Copa Holdings SA (CPA) 2023 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to Copa Holdings First Quarter Earnings Call. (Operator Instructions) As a reminder, this call is being webcast and recorded on May 11, 2023. Now I will turn the conference call over to Daniel Tapia, Director of Investor Relations. Sir, you may now begin.

Thank you, Felicia, and welcome, everyone, to our first 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 first 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.

Thank you, Daniel. Good morning to all, and thanks for participating in our first quarter earnings call. Before we begin, I would like to extend my sincere gratitude to all our co-workers 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.

Today, we're pleased to report strong results for the first quarter and a solid outlook for the year. Despite the continued high fuel prices in the quarter, we were able to deliver an operating margin of 22.3%. These results were mainly driven by a robust demand environment in the region, which led to an improved load factor as well as an increase in passenger yields during the quarter.

Among the main highlights for the quarter, passenger traffic grew 7.1% compared to the same period in 2019, outpacing our capacity growth of 2.8%. This resulted in an 86.8% load factor, a 3.5 percentage point increase compared to Q1 2019.

Passenger yields came in at $0.146 or 20% higher than the first quarter of 2019, while cargo revenue was 52% higher, resulting in unit revenues, or RASM, of $0.131, a 25.5% increase compared to the first quarter of 2019.

On the cost side, our unit cost excluding fuel came in at $0.062 or 2.1% higher compared to Q1 2019. As a result, our operating margin came in at 22.3%, 5.5 percentage points higher than in the first quarter of 2019.

On the operational front, Copa earnings delivered an on-time performance of 92.2% and a completion factor of 99.9%, once again amongst the very best in the world.

I would like to take this opportunity to express my recognition for more than 7,000 coworkers who day in and day out deliver a world-class travel experience to our customers. Their contributions are key to our success.

Turning now to our fleet. We received two 737 MAX 9 aircraft during the quarter, and we expect to receive 10 more MAX 9s during the remainder of the year, to end 2023 with a total fleet of 109 aircraft.

With regards to our network, as we mentioned in our last call, we plan to start new service to the cities of Manta in Ecuador and Baltimore and Austin in the U.S. starting this summer. With these additions, we will serve 80 destinations in 32 countries in North, Central, South America and the Caribbean, as we continue to strengthen and solidifying our position as the most complete and convenient hub in Latin America.

Finally, with regards to Wingo, Wingo continues its regional expansion with the announcement of 3 new domestic Colombia routes from Bogota to Barranquilla, Pereda, and Bucaramanga and 1 international seasonal service from Cali in Colombia to Aruba. With these additions, Wingo will operate 34 routes with service to 21 cities in 10 countries.

Now turning to our expectations for 2023. As you saw in our earnings release, we increased our operating margin guidance to a range of 22% to 24%, mainly driven by the current solid demand environment in the region as well as a lower fuel curve for the remainder of the year. As always, Jose will provide more detail regarding the full year's outlook.

To summarize, we're off to a very good start in 2023 and expect to keep seeing a healthy demand environment throughout the year. We continue growing and strengthening our network, the most complete and convenient hub for intra-Latin America travel. And as always, our team continues to deliver world-leading operational results while maintaining our cost low. Lastly, we're as confident as ever in our business model. We continue to deliver solid margins and competitive unit costs while offering a great product for our passengers, 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.

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 a world-class service to our passengers. I will start by going over our first quarter results.

We reported a net profit for the quarter of $121.5 million or $3.07 per share. Excluding special items, net profit came in at $157.8 million or $3.99 per share. First quarter special items are comprised of an unrealized mark-to-market loss of $37.9 million related to an appreciation in the value of the company's convertible notes and a $1.7 million unrealized mark-to-market gain related to changes in the value of financial investments.

We reported a quarterly operating profit of $193.2 million and an operating margin of 22.3%. Capacity came in at 6.6 billion available seat miles or approximately 3% higher than in Q1 2019. Load factor came in at 86.8% for the quarter, a 3.5 percentage point increase compared to the same period in 2019, while passenger yields increased 20% to $0.146.

As a result, unit revenues came in at $0.131 or 25.5% higher than in the first quarter of 2019. Driven by higher jet fuel prices, unit costs or CASM increased 17.2% versus Q1 2019 to $0.102. And our CASM excluding fuel came in at $0.062, a 2.1% increase versus Q1 2019, mainly driven by additional engine maintenance costs, changes in supplemental rent provisions related to aircraft utilization as well as additional lease engine costs, plus an increase in our sales and distribution costs as a function of higher sales during the period.

I'm going to spend some time now discussing our balance sheet and liquidity. As of the end of Q1, we had assets of close to $4.9 billion. And in terms of cash, short- and long-term investments, we ended the quarter with $1.2 billion, which represents 36% of our last 12 months' revenues. As to our debt, we ended the quarter with $1.7 billion in debt and lease liabilities and achieved a net debt-to-EBITDA ratio of 0.6x. 80% of our aircraft debt is fixed, and I'm happy to report that our blended cost of aircraft debt for the quarter came in at an annualized rate of 3%.

Turning now to our fleet. During the first quarter, we received two Boeing 737 MAX 9s to end the quarter with a total of 99 aircraft, compared to 102 aircraft in our fleet at the end of 2019. With these additions, our total fleet is now comprised of 68 737-800s, 22 737 MAX 9s and 9 737-700s. These figures include 1 737-800 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 10 additional aircraft, all Boeing 737 MAX 9s, to end the year with a total fleet of 109 aircraft.

Finally, I'm pleased to inform you that this past month of March, our Board of Directors approved a quarterly dividend of $0.82 per share, subject to Board ratification each quarter, which reinstates our dividend payout of 40% of prior year's adjusted net income. We made our first quarterly payment during the month of April, and the second payment will be on June 15 to all shareholders of record as of May 31.

As to our outlook based on the strength of the current demand environment, we can provide the following guidance for full year 2023. We expect to increase our capacity in ASMs versus 2022 within a range of 12% to 13%. We now expect an operating margin within the range of 22% to 24%. We're basing our outlook on the following assumptions: load factor of approximately 85%, unit revenues within the range of $0.125, CASM ex fuel to be in the range of $0.061, and finally, we're expecting an all-in fuel price of $2.85 per gallon. Thank you. And with that, we'll open the call to some questions.

(Operator Instructions) The first question comes from the line of Stephen Trent from Citi.

I was wondering, kind of on a high-level basis, if you could discuss the opportunities related to the renewed strategic alliance with United Airlines from August 2021 and what you might be seeing in terms of the potential for a joint business agreement, maybe revisiting that down the line.

Stephen, it's Pedro. As you know, we have a very strong alliance with United that goes all the way back to the Continental days. And on top of that, we are, of course, part of Star Alliance. So we feel that with our strong United relationship plus Star Alliance, we cover what's of most benefit to Copa in terms of where we fly, the regions where we fly, where we're active, and the airlines that we should be an alliance with.

We also have that letter of intent or whatever it's called with -- between Avianca, United and Copa for a JBA, joint business agreement. And I think that has not been implemented. The pandemic was in between. And honestly, I don't really know if that's going to be implemented or it will just be allowed to expire. I think it probably has over a year for that decision to be made. But again, what I'm trying to say is that we have the alliances we need and that add the most value to Copa.

I really appreciate that. And just my one follow-up, I believe you talked in the past about the LEAP engines driving kind of a one time relatively smallish CASM-ex headwind into this year? And any high-level view on whether that's going to ease as we move through 2024?

Yes, I'll let Jose answer.

Yes, Stephen, let me just say that, yes, there are some, I would say, short-term headwinds related to the LEAP engine. Most of the costs that we've seen so far this year are associated to short shop visits that some of the engines require to -- as part of campaigns that are being performed in the worldwide fleet of the LEAP. We're seeing an improvement in the performance of the engine, and we are relatively advanced in the majority of these campaigns. And so going forward, in the rest of 2023, we expect to have a lesser number of engines going into a shop and/or with some of the fixes that are required. And so that actually flows into our $0.061 CASM guidance that we have for the full year vis-a-vis the CASM-ex guidance that we had issued back in February.

Super helpful, gentlemen, and looking forward to seeing you on Tuesday.

The next question comes from the line of Savi Syth of Raymond James.

I was curious, you're usually a fairly conservative team in forecasting, and the kind of revenue outlook improvement is pretty meaningful. Just curious what trends you're seeing that kind of gives you confidence this early on to kind of take those numbers up.

Yes, Savi, I'll start and maybe, Pedro, you can jump in to complement. I would say that the first thing is that Q1 certainly had a very, very robust demand environment. So I think that's a portion of the increase that we had made to our unit revenue guidance. And then secondly, I would say that from our visibility that what we have for the coming months, specifically the second quarter, the demand environment continues to be relatively robust. So that's also embedded in there. And then we are cognizant that our visibility is limited for the remainder of the year. So I think that that's -- there's some seasonality as well that we put into the guidance. And of course, we're cognizant as well that there's a lot of capacity coming into market. There's a lot of -- fuel is also an item that we are paying close attention to and the movement in fuel. So we're -- I think we're -- I think we can say that we're confident in the 12.5%, but it's mostly related, I would say, to Q1 and to the visibility that we have into the first half of the year.

And the only thing I would add, Savi, is that our guidance, even though it has been improved, as you mentioned, still puts us at a lower RASM for the second half of 2023 compared to the second half of 2022. And that's because of the decreased fuel curve and the additional capacity coming into our markets. So we're still projecting lower RASM in the second half of the year.

That's helpful. And along those lines, for my second question, I wonder if you could talk a little bit about what you're seeing on the business demand standpoint. It seemed like it was a slow progress over the last few quarters. Have you seen any improvement there?

There's still some improvement, but things have changed, at least in our part of the world, since the pandemic. So leisure is our strongest segment now. It's not as much as half, but it's in the 40% of our split between leisure, VFR, and business. And business has come up somewhat, it's like in the mid-20s, maybe a little bit less than that percent in terms of that same split, but slight improvement in the last few quarters, nothing very significant.

The next question comes from the line of Guilherme Mendes from JPMorgan.

Pedro, Jose, Daniel, congrats on the pretty strong results. First question, just a follow-up on the assumptions behind the guidance. I think it's clear on the CASM front, but just wondering in terms of the capacity addition, there's a small reduction. Just wondering if it's related to any potential bottlenecks on the supply side of the industry. And on the rev guidance, thinking that probably it implies a stronger yield for the year despite of lower fuel cost as well. So if you could please just further explain how you're seeing demand environment going forward? And then my second question...

Yes, I'll start and then I'll let Jose add. So in terms of capacity, well, Copa itself is receiving 12 aircraft in the year. So that's quite a bit some capacity. And then our peers in Latin America are getting back to pre-pandemic levels, which was not the case in 2022, but will be the case from now on, the rest of 2023. So all of that together, plus there are other airlines, especially OCCs, which are growing faster than pre-pandemic. So when we add all of that up, it's a considerable number of additional seats in our region. Demand is there of course, so we're confident on the demand, and we're confident that there's enough demand, but more capacity plus lower fuel, usually, it tends to result in lower unit revenues.

Yes, Guilherme, in terms of the capacity movement that we made in terms of our full year guidance, it is, yes, related to the latest forecast that we have in terms of aircraft deliveries for the year. So that's what we have in terms of our best knowledge as of now in terms of new aircraft deliveries.

Very clear. And the second question is in terms of the capital allocation. And naturally, the dividend's already out, you have the buyback open as well. So thinking that leverage remains below 1x net debt to EBITDA, if you see room for maybe an extraordinary payment or a more aggressive buyback?

I have to say that we reinstituted our dividend. The Board approved that back in March, and it's 40% of our prior year's adjusted net income. And so we're, I think, happy, I think, with that level. I would say that our buyback program, as you saw, continued to be active during this year, during the first part of the year. And I think that there's a couple of important points to make.

Number one is that we have a sizable number of investments coming in related to aircraft for growth of our business. So I think that part of this capital that we have is geared towards growth of Copa itself. And number two, we have the convert, and we also have to -- want to have a lot of flexibility in terms of the management of that liability.

The next question comes from the line of Michael Linenberg from Deutsche Bank.

That was great forecast. A couple here. One, the move to add additional domestic service in Colombia by Wingo, was that in response to the suspension of Viva and Ultra? Is it a tactical move? Is it a harbinger of maybe getting bigger in the domestic Colombia? And is there an opportunity for you to maybe get some of the slots that will potentially be released as a result of consolidation and rationalization in the Colombian market? That's my first question.

Okay. So a few things there, Michael. One is that Wingo is not really a large player in domestic Colombia. Wingo has 9 planes, as we know, it's 9 737-800s. And this capacity shift has to do with something that's been developing over the last number of months, which is more strength in the domestic market than in some of the international routes that have seen a lot more capacity. So it's tactical. It's tactical, it's limited. Yes, the shutdown of certain airlines has a positive effect, but actually benefits much more the other airlines, the other incumbents in Colombia. Wingo, again, is not significant, and it never really competed that much head on with the airlines that are no longer flying. So not a huge impact but there is a little bit better strength in the domestic, and that's why they reduced -- what Wingo has done is reduced frequencies in some of the international markets that were not doing as well and redeploy them in the domestic market that is doing better. So again, tactical.

Anything on the Bogota slots that potentially become available? Are you in line to try to grab some of those for your use?

Right. So although there are no plans to grow the Wingo fleet in an aggressive way -- we tend to be disciplined, and Wingo will continue taking advantage of opportunities and not just taking a bunch of aircraft. So Wingo will remain disciplined and opportunistic. But the Bogota slots are very important because it was very difficult for Wingo -- it is very difficult for Wingo to publish an advance schedule and fly at the right time, at the peak times when most passengers want to fly, because up to now the slots in Bogota has been dominated by a single carrier. And so hopefully, this is going to change and make Bogota, which is like the only -- or one of the very few slot-restricted airports in our continent, it will make it more competitive, and it will allow Wingo and others to offer service at the times passengers want to fly. So we see that as a positive development.

Okay. Great. And then this is just another sort of network question, Pedro. One of the things that we saw coming out of COVID is we saw a lot of the big global hubs initially only benefit from the recovery of local traffic. And I think as things have started to turn on, we're seeing a lot more what we call 6th Freedom traffic, 3rd and 4th Freedom connections, which is something that you specialize in. And so when you look at the commentary out of, say, a Turkish or an Emirates or a Cathay Pacific, you're really starting to see that benefit. And I think when I look at Copa and I look at capacity coming online by some of your competitors, where I think you really outshine the competition, is all of the connections that you fly in city pairs that nobody else serves. And I suspect that maybe that wasn't seeing as much service in the earlier part of the recovery period and that's starting to turn on now, and those are markets that are uniquely served by Copa. Is that right? Is that something that -- a trend that you've been seeing in your markets, or maybe your connecting markets turned on from day 1?

Well, we've seen strength throughout our markets and throughout our network. And we're staying true to our vision and to our business model. So coming out of the pandemic, we went back to doing what we've always done in a very focused and disciplined way. And that demand has kind of been there from the beginning, I would say, but it's obviously stronger now and it continues to grow. It's holding up. And there's more capacity from other airlines and from ourselves coming in, but the whole market has improved. And yes, I think you're right. We have something unique about our network, and we hope to continue developing it.

The next question comes from the line of Bruno Amorim from GS.

Yes. So I'd like to hear from you, if possible, what's your vision for the next few years in terms of the competitive dynamics and the expected profitability for the business, of course adjusting for eventual volatility in macro conditions which might happen. My point here being that, if you look in the 2010 to 2014 cycle, margins were around 20% -- I'm talking about EBIT margin -- then between 2015 and '19 margins hovering around 15%. So if you were to guess for the next few years, are we more in the type of market that we saw between 2016 and '19, or is it possible to sustain margins around 20% even though you are not growing as much as back in that cycle 2010 to 2014 when the region was growing? But eventually, after the pandemic, you might see structurally less competition. Just trying to figure out what will be the new normal going forward, and it would be great to hear your thoughts around that.

Okay. So we have provided guidance for 2023 only, not from -- not for the years after that. And I would like not to speculate much about the future. But I should say that we spend a lot of time working on improving every aspect of the company, what we've always done, and make Copa more competitive as we go and as we grow. We see right now, right now, what we can see now is a robust demand environment. We see a good future for our business model, focused on one hub of the Americas in Panama, and we see many opportunities to increase the connectivity and add new cities, and we will continue working towards a cost-competitive, on-time, passenger-friendly with an efficient and productive and motivated workforce. So that's what we do. That's what we will continue to do.

And it seems like the environment for such an airline to thrive in our part of the world is there and it might be getting better. So that's what we're working on. There's always competition, of course. Hopefully, there's room for the ones that have also a business model that makes sense for them and that's realistic with the size of the market. So as long as it's -- there's that balance, I think we'll be fine. And in any case, we hope to always be in a position to do better than the other. So that's our focus. But beyond 2023, I think we have to wait a few more earnings calls.

If I may just ask a very quick follow-up then. After the capacity you expect to come back during the year, as you mentioned, will you be in the same position in terms of overlaps and competition overall vis-a-vis the pre-pandemic scenario, more or less competition? Can you comment on the competitive landscape after this capacity that you expect to come back is in place?

Well, I think -- I mean the competition is pretty public. So we probably kind of have the same information, but competition has changed. It's not -- I would say it's not less than before. If anything, it's more, it's more dynamic, maybe more aggressive, but it's changed in the sense that it's gone more towards the low-cost side of the spectrum. And in that sense, we are like one of the few remaining full-service airlines in our part of the world. And there's some -- there's a space for that. But there's a lot of competition, and we compete with all and we try to be as aggressive as anyone, especially since we've talked about a larger percent of passengers now are leisure than pre-pandemic.

The next question comes from the line of Helane Becker of Cowen.

So you guys are coming up to New York next month and holding your Investor Day. When we think about things you can say, have you thought about the focus of that and what you can update us on? I don't want to run ahead of it, but I'm kind of wondering what to look forward to?

Well, hopefully, a good meal and a good Q&A session. But as you know, Helane, our story doesn't change much from year to year. We always stick to pretty much the same business model, which, as I was mentioning before, we try to always improve and make better. And hopefully, we'll talk about that, about what are we working on, what are we focusing on, what we're making better, what's working, what might need changes. But never big surprises. We tend to have like a way of doing things, and as long as doesn't need to be changed, we just look to improve it. So I would say, expect more of the same and maybe -- well, Jose, go ahead.

I would just add, well, first of all, for certain things, Helane, we try to take one day at a time. So we're preparing earnestly for the earnings call, and then maybe next week we'll start working on the details of the Investor Day. But I would say a couple of things to add to what Pedro mentioned, number one, is that at our last Investor Day was here in Panama back at the end of 2019 before the pandemic. So we are cognizant that it's important for you to get face time with us. And I think part of what we have in store is also getting face time with members of management that are beyond us two. So I think that that's also an important part of it. And just simply provide an update on some of the initiatives that we had discussed back 3 years ago. So I think that's kind of what we have in mind.

And then my follow-up question is something I think, Jose, that you talked about, in terms of capital allocation with respect to share repurchase and the convert, which I think is callable. Did I interpret your answer correctly that either one of those is up -- is fair game, that you would buy back the convert if it made sense?

Yes. I don't want to speculate. I don't want to get into necessarily details of potential avenues that we might pursue. But I would say that we, at this stage, want to maintain flexibility in terms of the options that we have. So I think that the balance sheet is very, very strong and we have -- we want to keep alternatives open to minimize the cost for us in terms of the settlement of the convert. So -- and yes, we're also cognizant that the convert has a call option in there, and we -- all alternatives are on the table right now related to that.

The next question comes from the line of Daniel McKenzie of Seaport Global.

Congratulations on the quarter and the outlook here. Just have a couple of questions. The first really ties to revenue from premium seating. And I'm really just trying to get a basic understanding on this part of the story. So I guess, first, what percent of the revenue is it today versus what it was in 2019? And then just related to that, how quickly is that growing?

Okay. So let me start and then I'll let Jose follow up. So then -- we don't share that specific information, but what I can say is that premium demand and premium yields are above pre-pandemic levels. So load factors are better, yields are better and premium seating profitability is better than pre-pandemic.

Yes. Well, and also our paid load factor in business class which we don't disclose, but we can say directionally that it is higher today than where it was back in 2019 as well. So I think that's another data point that's important.

Okay. And then I guess a second question here is just a question on the new distribution strategy that you've talked about in the past. What percent of the revenue is booked on Copa's website today versus the GDSs? And how does that compare to 2019? And then to what extent is that helping you to capture some additional revenue, say from upsell opportunities or bundling? And then tied to that, how material are the cost savings that you're seeing from this new strategy?

Okay. I'll start and if I leave anything out -- so big, big picture. Pre-pandemic, we could say that 1/3 of our distribution was direct and 2/3 were indirect, so agencies and the like. And today, we're very close to flipping those numbers where 2/3 will be direct, including NDC connections, and 1/3 is going to be traditional travel agency, GDS bookings. So we're about to flip the numbers, the ratios, as I just mentioned. And that, of course, comes with considerable savings, including that we're charging a surcharge for traditional GDS bookings, which make up for any cost difference. So I don't know if we are sharing yet any cost saving numbers but when we add the revenue impact, so the revenue...

It's very positive. I mean, I think that so far -- I mean this -- first of all, we have to say that this started in Q3 of last year. So it is still an ongoing process that we have. But it is, from, let's say, ROI perspective or a cash perspective, performing, I think, as expected or barely a little bit better. But as Pedro mentioned, there's a portion of the benefit here that shows up [actually] in revenue because of the fact that we have a fee that we charge for sales that are not performed either on NDC channels or on our own direct channels.

Now going forward, our expectation is that the actual cost -- pure cost of distribution should come down in the manner that our direct channel sales continue growing. So we have an expectation that that will come over the next several quarters. And that benefit, actually, that channel shift benefit then is included in the guidance of $0.061 guidance, at least for the end of this year. But again, this is a kind of a change of model and so it will be with us for many years to come.

And as important is the fact that now we have much better control of our distribution, and that's going to allow us to do more things in the future that would lower costs and improve revenues, of course.

The next question comes from the line of Alberto Valerio of UBS.

Well done for the results. Sorry for being repetitive here, but it was amazing, the guidance that you guys just provided to us for the year. And I'm wondering here to find where was the difference between the guidance that you just provided in February -- mid-February from, 2.5 months later or 2 months later, the guidance that you guys are providing today. So we have talked about the demand already that's stronger, you said that also maybe higher exposure to the high income class with these business travelers. Is there anything else, like some exposure to regions, North America, South America, some different [jet] or something different from the people's style of traveling? If you could give me some information on that, it would help a lot.

So in a very simple way -- and I'll let Jose, if he needs to add anything or be more specific -- in a very simple way, what Jose mentioned before, we have now visibility on the first half of the year and a lower fuel curve. So those 2 things are the main drivers to the improved operating margin guidance.

Yes. I would say that in terms of regional performance, I would say that most of our regions are performing very well, ahead of what we had before. And as Pedro mentioned, first half is performing well. And when you look at the operating margin guidance, we cannot forget about fuel as well. When we provided our guidance back in February, fuel was at higher level than where it is today as well.

We can say also that competition is less fierce than it was in the past, because when we see fuel drop in the past, we see yields come down. And according to the guidance that you guys provided, yours could be flat for the year, even which if you're growing double-digits [now]?

No, not necessarily. As I mentioned before, our RASM guidance implies a lower RASM for the second half of 2023 than the actual RASM we delivered for the second half of 2022, the year before. So we are factoring in a lower than 2022 RASM, and that's the lower fuel curve and capacity from competitors. But again, having the better visibility for the first half of the year allowed us to adjust RASM upwards for the full year.

Fantastic, fantastic. And my last one here on the working capital. It came a little bit above what we had estimated for the quarter. Just wondering whether it's something not recurring on this quarter on the working capital matters.

I would say, Alberto, that we had -- from an (inaudible) perspective, I think even though (inaudible) is actually down for the quarter, sales are still ahead. I think there's some items there related to some refunds of tickets and expired coupons, et cetera. But it's -- I think there's also seasonality in there as well. So that's the main drivers there.

The next question comes from the line of (inaudible) of Bank of America.

Yes. Actually, this is Rogerio Araujo. I have one question. Last time we saw margins close to where Copa is delivering was prior to 2015. If I'm not mistaken, Venezuela was doing great at the time, was actually pushing that margin upward significantly. On an apples-to-apples basis, is there a reason to believe that Copa is actually much more profitable now than at that time? Let me put in other words this question: any reason to believe that Copa structural margin is higher now than before? If so, where does it mostly come from in your view?

Yes. Thank you, Rogerio. As I mentioned before, we're always working towards being a more competitive airline. And we never bank on strong revenues because we know there are cycles in our industry. What we bank on is having competitive cost and being more efficient and more productive. And we are a much more efficient and productive airline than back then in 2013, 2014. The bigger changes? Well, we have a lower CASM-ex and so we're more efficient in that sense. We've worked hard to improve our CASM-ex. So we have better unit cost, which allows us to be more profitable even with lower yields. And part of that is also having a more effective, efficient fleet.

We have a single fleet, mostly 737-800 and MAX 9, which have better -- much better operating cost than back then. And we've done a number of things, it will probably be a long list, to be more efficient. But for example, we do our own C-Checks in-house. We didn't do that back then. The distribution strategy is yielding results. And there's probably -- there is a list of other of other initiatives. We have densified the fleet somewhat and there's more to come. So yes, we're much more competitive and have better unit costs and more efficient that when we were -- what we were back then in 2011, 2012, 2013, when we had a similar margin, but maybe revenues were stronger.

Okay. Pretty clear. Congratulations for the very strong results and all these cost reduction and efficiency in the past years.

The next question comes from the line of Josh Milberg of Morgan Stanley.

Pedro, Jose, good to talk to you guys and big congrats on the results. I had a couple of follow-ups and please forgive any repetitiveness on my side. One is you touched on the issue of your -- what your competitors are doing in terms of bringing back capacity, but I was just hoping you could comment a little further on that issue, how much it's been impacted by aircraft delivery delays, and also just on the Avianca side, if you've been seeing any impact from that airline's shift in strategy with respect to network or in any other sense. That's the first question.

And then the second question is if you could comment a little bit further on your fleet plan and what it could mean for capacity growth in 2024. I know you said before that it's sort of early days to be getting into next year. But I know that you have the 737-800s that are scheduled to come off lease. I think your plan shows you holding on to those. So any color there would be great.

Yes, yes. Thank you, Josh. So I'll talk on fleet plan second, but we have -- well, I'll talk fleet plan first because we have published 2024. So we're getting 12 aircraft this year, and we've published that we're getting 8 MAX 8 next year, but it would have been more before if not for Boeing delays. As we know, Boeing, Airbus, everyone has delayed. So the delays are between 3 and 4 months in some cases, could be even longer for next year. So we have published 8. We hope to get more. Hopefully, we can get more than 8 once we get the latest information from Boeing. We also have a number of leases that come due, and we will renew -- we'll try to renew as many as we need to. And it all depends on how many deliveries we get from Boeing. So it's kind of like a dance, the dance of the assets, of the aircraft assets. So we need to balance the lease expirations with the Boeing deliveries with the demand forecast. And right now, it all looks good, actually. So we're hopeful that we'll get more aircraft and demand will remain strong as it is right now. Now, if you want to add anything to fleet, Jose?

Yes. I think that's very complete. In terms of 2024, as Pedro mentioned, we have right now our plan is published in our Investor Relations website, including the 8 aircraft that Pedro mentioned for 2024.

Right. In terms of competitors, I'm not sure there's much more to say, I don't like to give them like free advertising or anything like that. But you asked about Avianca. We, of course, compete quite a bit against Avianca. We have always competed with Avianca, even though we're also together in Star Alliance, and we have code sharing and frequent flyer reciprocity. So I would say it's a friendly and healthy competition. And they're still growing their hub. They're also flying non-stop. They've changed their model. So they have -- they went through a Chapter 11. So they are a strong competitor, no doubt. And does it show? Is it noticeable? Of course it is. But we're also growing and competing. So there's a balance, there's some sort of a balance there. As they grow and compete, so do we.

And in terms of the rest, well, they're pretty much back to pre-pandemic capacity as we are. So is LATAM and others that were smaller back then are probably above those levels. So we're in a dynamic market with strong demand, and I think it's what would be expected in any case.

The next question comes from the line of Duane Pfennigwerth of Evercore ISI.

This is Jake Gunning on for Duane. So just to put a finer point on previous questions about geographic demand strength, on a previous call you talked about point of sale for U.S. versus local, could you talk about just how that's trending now?

I don't know if it's -- I don't think it's changed much. We see strength in most of our regions and markets. Maybe South America is not as strong, relatively speaking, as it was before. So South America is not as strong, but still positive, but that could change from one quarter to the other. And U.S. point of sale remains pretty strong, even though the currency, the U.S. dollar, has lost a little bit of value, still has a lot of strength. And the economy, as we know, in the U.S. is still strong. Even though efforts were being made to slow it down, it's resilient. So there's still strength in U.S. point of sale. So I don't think anything has changed that much from our previous call.

And then on capacity, just given demand strength and the capacity constraints, where or how much more would you want to grow without these constraints?

So our fleet plan, I think, is a good reflection of our growth plan. We're getting 12 MAX 9s this year. Next year, we have published 8 MAX 8s we'll be getting. But as I mentioned, if we could get more -- because we were supposed to get more, but due to delays, we're not getting them all in 2024, the ones we were expecting to get originally. So if we can get a few more, we'll be very happy, and we're waiting to hear from Boeing, maybe that would happen. So that gives you an idea of our growth, which is in the double-digit range.

No, I was just going to say, Jake, that I think a good way to look at it, and this is just theoretical, of course, but look at the preliminary full year guidance that we issued back in November, it had a 15% growth. And so that was -- you could argue that our regional expectation of what we wanted. So yes.

Thank you. I would now like to turn the call back over to Pedro Heilbron.

Yes, thank you very much. And so thank you all. This concludes our earnings call for the first quarter of 2023. And so I'll take also this opportunity to announce that we'll have our Investor Day, as I think Helane mentioned. It's going to be on June 22 in New York City. You should be getting the invitations and any other details in the next couple of days. So hope to see you then next month, and have a great day. Thank you as always for your support.

Ladies and gentlemen, thank you for your participation. That concludes the presentation. You may disconnect and have a wonderful day.