Copa Holdings SA (CPA) 2010 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Copa Holdings Second Quarter Earnings Call. During the presentation, all participants will be on a listen-only mode. Afterwards, we will conduct a question and answer session. (Operator Instructions). As a reminder, this call is being webcast and recorded, August 12th, 2010. Now, I'd like to turn the conference over to Joe Putaturo, Director of Investor Relations. Sir, you may begin.

Thank you very much operator and welcome everyone to our second quarter earnings call. Joining us today are Pedro Heilbron, CEO of Copa Holdings, and Victor Vial, our Chief Financial Officer.

First, Pedro will open up with an overview of our second quarter highlights, followed by Victor, who will discuss our financial results. Immediately after, we'll open up the call for questions from analysts. We kindly request if you could limit yourself to one question with a brief follow-up, so we can accommodate all questions.

In today's call, we'll discuss non-GAAP financial measures. A reconciliation of non-GAAP to GAAP financial measures can be found in our second quarter earnings release, which has been posted on the Company's website Copaair.com.

In addition, our discussion will contain forward-looking statements not limited to historical facts that reflect the Company's current beliefs, expectations and our intentions regarding future events or results. These forward-looking statements involve risk and uncertainties that could cause actual results to differ materially and are based on assumptions that are subject to change. Many of these risks and uncertainties are discussed in our Annual Report filed with the SEC. Now, I would like to turn the call over to our CEO, Pedro Heilbron.

Thank you Joe. Good morning to all and thank you for joining us for a second quarter earnings call. As always, I would like to begin by thanking our coworkers for delivering another quarter of double digit operating margins and a world class (product). Among the main highlights for our second quarter, net income excluding special charges, mainly related to the mark-to-mark of our fuel hedge contracts came in at US$26.3 million or earnings per share of US$0.60 compared to adjusted earnings of US$0.64 in Q2 '09.

Reported net income came in at US$17.5 million or earnings per share of US$0.42. On the revenue front, healthy overall demand led to a 4% year-over-year increase in consolidated RASM, as load factors increased 4.4 percentage points year over year, more than compensating for lower consolidated yields. Copa Airlines' second quarter yields increased 1% year-over-year, which coupled with a 4.4 percentage point year-over-year increase in load factor helped drive unit revenues up 8%.

This healthy RASM growth was achieved despite a weaker than expected performance in the Venezuela market, where yield and load factors decreased after the currency devaluation in January. On the other hand, Aero Republica's RASM decreased 10% as yield showed a 17% decline year-over-year due to fare competition mainly in the Colombian domestic market.

Furthermore, year-over-year comparisons look more pronounced as aggressive domestic fare competition started to ramp-up in the second half of '09. In addition, unit costs for the quarter were up 7% year-over-year, mainly due to higher fuel costs, however at close to 11%, our operating margin for the quarter is still amongst the highest in the industry.

Now, on the operational front, in May, Copa Airlines took delivery of two Boeing 737-800s, as a result Copa Holdings' fleet at the end of the quarter stood at 60 aircraft, 45 at Copa Airlines and 15 at Aero Republica. In June, in anticipation of our third quarter high season, Copa Airlines added frequencies to Sao Paulo, Los Angeles, Guatemala, Havana and Punta Cana among others. These new frequencies, which will drive ASM growth in the second half of the year, were added to profitable markets which form demand trends.

Also in June, Aero Republica continued expanding its international service and complimenting our consolidated network by adding new frequencies from Bogota and Medellin into Copa's hub in Panama. Jointly, Copa and Aero Republica now serve the Panama-Bogota market with five daily frequencies, as well as four daily frequencies between Panama and Medellin.

For the second quarter, Copa Airlines reported outstanding one time performance of 92.9% and a flight completion factor of 99.7%. Our on-time performance has averaged above 90% for the first half of the year, again tops in Latin America and amongst the highest in the world. My compliments and congratulations to our operations group for a job well done.

As for the second half, we recently published our July traffic figures where load factors came in above 80% on a 12% capacity growth. In terms of capacity, we have already taken delivery of five out of the eight Boeing 737-800 aircrafts we will be receiving this year, which will drive our 10% consolidated capacity growth. This capacity comes mostly from Copa Airlines and is being deployed in the form of new frequencies which we started adding in June before our high season, as well as additional frequencies we will be adding before year end.

Our consolidated ASM growth accelerated even more in the third and the fourth quarters. In fact, in the second half, we expect consolidated ASMs to increase by almost 16% on a year-over-year basis compared to only 4% in the first half of '09. This second half growth along with the incremental aircraft we will receive next year will result in even higher growth in 2011.

Again, in 2011, most of our capacity growth will come from Copa Airlines, while Aero Republica's growth will be focused on adding international capacity into Copa's hub in Panama, as well as more point-to-point international destinations from select Colombian cities.

As a matter of fact, we recently announced that in October, Aero Republica will be adding service from Bogota to Mexico City, and to Havana. Therefore, a smaller proportion of Aero Republica's capacity will be assigned to the Colombian domestic market. I should highlight though that even with a substantial capacity expansion in the second half, as well as lower unit revenue forecast for full-year, our 2010 operating margin is still expected to be above 19%, which will again, without a doubt, be one of the highest in the industry and significantly above our peers.

In terms of our future growth, the new Tocumen Airport expansion is on schedule to be completed in May of next year. Our expanded hub with 34 international jet bridges compared to just nine and eight in our competitors' hubs, will place us years ahead of the competition in terms of airport facilities and will allow us to strengthen even more Copa's Hub of the Americas as the best connecting point for intra Latin America travel.

I must emphasize the advantage this gives us in relation to our competition who face growth constraints going forward as a result of significant airport infrastructure limitations. On the economic front, condition seems to be in place for a continuous recovery. In fact, in July, the IMF increased its GDP growth forecast for the region from 4% to 5% making it the second upward revision it has given the region this year.

The highest growth rate will be seen in South America driven mainly by the economies of Brazil, Uruguay, Argentina and Peru. Panama's economy is expected to grow between 5% and 6% in 2010, higher than most countries in the region. Growth will be largely fueled by major projects like the Canal expansion and public infrastructure.

In fact, excluding the US$5 billion Panama Canal expansion project, between 2010 and 2014, the government pledged public investment of more than US$13 billion, 70% of which are infrastructure projects comprising public transportation, road works and ports among others. These investments will be facilitated by Panama's recently acquired investment grade rating, as both S&P and Moody's upgraded the country to investment grade in the second quarter.

Panama now has investment grade rating by all three major rating agencies. As you can see, the economic prospects for Panama in the region are very favorable, and there are plenty of growth opportunities ahead, which we are eager to take advantage of. So, to recap, our second quarter revenue performance, although affected by the Venezuela markets and Aero Republica domestic market competition, still placed us among the most profitable airlines in the industry.

For the second half of the year, we expect marginally stronger unit revenues than in the first half of the year on a significant capacity expansion, which will be the main driver of second half revenue growth. On the other hand, lower ex fuel unit cost mainly coming from the added capacity, should result in operating margin expansion and should allow us to come through with yet another year of outstanding financial results. Thank you. Now, I'll turn it over to Victor, who will go over our second quarter results.

Thank you Pedro and good morning everyone. Thanks again for joining us. As always, I join Pedro in thanking all of our coworkers for their hard work and dedication. Without a doubt, it is thanks to their efforts that we remain well positioned for another year of strong earnings.

With respect to our second quarter financial result, before getting into the details, let me first highlight some key points. During the quarter, consolidated passenger revenue increased 9% year-over-year on 5% capacity increase. In fact, Copa Airlines' passenger revenue increased 14% year-on-year on 6% capacity increase.

In addition, consolidated unit revenues increased 4% with Copa Airlines showing an 8% increase. Furthermore, our margins remained healthy, our balance sheet is strong and we continue to strengthen our hub as we deliver another year of double digit capacity growth.

Now turning to our second quarter financial results, adjusted net income came in at US$26 million or US$0.60 in earnings per share, which compares to last year's second quarter adjusted net income of US$28 million or EPS of US$0.64. This resulted in fuel charges of approximately US$7.6 million, mostly related to the mark-to-market of fuel hedge contracts. Including these charges, Copa Holdings reported a net income of US$18.6 million, which translates to EPS of US$0.42.

With respect to demand, revenue in passenger miles increased 12% year-over-year on 5% capacity growth leading to high and low factors at both Copa Airlines and Aero Republica. So, yields declined 2.5% year-over-year triggered by lower fares in Colombia's domestic market and Venezuela, high yields in the rest of the network together with a four point increase in consolidated low factor, resulted in a 4% increase in passenger revenue per ASM.

In terms of revenues, operating revenues for the quarter came in at US$303 million for a 9% year-over-year increase with Copa Airlines showing an increase of 15% on 6% capacity expansion, while Aero Republica's revenues declined approximately US$5 million on 1% capacity growth. On the expense side, operating expenses increased 12.5% year-over-year, while on a unit basis, cost per available seat mile increased 7%. Excluding fuel, unit cost increased 4% to US$0.074 mainly driven by a stronger Colombian currency, higher maintenance costs and expenses related to capacity to be deployed during the second half of the year.

Turning to our main operating expenses compared to the second quarter of '09, fuel expense increased 20% driven by a 16% increase in the respective price per gallon of jet fuel including the impact of realized hedges, and a 3% increase in gallons consumed resulting from capacity growth. Salaries and benefits increased 12% mainly as a result of capacity growth, a stronger Colombian currency and operating headcounts for capacity to be deployed during the second half of the year.

Passenger servicing increased 12% mostly due to an increase in passengers carried. Commissions decreased 4% due to lower average commission rates, partially offset by a higher passenger revenue base. Reservations and sales increased 2% driven mainly by a 9% increase in passenger revenue. Maintenance, materials and repairs increased 10% mostly as a result of timing or major overhaul events at additional capacity.

Depreciation increased 10% mainly due to additional aircraft and spares, flat operations, lending fees and rentals combined increased 10%, main driver being additional capacity and other operating expenses increased US$2 million. Other non operating income and expense, total [in] net non-operating expenses of US$10.4 million, consisting mainly of a net interest expense at US$6.3 million and a US$7.6 million charge, mostly related to a mark-to-market of fuel hedge contracts.

Turning to operating earnings, the Company generated operating earnings of US$32.5 million, which is US$4.3 million below last year's second quarter operating earnings. And the operating margin came in at 10.7%, which compares to 13.2% for the second quarter of '09. At Copa Airlines however, operating margins increased 3 percentage points year-over-year to 15.6%, driven by an 8% RASM increase.

With respect to our fuel hedges, during the second quarter, we had 28% of our volume hedged, using crude oil and jet fuel swaps that on average, [accrual in] price in the range of US$75 to US$80 a barrel. And looking forward, our hedge positions currently stand as follows. For the third quarter, 27% at an average accrual in price of US$81 per barrel, for the fourth quarter, 22% at an average of US$82, for full-year 2011, 25% at an average of US$76, and for full-year 2012, 10% on an average of US$83 a barrel.

Turning now to our balance sheet, by the end of the quarter, assets reached US$2.2 billion, owner's equity came in at US$877 million, and debt totaled US$981 million with the average [standard] rate for the second quarter including fixed and floating rate debt coming in at 3.3%. In addition, debt plus capitalized leases totaled US$1.3 billion at the end of the quarter. In terms of cash, we ended the quarter with US$359 million in cash, short term and long term investments, which represents approximately 28% of last 12 months' revenues.

Turning to our full-year guidance, we remain confident with the overall performance of our network and continue to project another year of strong financial results. However though we expect demand to continue strong throughout the network, we do not anticipate any improvements right now with regards to fare environment in Colombia's domestic market or Venezuela.

As a result, we are adjusting our guidance for the year as follows. Capacity remains unchanged from our previous guidance at plus US$10.9 billion or minus US$10.9 billion ASMs for a 10% year-over-year increase. We are reducing our full-year RASM guidance from plus or minus US$13.1 to plus or minus US$12.7 compared to US$12.6 in '09. We're maintaining our cap and ex-fuel guidance excluding special charges at plus or minus US$7.1, which compares to US$7.2 in '09.

We are also maintaining our consolidated load factor guidance at plus or minus 77% compared to 74.6% in '09. We have adjusted our full-year fuel price assumption from US$2.41 per gallon including into plane and net occurring hedges to US$2.35, and we're adjusting our operating margin guidance from our previous guidance of 20% to 22%, to our new guidance of 19% to 21% compared to our '09 adjusted operating margin of 19.4%. With that, I'll turn it over to Pedro for closing remarks.

Thank you, Victor. As you can see from our updated guidance, our expected operating margin for 2010 will place us once more among the most profitable airlines in the industry. Let me assure that this is not by chance. We have delivered extraordinary results year-after-year, and we do not expect 2010 to be any different. The fundamental strength of our business model and our competitive advantages are as strong as ever.

Looking ahead, we are confident we will still benefit from having the best hub for intra Latin America travel in a region where most markets need a hub, growing, underdeveloped and underserved markets, which will allow us to continue expanding in years to come, very competitive costs and a dedicated and committed team highly focused on continuously delivering and improving the world class customer service and operating metrics that our customers expect from us. Now, we would like to open up the call for some questions.

Thank you. (Operator Instructions). And we'll go first to Caio Dias with Santander Bank.

Good morning everyone. I have two questions on competition. First, regarding the situation in Colombia, you mentioned that you cannot anticipate how it's going to evolve in the coming months, the situation of the strong competition in that market. So, what about the Copa's strategy given the fact that competition could remain at this very high level, could you change, do you have flexibility to change the strategy maybe, reallocate capacity to other routes or other regions, or do you plan to keep exactly the same strategy and wait until the price environment improves?

And the second question is related to competition in Copa Airlines region. Given the fact that some players are increasing capacity to this region, for instance Goway is launching many new frequencies to the Caribbean. Do you think this could jeopardize your profitability or their capacity to this region or it's due to a small -- you keep the same strategy, or again, could you reallocate capacity in order to respond to this increasing competition?

Okay, thank you Caio. We're going to have to extend the Q&A session to two hours, but okay, first Colombia. It's a domestic issue, it's domestic competition with very low fares, and yes, we do have the ability to change our strategy. We could deploy that capacity somewhere else if it gets to that point. So far what we've been doing is emphasizing international growth out of our future growth.

In Aero Republica, it's internationally. We are not increasing our domestic presence. But in the future, if we needed to change that even further by deploying domestic capacity to international routes, we could do that, and we will do it if needed, if that's the better outcome for Copa Holdings. Right now, our domestic capacity is around 12% of total ASMs for Copa Holdings. Next year, it's going to be below 10%, again because of all the new growth being international. But yes, that could be changed.

In terms of Copa Airlines and the competitive environment, we have not seen major changes or major threats there. We have healthy competition, rational competitors, but we are strengthening our hub, we're strengthening our presence and we are maintaining the advantage we've had in the past. In the specific case of Go, what they're doing to the Caribbean, it's not really significant, it does not really affect us in a meaningful way.

Okay, very clear, thanks very much.

Thank you.

We'll go next to [Pygo Macruse] with BTG Pactual Bank.

Hi, it's actually Rodrigo Goes. I just have one question. With regards to your guidance for the year -- your revived guidance for the year, it still implies a significant improvement and profitability for the back half, margins pretty much at the operating line, need to go back to above 20%. What do you think are the biggest risks associated with this ramp-up?

Is it yields on the Copa segment, given that you do have a significant amount of capacity, new capacity come in on-stream in the back half. Are there any risks associated with all that capacity coming online? Is it the Colombian market, is it something on the cost side? Can you elaborate a bit on that?

Hi, yes, this is Victor. Well, yes, we are adding a lot of capacity in the second half of the year. If you look at it on a quarterly basis for the third quarter, the capacity going up 15% year-over-year, and for the fourth quarter it's going up 21%. At the end of the day, for the year versus '09 we're going up in capacity roughly 10%. So, it's not unlike other years that we've had of growth.

We're adding that capacity in markets where we've seen very high load factors and the performance of our flights is very strong. We feel pretty confident that we'll deliver decent yields during the back half, the second half of the year. The biggest risk, it remains Colombia, but I think we're contemplating that in our guidance already, and so are we with Venezuela.

So, the guidance we're providing, I think reflects the strength of our network. Again, the capacity we're adding is in markets where we need that capacity, where we've been spilling traffic. So, we should see a pretty good second half of the year.

Have yields in Colombia pretty much stabilized? I guess the comps get a little bit easier in the back half, but what's the situation currently?

The yields in Columbia, as you know in the domestic market specifically, as we now have taken a hit as a result of the low first strategy of (inaudible). It's a strategy that started towards the middle of the year last year. We are assuming in our guidance that those yields will be pretty steady.

We don't foresee even bigger drops, but we're also not foreseeing any recovering of those yields in the domestic market. You have to remember that in the third quarter, there is some seasonality. It's our high season, but despite our assuming that there's no major change in the yield environment, in the domestic market in Colombia.

Okay, very good. Thank you, Victor.

And we'll go next to Luiz Campos with Credit Suisse.

Hi, good morning everyone. My question is also regarding Colombia. Do you think the potential interest of land in that marketing in 2011 could pose even a bigger threat to yields going forward, given they're kind of [goal] was not only offering domestic flights, but also connecting intra region? Thanks.

I think that the ones that really need to worry about that are the other carrier in Colombia. I won't mention their name, but the largest carrier in Colombia. They really need to worry about that. We -- the domestic market has already been trashed, so it cannot get worse, and we are not growing in that domestic market. And as I mentioned in a previous call, we can even redeploy that capacity if it gets to that.

In terms of international connectivity, we have a very, very strong hub in Panama with the infrastructure to keep them growing. That is non-existent in Colombia, there is no infrastructure. So, they're going to have to, I guess, share capacity, share routes, who knows, with the incumbent airline. So, if we were the incumbent, the large Colombian airline, maybe we would worry, but we have our strength in Panama, and we don't see a huge threat to that.

And just to add to that, it's Victor. Again, to emphasize the point that Pedro just made, in terms of infrastructure we already have a big advantage. With respect to the capacity at Tocumen Airport, our hub, with 22 gates, which is going up to 34 gates by next year, and that compares to nine gates in El Dorado, in Bogota, and which is actually being expanded to 14 or 15 gates in the next two years. So, by then, we'll have probably more than 34 gates. So, we have a huge advantage in terms of infrastructure.

Okay, thank you.

Thank you. We'll go next to Jim Parker with Raymond James.

Good morning guys, just a question on Venezuela. I'd like to know the progression since the devaluation in January, what has been the progression of the revenue? Has it been rebuilding, and does it remain a profitable market for Copa?

Jim, this is Pedro first, so I'll talk in general terms and then let Victor give you more details. But the real issue with Venezuela in this quarter are its comps versus Q2 '09. What happened, obviously the currency devaluated by 40%, 50%, and that not only affected our translation into dollars, but the demand came down by a significant percent also.

But again, we're comparing against what was an extremely strong Q2 '09 for Venezuela. We see in the future that market, where it has already stabilized, and it's not our worst market. It might not be our best as before, but again when we compare it to '09, it's where we see the big difference. I'll let Victor maybe give you a little bit more details.

Yes, Jim, good morning. Yes, I won't comment on specifics with respect to Venezuela yields and load factors other than say that they remain still healthy. And like Pedro said it's a comp issue. They were super high last year, they're healthy this year. Directionally, first quarter, the devaluation took place in January, and it wasn't until late in the first quarter, and then second quarter that you actually had the impact on demand.

And I would say that directionally third and fourth quarter, we're not expecting any improvement in the fare environment or demand environment from Venezuela. And just to give you a little bit of additional information, in terms of fares, we saw a drop in fares in the second quarter, quarter-over-quarter in the neighborhood of 6% to 8%.

So, if only we'll remain like that for the remainder for the year, and that's what we're -- that's the assumption we're working under. We don't believe it's going to get any worse, and maybe we'll have a little bit of upside, given seasonality, but our guidance reflects what we saw happen in the second quarter with respect to demand in yields.

Okay, and Victor, how much is your capacity down now versus prior to devaluation, because I believe that you've now down gauged in some aircraft size.

Sure. If you look at on a year-over-year basis, our capacity is roughly down 20%, and basically a function of down gauging. We pretty much kept our presence and frequencies intact, but year-over-year, we were down, in terms of ASMs it's roughly 20%.

Okay, thank you.

Thank you.

We'll go next to Stephen Trent with Citi.

Hi, good morning gentlemen.

Good morning.

I just wanted to get my hands around the second half of the year versus 2Q itself. If I am understanding you correctly, it seems like in the second quarter, maybe you had some upfront type costs related to fleet growth, and then in the second half of this year, one can argue that you could enjoy some fixed cost dilution, which seems to be behind the margin improvement that you're telegraphing. I just wanted to run that by you to make sure my view is not screwy or that sounds reasonable to you?

Hi Steve, it's Victor. No, absolutely, that's what's happening. You're adding a lot of capacity in the second half of the year, so you have been seeing dilution of overhead costs. As I mentioned earlier on, we had some salary wages and benefits cost in the first and second quarter related to capacity, and that was going to be -- or it's going to be deployed in the third or fourth quarter.

So, you'll see some efficiencies there, and you also have some maintenance events that are heavier in the first half of the year versus the second half. So, you will get some efficiencies there too in terms of ex-fuel CASM. So, that's what's really driving the lower CASM in the second half of the year.

Got you. Well, I will stick to your request with one question here, but congratulations on your transparency there. It seems like some of your competitors seem very eager to write stuff off as one time events and glad to see you are not doing that. Thank you.

Thanks Steve.

And we'll take our next question from Bob McAdoo with Avondale Partners.

Hi, good morning. I was just wanting to go back to Colombia just for a moment to make sure I understand what you said or what all the other questions have brought out. And the point that I'm trying to understand is, are you saying that what [IES] has done already, when you say it's trashed the system, does that mean that they are virtually covering your entire domestic Colombian system, so there really aren't any routes left for them to reduce the yields on? Is that what we should say, that really it is as bad as it can get there?

That is correct. They are covering every market, and have taken yields as low as they can go. So, we do not -- as Victor mentioned, it's Pedro -- as Victor mentioned, we are not forecasting an improvement, but we don't see it getting worse either.

Is there a cost structure as such, as you understand it, to be able to support these low prices on an indefinite basis or is this a typical new entrant that is burning up someone's equity trying to make their way into the marketplace?

That's a good question. They do have better cost, better unit costs than other airlines in Colombia, given that they've grown fast over a much smaller overhead organizational structure, and they have high density 737s, 73s with no business class et cetera and more direct distribution, so they do have better cost.

We do not see them so far covering their cost given their load factors, which were high during high season, but not nearly as high as needed during low season. That does not mean that with time, those load factors won't improve. So, I think the judge is still out.

Okay, that's really all I had. Thank you very much.

Thank you.

Thank you. (Operator Instructions). And we'll go to Augusto Ensiki with Morgan Stanley.

Hi, it's a question regarding Aero Republica. I'm sorry if this has already been answered, I came in partially through the call. But I noticed that breakeven load factor for Aero Republica has kind of spiked up recently at 74% first quarter, and this quarter was around 83%. What's the main driver for Aero Republica cost, and is this the kind of level that you're going to have going forward or will that be going down? Thank you.

This is Victor, Augusto, and thank you for your question. Well, definitely it has to do with the yield environment that we're seeing in domestic Colombia. And as I mentioned earlier, we're not expecting any improvement in that yield environment at least for the remainder of the year. So, we wouldn't expect that breakeven load factor to improve significantly from that to December. So, absolutely it's the yield environment in domestic Colombia, driving that breakeven load factor.

So, if I may just ask a little bit more, then as you say you're focusing Aero Republica to expand international, is there -- when will that begin to help the yields for Aero Republica?

We would expect that next year as we continue increasing the international presence. And I should remind you that when we acquired Aero Republica, 100% of the capacity was domestic Colombia. Today, almost a third of the capacity is international, and we're going to continue on that road. So, I would expect that by next year, we should see the impact of those international yields benefiting the Aero Republica's segment P&L. Certainly, for this year we're assuming the pretty much steady state, and that's reflected in our guidance.

Great, thank you very much for that.

Thank you. We'll take a follow up from Stephen Trent with Citi.

Hi guys. Just one other thing also speaking about competition, we'd noted that Mexicana Airlines, for several months, had been offering some pretty aggressive fares on the Panama to Mexico route. I don't know off the top of my head if they also have offered similar fares on Panama to Guadalajara, Panama to Cancun. I was wondering if you might have any comments with respect to the potential for some capacity to come out of those routes, and how this has perhaps factored into 2010 guidance.

Yes, this is Pedro, Stephen. We run very high load factors in our Mexican routes. We serve Mexico City twice a day, Cancun twice a day and Guadalajara once a day. There would be a little bit improvement in Guadalajara where we have room, but in Mexico City, we basically have very little room for load factor improvement.

We fly full and we've been able to keep our healthy yields in spite of Mexicana's promotions, again, due to our load factor. So, we don't see a big change there. And in Cancun, we have no competition from Mexicana, so that's not going to change. So, we are not impacted in either way in a significant way from Mexicana reducing capacity or going away altogether.

Okay, very clear. Thank you, Pedro.

Thank you. Okay, thank you. This concludes our second quarter earnings call. Thank you all for being with us, and as always, thank you for your continued support. We look forward to having you at our third quarter earnings call. So, have a great day, have a good weekend.

That does conclude today's call. Thank you for your participation.