Copa Holdings SA (CPA) 2011 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to Copa Holdings third-quarter 2011 earnings call. During the presentation, all participants will be in 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 on November 9th, 2011.

And now, I'll 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 third 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 our third quarter highlights followed by Victor who will discuss our financial results. Immediately after, we'll open up the call for questions from analysts.

Copa Holdings third quarter financial results have been prepared in accordance with International Financial Reporting Standards. In today's call, we will discuss non-IFRS financial measures. A reconciliation of non-IFRS to IFRS financial measures can be found in our third 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 intentions regarding future events and results. These forward-looking statements involve risk and uncertainty that could cause actual results to defer materially and are based on assumptions that are subject to change. Many of these risk and uncertainty are discussed in our annual report filed with the SEC. Now I'd like to turn the call over to our CEO, Pedro Heilbron.

Thank you, Joe, and good morning, everyone. I'm glad you could join us this morning for our third quarter earnings call. As always, my gratitude and recognition goes out to our co-workers for delivering another solid quarter, in which strong underlying demand together with a considerable capacity expansion led to outstanding revenue and earnings growth.

Among the main highlights for the quarter, demand continued on a very positive trend with passenger traffic increasing 22% for the quarter. Our consolidated load factor came in at a very healthy 77.1%, even more so when you take into account our year-over-year capacity growth which was near 20%.

Operating revenues grew more than 30%, driven by higher year-over-year load factors and yields in both our international and domestic markets. Our strong revenue performance along with a slight year-over-year reduction in ex-fuel CASM allowed us to deliver outstanding third quarter revenues and earnings, as well as one of the best operating margins in the industry.

On the operational front, we went through a full quarter operating under a new six-bank hub structure and the results have been quite positive, both from an operational as well as from a product standpoint.

The implementation of our six-bank hub, it's allowing us not only to better utilize the Tocumen Airport infrastructure, personnel and equipment, but it's also allowing us to provide our passengers with more and better flight options through the addition of more destinations and frequencies, as well as permitting significant schedule improvements throughout our network.

We also marked the first full quarter since the launch of four new destinations last June 15. I'm pleased to say that so far the performance of these new destinations, Toronto, Porto Alegre, Brasilia and Nassau have met or exceeded our original expectations.

Next month we will continue to strengthen our hub of the Americas, the leading hub for intra-Latin American travel, by adding service to five new cities; Chicago, the third largest city in the US; Monterrey, Mexico, an important business and industrial center which hosts a large number of Mexican and multinational companies that do business in our region; Asuncion, the largest city and capital of Paraguay; Montego Bay, Jamaica, our twelfth destination in the Caribbean; and Cucuta, an important commercial center with limited access to the region and our ninth city in Colombia.

So by year's end, our network will serve 59 cities in 28 countries in the Americas, by far the most complete and convenient network for intra-Latin American travel.

Also on the operational front, during the third quarter we took deliver of five Boeing 737-800s. As a result, our fleet at the end of the quarter stood at 71 aircrafts; 45 Boeing NGs and 26 Embraers 190s, with an average age of less than five years. In addition, in October we took delivery of our ninth 800 this year and with one more delivery scheduled in November, we expect to end the year with a fleet of 73 aircrafts.

For the quarter, Copa Holdings reported on-time performance of 91.3% and a flight completion factor of 99.6%, which once again places us amongst the best in the industry. In short, we had a great quarter financially and operationally. And as you can see from our recently released October traffic figures, where international traffic grew more than 20% year over year, demand trends continue to be favorable in the fourth quarter.

Our 2012 growth plan incorporates several new destinations, as we continue reinforcing what is currently the most complete and convenient intra-Latin America network. We will also keep working on product and cost initiatives that would further improve our long-term competitive position.

Going forward, the continued growth of our operations will be facilitated by the conclusion of the Tocumen Airport north terminal expansion in December of this year. As you know, the north terminal will add 12 new jet bridges to an already superior airport infrastructure, which along with our newly implemented six-bank hub will allow us to continue expanding without gate constraints for several years.

We're also working on several initiatives to improve our passenger experience and consolidate our leadership as the preferred airline for intra-Latin America travel, to mention a few, the introduction of the Boeing Sky Interior in all of our new deliveries this year. We now have nine of these aircrafts in our fleet. The opening of new Copa clubs in Santo Domingo and more recently in Guatemala, the introduction of our mobile website and electronic boarding passes earlier this year and our expectant entrance into Star Alliance by April 2012.

On this front, we recently expanded our code-share with United and are working on implementing code-shares and frequent flier reciprocity with other Alliance members.

On the economic front, the prospects for Latin America and for Panama in particular continues to be quite positive. As a whole, the region's GDP is expected to grow above 4%, while Panama is expected to have another year of strong economic growth and is expected to be the fastest growing country in Latin America during the next five years, as the country consolidates itself as one of the most important business hubs in the region and benefits from strong public and private sector investment.

Aside from achieving investment grade crediting rating last year, the US Congress recently approved a long awaited trade promotion agreement with Panama, which will strengthen the ties between both countries by promoting trade, consolidating assets to goods and services and favoring private investment between both nations. As such, we believe the economic environment and demand both in Panama and the region continues to favor our medium-term expansion plans.

So to summarize, we're very pleased with our third quarter results and how our business model keeps delivering industry leading profit margins and growth throughout the business cycle. We continue to operate in a favorable demand environment where passenger traffic continues to grow. Our team continues to execute and deliver a world class product. We maintain an extremely competitive cost structure, and last but not least, we're driving the necessary initiatives to maintain the loyalty and preference of our passengers.

Thank you. Now we'll turn it over to Victor, who will go over third quarter results.

Thank you, Pedro, and good morning, everyone. Thanks again for joining us. First and foremost, thanks again to our co-workers for their hard work and congratulations on another outstanding quarter.

This morning we are reporting another quarter of strong growth for Copa Holdings as we expanded our fleet by adding five new aircrafts, grew capacity in terms of ASMs by more than 19% year over year, increased revenues by more than 31% year over year and 11% on a quarter-over-quarter basis, and more importantly, increased year over year underlying net income by 44%.

Underlying net earnings for the quarter came in at $90.1 million for reported net income, which includes a $19.8 million fuel hedge mark-to-market loss, came in at $70.3 million versus last year's reported net income of $31.5 million. Third quarter proved to be another quarter of strong traffic growth as RPMs increased almost 22% year over year, leading to a 1.6 percentage point increase in consolidated load factor, which came in at 77.1%.

Strong demand also resulted in higher yields as yields increased 9% year over year, driving unit revenues up by more than 10%. On the expense side, third quarter operating expenses increased 30% year over year while costs per available seat mile increased 8.8%. Excluding fuel, however, unit cost decreased close to 3% year over year to $0.66, mainly as a result of capacity growth and a 13% increase in average stage length.

With respect to our main operating expenses compared to the third quarter of 2010, fuel expense increased 59% as a result of increased capacity and a 38% rise in the effective price per gallon of jet fuel. Salaries and benefits increased 21%, mainly due to additional headcounts driven by capacity growth.

Passenger servicing increased 19%, mostly as a result of a 17% increase in international departures. Commissions increased 29%, for the most part due to a higher passenger revenue base. Reservation and sales increased 23%, the main driver being an increase in passenger revenue. Maintenance, materials and repairs decreased 4%, mostly as a result of timing of engine maintenance events. Depreciation increased 17%, mainly due to additional aircraft and spares. Flight operations, landing fees and rentals increased 13%, mainly as a result of additional departures and block hours, and other operating expenses increased approximately $400,000.

Moving on to operating earnings, consolidated operating earnings for the third quarter came in at $102.2 million, approximately 38% above Q3 2010, with our operating margin coming in at 21.4%, a 4 percentage point above last year's third quarter operating margin.

Looking at non-operating income and expense, Q3 generated a net non-operating expense of $27.5 million, mainly consisting of a net interest expense of $6.3 million and the fuel hedge mark-to-market loss of $19.8 million. With respect to our fuel hedges, during the third quarter we had 24% of our volume covered, approximately one-third of which was through jet fuel swaps at an average of $1.83 per gallon and another two-thirds covered with crude oil swaps at an average of $87 a barrel.

In addition, we currently have in place the following coverage. For the fourth quarter of this year approximately 27%, a third of which was covered using jet fuel swaps at an average of $1.83 a gallon with the remainder covered using crude oil swaps at an average of $84 a barrel.

And with respect to 2004 and 2013, we surely have hedges for 20% and 10% of our projected consumption respectively, using crude oil swaps at an average equivalent price of $86 a barrel for 2004 and $88 a barrel for 2013.

Turning to our balance sheet, we ended the quarter with $2.9 billion in assets, owner's equity reached $1.2 billion and debt plus capitalized leases totaled approximately $1.4 billion.

In terms of debt, we closed the quarter with $1.1 billion in bank debts, 58% of which is fixed rate debt, with the blended rate including fixed and floating rate debt coming in at 3%. With respect to cash, we ended the quarter with $503 million in cash short-term and long-term investment, which represents approximately 30% of last four months revenues.

So in summary, we had another outstanding quarter both operationally as well as financially speaking. We're looking at another year of strong financial result and we continue to be well positioned for the future.

In terms of our guidance for 2011 considering the strong performance of the Company up to the third quarter, we're updating our guidance as follows. We are maintaining our capacity forecast at a plus or minus 21%. We're increasing our load factor guidance from plus or minus 75% to plus or minus 76%.

We're maintaining our RASM guidance at plus or minus $0.137. We are keeping our CASM ex-fuel guidance at plus or minus $0.67. With respect to fuel, we are reducing the effective price per gallon for the year from $325 to $311, and in terms of our operating margin we're now narrowing our guidance from a range of 19% to 21% to approximately 21%.

In addition to that, we're also providing preliminary guidance for 2102 based on our operational plan and demand outlook for the year. As such, we expect another year of strong growth as ASMs are expected to increase plus or minus 20% year over year. Load factor is expected to come in at plus or minus 74%. We're currently projecting a RASM decrease of approximately 7% to plus or minus $0.129, driven by a 4% increase in length of haul.

We expect ex-fuel CASM to decrease by 3% to $0.65, mostly as a result of economies of scale driven by the 20% ASM growth. Based on current fuel costs, we are assuming a year-over-year drop in the effective price of jet fuel from $311 to $305, and we're expecting operating margin to come in between 18% to 20%.

Thank you very much, and with that I'll turn it over to Pedro for closing remarks.

Thank you, Victor. Now we will open up the call for some questions.

Thank you. (Operator Instructions)

Luiz Campos, Credit Suisse.

I have a question related to the October traffic data. I just wanted to have your view whether you think that the, let's say, deceleration in growth we saw in October could put at risk your guidance that you're giving for 2012? So if there is any risk at all, that the 15% growth in RPKs slows down even further towards the end of the fourth quarter maybe with a weaker economy? And also, how you're seeing your -- the booking starts year end and beginning of next year.

Okay, this is Pedro. First -- well, first of all, I should say that we are giving preliminary 2012 guidance after obviously having October under our belt and being very aware of our projections, so that guidance reflects everything we know as of today. So we're comfortable with it.

I should also say that international traffic in October for Copa Holdings grew 21%. So obviously 21% traffic growth is quite significant and quite healthy, and advance bookings look pretty good right now. So we're confident that we're giving you as of today the best guidance we can.

Lewis, this is Victor. Let me just add to that. Also, when you look at the economic data out there for our region, the region is expected to have pretty decent economic growth in 2012. In fact, I think Pedro mentioned during his script that it's expected to grow at 4% average and Panama is expected to have another great year in terms of GDP growth. Panama this year is growing at a pace of 8% to 9% and next year is expected to be up there again and probably the fastest growing economy in the region.

And obviously, that all is conducive to a healthy traffic environment and we expect to benefit from that. So just to reiterate what Pedro is saying, we feel pretty comfortable what the guidance we're giving for the rest of this year and for next year.

Okay. Thanks.

Michael Linenberg, Deutsche Bank.

This is actually Katherine O'Brien filling in for Michael Linenberg. I just had a couple of questions, actually a follow-up on the October monthly traffic.

We noticed that your loads are off by about 5 points, yet you raised your 2011 load factor guidance by about a point. We're just wondering if October is looking like maybe an anomaly or do you think there's like a greater trend of customers trying to pushback against fare increases in the face of rising oil?

Well, I think first of all, when you look at October year over year, October last year was kind of a neutrally high. So you have a tough comp there. Secondly, when you look at October this year in terms of growth versus September, you have an additional 5% ASM growth.

And thirdly, to answer your question in terms of whether we're seeing customers pushing back, not really. I mean, again, like Pedro said, you're having 21% growth in the international route at very healthy yields. When you look at the yields year over year this year, they're extremely healthy -- higher than last year despite the fact that length of haul is higher by 13%.

So we don't see anything out there that will be indicative of any pushback or any inflection point in terms of demand decreasing or pushing back. Actually, we see it the other way around. We see pretty healthy demand out there and forward-looking bookings are looking pretty healthy. So we should have a very healthy fourth quarter and hopefully carry that over for next year.

Okay, great. If I could just ask one more on your 2012 guidance, looks like it implies a 7% decrease year over year in RASM, and I know you guys started the capacity growth in 2012 - that's kind of a factor of that, but in 2011 your capacity grew by about a similar amount and yield looks -- RASM rather looks like it's going to be up around 6% this year.

We're just kind of wondering if you're worried about the macro backdrop going to 2012, maybe some competitive capacity coming in. And on the competitive capacity, if you could just give us a little more color on where you might see some of that growing or by how much? That will be great.

Yes. Let me address the first one and then I'll turn it over to Pedro. But in terms of what we're seeing for next year, I think first of all we need to keep in mind that we're projecting full year -- in the fourth quarter of 2011 we're trying to project full year 2012. So that makes it kind of difficult. We have limited visibility.

And as we mentioned in previous calls, we will tend to be a little bit on the conservative side when we're generating or providing the market with preliminary guidance for the following year this early on. And I think you saw that back in the fourth quarter of 2010 when we're looking at 2011 and then we adjusted as we executed our plan throughout the year. I'm not saying that we're going to see the same increase in RASM every time we have an earnings call next year, every quarter.

But if the question is, is there upside? I think that's a fair statement. There could be upside as we get closer to the year and we see advanced bookings coming in and we have more visibility into 2012. And again, as I mentioned in the previous question, the good news is that everything out there indicates that it should be a healthy year in terms of demand because the economies are doing quite well, especially Panama.

And I'll address competition -- and I should say also we have length of haul issues -- not issues, but as we grow into longer haul destinations, that's how it's going to be affecting our yields and our RASMs. But we are not projecting or expecting any significant changes from what has been going on lately in terms of competition.

I think everybody is being pretty rationale and there is growth but there's also a lot of growth in Latin America, and that Latin American growth is providing a market for everybody to benefit from. So we don't see anybody putting irrational capacity or more capacity than what the market can take. So, no, we're not factoring any major changes from the standpoint of competition.

Okay. So kind of an under promise, over deliver on the 2012 guidance?

You said that.

Okay, great. Thanks. Great quarter, guys.

Thank you.

Jim Parker, Raymond James.

I still don't understand why the load factor in October is up 3.9 points, and you've had strong capacity growth for like the past six months and actually you've been showing increases in load factor for most of them. So there's a little bit of a mystery.

And I wonder if -- again, on this competing seat issue, if more seats are coming into your markets from Bogota and Lima. But I don't understand why load factor is off almost 4 points all of a sudden in October?

Jim, again, I don't think -- I mean, it's -- October was a month where we -- you're talking about October, obviously, a month where international traffic grew 21%, which is not insignificant. And you cannot judge a year or a future by one month. And again, it's a month of 21% growth, which is significant.

And we -- but I should also say that we do not manage load factor on a month-to-month basis, even on a year-to-year basis. We're managing RASM and we're managing bottom line results. We're managing EPS more than load factors alone. So I would not make a big deal out of a month where we grew 21% in traffic, but load factors dropped somewhat.

And just to add to that, Jim, again we're estimating operating margin to come in at 21% and next year's expectation for operating margin is to be where we've been in the past five years, 18% to 20%. So given all the information that's out there and the advanced bookings we're seeing, so, like Pedro said, I would not take October and make a bigger deal than it is, especially when you grew traffic 21% in the international markets.

Okay. Regarding the competing seats issue -- I don't know -- would your bookings give you any indication of what's going on in the first quarter, because it appears that there are substantial increases in competing seats from Bogota and Lima coming into markets that are in line where they're north of Panama?

So I'm curios, does your first quarter -- are you able -- do they tell you anything -- bookings tell you anything about the first quarter or what is the competitive seating? Have you done that analysis to see what's coming into your markets from Bogota and Lima?

I could say two things. In terms of bookings, directionally I could say that it all looks fine. We have no warning signs and nothing looks out of place, so it looks perfectly fine.

And the competitive fleets into our markets, I would not call them significant. I don't think there's anything significant. For sure there's nothing irrational and there's nothing there that the market cannot absorb. And we have a strong enough network that we have options, and we're growing ourselves because we see an opportunity. So there's nothing out there that raises alarms -- alarm bells, at least not in our books.

Okay. Thank you.

Thanks, Jim.

Eduardo Couto, Goldman Sachs.

My question is also on the guidance for next year, especially in terms of the yields. Basically, you guys are assuming that yields will go down a little but you said that there is the effect of the longer haul. So if we exclude this impact, can -- what sort of yield are you expecting versus -- next year versus this year? Can you assume that yields will remain flat, will go down less than this 3% to 4% that is implied on the guidance?

And the second question is, if we saw -- if we see higher fuel costs next year considering this second year of strong capacity additions, do you still believe that you're going to be able to offset that through higher yields? That's pretty much the question for next year yields.

Hi, Eduardo. This is Victor. I'll take the first part of the question and then I'll let Pedro answer the second part. But the short answer to your question about yields and how they look for next year if you take out the difference in length of haul, the short answer is they're pretty steady. They're basically flat. So the yield decrease that you see year over year is driven by and large by the difference in stage length or length of haul, which is about 4% to 5% -- 4% to 5%. So otherwise, it will be pretty flat.

And in terms of covering higher fuel prices next year, if that would happen -- it's not what we're projecting. We're actually projecting fuel prices to be slightly lower than the current fuel costs. But it's hard to say. If fuel goes in the opposite direction, if it goes up -- in the past we've been able to cover the difference. We've been able to do it this year again, and I would hope that we will be able to do it next year. And if fuel goes up, it means that the economies are probably doing very well and that should allow us to cover that. But it's too early to tell.

Okay. And just another question, guys, in relation to the CASM ex-fuel, because the yields is going down because of the, as you said, mostly because of the longer haul, but the CASM ex-fuel is pretty much -- it's going down, I would say, less for next year. Is there any reason for that?

Actually, it is going down. It's going down from $0.67 to $0.65, ex-fuel CASM. So if the question is why doesn't it go down, why doesn't it go down more? Next year we are returning three aircrafts, leased aircrafts. So you incur a little bit higher maintenance cost on a year-over-year basis. So that's probably the biggest reason why you wouldn't see that $0.65 maybe be $0.645 or something like that.

But otherwise, when you look at a $0.65 ex-fuel CASM number that we report and you compare that to other carriers out there, you're talking about an ex-fuel CASM that's approaching or much in line with low cost carriers. So extremely efficient, extremely competitive, and despite the fact we are a full-service product airline.

Okay. Thank you guys. Congratulations on the results.

Thank you.

Thank you.

(Operator Instructions) Dan McKenzie, Rodman & Renshaw.

A couple of questions here. What percent of your markets do you have fewer than 20 passengers per day? If I'm not mistaken, I believe that stat is moving around a little as you continue to add new flights.

Hi, Dan. This is Victor. Yes, I think the question is, in what percentage of the markets we move 20 passengers or less each way per day. Something like that, right?

Yes, exactly. Thank you.

Yes. The number has been above 70%, closer to 75% for as far as I can remember for the past five years, and this year it's around 74% or so. So it hasn't changed much.

Okay. Very good. And then, Pedro, I know you are very well plugged into the local business community, and I'm wondering if you can help us peel back the onion on what the new free trade agreement really means. Yes, obviously it sounds great at 30,000 feet, but beyond what exists today what scuttle, if any, are you getting on more businesses opening up shop in Panama as a result of the free trade agreement?

And then, I guess related to this, if we're not seeing anything today that really stands out as Panama becomes more attractive -- more of an attractive place to do business, is it simply a question of timing?

Yes, I think Panama, as you well know, it's booming right now. It's running on all cylinders and it has becomes the premier business center in Latin America, home to many regional offices of multinational companies. There's large public and private investment. The Panama Canal expansion. The ports are expanding. There's a new metro system, a subway system being built.

And so the free trade agreement, the trade promotion agreement with the US, is another piece in a very successful puzzle called Panama. I don't think we're going to see immediate reports -- results. Panama is not an export -- an industrial exporting country that service its economy.

But when you think of a canal that's expanding, a country that's right in the middle of the Americas and it's a major business center, this treaty not only adds to the prestige and image of Panama, but it could allow companies, for example, that have goods transiting the canal from Asia to the US, for example, do part of their work here in Panama, do part of the assemblies, take advantage of the treaty with the US.

I think it's just fits the economic model of Panama very well. And even though maybe we won't see specific immediate results, Panama is growing around 10% this year and again it's just part of a winning formula that's going to make sure that Panama keeps on growing and keeps down this very successful path that it's on right now.

Yes. Thanks, Pedro. I wonder if I can just follow-up on that a little bit. Do we by any chance know what percent of the Fortune 500 companies do business in Panama today or are domicile in Panama? And I guess kind of what I'm getting at, is there some way to benchmark this corporate activity that should grow incrementally as a result of this agreement.

Yes. We don't have that figure. We could probably get it. But there are more than 120 multinationals that have their regional base in Panama. Some like Procter & Gamble have more than 700 expatriate executives. They moved offices from three different countries here in Panama. You have Caterpillar, you have Dell. I mean, you have all the -- many of the big worldwide multinationals here.

And again, this trade promotion agreement might make a difference for some of them. It maybe not -- it may attract other companies that are not doing major business in Panama today will be attracted and they may set up the shop here. But again, it's a piece in a winning formula for the whole country, more than I think a single initiative that's going to have a great impact.

Okay. Thanks very much. I appreciate that.

Duane Pfennigwerth, Evercore Partners.

This is actually Steven Lee filling in for Duane. I just have one quick question. Just curious on what the foreign currency impact was on RASM growth for the third quarter and what your outlook is specifically for 4Q?

Yes, for the third quarter there wasn't anything significant. I mean, when you look at the currencies versus the second quarter, they didn't change much. On a year-over-year basis, you did have the Colombian peso that came down a little bit in value and the Brazilian real, but if there was a change to it on a quarter-on-quarter basis, it wasn't that significant. So the impact is not material. The net impact is not material.

Great. And can you make any commentary on 4Q at all?

On 4Q what we're seeing is the currencies strengthening slightly from what we saw in the late part of the third quarter, and for 2012 it's difficult to say. We've seen some volatility in some of currencies in the region, but I don't think anybody is right now expecting any significant change with what we've seen in the 2010-2011 year.

Great. Thank you for your time.

Thank you.

Stephen Trent, Citi.

Just a couple of quick questions from me. Looking at I guess this noise on the October 2011 load, is it fair to say that the year ago comp September, October 2010 was a somewhat unusual comp given what AIRES was doing in the Colombian market? And that's my first question.

It's hard to say. When you look at October 2010, the load factor came in, if I'm not mistaken, above 81% or so. So you're comparing against a load factor last year that's unusually high. So I think that's part of the reason.

And again, like Pedro mentioned, I think in our business model to focus strictly or overly focus on load factor is not prudent, because at the end of the day we managed RASM and we have reaffirmed our RASM guidance for this year. And actually, we're providing a RASM guidance for next year that puts RASM at the same level of this year when you adjust for length of haul. So I think to give too much importance to October's load factor without taking into account all the other factors is probably not the best way to look at October.

And you are right, Stephen. This is Pedoro. That's why I've been emphasizing the international traffic growth of 21%, because in effect Colombia had all kinds of promotions in October of 2010, which increased the load factors to really not normal levels for October in the Colombian domestic market. This year fares are much better. But, yes, load factor were slightly down.

Fair enough, guys. And that seems consistent with what we are seeing on this end. And just two more questions if I may. One, as we look into 2012, any sense as to what could be the opportunity for incremental revenue generation as you fully join the Star Alliance? And any sense as to what we could see there or even if you are incorporating any incremental revenue generation in your 2012 guidance?

Right. We obviously expect revenue increments from Star Alliance and it's one of the main reasons one would join a major global alliance. We usually don't work into our numbers those expectations. And at first, it takes time for that to spool up and materialize. And we are going to join in April, so we are not -- we're not building into our numbers any significant revenue increase from the Star Alliance. But we would expect something throughout the years.

It's fair enough. Thanks, Pedro. And just one more question and I will let somebody else ask. When I think about the Tocumen Airport hub, any color, roughly speaking, as to what percentage of your passengers either have Panama as the point of embarkation or the point of disembarkation versus, let's say, the Colombia domestic and your in-transit passengers?

Well, in terms of the hub, you could -- in very broad way, we're talking 50/50.

Perfect. That's it from me and -- that's perfect, and that's it from me, guys. But thanks again.

Thank you, Stephen.

Bob McAdoo, Avondale Partners.

Congratulations on a nice quarter. I'm just curious -- excuse me, about how the Toronto service is doing because it is your first shot in Canada, and I'm asking when do you start Chicago? And obviously, that's with the code-share. Is the code-share -- did you say the code-share is already in place for United, so that when you start Chicago you've got the ability to feed for the northern part of the United States into that Chicago flight?

Hi, Bob. It's Victor. Toronto is doing fine. Actually, it's a little bit better than we had expected. So we are very pleased with the service and we are looking forward to eventually increasing frequencies to Toronto.

So that's a flight that's actually doing pretty well. In terms of when Chicago is starting, that's in the fourth quarter in December.

15th.

On the 15th of December. And that's another flight that we are looking forward to do quite well. It's not easy to visit Chicago from the region, so that should be a good flight. And yet, we announced recently the code-share with Continental United, so all that helps.

So the United -- the technology to make the United code-share go into place on the day you start the Chicago services, that technology is up and running and not a problem?

Actually --

Is that right?

Yes. I mean, the code-share is already implemented, so if you are going in our website or United's website you can actually book that flight under the United code or the Copa code, either one.

Okay. Thank you. That's great. Just curious.

Thank you, Bob.

Thanks, Bob.

Thank you. And I'm showing no further questions at this time.

Okay. So this concludes our third quarter earnings call. As always, thank you for your continued support. As I mentioned before, we have good expectations for the fourth quarter and feel we're very well positioned to continue delivering industry leading operational and financial result in 2012. So thank you all for being with us and have a great day.

Ladies and gentlemen, thank you for participating in today's conference. This concludes our program for today. You may now disconnect and have a wonderful day.