Copa Holdings SA (CPA) 2024 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to Copa Holdings second quarter earnings call.

(Operator Instructions) As a reminder, this call is being webcast and recorded on August 8, 2024.

Now I will turn the conference call over to Daniel Tapia, Director of Investor Relations.

Sir, you may begin.

Thank you, [Gigi] and welcome everyone to our second 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 second quarter highlights, followed by wholesale to 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, Copa air.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, and good morning to all and thanks for participating in our second 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 has kept Copa at the forefront of Latin American aviation to them, as always, my highest regards and admiration.

Once again, we're pleased to report industry-leading financial results for the quarter.

As stated in our earnings release yesterday, our 19.5% Q2 operating margin represents the second best Q2 result in the company's history.

Among the main highlights for the quarter.

Passenger traffic grew 10.6% compared to the same period in 2023, while capacity increased by 9.7%, resulting in a 0.7 percentage point increase in load factor to 86.8%.

Unit costs, excluding fuel, are [CASMex], came in at 5.6%, a 5.8% decrease compared to Q2 2023, mainly driven by lower maintenance costs and sales and distribution costs.

Passenger yield came in at $0.121, 8.7% lower year over year.

As a result, unit revenues or ration came in at $0.11 or 7.7% lower compared to Q2 '23.

On the operational front, Copa Airlines delivered an on-time performance of 87.6% and a completion factor of 99.7% for the quarter.

Once again, positioning ourselves a month, the best in the industry.

Furthermore, Cobalt was recently recognized by [Skytrax] for the ninth consecutive year as the best airline in Central America and the Caribbean.

I would like to take this opportunity to recognize our more than 8,000 co-workers who day-in and day-out deliver a world-class travel experience for our customers.

Their contributions are key to our success.

Turning now to our network in the month of June, we started three new destinations, [Raleigh-Durham] in the US Florianópolis in Brazil and two room in Mexico with visitations were now serving 85 destinations in 32 countries, solidifying our leadership position as the hub with the most international destinations in Latin America.

With regards to our expectations for the rest of the year as we notified the market last week, on July 29, the Venezuelan government temporarily suspended commercial flights between Venezuela and several countries in the region, including Panama, forcing us to cancel our flight effective July 31, although the official notice mandate the suspension of flights until August 31.

At this time, we cannot determine if this suspension will be extended.

With regards to cost, we continue to focus on our cost efficiency initiative and expect to deliver lower year-over-year unit cost for 2024 leading us once again to deliver industry-leading margins for the year.

For sale will provide more details regarding our outlook.

To summarize, we delivered industry-leading financial results for the second quarter.

We continue to deliver on our cost execution strategy.

We keep expanding our network now serving 85 destinations across 32 countries, reinforcing Panama's position as the leading hub for international travel in Latin America.

And we expect to deliver industry-leading operating margins for the year.

As always, our team continues to deliver world-leading operational results while providing world-class service to our passengers.

Finally, we firmly believe that our business model remains as robust and relevant as ever and that our hub of the Americas in Panama is the best connecting hub in Latin America, making us the best positioned airline in our region to consistently deliver industry-leading results.

Now I'll turn over the call to Jose, who will go over financial results in more detail.

Thank you, Pedro.

Good morning, everyone, and thanks for being with us today.

I'd like to join data in acknowledging our great team for all their efforts to deliver world-class service to our passengers.

I will start by going over our second quarter results.

We reported a net profit for the quarter of $120.3 million or $2.88 per share.

We reported a quarterly operating profit of $159.5 million, an operating margin of 19.5% in what is our seasonally lowest quarter of the year.

Capacity came in at $7.4 billion available seat miles or 9.7% higher than in Q2 2023.

Load factor came in at 86.8% for the quarter at 0.7 percentage point increase compared to the same period in 2023.

Passenger yields decreased by 8.7% to [$12.1], mostly due to a revision of the unredeemed ticket revenue provision for tickets sold during the year 2024.

As a result, unit revenues came in at $0.11 or 7.7% lower than in the second quarter of 2023.

Excluding the revision related to the unredeemed ticket revenues, rather them would have decreased by 3.8% to 11.5 unit costs.

Our CASM decreased to [$8.9 cents] or 2.1% lower year-over-year.

And finally, our CASM, excluding fuel, came in at [$5.6 cents], a 5.8% decrease versus Q2 2023, mainly driven by lower aircraft maintenance costs due to an adjustment in leased aircraft return provisions of nine aircraft leases, which we extended during the quarter as well as lower sales and distribution costs due to the higher penetration of both direct channels and the lower cost NDC travel agency.

Excluding the adjustment in leased aircraft return provisions, the company would have reported an ex-fuel CASM of [$5.8 cents] for the quarter, a 1.7% decrease year-over-year.

Now I'm going to spend some time discussing our balance sheet and liquidity.

As of the end of the second quarter, we had assets of close to $5.4 billion to cash short and long-term investments we ended the quarter with over $1.2 billion, which represents 35% of our last 12 months revenues.

And in terms of debt, we ended the quarter with $1.8 billion of debt and lease liabilities came in with an adjusted net debt to EBITDA ratio of 0.6 times.

I'm pleased to report that our average cost of debt, which continues to be comprised solely of aircraft-related debt is currently in the range of 3.6%.

We have around 70% of our debt being fixed.

Turning now to our fleet.

During the quarter, we received 3.73, so MAX 9 aircraft, ending the second quarter with a total fleet of 109 aircraft comprised of $0.68, three seven eight hundred's, $0.32 percent MAX 9 and

[737-700s].

These figures include [737-800] freighter and the [9737-800] hundred's operated by Wingo.

Also in the month of July, we received our first Boeing 7% MAX 8, increasing our total fleet size to 110 aircraft.

Regarding the deliveries for the remainder of the year.

Recently, Boeing notified us of further delays to a 2024 delivery stream.

And now we expect to receive only two additional MAX 8 during the remainder of the year to end the year with a total fleet size of 112 aircraft instead of 115 mentioned during last quarter's call.

In terms of financing, we have already secured local financing for these deliveries as well as for the first three deliveries of 2025.

As for 2025 fleet plan.

We currently expect to receive 15 aircraft for the year, all Boeing 7% MAX 8.

As mentioned before, we extended all of our nine operating leases expiring next year.

Additionally, as contemplated in an up updated fleet plan, we expect to retire two of our Boeing 737-800 to end the year with a fleet of 125 aircraft.

Turning now to the return of value to our shareholders, I'm pleased to announce that the company will make its third dividend payment of the year $1.61 per share on September 13 to all shareholders of record as of August 30.

As to our guidance, we can provide the following update for the full year 2024 due to the temporary suspension of our Panama Venezuela flights.

We now expect to increase our capacity in ASMs to approximately 9% year-over-year instead of our previous expectation of approximately 10%.

And we reaffirm our operating margin guidance to be within the range of 21% to 23%.

We are basing our outlook on the following assumptions load factor of approximately 86.5% unit revenues in the range of [$11.5 cents], which account for the unexpected Venezuelan capacity reductions, weaker currencies in the region and a lower fuel cost environment.

CASM ex-fuel in the range of

[$0.059].

And we are now expecting an all-in fuel price of $2.70 per gallon.

Lastly, as you already know, last month after a career spanning over 30 years at Copa, I announced my decision to retire from the company by the end of 2024 being part of a Copa team here has been one of the joys of my life.

Our companies in great form consistently delivering strong financial results with unit costs at the lowest level they have ever been while continuing to build our very strong balance sheet and returning value to the shareholders.

We're currently engaged in an internal and an external search for my replacement, and I will remain with the company in an advisory role after my successful and my successor is named to assist with a smooth transition.

Thank you.

And with that, we'll open the call to some questions.

(Operator Instructions)

Savi Syth, Raymond James.

Hey, good morning, everyone.

And I guess congratulations on getting some time off from the airline world, Jose and the fix and up.

And maybe can I ask on the and Venezuela, slight Ascension impacts, like how you're thinking about the impact, given the uncertainty that you alluded to, just what's in the guidance in terms of kind of how long this impacts and what kind of pressure it puts on unit revenue in the third quarter?

Sure, Savi, and thank you for your for your good wishes there.

And so let me start by saying that the Venezuela impact is included in the guidance.

And we have taken a conservative assumption in terms of their capacity and their recent guidance here.

And we assume that there will be a build up of the capacity related to Venezuela, either in Venezuela after August for on alternative markets.

And the reason why the build up of capacities over a period of time, it will be a ramp-up of that capacity is because the flights we tend to sell.

So but we expect basically to be back at full capacity by the center, let's say, in a ramp-up to occur between September and December.

So that's and it's all again, just to reiterate, it's all included in the guidance, both in the capacity guidance on [interest] guidance.

As I said, that the impact is across second half is what you have here?

Yes,

And not just Turkey makes sense.

What can I say year-over-year Yes.

And just if I might on the on the demand side, you've seen some meaningful in a local currency devaluation against US Dollar over the last several months.

Are you seeing any perhaps either because of that or weakening of the economy, has any impact on demand or any change in point of sale direction?

Hi, Savi.

Its Pedro.

So of course, the Venezuela impact is immediate, a we are a network or line.

So it affects beyond just the on the Panama Venezuela and having to cancel from one day to the other that that has an impact in our in our whole network.

So it's in the guidance already for Q3 and the rest of the year, as Jose will mention.

And then that also is combined with the weaker currency.

That is that you alluded to it, which is affecting mostly Brazil, which is the most important market for anyone in South America and actually in Latin America.

So that's the main impact we're dealing with.

It also has a network impact in our case, otherwise demand, it's okay in spite of a lot of capacity growth it's from the industry in general.

That's helpful.

Thank you.

Duane Pfennigwerth, Evercore ISI.

Hey, guys.

Good morning and Jose.

I don't know why you'd ever want to leave this industry.

I think you're crazy.

We agreed.

Just to follow up on Savi's question is this is this a utilization hit?

Or do you actually have aircraft parked at this time?

And just maybe don't want to split hairs on your words, but you're assuming that by December this capacity is reallocated to Venezuela or to somewhere else in the network.

Is that is that the right way to think about it?

Sure.

Yes, absolutely.

That's the way to think about and there will be a ramp-up.

So it's not like we will have the ability to redeploy everything immediately, but we're assuming that there's a ramp up of that capacity, but that essentially will be either Venezuela as well or somewhere else by the by the final part of the year.

And so yes, and it's I think conservative is conservative in nature.

But what have we done.

Okay.

And then just on the one of the things you called out in the release, this changed to an unredeemed ticket revenue provision.

Can you just explain what that is and what changed and if that impact kind of continues?

Yes, Duane.

So it's a indeed as a revision to the unredeemed ticket revenue provision bad, we have four tickets that we sell or we are selling in the year 2024.

So following IFRS 15 standards, we apply for every dollar sales replace unredeemed ticket factor.

And then that gets reconciled after a year once the ticket just expire.

And so what we did this year, just based upon observed behaviour, we reduced and somewhat the factory that we use so there is an assumption that there is a lesser percentage of tickets and that will expire next year.

And so and we will therefore have to be in the factory were somewhat down and included that here.

That's something that happens every year.

But in this particular year, we just saw a difference in the behaviour of X5 group, and that's all included in the guidance is contemplated in the guidance and the revenue guidance as well.

So it's something that we've included in there.

Okay.

So maybe a way to think about it is less breakage, less breakage or lower assumed breakage going forward.

And so that's it.

That's a 2Q through, you know, the next 12 months impact.

So that would impact the that's in this back half as well.

So you've got an 18 sites, including the rest of guidance for the full year that we could be there.

Yes.

Okay.

Thank you very much.

Gail Glazerman Mendez, JP Morgan.

Good morning.

Good afternoon, everyone.

Thanks for taking my question and best wishes.

So Jose, on your new endeavours as well.

And I have just a follow-up on the on the first question, I guess, you mentioned about demand still resilient despite all the capacity increase in the region.

My question is, did you see any kind of oversupply in any of the markets that you guys operate or how comfortable are you with the yield assumptions you have for the upcoming quarters?

Thank you.

Okay.

So I mean, it's what you're saying cannot be ignored.

So there's always going to be more pressure on yields when when demand is growing at the pace that it has grown in Latin America, but the seats are being filled in load factors are not hurting in general terms, at least not in our case but when you add that up to other factors like likely weaker currencies, which by the way, the weaker currencies are, it's right now in a month could be different.

It could strengthen again.

And so we're not saying this is like a we're forecasting the year, but things could change.

But if we had in growing capacity to the other factors I mentioned yes, there's going to be there's always going to be some impact on yields, but that's all factoring in our guidance.

A super clear.

Thank you.

And maybe a follow-up on this you mentioned about ending 2025 with nearly 10%.

Fleet addition does imply that we can assume a lower yield in 2025 when compared to '24, giving us additional capacity where we're growing.

We're growing capacity in a measured way, and we're actually growing probably half what others are growing in our part of the world, and we're growing growing according to the needs.

We have the opportunities we see a within our network.

We're not trying to paid land from anyone else.

And again, it's measured to our opportunity and to our network have what the industry in general is growing.

So we're very, very comfortable with that.

Plus we have a lot of flexibility to adjust along the way we can park, the 700 and harvest the engines or we can I keep them flying depending also on Boeing deliveries.

So we have a lot of a lot of flexibility we feel.

And we are profitability driven company.

So so we'll make the best decisions we can to make sure that we maximize our profitability.

And by the way, we have any guidance for 2025 yet.

So stay tuned for that one.

And you know our prelim guidance in November and then the full guidance in the February call.

Very clear.

Thank you both.

Thank you, Guil.

Stephen Trent, Citi.

Yes, [Jose], good morning, gentlemen, and thanks for the time.

And Pedro, I think still you know best wishes to you and thanks for all those times on the road and what have you?

I really appreciate that, and thank you.

And I was curious, just on thinking about to some extent.

A follow-up on Gary's question in a different way.

What do you look at your opportunities to grow?

Any a high-level view on a, let's say, surfacing new destinations versus increasing frequencies to existing destinations or may be upgrading equipment or something along those lines?

I don't think this is Stephen.

Pedro here.

I don't think it's going to change much from what we've done in the past.

Usually, you know, plus or minus 80% of our Asian growth comes from existing destinations, but additional frequencies and then the difference or new frequencies for new destinations both during the year that ratio won't change from March this year, we've added three destinations so far.

Maybe we'll will to add a fourth one by the end of the year, and we expect something similar in the come in the coming years, somewhere between three and five new destinations each year as the region grows and our hub develops.

We feel we have a plenty of opportunities, including increasing our daily frequencies where we also have opportunities valuable opportunities.

Okay.

That's super helpful, Pedro.

Thank you very much on.

And just one quick follow up here and I appreciate what you guys mentioned on Venezuela recently that's been a bit of chop in Ecuador and what have you on a high level, do the other sort of broad markets you guys serve or are we talking about relatively commerce situations where it, you know, more business as usual.

The rest of yes, even in reality, there isn't really any other country that has any sort of non more political type of situation right now that is of concern and you know, and there will always be something.

There will always be something in our part of the world.

We are born and raised in this part of the world, and we're used to all of this and we've been successful in the highs and lows, and we're comfortable knowing that, you know, it's for dealing with today's crisis.

There will be a new one tomorrow and we'll strive always to run a company that can succeed beyond that.

Yes.

So great color, Pedro, in the developed market carriers that would love to do half of what you guys do so thanks very much.

Thank you.

[Joel Frito, from Goldman Sachs].

Hey, Good morning, guys.

Thanks for taking my questions.

I have two quick follow-ups.

The first one relates to Venezuela.

So you put out on the release that the capacity amounts of roughly 2% of your total capacity.

I just wanted to double check if this is the same case for revenues or if it's a higher or lower amount?

And then on the second points related to the unredeemed ticket provisions, you guys did the revision in the recovery rates rise of the non-music ticket, but you have already sold a portion of the tickets for this year.

Distribution in the second quarter is only related to the second quarter itself or it already accounts for some of the tickets you guys sold for the second half, meaning the impact could be lower in the second half of the year on the revenue side?

Thank you very much.

Yes, [John], I'll do the second part first.

It is actually a catch-up of the first half of the year.

The second and third quarter won't really have that much of a significant impact because of [Zohr] and again, as I mentioned before, is included in the guidance for that's a good callout and indeed, the figure was also a little bit higher because in the second quarter of 2024, we included the assumption for both the first and the second quarter of the year.

In terms of your first question was what's always going to happen in a network carrier like like gold price that we when we talk about a century, we're talking Panama, Venezuela, a sense and those are relatively short hauls.

When we talk about revenues, we're talking about home network revenues, passengers originating in Venezuela or with destination Venezuela that go toward pump from all over our network.

So those are going to be much longer hauls.

So revenues are going to always be much higher than a sense in any similar situation.

So we can say that revenues are going to be a little bit over doubles and just because it's short haul connecting it to long haul.

Thank you.

And again, it's showing the guidance, the impact is all in the guidance yet for clear.

Thank you.

Thank you.

Michael Linenberg, Deutsche Bank.

Oh hey, I'm Good morning, everyone.

And Jose, I echo what's been previously of you're going to be missed by the investment community, so congratulations on your new move and you might my new well, we're basically going to do a lot of your work in my house and E&O and D&O, you may have and then lien on it.

So I bit very nice anyway back to us on the Q&A on.

I have a couple here.

I didn't see anything in the release just around Boeing compensation on the MAX 9 grounding.

I think last quarter, I think you had said that you I'd get to reach an agreement on.

We're now looking at a year's loss of capacity.

I think coming into this year, we thought your fleet was going to be 121 airplanes.

It now looks like we're not going to get there until the end of 2025.

How should we think about that compensation, does it even ever show up in the numbers on maybe it shows up in the cash flow?

So I guess the question is, have you have you reached an agreement on that or is that still in the works?

And my guess is that's a very important question.

Yes, we have reached agreement.

I think it's a fair agreement.

The agreement is of a confidential nature, but I need a fair and the way that accounting works, unfortunately, you can't claim like the benefit in one particular quarter.

You have to.

So we'll see.

I think in summarize it terms, we'll see the impact on the D&A line on a smaller impact on the D&A line over the next call it, four years.

So that's how it works because you basically book any benefit that you got from the agreement with them against the aircraft would say on the property, plant and equipment line I may you that flows through the P&L through the G&A line, and we expect that to flow through the P&L over the next four years.

Is it fair to say that it may be a smaller impact on the P&L, but maybe a larger on the cash flow because things like PDPs get pushed back.

I mean the fact that you're not getting airplanes yet.

There's a portion there as well.

Of course,

[Kessel].

Okay, great.

And then just my second question.

When we looked at kind of the competitive backdrop I know there were a few questions asked about oversupply.

I you know, I look at the Copa network and with the exception, I guess of Porto Allegro because of the floods in the airport closure.

I don't see any route cancellations.

But then when I look at Wingo based in Colombia and I kind of look at this year, there are a lot of routes that look like they're either being cancelled and there is a bit of churn there.

And I presume that that's in response to just the competitive backdrop in Colombia, which may be a little bit more on, you know, intense than say what you're seeing on.

Can you can you talk about that and maybe what you're seeing in that market?

Thank you.

Yes, hi.

Pedro here.

And you're right, you kind of answered the question.

The Colombia market is very, very competitive, very intense and in lower yield.

And so Wingo is constantly adjusting to market trends and to competition and where we are and where the opportunities are.

So a year ago, they shifted a lot of capacity from international to domestic And lately, they have readjusted that a little for a little bit more international reduced domestic somewhat facial.

So they're always adjusting to the market opportunity to remain profitable and successful.

And and also conservative there.

And they are again in a market that's been so volatile as they've tried to just be conservative and keep things under control.

And that's been their formula to do well and and fill a niche in that very competitive market.

Okay.

That's helpful.

Pedro, if I could just squeeze one last one in on the share repurchase program, it did look like the shares were down a little bit.

Was there any activity in this quarter, Jose and with your cash or liquidity at 35% of LTM revenue, should we be primed for maybe a follow-on?

Or is that maybe a bit aggressive on my thinking?

Thank you again, thanks for everything,

There was a deferral was actually revolve around $10 million worth of shares.

And the first quarter we had bought some more.

So so yes, we're of course, we have a lot of means by which we return value to our shareholders, including our dividend, but we also are a growing company.

So we have a lot of aircraft coming over the next couple of years.

And we also have to make sure that that we will fund the PDPs and et cetera, for our growth.

So and we've also been actively buying leases.

We have been actively buying aircraft.

So we've deploy capital in different ways or over the year 2024.

Great.

Thank you.

Alberto Valerio, UBS.

I monitor gentlemen's, Pedro and Jose has a good look for the new site.

I hope to see you around some sports events maybe as one might have.

But my question's regarding the within that limited ticket, if there is any specific event that caused this a change in the behavior of the consumer?

And my second question is whether your guidance is considering a further deterioration in the American market and some shift of the aircraft to Latin market.

Thank you very much

And no particular consideration of a shift in the network in general terms, I think we expect the network to remain fundamental and the same in the same way.

And in terms of the first question, it wasn't really an event.

I mean, this happens every year and the board in particular, I think that the cause was that we decided to make this sort of almost, I say, retroactive because it's still part of 2024 but we just decided to be conservative in our approach in terms of the we are winning ticket revenue factor that we use.

Okay.

Thank you very much.

Daniel McKenzie from Seaport Global.

Oh, hey, Hi, Jose.

Congrats.

I'm going out on a great run it.

So it's been great working with you over the years.

So I'm enjoying your arms.

Yes, the couple of questions here.

The plan to use the balance sheet in liquidity position to strengthen your competitive position, reinforcing network and product I'm going back to the press release.

My first question is if this might mean an investment in another airline that might be in distress right now.

First question and then what up or what opportunities are you seeing?

And then how would you be how are you valuing that these potential opportunities?

It would be great if you just elaborate a little bit more here.

I'll answer that one, then we usually don't play in that market and but we wouldn't comment either if we were doing something so simple.

But if you look at our track record record.

We've always been very conservative and grown organically.

So I don't see that changing much in the future.

But of course, we always be on, you know, we always be alert for any opportunity.

And we did purchase at an airline in Colombia in 19 years, 19 years ago, which is now Wingo.

So we've done it before, and we will always be alert, but we're a conservative operator when we look, you know, so to our past.

Yes, understood.

Okay.

And second question here is I wonder if you can elaborate a little bit more on NDC, it seems to be driving revenue and cost savings.

So I'm curious what percent of the tickets you're upselling today, what percent of the revenue it is and what the growth rate is in this in this particular segment at this point?

Right.

So our direct connect strategy has been a huge success and it has driven some of our cash and a competitiveness and our lower cash and so has been very successful.

A talking about the specific numbers, you know, in general terms a GDS.

So so traditional the traditional GDS channel was over two thirds of our bookings when we started it towards the end of 2022.

And today is much less than a quarter of our business.

So talking like in general, in general terms, we are we're over 80% either direct or NBC channels today, over 80% travel agency connecting through NDC or copa.com bookings and the traditional high cost GVA GDS channel is really a small percentage of our business, relatively speaking.

Okay.

So able to upsell on 80% of the bookings now versus, you know, maybe a third in the past is the way to kind of think about that.

I'm not sure if I if I get exactly what you're asking, but bottle in copa.com plus NBC connections.

So direct NDC connections are 80% below 80% of our business.

And two years ago, it would have been only copa.com and other direct channels, which would have been in the 30% a range.

Understood.

Okay.

Thanks for the time you guys see exactly.

Tom Fitzgerald, TD Cowen.

Hi, everyone.

Thanks very much for the time and want to echo everyone's congrats to Jose, would you mind updating us on on just putting some numbers on the bookings and traffic for go through corporate revenues and just kind of where things stand versus pre-COVID and maybe any color you could add on just sectors sector the demand across the different sectors that you service out of Panama?

Yes.

So I would say that in general terms and business travel is for only a quarter of our total of our total our revenue base, it is in it is these are people who travel for business purposes, not not necessarily people traveling business class.

And then the remainder is in leisure and VFR, I would say leisure represents about 40% and then VFR is about call it 35%.

So that there is a bit of a shift because before the pandemic, it was kind of a third, a third, a third.

It's always still business.

Rail is still a little bit less than where it was back end in 2019.

Okay.

That's really helpful.

And then would you mind Eastern just kind of running through some of the tailwinds and levers you'll have next year to drive CASMex lower?

Thanks again for the time everyone?

Yes, there's still several items vary on the first one is densification of the fleet or subsector signing hundred fleet that is undergoing a densification of the whitespace.

Kevin there's some of the headwinds that we have seen over the last couple of years of maintenance are still being worked on as the engines mature.

Additionally, of course, there's growth value if we have growth of I mean on the low double-digit range, I would also aid in terms of our forecasting and there's maybe a tad more that can be done on the sales and distribution line with Copa Connect as well.

So those those are, I would say, three, three buckets of tailwinds in terms of CapEx spend that we have on the table, right, plus, of course, keeping overhead under check and growing a sense that formula usually works.

Yes.

Thank you.

At this time, I would now like to turn the conference back over to Pedro Heilbron for closing remarks.

Great.

Thank you, and thank you all for participating in our Q2 earnings call, and thank you also for your continued support.

Have a great day and you know where to find us.

So thanks for your support.

Ladies and gentlemen, thank you for your participation.

That concludes the presentation.

You may disconnect and have a wonderful day.