Copa Holdings (NYSE:CPA) reported strong financial results for Q3 2023 during its earnings call on November 16, 2023. CEO Pedro Heilbron highlighted a 13.3% increase in passenger traffic compared to the same period in 2022, with a load factor of 87.8%. The company also announced plans for future growth, expecting strong financial results for the full year 2023 and a capacity increase in the low double-digit range for 2024.
Key takeaways from the earnings call include:
- Copa reported low ex-fuel unit costs and an operating margin of 23.6%.
- The company's on-time performance was 89.4%, with a completion factor of 99.8%.
- Copa expanded its network by adding new routes and took delivery of two Boeing (NYSE:BA) 737 MAX 9 aircraft, ending the quarter with a total of 103 aircraft.
- Wingo, Copa's subsidiary, continued its network expansion.
- The company's Board of Directors approved a new share repurchase program of $200 million and ratified the fourth dividend payment of the year of $0.82 per share.
- Copa's debt consists solely of aircraft-related debt, with an average cost of debt around 3.4%.
Copa attributed its strong performance to robust demand, strong currencies in Latin America, and a healthy US economy. The company also discussed its financing strategy, stating that 11 of the 15 aircraft deliveries for next year are already financed with JOLCOs. Copa expects to see a reduction in its finance cost line due to the retirement of a convertible debt instrument.
Looking ahead, Copa plans to add new cities to its network in 2024 and confirmed that Wingo, its low-cost subsidiary, will maintain its fleet of 9 aircraft in the same year. The company also addressed the fuel mismatch between jet fuel and crude oil prices, stating that it has managed to recoup the incremental expense through unit revenues.
Copa executives also highlighted the success of the Copa Connect strategy, which focuses on direct distribution and lower distribution costs. This strategy has led to cost savings and increased revenue from ancillaries. While competition has grown, Copa expressed confidence in its ability to meet the challenge and continue improving as an airline.
Despite the El Nino drought affecting the Panama Canal, it has not had a significant impact on Panama's economy or Copa's revenues. The company concluded the call by expressing gratitude to participants and support for Copa Holdings.
InvestingPro Insights
Leveraging InvestingPro's real-time data, we note a few key metrics for Copa Holdings. The company's market cap stands at an adjusted $4010M USD, with a P/E ratio of 8.84, showing the company is trading at a low earnings multiple. Over the last twelve months as of Q3 2023, the company generated a revenue of $3434.78M USD, marking a growth of 29.64%.
InvestingPro Tips further shed light on the company's strong performance. Management's aggressive share buyback strategy aligns with the company's recent approval of a new share repurchase program. Additionally, the company's impressive gross profit margins and the high return on invested capital are indicative of its sound financial health.
Lastly, it's worth noting that the company's stock is in overbought territory according to the Relative Strength Index (RSI), suggesting that the stock is currently being heavily traded.
Remember, these are just a few insights. InvestingPro offers numerous other tips and metrics for a more comprehensive understanding of a company's financial health and performance.
Full transcript - CPA Q3 2023:
Operator: Ladies and gentlemen, thank you for standing by. Welcome to Copa Holdings Third Quarter Earnings Call. [Operator Instructions] As a reminder, this call -- this webcast is being recorded on November 16, 2023. Now, I will turn the conference call over to Daniel Tapia, Director of Investor Relations. Sir, you may begin.
Daniel Tapia: Thank you, Avy [ph] and welcome, everyone, to our third quarter earnings call. Joining us today are Pedro Heilbron, CEO of Copa Holdings; and Jose Montero, our CFO. First, Pedro will start by going over our third quarter highlights, followed by Jose, who will discuss our financial results. Immediately after, we will open the call for questions from analysts. Copa Holdings financial reports have been prepared in accordance with International Financial Reporting Standards. In today's call, we will discuss non-IFRS financial measures. A reconciliation of the non-IFRS to IFRS financial measures can be found in our earnings release which has been posted on the company's website, copaair.com. Our discussion today will also contain forward-looking statements, not limited to historical facts that reflect the company's current beliefs, expectations and/or intentions regarding future events and results. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially and are based on assumptions subject to change. Many of these are discussed in our annual report filed with the SEC. Now, I'd like to turn the call over to our CEO, Mr. Pedro Heilbron.
Pedro Heilbron: Thank you, Daniel. Good morning to all and thanks for participating in our third quarter earnings call. Before we begin, I would like to extend my sincere gratitude to all our coworkers for their commitment to the company. Their continuous efforts and dedication have kept Copa at the forefront of Latin American aviation. To them, as always, my highest regards and admiration. As you can see in our third quarter earnings release, once again, Copa reported strong financial results for the quarter. We were able to deliver industry-leading operating margins while continuing to grow our capacity by double digits year-over-year. The third quarter results were driven by a robust demand environment in the region and our focus on delivering low ex-fuel unit costs. Now, I'll summarize the main highlights for Q3. Passenger traffic grew 13.3% compared to the same period in '22, outpacing our capacity growth of 12.1%. As a result, load factor for the quarter increased 0.9 percentage points compared to Q3 '22 to 87.8%. Passenger yield came in at $0.134 resulting in unit revenues or RASM of $0.122. Unit costs decreased by 11.2% compared to Q3 '22, mainly driven by a lower jet fuel price per gallon and lower sales and distribution costs. Excluding fuel, unit costs or CASM-Ex came in at $0.058, a 2% decrease compared to Q3 '22. And our operating margin came in at 23.6%, 5.9 percentage points higher than in the third quarter of '22. On the operational front, Copa Airlines delivered an on-time performance of 89.4% and a completion factor of 99.8%, once again among the best in the world. With regards to our network, in the last 2 quarters, we have started service to Austin and Baltimore in the U.S. and Manta, Ecuador. And more recently, in October, we started flying to Barquisimeto in Venezuela. With these additions, we now serve 81 destinations in 32 countries in North, Central, South America and the Caribbean. As we continue strengthening and solidifying our position as the most complete and convenient connecting hub in Latin America. With regards to our fleet; during the third quarter, we took delivery of two 737 MAX 9 ending the quarter with a total of 103 aircraft. Turning now to Wingo; in the third quarter, Wingo continued its network expansion with the start of 3 new routes from Bogota to Caracas, Venezuela; a Panama domestic flight from Panama City to David and one seasonal route from Cali to Aruba. Additionally, in October, Wingo started service from Medellin to Cartagena and announced one additional domestic route in December from Medellin to Santa Marta. With these additions, Wingo expects to end the year operating 37 routes with service to 23 cities in 11 countries. Now, turning to our current expectations. We continue to see a robust demand environment in the region. And as you can see in our earnings release published yesterday, we expect strong financial results for full year '23 and preliminary in 2024, we plan to continue growing our capacity in the low double-digit range and further reduce our unit costs. As always, Jose will provide more details regarding the 2023 and 2024 outlook. To summarize, we delivered strong third quarter results while growing capacity 12% year-over-year. We continue to see a robust demand environment in the region. We achieved low fuel unit costs during the quarter and we continue to deliver on our cost execution strategies. We continue growing and strengthening our network, the most complete and convenient hub for travel in the Americas. And as always, our team continues to deliver world-leading operational results. Lastly, we remain as confident as ever in our business model. We continue to deliver low unit cost, high margins and a great product for our passengers, including the best connecting network in Latin America making us the best positioned 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.
Jose Montero: Thank you, Pedro. Good morning, everyone. Thanks for being with us today. I'd like to join Pedro in acknowledging our great team for all their efforts to deliver world-class service to our passengers. I will start by going over our third quarter results. We reported a net profit for the quarter of $187.4 million or $4.72 per share. Excluding special items, our adjusted net profit came in at $174.4 million or $4.39 per share. Third quarter special items are comprised of a net gain of $12.2 million related to the company's convertible notes which we retired during the quarter and an $800,000 unrealized mark-to-market gain related to changes in the value of financial investments. We reported a quarterly operating profit of $205 million and an operating margin of 23.6%. Capacity came in at 7.1 billion available seat miles or 12.1% higher than in Q3 2022. Our load factor came in at 87.8% for the quarter, a 0.9 percentage point increase compared to the same period in 2022, while we achieved passenger yields of $0.134. As a result, unit revenues came in at $0.122, mainly driven by lower jet fuel prices, unit cost or CASM decreased to $0.093 or 11.2% lower than our CASM in Q3 2022. And finally, we continue with our initiatives for maintaining our costs low. For the quarter, our CASM ex-fuel came in at $0.058, a 2.1% decrease versus Q3 2022, mainly driven by lower sales and distribution costs due to the higher penetration of both direct sales and the lower cost travel agency channels which were launched by Copa Airlines in September of 2022. I'm going to spend some time now discussing our balance sheet and liquidity. As of the end of the third quarter, we had assets of close to $5 billion. As to cash, short- and long-term investments, we ended the quarter with over $1.2 billion which represents 34% 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 0.4x. Our debt now is comprised solely of aircraft-related debt and I'm pleased to report that our average cost of debt is currently in the range of 3.4%. As we've previously announced, in the month of September, we completed with the redemption of the 4.5% convertible senior notes due in 2025. To summarize the transaction, holders of $349 million aggregate principal amount converted their notes in accordance with the terms of the inventory while holders of outstanding notes in the aggregate principal amount of $1 million redeemed at a price equal to 100% of the principal amount of each note call [indiscernible]. This was paid in cash plus accrued and unpaid interest. As a result, the transaction generated a total cash payment of $350 million in addition to approximately 3.7 million shares. Turning now to our fleet; during the third quarter, we received 2 Boeing 737 MAX 9s to end the quarter with a total of 103 aircraft. In November, we received 2 additional 737 MAX 9s to bring our total fleet to 105 aircraft. With these additions, our total fleet is now comprised of 68 737-800s, 28 737 MAX 9s and 9 737-700s. These figures include one 737-800 freighter and the 9 737-800s operated by Wingo. 2/3 of our fleet continues to be comprised of owned aircraft and 1/3 of our aircraft are under operating leases. During the remainder of 2023, we expect to receive one additional aircraft of Boeing 737 MAX 9 to end the year with a total fleet of 106 aircraft. As for our 2024 fleet plan, preliminarily, next year, we expect to receive 15%, 7% of MAX aircraft, including 3 737 MAX 9s and 12 737 MAX 8s. We've published an updated fleet plan of our -- in our Investor Relations website and we have already secured JOLCO financing for 10 out of the 15 deliveries in 2024. Turning now to a return of value to our shareholders. In October, we finalized the execution of our existing share repurchase program. And as published in our earnings release yesterday, our Board of Directors approved a new share repurchase program of $200 million. Additionally, I'm pleased to announce that our Board has ratified the fourth dividend payment of the year of $0.82 per share to be paid on December 15 to all shareholders of record as of November 30th. As to our outlook, we can provide the following guidance update for full year 2023. We expect to increase our capacity in ASMs versus 2022 by approximately 13% and we expect to deliver an operating margin within the range of 23%. We're basing our outlook on the following assumptions: load factor of approximately 87%, unit revenues within the range of $0.124, CASM ex-fuel to be in the range of $0.06 and we are expecting an all-in fuel price of $3.02 per gallon. In anticipation of 2024, we are projecting a year-over-year capacity increase between 12% and 14%. Additionally, we anticipate our CASM ex-fuel to be in the range of $0.059, aligning with our goal to achieve a CASM ex-fuel of $0.058 by 2025. This outlook reflects our continuous commitment to our operational excellence. Thank you. And with that, we'll open the call for some questions.
Operator: [Operator Instructions] Our first question comes from Savi Syth with Raymond James.
Savi Syth: If I might ask on the revenue front, you took kind of the outlook up here for 2023. And it doesn't seem like the competitive capacity, you've seen any pullback since your last update and I don't think your capacity has even kind of come down and -- just curious what you're seeing in the market that's driving that strength? And just any color on if there is any kind of regional differences and how you see that continuing?
Pedro Heilbron: Savi, it's Pedro. Demand is staying strong in spite of the additional capacity that's coming in from ourselves and especially from other airlines. I don't think there's specific reason for that. I mean the currencies have stayed strong also in Latin America. So that doesn't hurt. And the U.S. economy is doing well also. So I think all those factors are contributing for demand to remain robust in spite of the capacity.
Jose Montero: I would say, Savi, only that in general terms and this applies throughout the network and all the different regions that we're at. In general, still very robust.
Savi Syth: That's helpful. And if I might ask on the -- after the convert is done and the share buybacks that you've done so far, where does the share count stand today?
Jose Montero: We're at 42 million shares -- around 42 million shares right now, Savi.
Operator: Our next question comes from Duane Pfennigwerth with Evercore ISI.
Unidentified Analyst: This is Jake [ph] on for Duane. First question, on non-op. Is that the new run rate for non-op? Or were there any onetime benefits this quarter? And then could you just remind us what the actual interest expense through the P&L was given that it was different from what the coupon rate would indicate from the convert?
Jose Montero: Yes, Jake, I would summarize that taking aside the effect of the convert that we retired and going forward, I would say that our finance cost line would probably go down by approximately $10 million per quarter. So I would say that's the way to model it. The remainder of the non-op lines in general terms are in line with just simply the debt levels that we have and the average cost of debt that I mentioned that is about 3.4% right now and the yields that we have in terms of our investments. I would say that's -- the big change going forward, I would say, is the reduction in the finance cost line not associated with the coupon but rather associated with the way the accounting for the convert work, it was like a noncash item that passed through the P&L and it was around $10 million per quarter.
Unidentified Analyst: Right. That makes sense. And then just to go a little bit deeper into 2024 capacity growth. Could you just break out the components and the pacing of that seat, stage length, gauge, et cetera?
Jose Montero: I would say, Jake, that the majority of the growth for next year is going to be frequencies. Here we have it broken down is about, call it, about 70% of the capacity growth is going to be in additional frequencies into markets that we operate already. Then about, let's say, about 25% is going to be around full year effect of growth that we performed throughout 2023, that sort of lapse the year. And then the remainder is, call it, a new service that we're starting in 2024. That's kind of how we're placing it. So the vast majority is just frequencies into markets that we're really present in.
Unidentified Analyst: And so with the patient of that be steady here?
Jose Montero: In general terms, throughout a year, you say, a cadence. A little bit of a -- yes, I would say, in general terms, steady. I don't think there is a particular bumps throughout the year, given the majority of it is -- or a portion of it is full year effect.
Pedro Heilbron: Our aircraft deliveries in any case are spread throughout the year. So that's another reason.
Operator: Our next question comes from Guilherme Mendes with JPMorgan (NYSE:JPM).
Guilherme Mendes: Two questions as well. The first one is on the fleet plan. You guys mentioned about 15 deliveries next year on MAXs. If you see any kind of bottlenecks come from Boeing or any risk on this 15 aircraft deliveries? I understand that you mentioned that 10% are really secure in terms of financing. So if there's any kind of risk for this additional five? So the second question is regarding to the CASM ex-fuel guidance for next year, cutting price to see lower CASM ex-fuel? And maybe if you could comment on what are the main initiatives thinking that there's any kind of labor pressure, any out of initiatives to sustain this higher efficiency?
Pedro Heilbron: Yes. So a few things. In terms of the aircraft deliveries, 11 of the 15 deliveries scheduled for next year are already financed with JOLCO. So that's pretty much said. And in terms of delivery dates, this is the latest we have from Boeing, some aircraft passed from one aircraft at least passes from 2023 to 2024. That's why the number increased to 15%. So it's the best information we have right now. And again, most of the financing is already in place.
Jose Montero: Yes. But they're -- I mean, we're still unsure Boeing; all aircraft manufacturers are facing supply chain issues. So we have our conversation going with them. But I -- for now, in our -- in terms of our guidance, I have to start by saying that it's a preliminary guidance that we issued for a year. We'll issue our formal guidance in February but in general terms, it's in line with our expectations in terms of aircraft deliveries for 2024. And in terms of CASM for next year, I would say that the main areas of opportunities, first of all, is our continue working our distribution. Our team has been doing a great job there with the Copa Connect project and our new distribution strategy. Number two, we are continuing with our fleet densification of our 737-800 fleet on the Copa Airlines side. So that will provide some CASM benefits. Third, we continue working with our efficiencies in terms of overhead and some of the growth that -- efficiencies that we get with the growth that we have for next year. And finally, while we're on track to resolve the feeding issues that we've had with the leap. So I think that's another one that you have to consider over the next several months as well.
Operator: One moment for our next question. Our next question comes from Michael Linenberg with Deutsche Bank (ETR:DBKGn).
Michael Linenberg: Jose, I want to go back to just on next year's 12% to 14% frequency. It sounds like 5% to 10% of the ASMs are going to be new service. Maybe more specifically, what is the plan with a number of new dots on the map or a number of new cities? Is this 2 or 3 or 4 cities? Is it going to be like what we saw this year where you added -- I think it was what 4 new cities, maybe 5 new cities?
Pedro Heilbron: Mike, I'll answer that one. So maybe we'll help a bit more -- maybe we'll have a little bit more information in February and we'll make a few announcements. But right now, there's not much we can share. We're working on many possibilities. And it should be more than a few but we don't want to give a target because we don't really know it's kind of early and we're still planning; we usually start new cities midyear and at the end of the year. So we still have some months to go.
Michael Linenberg: Very good. Just my second question, Wingo is 9 airplanes now, in a more frequency or more routes as we move through this year. Is the plan to keep Wingo at 9 airplanes in 2024?
Pedro Heilbron: That is the plan -- that's the plan as of right now, given the dynamics of the Colombian market and yes. So yes, that's the plan right now.
Michael Linenberg: Okay. Great. And then just my last question, when I think about you have a significant cost of capital advantage, when I think about some of the other big debt deals that we've seen some of your competitors launched over the last 12 to 18 months. And so that 3.4% cost of debt that's low. As we think about the 10 or 11 airplanes that have already been financed with JOLCOs, does that change that 3.4%? How should we think about your average financing as you reach for'24?
Jose Montero: Yes. I'll give you a data point, Mike and you could argue that an incremental aircraft right now, it's in the range of around 5% so we're a little higher. But we -- by the way, we have our -- 80% of our fleet is financed on their fixed rate. So the changes in interest rates have not affected us significantly. But given the current environment, our last set of aircraft on variable rates. So we'll enjoy the benefit of if and when rates come down. So -- but it's around the 5% range, still very good.
Operator: One moment for our next question. Our next question comes from Rogerio Araujo with Bank of America (NYSE:BAC).
Rogerio Araujo: Congratulations on the results, I have 2, one on RASM. I know you didn't provide any guidance for '24 but can you give us the -- what you're seeing in the booking curve for next year? Can you give us an expected direction? Is it coming down versus 2023 because of extra capacity coming in or it's still unknown at this moment? And the second question is regarding a mismatch between jet fuel price and oil in 3Q. It didn't happen only for Copa but all the peers in the region. What is driving that? Is it sustainable going forward?
Pedro Heilbron: Okay. So I'll start with the first one. And yes, we're not giving RASM guidance for '24. Still early and our visibility is always like 3 months or 2 months into the future. So what we're seeing so far which would be early 2024, is that the revenue strength stayed robust, it's following the same trend we've seen in Q3 and Q4. So even with the capacity that you mentioned, revenues are staying strong so far.
Jose Montero: Yes. In terms of fuel mismatch between jet and crude, yes, the crack of jet fuel spiked during the quarter and it's in the range. It's a little bit over $40 right now per barrel. So it's historically -- not historically high but it is at a higher level than what it was on a regular basis. And -- but you know what, we've learn to manage our fuel expense and in terms of recapping or recouping some of this incremental expense in our unit revenues and we've done that in the fourth quarter with our revised guidance. And so it's -- I think in the end, it's something we know how to do.
Rogerio Araujo: Sounds great. And one follow-up on that last one. Is the few guidance, it includes the current curve?
Jose Montero: Yes, yes, absolutely. It's a current jet curve as of like 2 days ago, yes. So we -- there -- it's all in. It's our average fuel price all in. We see $0.06 above the last guidance that we provided by in August.
Operator: One moment for our next question. Our next question comes from Stephen Trent with Citi.
Stephen Trent: I definitely appreciate the color on 2024. As you think about that build-out, are you content with maintaining those 6 daily flight banks at Tocumen? Or do you think you could make some possible adjustment to that with the 2024 growth?
Pedro Heilbron: Yes. Not in '24. I mean we could make adjustments in the future but that's not the plan in '24. We think we can still strengthen our 6 bank structure. There are opportunities, there are gaps that we can fill and further strengthen our whole network. So that's the plan for now.
Stephen Trent: Perfect page. I appreciate that. And as my follow-up, looking at this, a very good ex-fuel, CASM color for 2024 to what degree do you think some of that might be coming from tilt towards more direct channel sales, for example?
Jose Montero: Sure. No, absolutely. That's a big portion of our strategy for having a multiyear CASM target, clearly sub-6; it's been driven in large part through our Copa Connect strategy. It's been working on great over the last several months. So that's certainly a big portion of our continued track towards 5.9% in 2024 and 5.8% 2025.
Pedro Heilbron: And also, Stephen, it's holding overhead, holding fixed costs tight, so we benefit from the growth in ASMs. That's another way we're achieving our numbers.
Jose Montero: Yes. And look, I mean we're talking about CASM, there's always headwinds of items that we might not control. There might be whatever, aerospace, charge increases in different countries, et cetera and that's the sort of thing or inflationary pressures because of ARB. As partners we try to counter those with our own internal efficiencies and with projects such as Copa Connect or diversification, et cetera. So we always have our guard up in terms of keeping our costs as low as they can be.
Stephen Trent: Okay. That's very, very helpful. And see you in a few weeks.
Operator: One moment for our next question. Our next question comes from Daniel McKenzie with Seaport Global.
Daniel McKenzie: I guess following up on that last question, going back to Copa Connect and to lower distribution costs. I'm wondering if you can just help us put some numbers around what that means exactly. So what you're seeing on cost savings and specifically from this initiative? And how the change in the distribution strategy is helping you to drive more revenue. So maybe just related to that, what percent of the passengers coming to copa.com are actually purchasing a ticket with an upsell feature, for example?
Pedro Heilbron: Okay. So let me start with a few general comments, then I'll give Jose some time too. To see how much of the info you're asking. We can gather quickly. But first thing I would say is that, as Jose mentioned, our direct distribution strategy which we call Copa Connect has been very successful. And to date, we are already over 70% direct sales, including the NDC channel for the agencies. So when we add our website, our other direct channels and the agencies that connect through our NDC channel, we're over 70%. It used to be the other way around, a year over a year ago when we first started. So that in itself it's a significant change and it surpassed our projections for this year. Then by going direct, via -- be it through the NDC channel or our website, we're able to offer more options for passengers. We're able to work on the upsell and a significant percent of the passengers that buy in the website and NDC for sure, are upselling. And only we have with us right now the exact percentage but it's important. And it's a valid question because, of course, our lowest fares come with additional ancillaries like seats and bags. But then upselling, it's also a very important revenue stream for us.
Jose Montero: Yes, Dan, I would say that in terms of cost, the channel shifting and Copa Connect strategy, good argue call it, $0.001 of cash on this, provided for us -- for this year. And in terms of the value of ancillaries, within -- I don't know, we've probably quadrupled. The value of ancillaries is back in 2018. So in terms of revenue. So there is, of course, within that upsell of product -- of folks that are buying tickets through our channel. So yes, it's actually grown quite a bit over the last -- so it's back in 2019, call it, 4x the level of where we were. And that's information that we shared back in our Investor Day a couple of months ago.
Daniel McKenzie: Yes, very good. And then second question here. Historically, Copa has targeted 18% to 20% operating margins. And in light of this year's results, I guess my next question is how investors should really think about steady-state margins? Are the initiatives in place today enough to help you punch above what you've done historically?
Pedro Heilbron: Well, now you're asking for 2024 guidance in a direct way. So we have to wait until February for that. But we have the wind in our back right now. And what that means for steady state in the future. It's going to depend on how external factors change, fuel capacity from competitors et cetera, et cetera.
Jose Montero: But we are really pleased with our operating margin guidance of 23% for the year '24 -- full year 2023. It's a pretty good result. I think it's certainly -- it's been a very, very good year so far.
Operator: Our next question comes from Bruno Amorim with Goldman Sachs (NYSE:GS).
Bruno Amorim: I have a follow-up on this question on margins. I'm not asking for '24 guidance but just wanted to hear from you what were in your view, the big changes that could eventually have led to those higher margins? We can understand to what extent they are sustainable. I understand there are some cost efficiencies, ex-fuel CASM is performing [indiscernible]. But if you look on a total CASM perspective, it is still higher versus 2019, right? Because that ex-fuel is much higher. So maybe the answer comes from the revenue side. And then on the revenue side, maybe one could argue there is less competition now post-pandemic? Is that the main change? Or is there anything else that you believe could justify much higher unit revenues on a sustainable basis?
Pedro Heilbron: So Bruno, I'll say 3 things, 3 general concepts that are important coming out of the pandemic. And they are playing in different directions. So the number one surprise out of the pandemic was that demand came back a lot quicker than what anyone expected. And it has remained strong overall in our region, in the Americas and it is still robust through the day. So of course, demand has been a positive change. The other, I would say, surprised coming out of the pandemic which works in a different direction in the opposite direction. It's how much growth there has been in aviation, in our region, how much growth by the airline industry in general, that also surprised us coming out. So capacity came back quicker than what we would have expected and it's actually above pre-pandemic levels. And then the third concept I want to share which is more a Copa-specific is that we work really hard during the pandemic, even while we were shut down for almost 5 months, we never stopped working on 2 things and one was working on our cost, on the cost side, on doing all the investments and changes that were going to make us more efficient going forward, including Copa Connect, a lot of technological enhancements and same thing for revenues which, in a way, some are related to Copa Connect, others are not. So we've worked very hard in our revenue-related technology, on the revenue team and we are a much more efficient, competitive airline from the revenue side and from the cost side. So I would say those are 3 general concepts that have a lot to do with where we are today.
Bruno Amorim: And in terms of the competitive dynamics, what can you comment?
Pedro Heilbron: Growth competitive is dynamic. It's growing. It's strong. It's now mostly LCCs or ULCCs, in our region. Most of our competitors are ULCCs or LCC, either because they were born that way or they converted to that model. So that in a way has made us become a lot more efficient and that's the vision we had from before. So we were not surprised. We were preparing for this from way back and we're meeting the challenge. We have the tools. We have a strong network. We have the hub, we have the cost and we're still working on additional efficiency. And we think there's room for all. I mean we've done -- our success is not dependent on the failure of others, especially if the market continues on a healthy pace. But we worry about ourselves and we're just making -- we're just making Copa a better, more competitive airline. But yes, competition has grown. And right now, many of our competitors are growing actually at a faster rate than we are.
Operator: Our last question comes from Savi Syth with Raymond James.
Savi Syth: If I might, just curious if you can honing on business demand. It seems like there's a slight pickup in other regions. And I'm wondering if you're seeing that in? And particularly in Panama, I'm wondering if the drought is having any impact or the economy is still pretty strong?
Pedro Heilbron: Yes. So business demand has not changed much from the previous 2 quarters. It used to be above 30%. It's now in the 25% range but it has been replaced by, I would say -- I mean, by leisure but also by the higher segment of leisure travelers because we're doing better in business class revenues than what we were doing pre-pandemic and with less business demand. So in a way, it has been replaced. We're not missing it, even though we're happy to see it grow and hopefully, will grow at a faster pace in the future. The Panama Canal, of course, has been affected by the El Nino drought in the region and it has restricted the transit of ships but it's not having, I would say, a significant impact on the economy of Panama. The economy is still expected to be one of the fastest-growing economies in Latin America. And in spite of the adjustments the Panama Canal needs to make because of El Nino. But again, it's not having a drastic impact on our economy. And it's still a small percent of the revenues are being affected in a way -- in the news is probably exaggerating the problem.
Operator: That concludes the question-and-answer session. At this time, I would like to turn the call back to Pedro Heilbron for closing remarks.
Pedro Heilbron: Thank you. Thank you, operator. So thank you to all. This concludes our earnings call. As always, thank you for participating and special thanks for your continued support to Copa Holdings. So I hope you have a great day.
Operator: Ladies and gentlemen, thank you for your participation. That concludes the presentation. You may now disconnect and have a wonderful day.
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