Copa Holdings, S.A.

Ladies and gentlemen, thank you for standing by and welcome to COPA Holdings second quarter earnings call. During the presentation, all participants will be on a listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, you will have to press star 1 on your touch phone As a reminder, this call is being webcast and recorded on August 6, 2020. Now I will turn the conference call over to Raul Pascual, Director of Investor Relations. Sir, you may begin.

Thank you, Lawrence, and welcome everyone to our second quarter earnings call. Joining us today are Pedro Hebron, CEO of Copa Holdings, and Jose Montero, our CFO. First, Pedro will start by going over the actions the company has taken to mitigate the impact of the COVID-19 crisis, 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, COPPA.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 discussing our annual report with the SEC. Now I'd like to turn the call over to our CEO, Mr. Pedro Hebron.

Thank you, Raul. Good morning to all, and thanks for participating in our second quarter earnings call. I hope that all of you and your families are doing well and staying safe. Before we begin, I'd like to thank all of our coworkers for their commitment to the company and and recognize their efforts and many sacrifices during these very difficult times. To them, my utmost respect and admiration. Over the last several months, many countries, including Panama, extended air travel restrictions. We have not been able to provide scheduled commercial operations since March 22nd and remain subject to the eventual easing of air travel restrictions in the region. During the second quarter, we completed a total of 86 humanitarian and charter operations, which although only provided a marginal revenue contribution, allowed us to demonstrate our readiness and ability to operate flights with effective biosafety measures. This has been the most challenging quarter in our history. The current demand environment and operating restrictions have had a significant impact on our financial results. We recorded a net loss of $386 million, including significant non-cash and non-recurring charges, which Jose will explain in detail. Excluding special items, we would have reported a net loss of $114.6 million, our first quarterly loss on an underlying basis in 20 years. During this period, we have obtained new credit facilities, once again demonstrated our ability to control costs, and kept our cash burned below our original expectation. We closed the quarter with $1.3 billion in cash and undrawn committed credit lines. Our very strong liquidity position and great cost discipline, we believe makes us one of the best prepared airlines to withstand the crisis. Assuming there are no further extensions to the air travel restrictions in Panama, we will restart our commercial operations on September 4th. The scaled down schedule equivalent to less than 10% of our September 2019 capacity. In the meantime, For the month of August, we have obtained approval to operate a limited number of humanitarian flights. Initially, we will serve 10 cities for passengers departing and connecting via Panama, while arrivals in Panama will be subject to specific approvals by the Panamanian government. Subject to the easing of travel restrictions in the region and the demand environment, Our plan is to gradually spool up our network so that by December 2020, we're at approximately 30 to 40% of December 2019 capacity. To adjust to this reduced demand and capacity expectations, we continue making changes to our fleet. We finalized the sale of all our Embraer aircraft, engines, and spare parts, and have agreed to deliver these assets during the next 12 months. We're also marketing for sale our Boeing 737-700 fleet and plan to operate a simplified fleet of Boeing 737-800 and Mach 9s. And in order to retain flexibility, we plan to keep several aircraft in long-term storage to be able to accelerate our capacity plans if needed. Lastly, we have a proven and very strong business model, which is based on operating the best and most convenient network for intra-Latin America travel from our hub of the Americas, leveraging Panama's advantageous geographic position with the region's lowest unit cost, best on-time performance, and strongest balance sheet. Going forward, we expect that our hub of the Americas will be an even more valuable source of strategic advantage, especially if fewer intra-Latin American markets are able to sustain direct point-to-point service. We believe the hub of the Americas will be the best position to serve this market. Now I'll turn it over to Jose, who will go over our financial results in more detail.

Thank you, Pedro. Good morning, everyone, and thanks for being with us today. I'd like to join Pedro in acknowledging our COPPA team. Today, under very difficult circumstances, they are showing their great spirit. For the second quarter, we reported a net loss of $386 million, or $9.08 per share. As Pedro mentioned, our results include several non-cash special charges. So let me begin by first . During the quarter, we made the decision to place the Boeing 737-700 fleet for sale. and given the reduced capacity plans, determined that we would likely not operate those aircraft again. That decision triggered a $186.8 million non-cash and non-recurring charge, and the assets are now classified as held for sale on the balance sheet. During the quarter, we also negotiated the sale of all of our remaining 14 Embraer 190 aircraft, six spare engines and the spare parts inventory. This transaction was concluded last week. You might remember those assets were already booked as sale for sale since our fourth quarter 2019 results. Even though the agreed sale price was lower than our original estimates, which resulted in a $50 million non-cash and non-recurring loss, given the current market conditions, we believe this was a good deal for us. We also recorded a non-cash $22.2 million unrealized mark-to-market loss on the implicit derivative instrument related to the cash settlement option the senior convertible notes issued in April 2020. And finally, a $12.3 million non-cash reversal of unredeemed ticket revenue provisions booked during the first quarter of 2020, given the uncertainty in future passenger behavior related to the COVID-19 crisis. Excluding these special items, our underlying net loss for the second quarter came in at $114.6 million, or a loss of $2.70 per share. Our cash burn for the second quarter came in at $232 million, an average of $77 million per month, which is lower than our prior estimates, as we mainly focused on reducing our fixed expenses and had a lower number of cash ticket refunds than forecasted. This figure only excludes proceeds and payments from extraordinary financing activities. In terms of capacity for the remainder of the year, our operating plan for the month of September represents less than 10% of 2019 capacity for the month and could build up to a range of 30 to 40% of 2019 ASM levels by December. Assuming this gradual restart of operations, we should be able to further reduce our average monthly cash outflow to around $66 million for the second half of 2020. This figure assumes that our leased aircraft and debt commitments are paid in full, and that we stay current in all of our obligations. The improvement in our cash burn estimate for the remainder of the year is a function of our sharp focus in the reduction of our cost base, as well as a gradual restart of our operations. I'm going to spend some time now discussing our balance sheet and liquidity. As of the end of the second quarter, assets total $4.1 billion, owner's equity was almost $1.7 billion, Our debt plus our lease liabilities total $1.6 billion. Our lease liability adjusted net debt to a bid-buy ratio came in at 0.9 times, and our debt-to-equity ratio ended the quarter at 1.1 times. We closed the quarter with approximately $1.3 billion in debt, more than 78% of which is fixed, with a blended rate including fixed and floating rate debt of approximately 3%. This debt balance includes $50 million in revolving short-term credit lines, which we drew on during the month of March, as well as the convertible notes issued in April. During the quarter, we also repaid $95 million of our short-term credit facilities. As to cash, short, and long-term investments, it was a quarter with $1.14 billion. As previously reported, during the second quarter, the company took aggressive actions to further bolster its liquidity position. including raising $343 million in cash and head of expenses through a senior unsecured convertible note offering maturing in 2025, and adding new committed credit facilities for an aggregate amount of $150 million, taking our total available liquidity to almost $1.3 billion at the end of the quarter. Furthermore, during the month of July, we closed a secured revolving credit facility for an initial aggregate amount of $105 million, Including this facility, we now have an aggregate amount of $255 million in unutilized committed credit facilities. Let me close by stating that once this most challenging situation passes, we believe Corpus Hub of the Americas will remain as the best connecting point for travel in the region, with a privileged location, an even more efficient business model, and the best team in the industry. We are working harder than ever with these goals in mind. Thank you, and with that, we're open to call to some questions.

At this time, if you would like to ask a question, please press star 1 on your telephone keypad. Again, that is star 1 on your telephone keypad. Your first question comes from the line of Savvy Sith from Raymond James. Your line is open. Excuse me, Savi, your line is now open. You may ask your question.

I guess we'll move on to the next one while Savi fixes her connection.

Your next question comes from the line of Hunter King. Your line is open.

Thank you, everybody. Good morning. Good morning. You can hear me? Okay, great. Pedro, I'd be curious to hear your views on the competitive landscape given the use of the U.S. bankruptcy process by a couple of your major competitors, some I'm curious what you view as key for COPA to being competitive in a backdrop where your competitors are going to come out with potentially leaner cost structures. Thank you.

Yeah, Hunter. So first of all, I have to say that we're very happy to be able to avoid a Chapter 11 proceeding, which we all know that one never knows how it turns out, and it can be a lot more complicated procedure. than what one would think so we're very happy to be able to stay away from that it's good for our shareholders also of course if we had such an advantage in terms of balance sheet strength liquidity and unit cost that we're very confident then after we get out of this crisis even if our competitors have a successful Chapter 11 process, we will retain maybe not the same advantage as before. The gap might close, but we will still have an advantage in that sense. Plus, of course, our very strong intra-American network. We hope that that will also remain as an advantage. So we're confident on that. Okay.

Thank you. And then, Jose, can you elaborate a little more on the $12 million contract Revenue reversal charge. Kind of curious, what were the assumptions that triggered it, and what does this mean for revenue assumptions going forward that tie to whatever issue drove it? Thank you.

Yeah, Hunter, you know, the revenue standard, accounting standard calls for you to make an estimation every month on how much of your sales are going to actually expire a year from the period where you sell, and then you basically perform a reconciliation. once that moment passes, and you make that accounting entry based on past behavior or past observed behavior that you see. Yeah, you know, mathematical formula. And so, you know, in first quarter, we're still business as usual, so we, you know, follow the accounting rule and perform that entry, but the reality is that given our changes in policy for reaccommodating passengers, et cetera, you cannot determine that those tickets are going to expire a year from the first quarter. So we reverse that expiration entry. So that's the nature of that.

Okay. Thank you very much. Mm-hmm.

Your next question comes from the line of Dwayne Fenningworth. Your line is open. You may ask your question.

Hey, thanks. Just a question on fleet. You're retiring the 190s. It looks like you're exiting your 700s. Post those two moves, if you fully flexed up your capacity, what would that look like relative to 2019 levels?

Dwayne, I think that our capacity for the next couple of years, I think we still have some flexibility in terms of lease expirations with the remainder of the fleet. And so we are now trying to make sure that our capacity that our fleet matches what could be a demand environment in the next couple of years. So more likely than not, we would, we're expecting to return the majority of the lease airplanes that we have once those contracts expire to be able to match our fleet size to what we have. So what we have right now, even with the export, retirement of the 700s and the 190s is that we still probably see that there's further fleet moves less to match to where demand is. And so that's, I think, what we can say about that and just keeping our flexibility open. I mean, on the downside, more than anything, just simply to adapt our fleet to where demand could be.

Yeah, and what I'll add to that, Duane, is that we've always talked about our flexible fleet plans and this is an occasion where that becomes very, very valuable. We have a large order for Mach 9, as we know. And we can work with deliveries. We can accelerate. We can defer. And as Jose mentioned, we can return leases or renew them, depending on how demand behaves going forward. So right now, we're making sure that we're protected on the downside. So if things stay low, stay weak, we will have a fleet that can adjust to that demand, knowing that it's not very difficult for us to increase the fleet if needed, given the flexibility that's embedded in our plans.

That makes sense. And then if I could ask, just if you have a baseline in mind as we think about, you know, 21 and 22 relative to 2019, you know, how much smaller do you think the airline would be over that timeframe? Okay.

It's hard to tell right now, very, very hard to tell right now because it depends on so many unknown factors. But in terms of our fleet, our plan is to bring down our fleet to a number that's going to be in the high 70s, but some of those planes are going to be in long-term storage depending on demand forecasts. and we can bring them out of storage at any time if demand improves. And, again, we have the leases we can renew. We have the Mach 9 deliveries. So there's plenty of flexibility there.

Got it. And just for a follow-up, in terms of reopening, which countries would you expect to reopen or what do you think your network will look like on that first 10% that you're targeting in September, and what data are you guys watching that gives you any change in confidence that this late August timeframe is the right timeframe, and appreciate you taking the questions.

Right, well, the right timeframe, I think no one knows that, to be very honest. So we're going by when countries are lifting the restrictions, the flight restrictions. What I also mentioned at the beginning of this earnings call is that we have been approved to start flying what we could call some sort of a mini-hub starting mid-August, the 14th of August. We're going to start serving... ten destinations. That's Miami, New York, Mexico, Ecuador. I mean, in Ecuador, Guayaquil and Quito. We're going to fly Santo Domingo. We're going to fly Santiago, Chile, Sao Paulo, and I think Havana, San Jose. So we're going to fly around ten destinations mid-August. We're going to offer connections, connectivity among those destinations. And even if the date of September gets delayed, just the fact that we're already offering this mini hub starting in August, even though it's going to be, yeah, only a few percentage points, we can add destinations as the country's list restrictions. and as demand improves. So once we're up in the air flying with a small network, it's very easy to take it from there and just increase service as demand shows up. So that's the plan right now. Okay, thank you.

Thanks, Dwayne. Thanks.

Your next question comes from the line of Joseph Denardi. Your line is open.

Hey, good morning. Jose, can you talk a little bit about your expectations for non-fuel costs over the next few quarters as you bring back capacity, and then what level of capacity you think you need to get CASMX back to 19 levels, just in the context that you'll likely emerge from this a little leaner. Can you get back to 2019 CASMX with a substantially smaller ASM base? Thank you.

Okay, I'll start, and then I'll let Jose compliment me. Maybe I'll start with the second part of your question. Of course, for an airline, it's very difficult to bring down unit costs to pre-crisis level unless capacity is up at a similar percent. So we're not focusing so much on unit costs, on ex-fuel costs right now, We're focusing mostly on bringing down our fixed costs, renegotiating contracts, making costs more variable than fixed, and, of course, with two eyes set on our cash burn and our liquidity. So that's our focus right now. And we think we're being quite successful in doing that, which leaves us in a good spot for when traffic starts recuperating. Whenever that starts recuperating, But if I had to give you a number, we think that when we get to the 70% range of capacity, let's say of 2019 capacity, so 7-0, when we're in the 70% range, a range of 2019 capacity. Our unit costs are also going to be in the range of what we had before this crisis, what we had in 2019, and that's going to be a result of the efforts we're making to lower our fixed costs, to renegotiate contracts, and to make sure that we can have the success we had before at a smaller capacity size.

Yeah, and Joe, in terms of where we see these costs in the second half, I'd say our focus is on fixed costs. And so I think where you add all that, it's probably going to be a 40% reduction versus the baseline at the very least. And here we're talking about kind of trying to get shed from the baseline all the most of the sort of unnecessary fixed costs that we might have, and we're doing a lot in renegotiating contracts with suppliers and just simply getting rid of items that we don't need under a reduced operation scenario. So I would say that's the range.

That's super helpful. Jose, can you just update us? Sorry if I missed this in your prepared remarks, but just on unencumbered assets and kind of your appetite to raise additional liquidity going forward. Thank you.

Yeah, we have a – I think that, you know, we have around $300 million in unencumbered assets in the down sheet right now. I think that from now, as you saw, in July we – concluded our $105 million revolving credit facility that we expect that has an accordion feature to it. So I think we can expect that that facility will grow as time passes. And I expect that to grow anywhere between $50 to $100 million more over the next several months in terms of the availability that we will have for additional liquidity. using that facility.

Thank you very much.

Your next question comes from the line of Matthew Wisniewski. Your line is open.

Yeah, thanks for taking my questions. So, the 66 million cash burn, from my understanding, that's the average from September to December. but maybe you can share what it could look like under, you know, the 30% to 40% capacity by the end of the year. Is it possible to hypothetically break even at that level, or is it not necessarily prudent to take that much cost out of the business given, you know, it impairs you going forward? Any thoughts on that?

Yeah, Matthew, this is Jose here. So just to clarify, the $66 million cash burn figure, monthly cash burn figure, is for the second half of the year. So it's from the average from July until December of this year. But we, you know, again, with the estimates that we have right now, we still will be even under a 30% operational or 30%, 40% range operation rate. we'll still be burning a figure of cash.

Okay. That's helpful. And then quickly, can you remind us where you're at with Boeing as far as delivery schedule and the max? Should we just assume that that's still kind of in flux and kind of being negotiated with Boeing going forward?

It's still being negotiated. This is Pedro here. I should say that we have seven built but not delivered aircraft somewhere in Seattle, and there's also seven what they call implemented aircraft which still need to be built, but everything has been ordered. Maybe parts of it have already been manufactured by Boeing suppliers. So it's to be expected that those 14 aircraft will be delivered I would say in the 18 months after the MAX starts delivering again. So in that 18-month period, it is expected that we could be taking delivery of 14 aircraft, even though we're still negotiating with Boeing, so that's not a given right now. We're still in the middle of those negotiations.

Okay. And if I could sneak one more in, just to understand, you know, as you start up the operation again, should we assume that there's kind of some one-time costs to bring aircraft back into service or restarting operations, or could there be a blip in costs as well as you kind of ramp things back up?

Nothing really that is major in nature, and in any event, all that will be in the $66 million cash flow figure. So there isn't really anything particularly significant in the restart.

Okay, cool. Thanks for the time. Thank you.

Here, our next question comes from the line of Aljintro Vanakonu.

Your line is open.

We can hear you.

Thank you. Good morning. Hope everyone is staying safe. We have a question regarding the air travel restrictions. So I know that you have a good relation with the Panama government. So based on your ongoing conversations, do you feel confident this time to restart operations by September 4th?

Well, the way we look at it right now is that this approval, we just got to start operating mid-August with this program. You can call it a humanitarian mini-hub, or it doesn't really matter, but we can grow that as other countries open up, lift travel restrictions, and as demand materializes. So the September 4th restart date we have It's not as critical as maybe a week ago before we got approval to start operating in mid-August. Again, it's in a limited and controlled way at first, but we can build on that. So it won't be that significant if the August 22nd restart date for Panama, opening date for listing of restriction date for Panama gets extended because we will continue to building on this operation we're going to start in mid-August.

Okay, thanks. And a second question regarding yields. So any expectations on yields once the commercial operations are restarted? And is it fair to expect lower yields as a demand incentive? Thank you.

Yes, Alejandro, the expectation is that yields are going to be affected once we restart operations. I mean, I think ultimately when you look at unit revenues in the restart, there will be an impact both on load factor and on yields, definitely, even with a lower capacity.

Do you have any kind of... I'd say that it's too early to tell.

I mean, I think the data has still, I would say, not too much clarity in what we're seeing. But certainly what we are seeing is that there is a drop, and it's going to be a drop versus what we had been seeing prior to COVID in terms of the yield environment.

And it's going to be significant. It's not going to be small numbers. But right now there's not enough demand to know for how long and how severe. It's just very hard to predict.

Okay, thank you. Thanks.

Just a reminder, analyst, please limit your question to only one. Your next question comes from the line of Rogério Araújo. Your line is open.

Yeah, thank you. Thank you so much for the opportunity. So can you – I know it's pretty difficult to talk about demand recovery at this moment But can you speak a little bit about the mix of passengers of Copa concerning leisure, corporate travelers, transit passengers, you know, the main route? So what is your thought so far on what is going to be a sustainable drop in traffic? You know, what is going to recover faster? Sure. and compare this to COPPA's exposure. Again, I know it's pretty difficult at this moment, but I would really appreciate if you could share your thoughts so far. Thank you.

Yes. Yeah, we actually feel that the way our business and network is structured, we're in a good position to deal with what's, of course, the most difficult crisis ever for our industry. And I say this because our... Passenger is evenly segmented or a third leisure, a third VFR, and a third business, and also our network. We have a vast, the most complete network where also there's a combination of leisure, markets, and business, and VFR. So we expect VFR, visiting friends and relatives, to recuperate. faster, probably followed by leisure. Business will reach a plateau. Maybe I won't take that much, but it's going to take maybe longer to go back to what it used to be. But I think we can balance the fact that we have such a diversified market and network to just put more emphasis and capacity where it's needed most. And in any way, we will also have to adjust total size, and we're preparing for that also.

Very clear. Thank you so much. Have a great day, everyone.

Thank you, Roger.

Thank you.

Your next question comes from the line of Victor Mizuzaki. Your line is open.

Hi, thank you. I have two questions here. The first one is kind of a follow-up on the question related to the use in this period of that you need to reconstruct the network. So I'd like you to understand, I mean, I don't know if you can comment on me going into details, but if you can comment about the pricing strategy. I mean, what folks at this time, I mean, the idea is to, let's say, have a positive margin of contribution. I think about cash and not necessarily on margins. And if you can also go a little bit deeper and comment a little bit how your port bookings look like today. And my second question, which is related to your fleet, I mean, these impairments with the jets and with the 737-700, is there any plan to turn on how to finance the aircraft fleets?

Okay, so I'll start with the first part, and then I'll let Jose address the second part of your question. I won't get into pricing strategy. We think that pricing strategy is probably going to be different post-crisis, at least for a while. I will strive to have the lowest cost so we can be as competitive as needed in terms of pricing and pricing issues. reaction to our competitors. There will be lower yields, as we mentioned before, and that's going to be a way of stimulating new traffic, even though we also know there are segments that will travel because they need to and not tied to pricing. So we'll try to make the best decisions in what will be a new way of doing business, at least for a while. In terms of future demand, It's early. We're talking about much smaller numbers than before, so it's hard to predict right now. But short-term demand, short-term is down 90%. And if we look, let's say, five, six months ahead, it's down 75%. That's what we're seeing right now. And of course, our capacity... It's going to match demand, and it's going to get adjusted accordingly.

And, Victor, this is Jose here. In terms of aircraft financing, as Pedro mentioned before, we're currently in negotiations with Boeing for the MAX situation. As Pedro mentioned, there are seven airplanes that are already manufactured, and once the return to service of the fleet starts at one point over the next 18 months, we expect to take delivery of a certain number of aircraft. And for that, we are preparing. We're in the process of running an RFP for the financing, and so far we've gotten good offers both on the sale-leaseback side and also on the U.S. Ex-Im Bank side. guarantee side. So there are attractive financing options available still for us.

Okay. Thank you.

Your next question comes from the line of Connor Cunningham. Your line is open.

Hey, everyone. Thanks for the time. On the $10 million cash burn improvement from 2Q through the remainder of the year, Can you say which portion of that is better revenue than what's cost in general? I would think that the majority of it's revenue-related, but just curious if – because it just seems like you've achieved a lot of your cost reduction stuff already.

Yes, absolutely, Connor. The majority is cost-related. I would say that – I would say call it six out of the ten is probably cost-related, and then you worry that there's a minor portion, four, probably related to – to the assumption of restarting the operation.

Okay. So just a little revenue and mostly costs. Okay. And then on the 10 markets that you're restarting in August, did you go to the government with the list of those 10 markets saying, like, here's where we think demand is? Or did they come to you? Just curious on how those were determined overall. Thanks for the time.

Yeah, it's Pedro. The markets we pick and if the markets were The markets are open, of course. That's kind of rule number one. The market needs to be open, and we're seeing most demand and need for travel, both out of Panama and connections. And we can add cities to that list. The government is not really involved with that. The government's main concern has to do with passengers entering Panama, which they're limiting to Panamanians and residents of Panama, and that's what they will control. But otherwise, in terms of connectivity and city, we have total flexibility there, and that's why I said before that Even if Panama extends the closure past the end of August, our September 4th restart date is no longer so critical because we can grow this operation that we're going to start mid-August as other countries open up and as demand materializes.

Great. Thank you. Thank you.

Your next question comes from the line of Michael Linenberg. Your line is open.

Hi, this is Kate on for Mike. We were just wondering, with the Avianca bankruptcy, are you reconsidering maybe your strategy in the Colombian operation and then adding on to that? Can you just give a little bit of an update on Wingo, please?

I'll address this first. We didn't get the second part of your question, an update on what?

On Wingo, please.

Oh, okay. Okay, Wingo, yeah, thank you. So, you know, we're very careful in not assuming the weakness of others, even under a Chapter 11 procedure. We obviously have the assets. We have the aircraft. We have the team. So we can be very flexible to take advantage of opportunities. But we usually don't jump the gun. So Wingo has the fleet and has the flexibility. Their priority is going to be to put together the network they flew before the crisis because they're not operating either. Colombia is closed until the end of August, so they're not operating either, but that's going to be their priority. And since their operation is only for aircraft right now, we think that by the end of this year, Wingo can be very close to pre-COVID operational levels. But if there are opportunities... any airline drops markets or struggles more than expected, they will have the capacity and the ability to take advantage of that. But, you know, right now we'll probably be more reactive than proactive in that sense.

Okay, thank you. And then just for my second question, When you do restart your services, can you just talk a little bit about the safety measures you might be taking? Are you planning on blocking the middle seat, anything along those lines?

Yeah, so we've been flying humanitarian flights. In the quarter, we did over 80 operations, many of which had multiple stops, so probably around 200 flight segments. have been flown in the quarter using our new biosafety protocols with great success. We haven't had any reports of issues with passengers or crews, so we're very glad about that. And then the measures are there's social distancing at the airport, extreme cleaning of the aircraft cabin, a reduced onboard service to limit the interaction between crews and passengers. Every passenger has to wear a mask inside the airplane and at our Panama hub also, and then other airports, depending on the own airport's regulations. But on board, 100% mask, temperature check before boarding. The aircraft, our modern aircraft, also has the... HEPA filters, which are very, very effective in filtering 99.7% of particles. So we think we're offering quite a safe environment, flight environment. And obviously, there's still a ways to go in terms of getting passengers confident enough. But so far, I think we've done well in that regard.

Thank you.

Thanks.

Your next question comes from the line of Stephen Trent. Your line is open.

Good morning, gentlemen, and thanks very much for taking my question. I just had a quick follow-up. You guys mentioned, you know, your conversations with Boeing and that you're going to keep some of your planes in storage and these kind of things. I'm just wondering, when I look at this, are you suggesting perhaps over the long term that COPPA will lean towards owning its fleet as opposed to leasing its fleet? Maybe giving your views about the asset risk of holding planes and the financial advantages of owning versus leasing. I was just curious. if I got that correctly.

Steve, this is Jose here. We historically have had a mix of owned airplanes versus leased airplanes. Our historical ratio has been two-thirds, one-third, owned versus leased. And I think that the definition, it depends on several factors in terms of what decision we make It depends on just simply keeping the flexibility, the pricing on a particular moment in terms of the markets for financing. And so that decision gets made, I think, in each individual sort of campaign that we perform for the financing of each individual airplane. Always keeping a balance and trying to maintain flexibility. I think that the fact that we have had a portion of the fleet has leased, has provided flexibility in the past, and that's been okay. But at the same time, ownership of aircraft has been much cheaper for us. So I think it's a balance. I would say that going forward, probably our preference is to own aircraft, but it's something that we consider depending on what market conditions are at the time.

Very helpful, Jose. And if I could just squeeze in one other quick one. I know it's been, you know, since 2005 when you guys acquired AeroRepublica. You know, just to ask again, if given the massive dislocation in the space that you see any kind of medium to longer term opportunities to, you know, to buy a competitor?

Well, it's Pedro here. Stephen, good hearing from you. We won't comment on that specific question. And we've always been very comfortable with the strength of our Panama-based hub model that allows us to serve in a very effective way all of the Americas. So for that reason, we've never been in a rush to get into America. M&A transactions with other airlines in the region. The Columbia opportunity 15 years ago was very unique and has been very valuable for us. But at the same time, we're always open. We're always open and willing to listen and consider. So if those opportunities come along, you know, we'll take a long and hard look at it.

Very helpful, Pedro. Thanks very much, and you guys stay safe and healthy.

Thank you. Thank you, Steve. The same to you.

Your last question comes from the line of Matt Roberts. Your line is open.

Hey, good morning. Thanks for squeezing me on here. I'm filling in for Savi. I appreciate the color around the cash burn, and I apologize if I missed this. But could you talk about what you're expecting in terms of refunds reflected in that second half cash burn? as well as any differing assumptions between 3Q and 4Q?

Yeah, I'll stick to the second application. You know, so far we've seen the ticket reimbursements in the range of around $9 million to $10 million, so I think that that's a fair figure for the remainder of the year on a per-month basis.

Great. Thank you. And then maybe lastly, in terms of the unencumbered assets you mentioned, the accordion feature on that revolving credit facility, does that impact that initial number?

Or is that all embedded in there?

Yeah, correct. If we draw on the facility, then of course the number of the level of unencumbered assets would come down, but just on the moment where we draw on it.

So, yeah. Good. Thank you all very much.

Thank you, Matt.

Excuse me, presenters. No more phone questions.

Okay. Thank you. Thank you all. This concludes our earnings call. Thank you for being with us. And thank you for your continued support. Have a great day. Thank you.

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