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Operator
Ladies and gentlemen, thank you for standing by. Welcome to COPA Holdings' third quarter earnings call. During the presentation, all 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 need to press star 11 on your touchtone phone. As a reminder, this call, this webcast is being recorded on November 16th, 2023. Now I will turn the conference call over to Daniel Tapia, Director of Investor Relations. Sir, you may begin.
Daniel Tapia
Thank you, Abby. And welcome, everyone, to our third 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 our third quarter highlights, followed by Jose, who will discuss our financial results. Immediately after, we will open the call for questions from analysts. COPPA 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, coppaair.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 Gelron.
Abby
Thank you, Daniel. Good morning to all, and thanks for participating in our third quarter earnings call. Before we begin, I would like to extend my sincere gratitude to all our coworkers for their commitment to the company. Their continuous efforts and dedication have kept COPPA at the forefront of Latin American aviation. To them, as always, my highest regards and admiration. As you can see in our third quarter earnings release, once again COPPA reported strong financial results for the quarter. We were able to deliver industry-leading operating margins while continuing to grow our capacity by double digits year over year. The third quarter results were driven by a robust demand environment in the region and our focus on delivering low ex-fuel unit costs. Now I'll summarize the main highlights for Q3. Passenger traffic grew 13.3% compared to the same period in 2022, outpacing our capacity growth of 12.1%. As a result, load factor for the quarter increased 0.9 percentage points compared to Q3 2022 to 87.8%. Passenger yield came in at 13.4 cents, resulting in unit revenues or RASM of 12.2 cents. Unit cost decreased by 11.2% compared to Q3-22, mainly driven by a lower jet fuel price per gallon and lower sales and distribution costs. Excluding fuel, unit cost, or CASAM-X, came in at 5.8 cents, a 2% decrease compared to Q3-22. And our operating margin came in at 23.6%. 5.9 percentage points higher than in the third quarter of 2022. On the operational front, Coop Airlines delivered an on-time performance of 89.4% and a completion factor of 99.8%, once again among the best in the world. With regards to our network, in the last two quarters, we have started service to Austin and Baltimore in the U.S., and Mante in Ecuador, and more recently, in October, we started flying to Barquisimeto in Venezuela. With these additions, we now serve 81 destinations in 32 countries in North, Central, South America, and the Caribbean, as we continue strengthening and solidifying our position as the most complete and convenient connecting hub in Latin America. With regards to our fleet, During the third quarter, we took delivery of two 737 MAX 9s, ending the quarter with a total of 103 aircraft. Turning now to Wingo. In the third quarter, Wingo continued its network expansion with the start of three new routes, from Bogota to Caracas, Venezuela, a Panama domestic flight from Panama City to David, and one seasonal route from Cali to Aruba. Additionally, in October, Wingo started service from Medellín to Cartagena and announced one additional domestic route in December from Medellín to Santa Marta. With these additions, Wingo expects to end the year operating 37 routes with service to 23 cities in 11 countries. Now turning to our current expectations, we continue to see a robust demand environment in the region, and as you can see in our earnings release published yesterday, we expect strong financial results for full year 23. And preliminary, in 2024, we plan to continue growing our capacity in the low double-digit range and further reduce our unit cost. As always, Jose will provide more details regarding the 2023 and 2024 outlook. To summarize, we delivered strong third quarter results while growing capacity 12% year over year, We continue to see a robust demand environment in the region. We achieve low ex-fuel unit costs during the quarter and we continue to deliver on our cost execution strategies. We continue growing and strengthening our network, the most complete and convenient hub for travel in the Americas. And as always, our team continues to deliver world-leading operational results. We remain as confident as ever in our business model. We continue to deliver low unit costs, high margins, and a great product for our passengers, including the best connecting network in Latin America, making us the best positioned airline in our region to consistently deliver industry-leading results. Now I'll turn it over to Jose, who will go over our financial results in more detail.
Daniel
Thank you, Pedro. Good morning, everyone. Thanks for being with us today. I'd like to join Pedro in acknowledging our great team for all their efforts to deliver world-class service to our passengers. I will start by going over our third quarter results. We reported a net profit for the quarter of $187.4 million or $4.72 per share. Excluding special items, our adjusted net profit came in at $174.4 million or $4.39 per share. Third quarter special items are comprised of a net gain of $12.2 million related to the company's convertible notes, which we retired during the quarter, and an $800,000 unrealized market-to-market gain related to changes in the value of financial investments. We reported a quarterly operating profit of $205 million and an operating margin of 23.6%. Capacity came in at 7.1 billion available seat miles or 12.1% higher than in Q3 2022. Our load factor came in at 87.8% for the quarter, a 0.9 percentage point increase compared to the same period in 2022, while we achieved passenger yields of 13.4 cents. As a result, unit revenues came in at 12.2 cents. Mainly driven by lower jet fuel prices, unit costs or chasm decreased to 9.3 cents or 11.2% lower than our chasm in Q3 2022. And finally, we continue with our initiatives for maintaining our costs low. For the quarter, our chasm excluding fuel came in at 5.8 cents, a 2.1% decrease versus Q3 2022, mainly driven by lower sales and distribution costs due to the higher penetration of both direct sales and the lower cost travel agency channels which were launched by Copa Airlines in September of 2022. I'm going to spend some time now discussing our balance sheet and liquidity. As of the end of the third quarter, we had assets of close to $5 billion. As to cash, short, and long-term investments, we ended the quarter with over $1.2 billion, which represents 34% of our last whole month's revenues. And in terms of debt, We ended the quarter with $1.7 billion in debt and lease liabilities and came in with an adjusted net debt to a bid-debt ratio of 0.4 times. Our debt now is comprised solely of aircraft-related debt, and I'm pleased to report that our average cost of debt is currently in the range of 3.4%. As we've previously announced, in the month of September, we completed the redemption of the 4.5% convertible senior notes due in 2025. To summarize the transaction, holders of $349 million aggregate principal amount converted their notes in accordance with the terms of the inventor, while holders of outstanding notes in the aggregate principal amount of $1 million redeemed at a price equal to 100% of the principal amount of each note called for redemption. This was paid in cash plus accrued and unpaid interest. As a result, the transaction generated a total cash payment of $350 million in addition to approximately 3.7 million shares. Turning now to our fleet, during the third quarter, we received two Boeing 737 MAX 9s to end the quarter with a total of 103 aircraft. In November, we received two additional 737 MAX 9s to bring our total fleet to 105 aircraft. With these additions, our total fleet is now comprised of 68 737-800s 28 737 MAX 9s, and 9 737 700s. These figures include one 737-800 freighter and the nine 737-800s operated by Wingo. Two-thirds of our fleet continues to be comprised of owned aircraft, and one-third of our aircraft are under operating leases. During the remainder of 2023, we expect to receive one additional aircraft, a Boeing 737 MAX 9, to end the year with a total fleet of 106 aircraft. As for our 2024 fleet plan, preliminarily next year, we expect to receive 15 737 MAX aircraft, including three 737 MAX 9s and 12 737 MAX 8s. We've published an updated fleet plan in our investor relations website, and we have already secured droco financing for 10 out of the 15 deliveries in 2024. Turning now to a return of value to our shareholders, in October, we finalized the execution of our existing share repurchase program. And as published in our earnings release yesterday, our board of directors approved a new share repurchase program of $200 million. Additionally, I'm pleased to announce that our board has ratified the fourth dividend payment of the year of $0.82 per share to be paid on December 15 to all shareholders' record as of November 30. As for our outlook, we can provide the following guidance update for full year 2023. We expect to increase our capacity in ASNs versus 2022 by approximately 13%, and we expect to deliver an operating margin within the range of 23%. We're basing our outlook on the following assumptions. Load factor of approximately 87%, unit revenues within the range of 12.4 cents, Casamex fuel to be in the range of 6 cents, and we're expecting an all-in fuel price of $3.02 per gallon. In anticipation of 2024, we are projecting a year-over-year capacity increase between 12% and 14%. Additionally, we anticipate our CASMX fuel to be in the range of $0.59, aligning with our goal to achieve a CASMX fuel of $0.58 by 2025. This outlook reflects our continuous commitment toward operational excellence. Thank you, and with that, We'll open the call to some questions.
Operator
Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment for our first question. Our first question comes from Savvy Sith with Raymond James. Your line is open.
Savvy Sith
Hey, good morning. Um, if I might ask on the, on the revenue front, you, you know, you took, uh, kind of the outlook up here for 2023 and, and it, it doesn't seem like the competitive capacity you've seen any pullback since your, your last update. And, and I don't think your capacity has even kind of come down and. Just curious, you know, what you're seeing in the market that's driving that strength and just any color on if there's any kind of regional differences and how you see that continuing.
Abby
Hi, Savi. This is Pedro. Demand is staying strong in spite of the additional capacity that's coming in from ourselves and especially from other airlines. I don't think there's a specific reason for that. I mean, the currencies have stayed strong also in Latin America, so So that doesn't hurt. And the US economy is doing well also. So I think all those factors are contributing for demand to remain robust in spite of the capacity.
Daniel
I would say, Xavi, only that in general terms, and this applies throughout the network in all the different regions that we're at, it's in general still very robust.
Savvy Sith
That's helpful. And if I might ask on the, you know, after the convert is done and the share buybacks that you've done so far, where does the share count stand today?
Daniel
We're at 42 million shares, around 42 million shares right now, Sally. Yeah. Okay.
Operator
Perfect. All right. Thank you. One moment for our next question. Our next question comes from Dwayne Fenningworth with Evercore ISI. Your line is open.
Dwayne Fenningworth
Hey, good morning. This is Jake Gunning on for Dwayne. First question, on non-op, is that the new run rate for non-op, or were there any one-time benefits this quarter? And then could you just remind us what the actual interest expense through the P&L was, given that it was different from what the coupon rate would indicate from the convert?
Daniel
Yeah, Jake, I would summarize that taking aside the effect of the convert that we retired and going forward, I would say that our finance cost line would probably go down by approximately $10 million per quarter. So I would say that's a way to model it. The remainder of the non-op lines in general terms are in line with just simply the debt levels that we have and the average cost of debt that I mentioned that it's about 3.4% right now and the yields that we have in terms of our investments. I would say that's the big change going forward, I would say, is the reduction in the finance cost line, not associated with the coupon, but rather associated with the way that the accounting for the convert worked. It was like a non-cash item that passed through the P&L, and it was around $10 million per quarter.
Dwayne Fenningworth
Right. That makes sense. And then just to go a little bit deeper into 2024 capacity growth, could you just break out the components and the pacing of that, you know, seats, stage length, gauge, et cetera?
Daniel
I would say, Jake, that the majority of the growth for next year is going to be frequencies. The way that we have it broken down is about, call it about 70% of the capacity growth is going to be in addition to frequencies in the markets that we operate already. Then about, let's say, About 20, 25% is going to be around a full year effect of growth that we performed throughout 2023 that sort of lapsed the year. And then the remainder is called a new service that we're starting in 2024. That's kind of how we're placing it. So the vast majority of it is just frequencies into markets that we're already present in.
Dwayne Fenningworth
And so would the pacing of that be steady or...
Daniel
In general terms, throughout the year, you say a cadence, you know, a little bit of a, I would say it's in general terms steady. I don't think there is a particular bumps throughout the year, given the majority of it is, or a portion of it is full year effect, yeah.
Abby
Yeah, and our aircraft deliveries, in any case, are spread throughout the year. So that's another reason. Okay.
Dwayne Fenningworth
Thank you very much.
Operator
One moment for our next question. Our next question comes from Guilherme Mendez with JP Morgan. Your line is open.
Guilherme Mendez
Good morning, Pedro, Jose, Daniel. Thanks for taking my question. Two questions as well. The first one is on the fleet plan. You guys mentioned about 15 deliveries next year on the MAXIS. If you see any kind of bottlenecks come from Boeing or any risk on these 15-year credit deliveries. I understand that you mentioned that 10% are already secure in terms of financing. So if there's any kind of risk for this additional five. And the second question. So sorry, go ahead.
Daniel
No, no, go ahead. Go ahead with the second question and we'll answer them, yeah.
Guilherme Mendez
Thanks. So the second question is regarding to the CASMAC field guidance for next year. I'm pretty impressed to see a lower CASMAC field. And maybe if you could comment on what are the main initiatives thinking that there's any kind of labor pressure or any other initiatives to sustain this higher efficiency. Thank you.
Abby
Yeah, so a few things. In terms of the aircraft deliveries, 11 of the 15 deliveries scheduled for next year are already financed with JOCLs. So that's pretty much said. And in terms of Delivery dates, this is the latest we have from Boeing. Some aircraft pass from, one aircraft at least passes from 2023 to 2024. That's why the number increased to 15. So it's the best information we have right now. And again, most of the financing is already in place.
Daniel
Yeah, but they're, I mean, it's still uncertain and Boeing and all aircraft manufacturers are facing supply chain issues, so we have our conversation going with them. But for now, in terms of our guidance, we have to start by saying that it's a preliminary guidance that we issue for a year. We'll issue our formal guidance in February, but in general terms, it's in line with our expectations in terms of aircraft deliveries for 2024. And in terms of CASIM for next year, I would say that the main areas of opportunities, first of all, is our Continue working our distribution. Our team has been doing a great job there with the Copa Connect project and our new distribution strategy. Number two, we are continuing with our fleet densification of our 737-800 fleet on the Copa Airline side. So that will provide some cash and benefits. Third, we continue working with our efficiencies in terms of overhead and some of the growth that efficiencies that we get with the growth that we have for next year. And finally, you know what, we're on track to resolve the teething issues that we've had with the LEAP. So I think that's another one that you have to consider over the next several months as well.
Guilherme Mendez
Okay, super clear. Thank you both. Thank you.
Operator
One moment for our next question. Our next question comes from Michael Linenberg with Deutsche Bank. Your line is open.
Michael Linenberg
Hey, good morning, everyone. Jose, I want to go back to just on next year's 12% to 14% frequency. It sounds like 5% to 10% of the ASMs are going to be new service. Maybe more specifically, what is the plan with number of new dots on the map or number of new cities? Is this two or three or four cities? Is it going to be like what we saw this year where you added, you know, I think it was, what, four new cities, maybe five new cities.
Abby
Hi, Mike. I'll answer that one. So maybe we'll have a little bit more information in February, and we'll make a few announcements. But right now, there's not much we can share. We're working on many possibilities, and it should be more than a few. But we don't want to give a target because we don't really know. It's kind of early. and we're still planning, we usually start new cities mid-year and at the end of the year. So we still have some months to go.
Michael Linenberg
Very good. Just my second question, you know, Wingo is nine airplanes now, you know, more frequency or more routes as we move through this year. Is the plan to keep Wingo at nine airplanes in 2024?
Abby
That is the plan as of right now, given the dynamics of the Colombian market. And yes, so yeah, that's the plan right now.
Michael Linenberg
Okay, great. And then just my last question, you know, when I think about, you know, you have a significant cost of capital advantage in Beijing when I think about some of the other big debt deals that we've seen some of your competitors. launch over the last 12 to 18 months and so that's three to three point four percent cost of debt um that's low as we think about the um because it's you know the 10 or 11 airplanes that have already been um financed with chocos how much does that change that 3.4 percent how should we think about your average financing over your 24 thanks for taking my question
Daniel
I'll give you a data point, Mike. You could argue that an incremental aircraft right now is in the range of around 5% or a little higher. By the way, we have 80% of our fleet is financed on their fixed rate, so the changes in interest rates have not affected us significantly. But given the current environment, our last set of aircraft would be done variable rate. So we'll enjoy the benefit of if and when rates come down. But it's around in the 5% range. Still very good.
Michael Linenberg
Still very good. Yeah, still very, very good. So thanks. Thanks, everyone. Good quarter. Great quarter. Thank you, Mike.
Operator
One moment for our next question. Our next question comes from Rogério Arujo with Bank of America. Your line is open.
Rogério Arujo
Hi, guys. Congratulations on the results, and thanks for taking the questions. I had two, one on RASM. I know you didn't provide any guidance for 24, but can you give us what you see in the booking curve for next year? Can you give us an expected direction? Is it coming down versus 2023 because of extra capacity coming in, or it's still unknown at this moment? And the second question is regarding a mismatch between jet fuel price and oil in 30Q. It didn't happen only for Copa, but all the peers in the region. What is driving that? Is it sustainable going forward? Thank you.
Abby
Okay, so I'll start with the first one. And yeah, we're not giving RASM guidance for 24, still early, and our visibility is always like three months or two months into the future. So what we're seeing so far, which would be early 2024, is that the revenue strength, staying robust, is following the same trend we've seen in Q3 and Q4. So even with the capacity that you mentioned, revenues are staying strong so far.
Daniel
Yeah, in terms of fuel mismatch between jet and crude, it's, yeah, the crack of jet fuel spiked during the quarter, and it's in the range. It's a little bit over $40 right now per barrel, so it's at a historically, not historically high, but it is at a higher level than what It was on a regular basis. But you know what? We've learned to manage our fuel expense. And in terms of recapping or recouping some of this incremental expense in our unit revenues, and we've done that in the fourth quarter with our revised guidance. And so I think in the end, it's something that we know how to do.
Rogério Arujo
Sounds great. And one follow-up on that last one. Is the fuel guidance, it includes the current curve?
Daniel
Yes, yes, absolutely. It's a current jet curve as of like two days ago. So we're there, and it's all in. It's our average fuel price all in. You can see six seconds above the last guidance that we provided by the office.
Rogério Arujo
Sounds great. Thank you so much. Thank you.
Operator
One moment for our next questions. Our next question comes from Steven Trent with Citi. Your line is open.
Steven Trent
Good morning, gentlemen, and thanks very much for taking the time. I definitely appreciate the color on 2024. As you think about that build-out, are you content with maintaining those six daily flight banks at Takumen, or do you think you could make some possible adjustment to that with the 2024 growth?
Abby
Yeah, not in 2024. I mean, we could make adjustments in the future, but that's not the plan in 2024. We think we can still strengthen our six-bank structure. There are opportunities. There are gaps that we can fill and further strengthen our whole network. So that's the plan for now.
Steven Trent
Yep. Perfect, Pedro. Appreciate that. And as my follow-up, you know, looking at this, you know, very good ex-fuel chasm color for 2024, you know, to what degree do you think some of that might be coming from tilt towards more direct channel sales, for example?
Daniel
Sure. No, absolutely. That's a big portion of our strategy for 2021. you know, having our multi-year CASM target, you know, clearly sub-six, it's been driven in large part through our Copa Connect strategy that it's been working out great over the last several months. So that's certainly a big portion of our continued trek towards, you know, 5.9 in 2024 and 5.8 in 2025. Right. And also, Stephen, it's
Abby
Holding overhead, holding fixed costs tight so we benefit from the growth in ASN. That's another way we're achieving our numbers.
Daniel
And look, we were talking about chasm. There's always headwinds of items that we might not control. There might be whatever airspace charge increases in different countries, etc. And that's the sort of thing where inflationary pressures because of A or B suppliers, but we try to counter those with our own internal efficiencies and with projects such as Cooper Connect or densification, etc. So we always have our guard up in terms of keeping our costs as low as they can be.
Steven Trent
Okay, that's very, very helpful. Thanks very much, Jensen, and see you in a few weeks. Thank you.
Operator
One moment for our next question. Our next question comes from Daniel McKenzie with Seaport Global. Your line is open.
Daniel McKenzie
Oh, hey, good morning, guys. You know, I guess following up on that last question, going back to COPA Connect and the lower distribution costs, I'm wondering if you can just help us put some numbers around what that means exactly, you know, so what you're seeing on cost savings and, you know, specifically from this initiative and how the change in the distribution strategy is helping you to drive more revenue. So maybe just related to that, what percent of the passengers coming to Copa.com are actually purchasing a ticket with an upsell feature, for example?
Abby
OK, so let me start with a few general comments. And then I'll give Jose some time to see how much of the info you're asking we can gather quickly. But first thing I would say is that, as Jose mentioned, Direct distribution strategy, which we call Copa Connect, has been very successful. And to date, we are already over 70% direct sales, including the NDC channel for the agencies. So when we add our website, our other direct channels, and the agencies that connect through our NDC channel, we're over 70%. It used to be the other way around. over a year ago when we first started. So that in itself is a significant change and it surpassed our projections for this year. Then by going direct, be it through the NDC channel or our website, we're able to offer more options for our passengers. We're able to work on the upsell and a significant percent of the passengers that buy in the website and NBC for sure are upselling. Only we have with us right now the exact percentage but it's important and it's a valid question because of course our lower fares come with additional ancillaries like seats and bags but then upselling is also a very important revenue stream for us.
Daniel
Yeah, Dan, I would say that in terms of cost, the channel shifting and, you know, the Copa Connect strategy, it's good to argue, is 0.1 cents of cash provided for us for this year. And in terms of, you know, the value of ancillaries, you know, we've been, I don't know, we've probably... quadrupled, you know, the value of ancillary since back in 2018. So in terms of revenue, so there is, of course, within that upsell of product of folks that are buying tickets through our channel. So yeah, it's actually grown quite a bit over the last, since back in 2019, call it four times the level of where we were. And that's information that we shared back in our investor day a couple of months ago. Yeah.
Daniel McKenzie
yeah very good um and then you know second question here you know historically Copa has targeted 18 to 20 percent operating margins and you know in light of this year's results you know I guess my next question is is how investors should really think about steady state margins and you know are the initiatives in place today you know enough to help you you know punch above what you've done historically well now now you're
Abby
asking for 2024 guidance. So we have to wait until February for that. But we have the wind on our back right now. And what that means for steady state in the future, it's going to depend on how external factors change. Fuel capacity from competitors, et cetera, et cetera.
Daniel
But we are really pleased with our operating margin guidance of 23% for the full year 2023. It's a pretty good result. I think it's certainly been a very good year so far.
Daniel McKenzie
Yeah, very good. It's an impressive year. Thanks so much, you guys. Thank you, Dan.
Operator
One moment for our next question. Our next question comes from Bruno Amorum with Goldman Sachs. Your line is open.
Bruno Amorum
Thank you. Thank you for taking my question. I have a follow-up on this question on margins. I'm not asking for 24 guidance, but just wanted to hear from you what were, in your view, the big changes that could eventually have led to those higher margins so we can understand to what extent they are sustainable. There are some cost efficiencies. Ex-fuel chasm is performing well with these pre-pandemic levels. But if you look on a total chasm perspective, it is still higher versus 2019, right? Because jet fuel is much higher. So maybe the answer comes from the revenue side. And then on the revenue side, maybe one could argue there is less competition now post-pandemic. You know, is that the main change? Or is there anything else that you believe could justify much higher unit revenues on a sustainable basis? Thank you very much.
Abby
So, Bruno, I'll say three things, three general concepts that are important coming out of the pandemic. And they all play in different directions. So the number one surprise out of the pandemic was that demand came back a lot quicker than what anyone expected, and it has remained strong overall in our region, in the Americas, and it is still robust to this day. So, of course, demand has been a positive change. The other, I would say, surprise coming out of the pandemic, which works in a different direction, in the opposite direction, is how much growth there has been in aviation in our region, how much growth by the airline industry in general, that also surprised us coming out. So capacity came back quicker than what we would have expected, and it's actually above pre-pandemic levels. And then the third concept I want to share, which is more COPPA specific, is that we work really hard During the pandemic, even while we were shut down for almost five months, we never stopped working on two things. And one was working on our costs, on the cost side, on doing all the investment and changes that were going to make us more efficient going forward, including Copa Connect and a lot of technological enhancements. And same thing for revenues. which in a way some are related to CopaConnect, others are not. So we've worked very hard in our revenue-related technology, on the revenue team, and we are a much more efficient, competitive airline from the revenue side and from the cost side. So I would say those are three general concepts that have a lot to do with where we are today.
Bruno Amorum
Thank you. And in terms of the competitive dynamics, what can you comment?
Abby
Well, competitive is dynamic. It's growing. It's strong. It's now mostly LCCs or ULCCs in our region. Most of our competitors are ULCCs or LCCs, either because they were born that way or they converted to that model. So that, in a way, has made us become a lot more efficient. And that's a vision we had from before. So we were not surprised. We were preparing for this from way back. And we're meeting the challenge. We have the tools. We have a strong network. We have the hub. We have the cost. And we're still working on additional efficiency. And we think there's room for all. I mean, we don't, our success is not dependent on the failure of others, especially if the market continues on a healthy pace. We worry about ourselves and we're just making Copa a better, more competitive airline. But yes, competition has grown and right now many of our competitors are growing actually at a faster rate than we are.
Bruno Amorum
Thank you. Have a good day.
Daniel
Thank you, Bruno.
Operator
One moment for our next question. Our last question comes from SaviSys with Raymond James. Your line is open.
Savvy Sith
Hey, thanks for the follow-up. If I might, just curious if you can hone in on business demand. It seems like there's a slight pickup in other regions. I'm wondering if you've seen that, and And particularly in Panama, I'm wondering if the drought is having any impact or the economy is still pretty strong.
Abby
Yeah, so business demand has not changed much from the previous two quarters. It used to be above 30%. It's now in the 25% range, but it has been replaced. by, I would say, I mean, by leisure, but also by the higher segment of leisure travelers, because we're doing better in business class revenues than what we were doing pre-pandemic and with less business demand. So in a way, it has been replaced. We're not missing it, even though, you know, we're happy to see it grow and hopefully will grow at a faster pace in the future. The Panama Canal, of course, has been affected by the El Nino drought in the region, and it has restricted the transit of ships, but it's not having, I would say, a significant impact on the economy of Panama. The economy is still expected to be one of the fastest growing economies in Latin America, and in spite of the adjustments that Panama Canal needs to make because of El Nino. But again, it's not having a drastic impact on our economy. And it's still a small percent of the revenues that are being affected. In a way, the buzz in the news is probably exaggerating the problem.
Savvy Sith
Makes sense. Thank you.
Daniel
Thank you, Xavi.
Abby
Thank you, Xavi.
Operator
Thank you. That concludes the question and answer session. At this time, I would like to turn the call back to Pedro Heilbron for closing remarks.
Abby
Thank you. Thank you, Operator. So, thank you to all. This concludes our earnings call. As always, thank you for participating and special thanks for your continued support to Copa Holdings. So, hope you have a great day.
Operator
Ladies and gentlemen, thank you for your participation. That concludes the presentation. You may now disconnect and have a wonderful day.
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