Copa Holdings, S.A.

Ladies and gentlemen, thank you for standing by. Welcome to COPA Holdings' second quarter earnings call. During the presentation, our participants will be in 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, then 1 on your touch-tone phone. As a reminder, this call is being recorded on August 5, 2021. Now I will turn the conference over to Daniel Tapia, Director of Investor Relations. Sir, you may begin.

Thank you, Stephanie, and welcome everyone to our second quarter earnings call. Joining us today are Pedro Helron, CEO of Copa Holdings, and Jose Montero, our CFO. First, Pedro will start by going over our second quarter highlights, followed by Jose, who will discuss our financial results. Immediately after, we will open the call for questions from analysts. COPPA holding 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 discussed in our annual report filed with the SEC. Now I'd like to turn the call over to our CEO, Mr. Pedro Gelón.

Thank you, Daniel. Good morning to all, and thanks for participating in our second quarter earnings call. Before we begin, I'd like to thank all our coworkers for their commitment to the company and recognize their continuous efforts and dedication to keep COPPA at the forefront of Latin American aviation. To them, as always, my utmost respect and admiration. As many of you know, Raúl Pascual decided to take on a new professional challenge and left the company earlier last month. We are very grateful for the more than 15 years of outstanding work he dedicated to COPPA. I would also like to take the opportunity to welcome Daniel Tapia, our new Director of Investor Relations. Daniel has over 12 years of experience with the company in many areas, including airports, scheduling, and most recently fleet and network planning. We're very confident in Daniel's ability to lead our investor relations group. As you may remember, in our last earnings call, we discussed two diverging themes happening in Latin America. On the one hand, some countries, including Panama, were experiencing a downward trend in infection rate, which led to fewer travel restrictions and an improved demand environment. On the other hand, several other countries continued to struggle with the virus, which led many of them to re-impose air travel restrictions and or new health requirements, affecting demand for international travel. As of today, the story has not changed much. Due to the increase in COVID-19 cases, several countries have maintained and in some cases increased travel restrictions, which has affected our ability to ring state capacity. On the other hand, markets without significant restrictions, mainly to and from the U.S. and certain leisure destinations, have continued to recover, which has allowed us to increase capacity quarter over quarter while also growing load factors. In the month of June, we successfully transitioned our Hub of the Americas in Panama back to a six-bank connecting structure, which enables cost efficiencies and lets us continue adding back frequencies and destinations. Moreover, we started to reactivate some of the aircraft sent to temporary storage during 2020. Going forward, we assume ongoing vaccination efforts will have a positive effect on COVID-19 infection rates in the region, which we expect will lead to the relaxation of travel restrictions and a faster demand recovery, supporting the capacity deployment for the second half of the year. Now I'll highlight some of our second quarter results. In terms of capacity, we reached 48% of second quarter 2019 ASMs compared to 39% in the first quarter. Load factor came in at 77%, which is an improvement of 8 percentage points compared to the first quarter. Revenues increased by 64% over the previous quarter to $304 million. as a result of the additional capacity, higher load factors, and improved yields. The additional capacity also allowed us to reduce our ex-fuel chasm from 8.5 cents in Q1 to 7.6 cents in Q2. We reported an operating profit of $8.7 million in the quarter, excluding a $10.4 million passenger revenue adjustment the company would have reported an operating loss of $1.7 million. Cash acquisition averaged $21 million per month, which was better than our expectations, primarily due to stronger sales in the quarter. We ended the quarter with a cash balance of $1.3 billion and total liquidity of over $1.6 billion. In terms of our operations, and despite the complexity imposed by the multiple biosafety protocols, we are pleased to report an on-time performance of 92% for the quarter and a flight completion factor of 99.5%, which again places us among the best in the world and is a true testament to our employees' continuous commitment to providing a world-class product to our passengers. Turning now to Wingo, we can report that it's now operating six 737-800s compared to the four it operated pre-pandemic. During the second quarter, Wingo continued its regional expansion with new flights from Panama to San Jose, Costa Rica, and from Bogota to Lima, Peru. And since Q1, it's been operating more capacity than in 2019. To finalize, I'd like to reaffirm that we have a proven and 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 for a full service carrier, best on time performance and strongest balance sheet. Going forward, the company expects that its help of the Americas will be an even more valuable source of strategic advantage. Now, I'll turn it over to Jose, who will go over our financial results in more detail.

Thank you, Pedro. Good morning, everyone. I hope that you and your families are safe and doing well. Thanks for joining us today. I'd like to join Pedro in acknowledging our great Copa team for all their efforts and great spirit in these many months of the pandemic. I will start by going over our second quarter results. Our capacity came in at 2.9 billion available seat miles, which amounts to about 48% of the capacity operated during the second quarter of 2019. Load factor came in at an average of 77% for the quarter. We reported a net profit of $28.1 million, or 66 cents per share. Excluding special items, we would have reported a net loss of $16.2 million or a loss of $0.38 per share. Special items for the quarter are comprised mainly of an unrealized mark-to-market gain of $33.9 million related to the company's convertible notes issued in 2020 and $10.4 million in revenues related to underpinned tickets, which correspond to sales made during 2019 and early in 2020. We reported a quarterly operating profit, which came in at $8.7 million. On an adjusted basis, not including the $10.4 million in unredeemed ticket revenues, we had an adjusted operating loss of $1.7 million for this quarter. It's worth noting that we achieved this result while operating at 48% of our pre-COVID capacity. Unit costs, excluding fuel for the second quarter, came in better than the first quarter at 7.6 cents per ASM. driven by quarter-over-quarter capacity growth as well as our continued focus in maintaining the savings achieved during the past year. We continue with our cost savings initiatives, and we are targeting to achieve our unit cost below $0.06 once we reach 100% of our pre-COVID-19 capacity. Aside from our cost performance, our operating results for the quarter were driven primarily by our yields. which at 11.9 cents on an underlying basis came in 1% better than those in Q2 2019. We also achieved cash accretion of approximately $21 million per month for the quarter, which is ahead of our expectation and driven mainly by increased sales during the period, as well as some timing of operational cash outflows. As a reminder for our cash accretion measure, we exclude all extraordinary proceeds from asset sales, but include capex, and the payment of our financial obligations. I'm going to spend some time now discussing our balance sheet and liquidity. As of the end of the second quarter, we had assets of close to $4.1 billion, and our cash, short, and long-term investments ended at $1.3 billion. We also ended the quarter with an aggregate amount of $345 million in unutilized committed credit facilities, which added to our cash brought our total liquidity to more than $1.6 billion. In terms of debt, we ended the quarter with $1.6 billion in debt and lease liabilities, similar levels to the ones reported for the end of the first quarter. Turning now to our fleet, during the second quarter, we finalized the sale and delivery of three Embraer 190s, and in the month of July, we delivered the last remaining Embraer 190 aircraft in our fleet. During the month of July, we also entered into an agreement for the sale of six 737-700s. and decided to keep in our fleet the remaining six 737-700s. We ended the second quarter with 81 aircraft, 68 737-800s and 13 737 MAX 9s. In these figures, we include our 737-800s that were sent to temporary storage during 2020. During the fourth quarter, we expect to receive two more 737 MAX 9s, and considering we are now keeping the six 737-700s, we expect to end the year with a total of 89 aircraft. As to our outlook for the rest of 2021, we're still in an uncertain and unpredictable demand and operating environment. And as such, we will not be providing full year guidance. However, based on preliminary results for the month of July and the current state of the demand environment and air travel restrictions, it can provide the following outlook for the third quarter of 2021. We expect capacity to be approximately 70% of Q3 2019 levels at about 4.5 billion ASMs. Revenues to be approximately 58% of Q3 2019 levels at about $415 million. We expect our CASMX fuel to be approximately 6.6 cents, a decrease of 14% versus the second quarter. Given these operating assumptions, an oil and fuel price of $2.15 per gallon, as well as the incremental capex that we were incurring during the quarter to reactivate our fleet, we expect to be cash neutral for the third quarter. Thank you, and with that, we'll open the call to some questions.

Thank you. As a reminder, if you'd like to ask an audio question, please press star followed by the number one on your telephone keypad. Once again, that is star one to ask a question. And your first question is from the line of Duane Penningworth with Evercore ISF.

Hey, good morning, guys. This is actually Ray Wong on for Duane. You had mentioned significant travel restrictions being a major indicator for demand recovery, specifically some bright spots in leisure into the U.S. Along those lines, what percent of your markets are reopened? Do any countries in your network have a vaccine requirement? And could you provide some specificity for countries that have or don't have significant travel restrictions in place?

Okay, this is Pedro here. Good morning. I don't think I have the exact percent of numbers, or numbers, but pretty much every market has some sort of travel restriction. It might be as simple as providing an antigen or PCR test X hours before travel, a negative test of course. Most countries have that restriction, a few like Mexico and Brazil don't, but the rest pretty much have it. Others have quarantine restrictions, like Chile, for example. And where we get the most affected is when countries are restricting the number of flights, like it's happening in Argentina, to the whole industry. And a few other markets are also restricting capacity. So it's hard to pinpoint, but The open markets like Brazil, Mexico, the U.S. for most origins, not for all, it's not open for Brazil as we know, but those markets, some Caribbean islands like the Dominican Republic, those markets are seeing a faster recuperation or recovery than the ones that have higher restrictions as would be expected.

That's helpful, thanks. And just for my follow-up, as you look across your network, where do you see longer-term structural competitive capacity shifts, whether it be higher or lower?

Competitive capacity in the lower term?

Yeah, just for the sense of, like, you know, when you see network, you know, when you see other competitors across your network restructuring, et cetera, going through harsher times, you know.

Yeah, no, we don't really see... I mean, there are a number of our main competitors restructuring under Chapter 11, but we expect them to come out of Chapter 11 with a network that won't be much different to what they have before. Of course, we don't know for sure. We haven't seen the restructuring plans, but we're not expecting major shifts there, if any. And then there's new competition, of course. From new and existing carriers, they're adding capacity throughout our region, so we expect to see more competition in the future, but no major capacity shifts that I can think of.

The only thing that I add to that is that the hub on the post-COVID world, the hub still carries quite a bit of uniqueness, and it has a lot of strength in terms of the smaller markets that we serve. And so, therefore, I think that we're well positioned even under the increased competitive influx of some of the low-cost carriers in the region and some of the capacity from the U.S. The reality is that the hub still competes on markets that cannot be served very well on a point-to-point basis.

Thanks for the time. Have a great day.

Thank you, Ray.

Your next question is from the line of Stephen Trent with Citi.

Good morning, gentlemen, and thanks very much for taking my question. I'm curious, you know, given what we've seen with kind of slower business travel in the Americas, I've had one or two industry contacts mention that, you know, they know of plans by specific businesses to try to launch you know, business passenger-only type services. You know, I'm wondering if you guys have even seen anything like this or if it's, you know, we're talking about, you know, paper tigers here. Just love to get your take on that.

Yeah, well, our part of the world might be different to others. The distances are shorter and not everywhere, but in many markets. In our case, we operate mainly in narrowbodies. Of course, we've seen corporate travel slow down. I would say that corporate travel in our network is about 50% of what was pre-pandemic, and it's recovering a lot slower than VFR and leisure. that in some markets is getting close to pre-pandemic. And what we've heard for a lot of our accounts is that, you know, they'll start traveling after the summer. But I'm sure that will depend on the virus also. We're not planning to make any major changes to our product to target a specific market. We've always been almost evenly split amongst leisure, VFR, and corporate markets. and have a product that can cater to all three segments. But what we know is that going forward, there will be more, at least for a few years, until corporate fully recovers, there will be more weight towards leisure and VFR. So we're making sure our costs are going to be lower than before so we can have the same success, even if there's a little bit more pressure on yields.

Okay, very helpful, Pedro. And as a quick follow-up, Could you refresh my memory? You know, Panama itself, I know that Panama has been allowing in-transit passengers to pass through the airport with no problems. But for foreigners arriving in Panama, could you just remind me what kind of, if they have quarantine requirements or anything like that?

There's no requirement other than a negative test 72 hours before travel for most passengers from Europe, Latin America, and the U.S. However, certain high-risk countries, mostly from South America and a few from Europe, have to provide the negative test plus another test on arrival and then a three-day quarantine at, you know, one of the listed hotels. However, that is about to change. If the passenger, the arriving passenger from a high-risk country has the negative test plus is fully vaccinated, then they'll do away with the three-day quarantine.

Okay. Very helpful, Pedro. I'll let someone else ask a question. Thank you.

Thank you, Stephen.

Thank you, Stephen.

Your next question is from the line of Hunter Kay with Wolf Research. Hey, good morning, everybody.

Good morning. Pedro, you know, sometimes I know airlines collaborate on safety and operational issues. Have you seen, either from afar or through conversations with your U.S. airline counterparts, about any lessons learned? that you might consider as you contemplate restarting operations, just to ensure that you don't incur some of the same issues operationally that we're seeing up here happening in the States right now?

We have, obviously we're now guiding to 70% of pre-pandemic capacity in Q3. So we've been spooling up since Q1, actually since Q4. of last year. We've been doing it gradually. However, between Q2 and Q3, we're going to be growing 50% in ASM, so it's going to be like our fastest redeployment of capacity. But we've had a few quarters to get it done correctly, and as you've seen from our on-time performance, at 92% in Q2 and even higher in Q1, we haven't lost a step in coming back with the capacity. We're not cooperating with others, which is your specific question, but we have paid a lot of attention and we have talked to our industry groups and we have talked to some of our peers and yearlings that we're closest to from the very beginning, but not right now.

Okay. Okay, thank you. And then, Jose, sorry for the modeling question, but it could be a nice little factor here. I'm kind of curious about ASMs per gallon. You had a low stage length. You're under 1,200 miles. Obviously, you got rid of the U190s. But as you think about the MAX that's coming in, the U190s, are you going to be able to keep these ASMs per gallon above 83 or take them even higher over the next two to three years?

Yeah, I think the trend, the MAX has... a fuel performance that is around 13% better than the 800 on a per ASM basis. So therefore, you know, you can certainly assume that as the MAX come into the fleet, that there will be an improvement in the ASM per gallon figure that we will be seeing over the next several months as more MAXs come in. So, yeah, the MAX right now represents almost 20% of the fleet, so it will become more and more important as time passes and more MAXs come into the fleet. And the other thing is that you have to also model it on a going-forward basis, and the fact that the E190s are gone, and that also aids in the field that we're seeing in the business.

So this is a sustainable level here going forward, you think? Yes. Thank you.

So we have a next question.

Alejandro Domacano with Credit Suisse.

Thank you. Hi, Pedro, Jose, Daniel. Thank you for the call. A quick question on the unitary cost. What are your expectations in terms of KSMX fuel as long as capacity continues to recover? I mean, do you believe there might be some structural savings cost savings once capacity is fully recovered, and where does these structural cost savings may come from? Thank you.

Yes, Alejandro. As you saw, first of all, we are providing our guidance for Q3 at 6.6 cents, which is getting very close to our 2019 cash demand. That's only at 70%. of our 2019 capacity. So it is getting close to the levels that we had pre-pandemic. Our expectations, as I mentioned in my prepared remarks, is that we will achieve CASM below six cents. That is below where we were in 2019 pre-pandemic. By the time that we reach 100% of capacity. Where did that come from? First of all, last year we worked exceedingly hard in renegotiating our contracts with suppliers, with counterparties that we do business with. We have been very adamant about the fleet changes that we've made. That provides quite a bit of savings as well on a per ASM basis. And we continue on with that. We continue with our savings plans, both in terms of looking for further efficiencies in contracts, IT systems, Overhead, we are a leaner organization than what we were a year ago. It's all about that, and we are confident that as we get back to 100%, we will achieve cuts, and that will be less than six cents.

Okay, thank you. Just a second question, if I may. On the decision, I mean, what was the rationale behind the decision of keeping the remaining 6, 737, 700?

Yeah, Alejandro. I would say that reason number one is when we started experiencing a faster capacity recovery or demand recovery than what we expected earlier in the year. So that was number one. And number two is that those aircraft, well, first of all, they're owned and paid for, not very expensive, so the per-seat cost is equivalent to the $800. And at the same time, they have the same great reliability of the rest of the fleet. So the cost of keeping those aircraft, even if it was as insurance, is nothing. And the cost of being short aircraft could be very high. So we're just hedging our bets. Flexibility for us.

Okay, got it. Thank you so much, guys.

Thank you, Andrew.

Your next question is from the line of Savvy Sight with Raymond James.

Hey, good morning. On your revenue guidance, you know, it implies a significant kind of yield compression in 3Q compared to 2Q, given that your year-over-two-year capacity is kind of improving by 22 points on a sequential basis, but your revenue is not improving. It's improving on about 13 points. Is that just a function of you're bringing back a lot of capacity and you're just seeing more leisure yields? You know, because we are moving from kind of the seasonally weak 2Q to 3Q, so I was wondering why that was.

Yeah, Xavi, so this was said here. Indeed, you very well hit it in the head there. We are adding 50% of capacity Q3 versus Q2, as Pedro alluded to earlier. Traffic is in that same line. So it is indeed yields. We are seeing that with a rampable capacity, there is a gap simply to... allow ourselves to grow. What I would say is that this is not about a quarter. It's about rebuilding the hub. And we believe that the ramp up of the hub and maintaining its frequency and destinations is very important in sort of the future development of it. So it is sort of like a transitional quarter, but we are seeing that indeed there is a yield reduction on a percent basis, especially during the latter part of the quarter, especially during the latter part of the quarter. And you know what? We'll make adjustments to the capacity if required. So we are being very flexible in the way that we are putting out our capacity forward.

Makes sense. And the... You addressed this a little bit, I think, Pedro, earlier when talking about competition, but I was wondering just one on Volaris. You know, they've talked about expanding to northern South America in the medium term and deploying like 18 to 22 aircraft there, either from Mexico, Costa Rica, or El Salvador. Just wondering you talked about the small markets that you serve maybe that's the answer here but just you know how and what and what to what extent will copa be able to defend against you know potential uh excursions from valaris into your market yeah well yeah savvy pedro here and and you know you you provided part of the answer and we you know we have many competitors and we've seen growth since the pandemic started

from both legacy earnings from the U.S., LCCs from the U.S., from Latin America, et cetera. So that's not new. The news are kind of been repeating for the past few months. We're focusing on what makes us successful, which is one is keeping our costs as low as possible. As Jose mentioned, we're planning to come out of the pandemic. Hopefully the pandemic ends one day. But we're hoping that when we are back at 100%, we're going to be at below $0.06 a KASM. And we're going to be at pre-pandemic KASM when we reach 80%, which that should not be... too far from now. We're also connecting small markets. The strength of our hub is that we connect over 70% of our markets. Our markets are too small to be able to be served non-stop directly. That's not going to change after the pandemic, at least not for a while. And it's also hard to stimulate traffic in many markets in Latin America, not only because of the size of the market, but because of how high the airport fees and taxes are. So before you start charging a penny, the passenger has to pay quite a large amount of money. So it's hard to stimulate new traffic with those kind of We also have – we're part of a strong alliance with United and Star Alliance. So we think we have all the pieces in place to remain successful, even though we do expect more competition from many others.

Makes sense. Appreciate it. Thank you.

Thank you, Sari.

Your next question is from the line of Pablo Mancibias of Barclays.

Hi. Good morning. Thanks for taking my question. Just kind of a follow-up on the first question. If you were to estimate how capacity recovery was among leisure and BFR, what would it be your best guess? And kind of a related question to that one, to what extent do you think that vaccination tourism helped demand over the quarter? Thank you.

I will start by saying, Pablo, that what we're seeing right now in terms of the breakdown of the type of demand that we have is that, yeah, it's being driven by VFR. I would say that VFR is almost half of the traffic that we're seeing. I'm sorry, leisure is about half, a little bit less than half in leisure, and followed by VFR about a third. And then as Pedro mentioned before, business travel is down, I want to say, half versus where it was before the pandemic. So it now represents maybe 15% to 20% of our total traffic. That's the breakdown that we are seeing right now. But of course, again, the pandemic has taught us that things change over time. So this is the picture that we have as of today.

And in terms of vaccine tourism to the U.S., it's obviously impossible for us to know the reasons people travel for. But there was an increase in two from the U.S. traffic sometimes towards the end of April. when vaccines were kind of openly available in the U.S. So that obviously led us to believe that one thing is tied to the other. And we're seeing a slowdown right now. You know, as more vaccines are available in Latin American countries and as people get vaccinated, you know, there's an initial rush and we expect that to continue slowing down. But as you know, we have a very strong network that's not dependent on one particular market or one particular sector. So we'll keep on rebuilding our network and leveraging those strengths. Okay, perfect. Thank you very much.

Thank you, Paolo.

Your next question is from the line of Bert Subin with Stifel.

Hey, good morning, and thanks for the time. Good morning. As a follow-up to Hunter's question, what is your current upper limit on capacity? If all countries reopened today, restrictions fully removed, what percent of your 2019 capacity could you fly? And how should we think about your capacity over the next few quarters if things remain as they are today? Clearly, I know you're not giving a guide beyond 3Q, but if we were to assume that nothing changed, is it fair to say that you would continue to add capacity from here? Thanks.

Yeah, so Pedro here. If we compare to pre-pandemic, let's say to 2019, we were, by the end of 2019, we were operating 96 aircraft. We had 102, but that included 6, max 9, which were not operating, were grounded, as we know. So in 2019, by the end of 2019, we operated 96 as COPPA holdings. By the end of 2021, we'll have 89 as COPPA holdings. We might still have a few in the desert, which we have to reactivate, but that can happen in the first part of 2022. And then we have five max nine deliveries in 2022. So that's going to take us to, you know, we also have lease returns, which we have to decide how many we're going to return or not. We're guiding now that we will renew some of those leases. And then our aircraft are of higher gauge because we've sold the Embraer 190s. So we're operating mostly 800 NGs and max 9, so much higher gauge than the Embraers. So shortly, sometime, right now, we will not be at 100%, but we can be in the high 80s by the end of this year. And sometime towards the second half of 2022, we could be close to the 100% in ASMs.

And in terms of costs, Bert, you know, we're not providing guidance for the fourth quarter, but if we are in, you know, if demand trends sort of go on in the way that we expect them to, you know, our unit costs for the fourth quarter could be in the low six cent range.

Okay, thanks. That's very helpful. Maybe just along the same vein, Can you just give us an update on how you're thinking about your fleet longer term? I wish I could find this, but you had a good chart in one of your investor presentations that sort of showed two lines, one going up and down, and just sort of highlighted your fleet flexibility, which has clearly been a nice lever to be able to pull during the pandemic. You know, demand seems to be proving pretty resilient. Are you starting to refocus maybe on your longer-term growth? Thanks again for the questions.

Yes. So we're still cautious. Because, you know, it's something we've learned is that this virus is unpredictable. And even the people that know don't really know that much until it happens. So we've been very cautious, but at the same time we've been reactivating our aircraft, bringing them back from the desert at a much faster pace than what we expected earlier in the year. And, you know, we're even talking to Boeing right now to see if we can move forward some MAX 9 deliveries. So we're in those discussions right now and we have the flexibility of over 20 LEED NGs coming due in the next three to four years. So that gives us, we could bring forward MAC-9s, we could renew NGs or return NGs. We're going to retain a lot of flexibility in the next three years. and we hope to have enough capacity to grow above the ASM levels we had in pre-pandemic. Thank you. Thank you, Bert.

Your next question is from the line of Dan McKenzie with Seaport Global.

Yeah. Hey, thanks. Good morning, guys. A couple of questions here. So first question really ties to the vaccine rollout across your network, the countries you serve versus the expectation for business travel to recover. So I think every country has got a different vaccine rollout, of course. If you were to take some kind of average of the various rollouts, I'm just wondering what that expectation for when your markets would be fully vaccinated is that you know, early 2022, you know, Brazil by year-end, but for the whole network, early 2022, or is it end of 2022, or does it really tie to an earlier question, you know, sometime mid-next year? And then related to that vaccine rollout, you know, what is the expectation? Does business travel recover ahead of that rollout, or is it, you know, coincide with it or lag it? You know, what can you share along those lines? So...

I'll take the first shot at it and then I'll let Jose back me up. In Panama, for example, we think that by the month of September, so a month from now, anyone that wants a vaccine will have access to a vaccine. We are about 80%, I'm sorry, 40% vaccinated right now, but the vaccines are coming in at a very fast pace on a weekly basis And I think in a month, anyone that wants to get vaccinated will be able to get vaccinated. It seems to be going that way also in Colombia from what we know. And it's just gaining steam in most countries in Latin America. So I would hope that by the end of the year, so by the end of the fourth quarter, the countries will be vaccinated to the degree that the population wants to get vaccinated. And in terms of corporate travel coming back, so we've heard from some of the major accounts that they'll start traveling after the summer, but we know that it won't be at the same rate than before, in the same percentage as pre-pandemic. Also, Latin America is made up of a lot of small companies and regional multi-Latin American companies, and I think those are going to start traveling soon. probably sooner than the larger international or U.S. corporations. But we cannot really predict exactly how that's going to play out.

Yeah, I just add, Dan, that the business traveler that travels on COPPA, there's a big component there of small business owners or people who work for very small companies. And we believe, as Pedro mentioned, that those folks will get back in the air in a shorter term than sort of the big corporate accounts.

Yeah, that makes sense. So that ties to, I guess, my second question here, and it's really kind of a two-pronged question. It kind of gets back to, I think, an earlier question, Savi, just on the yield expectation for the third quarter. I'm just wondering if you can You know, help us understand what really happened in the second quarter. Were yields initially weaker and then stronger towards the end? And, you know, how does that tie to the third quarter? I mean, if corporate travel comes back, it sounds like that might not be embedded into the third quarter revenue outlook. And then, you know, kind of related to that, are there any countries in Latin America looking to Europe as a model for how to open, so requiring a vaccine passport potentially as a way to bypass testing and quarantines?

Yeah, I would say for the third quarter, first of all, the news story in the second quarter was... I think it was mostly towards the latter part of the second quarter, more than in the beginning. And it, I think, was... As a function of several items, there was, as Pedro mentioned before, there was some vaccine tourism to the U.S., but also there was, I think, an opening of certain countries started to open, especially in the Caribbean and in Mexico. So that created, I think, that bump in demand that we saw. And it was mostly, again, during the latter part of the second quarter. And what we're seeing right now is that in the third quarter specifically, the latter part of the third quarter is where we're seeing that there is a little bit of a yuga. But the important thing here, however, is also that we're putting in quite a bit of additional capacity into the third quarter. So I think it's not necessarily a story of weakness, but rather the fact that we are adding capacity into a network in order to build the network back. And I think that's the story related to what we're seeing in the third quarter right now.

And then Europe as a model for opening Latin America, are any countries looking at requiring a vaccine passport?

It's been talked about quite a bit. There are trials going on with the Ayada Travel Pass, but no one has made that decision yet. I would not be surprised, however, if some of that happens, especially as the digital passports get tried out and are proven to be a good method of opening up, a good way of opening up. But no one has announced that yet. I see. Thanks for the time, you guys. Thank you, Dan. Thank you, Dan.

And your final question will come from the line of Mike Linenberg with Deutsche Bank.

Oh, hey. Hey, everybody. Hey, Pedro, in your response to Alejandro's question earlier about holding on to the 6737-700s, you gave two reasons. And I actually thought that maybe a third reason was that maybe you recognize the importance of having some smaller gauge airplanes around. You know, I think you had mentioned the strength of of the Panama hub and the reliance on small markets. And I'm just curious, but it sounds like that wasn't a consideration. Or you may be actually potentially looking down the road at maybe a smaller gauge airplane. Just thoughts on that?

So it's an interesting question. It was not a consideration. However, the 6700s are going to fly a network aircraft made up of the smaller, the thinner routes. So those aircraft that are going to operate were before we had exclusively E-190s operating. And that actually adds to the value of staying with the 700. Okay.

Makes sense. And then how about, you know, with respect to bigger airplanes? I mean, your largest airplane is the MAX-9. And yet I was actually surprised to see this. You know, you're flying Miami, Panama or Panama, Miami. I think you're doing now nine round trips, which pre-COVID, I can't even think that, I mean, I think around the holidays you got to nine round trips. But you do have a bit of wingtip flying, you know, where you have planes going out within minutes of each other. So it would suggest that the 800s, they're not big enough. And I'm not telling you to go buy an A350 or a 787, but would you consider max nines number one number two tied to that is a lot you know you hear ayat talk about a lot of broken itineraries and i think when i look throughout south america latin america there's been a significant pull down in service um namely by some of the carriers that are going through restructuring we've seen a lot of itineraries that have completely disappeared and it does seem like that copa is in a very good position to maintain those itineraries, maybe not on a nonstop basis, but on a one-stop basis over Panama. And I'm just curious if you're picking up some of that share, because again, I, I almost thought I had to do a double take to see how much frequency that you're running between Miami and Panama now. And I suspect that that's not everybody who wants to go to Miami or Panama city. You're taking a lot of passengers into South America because the service isn't there because of the pandemic. So sort of a two prong question about the seven, three, seven max 10 and, and or share that you may have picked up in the meantime because of the struggles of competitors in your region. Thank you for answering the questions.

Yeah, so Mike, a lot of stuff in your question.

I'm sorry.

As always. When we think of larger gauge aircraft, and as we said in the past, and you know us well, we try to keep things as simple as possible so we can have a simple single fleet as much as possible. Right now we are a 737 operator, exclusively 737, mainly NG-800s and MAXs. MAX 9 is very simple. There's pilot commonalities, the whole thing. And sometimes we sacrifice having the ideal aircraft or the ideal gauge in a few markets in exchange for having the better fleet for the whole network. And we're going to keep that mentality. And if the MAX 10 is something we're going to bring in, it needs to make sense in more than just one route, more than just Miami, etc. We would rather run wingtips in some markets, knowing that that facilitates the having a single, narrow body, very efficient fleet. So that's kind of what we're weighing out always. commonality, simplicity versus the ideal aircraft for each market, which is hard to do. And that's also going to drive any future decision about a smaller gauge aircraft, which was your first question. That same philosophy is going to drive that. In terms of the broken itineraries, we're in a recovery mode ourselves, so we're rebuilding our network. and our six-band connectivity, which started late in June. So we'll take advantage of any opportunities that fit that single hub model, but we are in that recovery mode, so I cannot say that we're taking full advantage of everything. Plus, we know that a lot of that service will be covered when some of the other carriers come out of their own restructuring. So we also want to be rational about that.

Okay. Very good. Thanks, Pedro. Thanks, everyone. Thank you, Mike.

There are no further questions at this time.

Okay. Okay. So thank you all. This concludes our earnings call. Thank you for participating. Thank you for your continued support. Have a great day and a great rest of the week. See you next time.

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