Operator
Ladies and gentlemen, thank you for standing by. Welcome to COPPA Holdings' first quarter earnings call. During the presentation, all participants will be in 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 11 on your touchtone phone. As a reminder, this call is being webcast and recorded on May 16, 2024. Now I'll turn the conference over to Daniel Tapia, Director of Investor Relations. Sir, you may begin.
Daniel Tapia
Thank you, Warren. And welcome everyone to our first 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 first quarter highlights, followed by Jose, who will discuss our financial results. Immediately after, we will open the call for questions from analysts. Copa Holdings financial reports have been prepared in accordance with international financial reporting standards. In today's call, we will discuss non-IFRS financial measures. A reconciliation of the non-IFRS to IFRS financial measures can be found in our earnings release, which has been posted on the company's website, co-buyer.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.
Pedro
Now I'd like to turn the call over to our CEO, Mr. Pedro Hedrons. Thank you, Daniel.
Daniel
Good morning to all, and thanks for participating in our first quarter earnings call. Before we begin, I would like to extend my sincere gratitude to all our 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. Once again, we're pleased to report strong financial results. Despite facing a significant headwind in January with the partial grounding of our 737 MAX 9 fleet, we were able to deliver once more industry-leading operating margins while growing capacity year over year. These results were driven by a continued robust demand environment in the region and our ability to maintain low ex-fuel unit costs. Among the main highlights for the quarter, Passenger traffic grew 7.1% compared to the same period in 2023. Load factor for the quarter came in at 86%. Passenger yield came in at 14 cents, 3.8% lower year-over-year, while unit revenue or RASM came in at 12.5 cents, a 4.6% decrease compared to Q123. Unit costs decreased by 6.9%, compared to Q1-23, mainly driven by lower fuel, aircraft maintenance, and distribution costs. Excluding fuel, unit cost, or CASAM-X, came in at 6.1 cents, a 2% decrease compared to Q1-2023. As a result, operating margin for the quarter came in at 24.2%, 1.9 percentage points higher than in the first quarter of 2023. On the operational front, during the quarter, Copa Airlines' on-time performance was again recognized by Cerium as the highest of any airline in Latin America. In fact, Copa's Q1 on-time performance, averaging above 90%, was the highest of any carrier in the Americas and amongst the highest in the world. I would like to take this opportunity to recognize our more than 8,000 coworkers who day in and day out deliver a world-class travel experience to our customers. Their contributions are key to our success. Turning now to our network growth plans, as we mentioned in our previous call, we expect to start three new destinations next month. Rally Durham in the U.S., Florianopolis in Brazil, and Tulum in Mexico. I'm glad to comment that early bookings are coming in at healthy levels and we expect these routes to have a solid start. With these additions, we'll serve 85 destinations in 32 countries, solidifying our leadership position as the hub with the most international destinations in Latin America. Turning now to our expectations for the rest of the year, we continue to see a healthy demand environment in the region. And as you saw in our earnings release published yesterday, we are reaffirming our guidance for the year, which includes an operating margin within the range of 21 to 23%. Jose will provide more detail during his presentation. To summarize, we delivered industry-leading first quarter financial results. We continue to deliver on our cost execution strategy, We'll grow to 85 destinations by this summer, further strengthening our network, the most complete and convenient hub for intra-America travel. We continue to see a healthy demand environment in the region and expect to once again deliver strong operating margins in 2024. And as always, our team continues to deliver world-leading operational results. Finally, Our business model is as solid and as relevant as ever. And our hub of the Americas in Panama is the best connecting hub in Latin America, making us the best positioned airline in our region to consistently deliver industry-leading results. Now I'll turn it over to Jose, who will go over our financial results in more detail.
Jose
Thank you, Pedro. Good morning, everyone, and 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 first quarter results. We reported a net profit for the quarter of $176.1 million, or $4.19 per share. These results include the negative impact of approximately $44 million due to the grounding of 21 of the company's Boeing 737 MAX 9 aircraft in January, and exclude any compensation from Boeing related to the grounding. We reported a quarterly operating profit of $216 million and an operating margin of 24.2%. Capacity came in at 7.1 billion available seat miles, or 8% higher than in Q1 2023. Load factor came in at 86% for the quarter, a 0.7 percentage point decrease compared to the same period in 2023, while passenger yields decreased by 3.8% to 14 cents. As a result, unit revenues came in at 12.5 cents or 4.6% lower than in the first quarter of 2023. Mainly driven by lower jet fuel prices, unit costs or CASM decreased to 9.5 cents or 6.9% lower year over year. And finally, our CASM excluding fuel came in at 6.1 cents, a 2% decrease versus Q1 2023, mainly driven by lower aircraft maintenance and lower distribution costs as we continue deploying our Corporate Connect NDC strategy. Excluding the negative impact on costs and capacity of the partial grounding of our 737 MAX 9 fleet in January, the company would have reported an ex-fuel chasm of approximately 5.8 cents for the quarter. I'm going to spend some time now discussing our balance sheet and liquidity. As of the end of the first quarter, we had assets of close to $5.2 billion. As to cash, short, and long-term investments, we ended the quarter with over $1.1 billion, which represents 32% of our last 12 months' 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-dial ratio of 0.5 times. I'm pleased to report that our average cost of debt, which continues to be comprised solely of aircraft-related debt, is currently in the range of 3.5%, with around 70% of our debt being fixed. Turning now to our fleet, we ended the first quarter with a total fleet of 106 aircraft, comprised of 68 737-800s, 29 737 MAX-9s, and nine 737-700s. These figures include one 737-800 freighter and the nine 737-800s operated by Wingru. During the first quarter, and as part of our ongoing fleet management initiatives, we purchased two of our leased Boeing 737-800 aircraft. With this transaction, we ended the quarter with 73% of our aircraft being owned and 27% under operating leases. As for our current max delivery scale, so far in May, we have received two additional 737 MAX 9s. And for the remainder of the year, we expect to receive seven additional aircraft, one additional 737 MAX 9 and six 737 MAX 8s to end the year with a total of 115 aircraft. We have already secured JOCO financing for all of these 2024 deliveries. In April, we signed a confidential agreement with Boeing related to the January grounding. Following IFRS accounting standards, we expect that the compensation amount will be amortized through the depreciation line in our income statement over the coming four years. Turning now to a return of value to our shareholders, I'm pleased to announce that the company will make its second dividend payment for the year of $1.61 per share on June 14th to all shareholders of record as of May 31st. Additionally, during Q1, the company executed approximately $40 million of its share repurchase program. As to our outlook, we are reaffirming our full-year operating margin range guidance of 21% to 23% when a capacity growth in the range of 10%. We are basing our outlook on the following assumptions. Load factor of approximately 87%, unit revenues within the range of 12 cents, Casamax fuel to be in the range of 5.9 cents and we are expecting an all-in fuel price of $2.85 per gallon. Thank you and with that, we'll open the call to some of your questions.
Operator
Thank you. At this time, we will conduct the question and answer session. As a reminder to ask a question, you'll need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Savi Seth of Raymond James. Your line is now open.
Savi Seth
Hey, good morning. I was wondering if you could talk about, you know, the unit revenue that you're basing your guidance on. It's kind of ticked down here a little bit. Just wondering what drove that and how you're thinking about kind of the year-over-year RASM progression over the next few quarters.
Jose
Yes, I'll start. First, I have to say that our RASM performance or our outlook of 12 cents is still very strong. It's, you know, very high levels compared to other periods that we've been at. And in addition to that, you know what, it's early on in the year, so our visibility for the second half of the year is limited. Still, there's still a lot of water to come down onto the bridge. And in general terms, you know, we are in a competitive environment, so we are looking out for that. Additionally, we have seen a – it's kind of like a more technical item. We've seen a little bit of an increase or an increase in direct sales. And so as more direct sales have come in, there's a slight reduction in yields related to the surcharge that we're not recovering on tickets that are sold indirectly. So there's a little bit of that as well. And I have to close by saying that our guidance for the year is still in the 21% to 23% range, which is very, very strong performance for a full year.
spk13
I don't know if everyone had something to add.
Daniel
Yeah, and also we're lowering our unit cost X guidance, which is also very important because that's something we control better and gives us better control over our margin performance.
Savi Seth
I guess on that, just to follow up on that comment, Pedro, is this, and what Jose was talking about, is this a pull forward of what you were expecting and kind of reflected in that 5.8 cents target for 2025? Or are you thinking, is your unit cost kind of coming in better than you were thinking?
Jose
I think that it's in line with what we guided to and our target, multi-year target of reaching 5.8 by next year. So we're on track for that. And we're very confident and comfortable with our 5.8 target for 2025. Great.
Operator
Thank you. Thank you.
Elaine
One moment for our next question. Our next question comes from the line of Duane Finningworth of Evercourt.
Operator
Your line is now open.
spk33
Hey guys, good morning. Very strong results, especially considering the grounding. On unit costs, obviously there's some noise in the first quarter, but maybe you can just help remind us what are kind of the factors driving improvement in unit cost, you know, beyond the first quarter, maybe like normalized unit cost reduction. Can you just remind us what the, you know, maybe one, two, three drivers of that are?
Jose
Yeah, Dwayne, great question. And I would say that there's the number one item that continues being a great contributor to our reduction is In CASM, it is distribution. It continues to be a great story, and so it's been a great component to our cost execution over the last several quarters, and we expect that to, you know, as they continue sort of maturing, it will continue being a very good contributor to our cost base. Number two, I would say that maintenance. You remember last year, maintenance, we had a... slight increase related to engine issues and that as we expected is being more under control this year and we're getting also some benefits in our maintenance line associated with some of the lease transactions that we perform, both the buying of leases and some of the lease extensions that we've signed and lowering some of the return conditions. So that's another item that I think is of note Going forward, remember that we are in the process of densifying a portion of our 737-800 aircraft, and we expect that to be also concluded sometime in 2025. So that will also be a contributor to our CASM going forward as well. Of course, now, there are headwinds in CERN of our cost lines as well that There's inflationary pressures and costs that are more difficult for us to control, such as airspace, user fees, and airport charges, et cetera, that take away a tad of these improvements and efficiencies that we have achieved. But in essence, we are very confident about our cost performance going forward, and our track record so far has been very, very good after the pandemic.
Daniel
And we also keep our overhead costs very tight under control, so as we grow capacity, there's also a benefit there.
spk33
Thanks for that. And then I guess just conceptually, how do you approach full-year guidance at this time in the year? As you said, there's a lot of the game left to play in the second half. But if we were just considering the results here in the March quarter and the outlook that you see right now, all else equal, does that put upward pressure on that range or downward pressure on that range? Because I agree, it's hard to raise 22% to 23% EBIT margins at this point in the year.
Daniel
Yeah, it's early in the year, as you well said. And, you know, we never roll the dice. We're always pretty conservative in our outlook. And, of course, we work very hard for our results to be on the upper half of our projections. And that's what we're doing right now.
spk33
Makes sense.
Daniel
Thank you.
Elaine
Thank you. One moment for our next question.
Operator
Our next question comes from the line of Rogelio Araujo of Bank of America. Your line is now open.
Rogelio Araujo
Hey, everyone. Thanks for the opportunity. I have a couple here. The first one, we noticed some weakness in Latin American yields for the U.S. airline this quarter, and there was kind of a mismatch on what COPPA reported. If you could please clarify a little bit on the differences of addressable markets in between U.S. Airlines and COPPA, and, you know, any difference that you are noticing in the strength of the demand in those different addressable workers would be great. And I can make the second questions afterwards. Thank you.
Daniel
Right. Thanks, Rogerio. I would say maybe the bigger difference is that we are extremely strong in intra- Latin America. The U.S. to Latin America is important to us, but we're much stronger in intra-Latin America. Plus, the U.S. airlines are very strong in U.S. to Leisure Caribbean and U.S. to Leisure Mexico, and those are not huge markets for us. Actually, we hardly play in those markets. We're not playing in those markets. So we have differences, and our markets remain quite strong, besides the adjustment, downward adjustment in unit revenues, which we have already communicated.
Rogelio Araujo
OK, pretty clear. Thank you. And my second question is regarding the two purchases of listed aircraft that COPPA did this quarter. How many aircraft are owned by COPPA right now, are unencumbered, and is there a trend here? Can this continue to happen? And will you ultimately increase the EBITDA cash conversion for the company in the future if that keeps rising? So that's why I'm interested about it. But anything you could share would be great. Thank you.
Jose
Yeah, Rogerio, we bought two of our aircraft that were under operating leases during the quarter, and we are expecting to be selective or opportunistic in terms of deploying capital that way. We believe the 737NG is a great asset to own, and so we've been in negotiations with different or the lessor to see if we can find a deal that is convenient for us. In terms of the number of aircraft that we have unencumbered, just to give you, I think in my prepared remarks, I mentioned that around 73% of our aircraft, of our total fleet of 106 aircraft, are owned by the company. And in terms of the aircraft that are fully unencumbered on our fleet, it's around almost 40 of our aircraft are fully unencumbered. So, yeah, it's quite a bit of a strong... that we have in terms of our fleet.
spk26
Okay. Thank you so much.
Operator
Thank you. One moment for our next question. Our next question comes from the line of Helene Becker of TD Cowan. Your line is now open.
Helene Becker
Thanks very much, operator. Hi, team. Thank you for the time. I appreciate it. And also, I appreciate that you guys are conservative, but one question I had was with respect to Boeing delivery delays. I guess from what you said, Jose, you're not really expecting too many because you're thinking of ending the year with 115 aircraft. Does that include the two you bought off lease?
Jose
No, no, no. The two that we bought, all these were already in the base. So, therefore, these are nine deliveries that we're getting new from Boeing, of which we've already received two MAX 9s. So, actually, we took delivery of one MAX 9 yesterday. So, and we have another one, another MAX 9 coming next week. And then for the remainder of the year, the latest schedule is that we'll receive six 737 MAX 8s to end the year with the 115 that you alluded to.
Helene Becker
Okay, that's helpful. Thank you. And the other question I had was with respect to, I guess with respect to your demand, you're seeing an 87% load factor, which I think you're forecasting for the quarter and the year as well. How does the demand look for either you know, Panama South or within Panama relative to maybe, you know, where it was three or five years ago since it's so much higher than it was, you know, back in the last decade?
Daniel
Yeah, it's stronger than before, definitely. And, for example, tourism – in Panama is growing at a very healthy double-digit rate, and that's helping the OND Panama traffic. Of course, our main market is the connectivity we provide through our Hub of the Americas here, so our bigger markets are connecting up and down. and east and west in a way. And most markets remain robust in general terms. Even though there's a lot of new capacity from us and from other airlines, we're still guiding to a very high load factor. So that tells something about the strength of the markets.