives?
Speaker #8: If maybe you're being too conservative on this assumption. And the second one, looking for 2026, maybe if you could guide us on the moving parts of this expectation, maybe for us it sounded a little too conservative given that you potentially could increase fixed cost dilution from the capacity expansion.
Speaker #8: Just trying to understand those points. Thank
Speaker #8: you. Thank you, Philippe, Peter
Speaker #6: So yes, on the Casamax, we're guiding to approximately 5.8 for the quarter. Of course, for the year, we only use one decimal.
Speaker #6: So there's a range to that 5.8 that we are alluding to. It's not necessarily going to be exactly 5.80 for the full year. And I would say that I would also like to comment on the two items that we highlighted on our earnings, release yesterday.
Speaker #6: First, we did highlight those two items more to make it easier to compare. And to give some color, the return conditions every time we do lease extensions, what happens is we spread the provision for a longer period of time.
Speaker #6: So, we did execute one lease extension during the quarter, and that's what you see there. That's around one-third of the effect of what we call out there.
Speaker #6: And the other two-thirds, which I may say are not necessarily one-offs, is the engine exchange. This is mainly due to the longer turnaround time that we have been seeing. The team is sending some engines to do engine exchange instead of sending them to engine restoration.
Speaker #6: This transaction usually sees some accounting benefits due to the difference between the book value and the transaction price. This transaction is something that we're doing this year.
Speaker #6: And most likely, we'll continue doing next year. So I wanted to highlight that it's not necessarily a one-off transaction. For the engine exchange. And for the year, for the 2025, I addressed it's a range of the 580.
Speaker #6: So we would need to model what is within that range of that decimal. And for 2026, we feel pretty comfortable. And what we wanted to guide is that we have enough levers in our tool of cost initiatives to offset inflation at least and push the casualty to lower.
Speaker #6: So, I think that's the guidance we're giving the casualty. It's the directionality of the casualty that we have enough initiatives to address inflation and push the casualty at least even lower.
Speaker #6: That's the main point we want to address.
Speaker #8: Great. This is super clear. Thank you.
Speaker #8: you. Thank you.
Speaker #1: And one moment for our next question. Our next question comes from the line of Daniel McKinsey with Seaport Global. Your line is open. Please go ahead.
Speaker #7: Guys, a couple of questions here. First, going back to the script, the healthy demand backdrop in the region, I'm wondering if you can elaborate on that.
Speaker #7: Macro has been especially volatile this year. And Latin America just seems to be completely disregarding it. Plowing through it. And so I'm just wondering, what is driving that?
Speaker #7: And or is it just that the demand is inelastic given the wealth demographic of your customers? I'm just wondering if you can break it apart for us.
Speaker #6: Okay. So Pedro here, Dan. And it's I'm not going to say we have all the answers or that we can share all the answers.
Speaker #6: We might have. There might be something with demographics, as you will explain. We have a lower percent of people that travel in Latin America versus what you would find in Europe or the US.
Speaker #6: But the traveling class does have, on average, the resources to travel. And they're traveling more than before, I must say. And before the pandemic, that's noticeable.
Speaker #6: And that's very clear. So, an analysis of the demographics is not going to be easy. But demand remains healthy and continues to grow. There's a lot of capacity coming in.
Speaker #6: But load factors are holding up. And I would say that that's what we're seeing in most regions. And the regions were maybe that won't be the case are easy to point out.
Speaker #6: For example, we had the strong devaluation in Brazil last year, starting in mid last year. But the currency has been stable and has even recuperated some ground since.
Speaker #6: So we see Brazil slowly coming back. Maybe not all the way back toward was in 2023. But it's on its way. The rest of South America, it looks fine.
Speaker #6: The Andean pack looks fine. The U.S. is pretty stable, maybe just slightly down, but with a lot more capacity. So, and I'm saying load factors, of course.
Speaker #6: Demand is up. It's up double digits. Argentina has seen a lot of capacity come in, so it's still a strong market, but not nearly as strong as before.
Speaker #6: Because of all that capacity. But I think that's going to taper down. We ourselves are going to grow. We've grown quite a bit in Argentina.
Speaker #6: We won't be growing that much, if at all, in the future. So we're also adjusting our capacity and putting our capacity where it makes the most sense.
Speaker #6: So, yeah. I mean, in general, it's a healthy demand environment. Sometimes the additional ASMs hit on yields a little bit, but even that has not been significant.
Speaker #7: Yeah. Very impressive. Second question here. And thanks for that, Pedro. Second question here. I'm wondering if you could speak to the durability of growth opportunities beyond 2026.
Speaker #7: So should we be thinking low, double digits for the foreseeable future? Or how should we be thinking about growth longer term? Say three years out
Speaker #7: or so. Yeah.
Speaker #6: I'll go with our aircraft order, which I think the better way of understanding our growth plans. And as you know, we've always been very rational, very pragmatic.
Speaker #6: We never do crazy things. But for yeah. You know us well.
Speaker #6: But. Like for the It.
Speaker #7: Yeah.
Speaker #6: For the last three years, we have delivered plus 20% margins every quarter. One quarter we missed; we were at 19.5%. So, okay.
Speaker #6: We're right there. And that's because we're really careful. I mean, we focus on our business model. We focus on our low cost. And we grow capacity.
Speaker #6: By what makes sense to us, not necessarily in response to anything else. So, if you look at our fleet plan, it follows that same pattern.
Speaker #6: And it points to somewhere between 7 and 8 percent per year, consistently. We have a little bit over 40 planes pending delivery. For the next four years, and if you do the math, it's going to be around 7, 8 percent average growth KGAR.
Speaker #6: For that period, I think we have the opportunities, given the strength of our hub and network, our leading unit cost, and customer service on-time performance.
Speaker #6: When we put everything together, we think that's really reasonable growth that we can sustain in a profitable way.
Speaker #7: Yeah. I would just add that, as Pedro alluded to, that's our plan of growth. It should be around the 6, 7 percent that Pedro alluded to the next couple of years.
Speaker #7: But Pedro said it very well. We're not obsessed with growth. We're only growing. There's profitability in that growth. We'll be more focused on making sure we can get the most profitability.
Speaker #7: And we have a lot of flexibility for that growth on the downside. And we have the lease aircraft. We have 4,500 combat aircraft. We have the 700s that by any point, demand softens, we can decide to park, harvest the engines, and even help us lower in the chasm.
Speaker #7: So there are a lot of tools we have to address whatever market comes through us. And we'll try to make the best out of it.
Speaker #7: That's perfect. Thanks so much, you guys.
Speaker #8: Thank you. And one moment for our next question. Our next question comes from the line of Alberto Valerio with UBS. Your line is open.
Speaker #8: Please go ahead.
Speaker #6: Hi. Thank you for taking my question, Pedro. And Peter. One more on my side, in terms of yields. We see a healthy environment. But I think market was expecting a little bit more, in terms of yields for this quarter.
Speaker #6: As well, for the next one, maybe a revising revision on guidance. If there is any specific detail that makes us guide you guys be a little bit more conservative.
Speaker #6: And another one, if I may, in terms of competition in the region, we see an IPO in Mexico. We may see another IPO next year, in Latin America.
Speaker #6: And also in Brazil, Azul has come back from Chapter 11. What is the perspective? And how is the marketing in the region? If you can provide some details in terms of competition.
Speaker #6: Thank you very much. Yeah. Okay. A few things. So I think we're ready to spoke quite a bit about 2026. Yield, you're asking about fourth quarter.
Speaker #6: We do not give a quarter-by-quarter yield guidance. But we did narrow our operating margin guidance to somewhere between 22 and 23 percent. So we narrow it to the higher end of our previous guidance.
Speaker #6: So that's what we can share now. In terms of competition, it's something that we've lived with for a long time, always, I would say.
Speaker #6: But even more so in the last four years, in the last four years or three years. And we worked on the, on our competitive advantages to make them stronger.
Speaker #6: And that's our product, our unit cost, and the strength of our network. So we're confident that we can continue delivering in 2026 and beyond the strong margins you've seen before.
Speaker #6: And the IPOs you alluded to, well, those are companies that were public before. So they're going back to where they were before they went through bankruptcy and all the other troubles.
Speaker #6: They got into. We work hard to avoid that kind of situation and try to be a little bit more steady on everything we
Speaker #6: do. Perfect.
Speaker #7: Thank you very much.
Speaker #8: Thank you. One moment for our next question. Our next question comes from the line of Tom Fitzgerald with T.D. Cowan. Your line is open.
Speaker #8: Please go
Speaker #9: Hi. Thanks so much for the time. Just kind of going back to the high-level conceptually for next year, how do you think about how, from the incremental frequencies and then the 10 points for the new dots, just in a normal year, how would you think about how those should theoretically compare to system ransom?
Speaker #6: Yeah. So normally, in a regular year, most of our growth goes to adding frequencies. And then we always have a little of that growth to put on new markets.
Speaker #6: And then for those new markets, for the next year, normally mature, and then they go in the first category of adding frequencies to those new markets.
Speaker #6: As we normally open markets with three to four daily flights and three to four weekly flights, we then go building up. So that's more or less how we have deployed growth in the past years.
Speaker #6: And how we've done it: most of it going to frequencies, and then a smaller portion going to new markets.
Speaker #9: Got it. Okay. I mean, is it normally just think of the on the just think of the maturity ramp for the incremental departures. Do you think of that as a decent discount, like a 10-point discount to system average or pretty much in line with the system that you're
Speaker #9: producing? I would say it's pretty much in
Speaker #6: line. It's pretty much in line. And kind of a related factor is that, as we all know, Boeing deliveries were have been delayed quite a bit for the last few years.
Speaker #6: This year, they've been on time— even earlier— so there's a noticeable improvement there. But overall, we're still behind where we thought we would be if we had topped three years ago.
Speaker #6: So, these are kind of overdue deliveries, and we feel we have the demand for those aircraft, especially that we're adding frequencies, as Peter mentioned.
Speaker #9: Okay. That's really helpful, Caller. And then just as a follow-up, I was wondering if you could talk you've talked in the past about some of your some of the kind of lower-hanging fruit you guys have with technology, and your ability to maybe price better, whether incorporating more dynamic pricing or upselling products like economy extra.
Speaker #9: I'm just wondering if you could maybe it's more of a preview for investor today, but the latest thinking there. Thanks again for the time.
Speaker #6: Yeah. We have to keep something for the investor today. You're right. You just helped me answer that question. There's still a lot of opportunities.
Speaker #6: We continue investing quite a bit in our digital tools. And especially, actually, not necessarily in new digital tools, but in making better what we already have.
Speaker #6: And there's an opportunity we have in doing better merchandiser. Merchandising, I'm sorry. Better UX, better user experience. Those products we're offering make them more visible to our customers, especially in the booking flow and in the check-in flow.
Speaker #6: We're working on that. And focusing on three things. And three ancillary categories. Baggage, of course. Upgrades, to business class. And we're having a lot of success there.
Speaker #6: And also our premium economy cabin, which we call economy extra. We haven't given that enough visibility. And there's nice upside there. So yes, that's where we're focusing.
Speaker #6: And we expect to continue increasing revenues in those categories.
Speaker #8: Thank you. And one moment for our next question. Our next question comes from the line of Guilherme Mendez with J.P. Morgan. Your line is open.
Speaker #8: Please go
Speaker #8: ahead. Yes.
Speaker #6: Thanks, guys, Pedro and Peter. Thanks for taking my questions. First one is a follow-up on the competition. Pedro, you mentioned about Argentina being especially competitive.
Speaker #6: And you also mentioned about Brazil. But which other regions do you see a, let's say, higher-than-average competitive environment? And the second one, Pedro, you also mentioned about feel being the wild card for 2026.
Speaker #6: Given that a potential environment, do you see COPA changes its hedging policy in some way? Thank you. Okay. Yeah. So yeah, what I said in general terms is demand is healthy.
Speaker #6: It's growing at the pace of capacity. In all of Latin America, load factors are holding up well. I highlighted a few regions: Brazil got hit hard last year and at the beginning of this year.
Speaker #6: Because there was a sudden devaluation of the currency, and a lot of capacity had come in because of that success. That was during the first half of 2024.
Speaker #6: Since the currency, and you know that very well, the currency has been stable. Actually, it has improved since 12 months ago. And that market is coming back little by little.
Speaker #6: Less capacity has come in compared to the first half of last year, so we're seeing an improvement in our Brazil load factor and load factors in our Brazil ransom.
Speaker #6: So, we're seeing improvement in those, and Q4 should be better than Q3, and Q3 was better than Q2. So, it's going in the right direction.
Speaker #6: Not all the way back to where it was at the end of 2023, but it's in the right direction. And then Argentina has been booming, has been quite a market with all the economic changes that the new government has implemented in Argentina.
Speaker #6: It has been booming in general terms. The devaluation has been more predictable and not as significant as before. Inflation has been a lot more under control.
Speaker #6: And the traveling public, in a country that loves to loves to travel, has to travel, been growing at a very strong pace. That has attracted a lot of capacity.
Speaker #6: From us and from everyone. And with that, when that happens, well, yields soften a little bit. But they're still very strong. What I said is that we will not be growing as much in Argentina as we've done in the past, let's say, the last 12 months.
Speaker #6: And that's probably going to be the case with most other airlines serving the country. So that's going to stabilize, I would say.
Speaker #9: Thanks, Pedro. Maybe on the hedging policy?
Speaker #6: Oh, okay. The hedging policy. I forgot about hedging because we haven't done hedging in so long that it's yeah. No, that's not going to change.
Speaker #6: And usually, the hedges many hedges are on WTI or Brent. And this what has shot up lately is the crack spread. So it's jet fuel.
Speaker #6: And I don't know for how long that's going to happen. That's going to stay up there. So no, we're not planning to change our hedging strategy.
Speaker #6: We're happy with not hedging. It has worked well for us. And it's going to remain that
Speaker #9: Very clear. Thank you,
Speaker #8: Thank you. And one moment for our next question. Our next question comes from the line of Saudi Sith with Raymond James. Your line is open.
Speaker #8: Please go ahead. Saudi, you may be on mute.
Speaker #10: Thank you. Sorry about that. Just can I get an update on the densification plan? Just how many aircraft are yet to go and just curious on how much next year's unit cost might be driven by that, and if there's anything further that it will drive in.
Speaker #10: '27? Yeah.
Speaker #6: Thank you, Saudi. We've done around half of the densification that we've planned to. And that was one additional role. So around six more seats per plane.
Speaker #6: We've done half of it. So around 25 of the it's called 50 that we said we were going to do. And we have another 25 left that we are planning to do during 2026.
Speaker #10: Okay. That's helpful. And just a clarification on the credit card benefit this quarter. Is that something that's just one time this quarter, or is that something that now is layered on and kind of continues going forward?
Speaker #6: So again, on the credit card benefit, we saw two separate pieces. And let's call it, to oversimplify, half and half. Half was related to the extension of our agreement with Visa.
Speaker #6: And that is one time every X amount of years. And then the other one is the growth of the program by itself. And that's the other half.
Speaker #6: And that's similar to what we saw in the second quarter and that should be continued. That growth should be continued and stable in that
Speaker #6: program. Understood.
Speaker #10: Thank you.
Speaker #8: Thank you. And one moment for our next question. Our last question will come from the line of Jean Spies with Morgan Stanley. Your line is open.
Speaker #8: Please go
Speaker #6: I joined late. So if you already answered for taking my call. Sorry, this question, please disregard. I just wanted to get a sense of how much conservatism is built into your guidance.
Speaker #6: So backing out like fourth quarter at the mid-range of your annual guidance for 2025, we get to an operating margin of around 22% and a fee yield of 11.4.
Speaker #6: So I just wanted to get a sense of how comfortable you feel with that number in the fourth quarter and how much at the end conservatism is built into it.
Speaker #6: Thank you. So our hedging, our fourth quarter, 2025 guidance was narrowed down to between 22 and 23 percent, which was like the upper part of our previous guidance, which was 21 to 23.
Speaker #6: And we're very comfortable with that range between 22 and 23 percent.
Speaker #9: All right. Perfect. And just in terms of yields, it does imply a deceleration of yields versus the third quarter. So I just wanted to get a sense on that and how, yeah, how you're looking into the next few quarters, maybe.
Speaker #9: Thank you.
Speaker #6: Yeah. That question was asked before. And the response was that we do not guide yield on a quarterly basis.
Speaker #9: Oh, sorry. Yeah. I mean, looking at your RASM guidance for the full year, we are able to back out like the fourth quarter RASM, right, which does imply, I think, 11.4 and does imply deceleration quarter over quarter.
Speaker #9: So just want to get a sense of, yeah, do you think there's potential upside to that, or you feel quite comfortable with that number?
Speaker #9: Thank
Speaker #9: you. I believe that
Speaker #6: our RASM guidance for the year is 11.2. And we haven't changed that
Speaker #6: guidance. Got
Speaker #9: it. So you feel comfortable with that guidance. All right. Perfect. Thank
Speaker #8: Thank Bye. you. I would now like to hand the conference back over to Pedro Hilborn for a closing
Speaker #8: remarks. Okay.
Speaker #6: Thank you. Okay. Thank you all for your questions and for joining us today. We appreciate your continued interest and support. Of course, I look forward to seeing you in person at our investor day and answer even more questions.
Speaker #6: So as always, you can feel confident that we will keep working really hard to strengthen and develop our competitive advantage and confident we'll continue delivering very strong results in years to come.
Speaker #6: So, thank you, and have a great day.