Copa Holdings, S.A.

Ladies and gentlemen, thank you for standing by. Welcome to Copa Holdings' second 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 have to press star, then 1-1 on your touchtone phone. As a reminder, this call is being webcast and recorded on August 8, 2024. Now I will turn the conference call over to Daniel Tapia, Director of Investor Relations. Sir, you may begin.

Thank you, Gigi. And welcome, everyone, to our second quarter earnings call. Joining us today are Pedro Helbron, 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. 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, CopaAir.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 file with the SEC. Now I'd like to turn the call over to our CEO, Mr. Pedro Hedro.

Thank you, Daniel. Good morning to all, and thanks for participating in our second quarter earnings call. Before we begin, I would like to extend my sincere gratitude to all our 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 industry-leading financial results for the quarter. As stated in our earnings released yesterday, our 19.5% Q2 operating margin represents the second best Q2 results in the company's history. Among the main highlights for the quarter, passenger traffic grew 10.6% compared to the same period in 2023, while capacity increased by 9.7%, resulting in a 0.7 percentage point increase in load factor to 86.8%. Unit cost excluding fuel, or CASMX, came in at 5.6 cents, a 5.8% decrease compared to Q2 2023, mainly driven by lower aircraft maintenance costs and sales and distribution costs. Passenger yield came in at 12.1 cents, 8.7% lower year over year. As a result, unit revenues, or RASM came in at 11 cents or 7.7% lower compared to Q223. On the operational front, Coop Airlines delivered an on-time performance of 87.6% and a completion factor of 99.7% for the quarter. Once again, positioning ourselves amongst the best in the industry. Furthermore, Copa was recently recognized by Skytrax for the ninth consecutive year as the best airline in Central America and the Caribbean. I would like to take this opportunity to recognize our more than 8,000 coworkers who day in and day out deliver a world-class travel experience for our customers. Their contributions are key to our success. Turning now to our network, in the month of June, We started three new destinations, Rally Durham in the US, Florianopolis in Brazil, and Tulum in Mexico. With these additions, we're now serving 85 destinations in 32 countries, solidifying our leadership position as the hub with the most international destinations in Latin America. With regards to our expectations for the rest of the year, As we notified the market last week, on July 29, the Venezuelan government temporarily suspended commercial flights between Venezuela and several countries in the region, including Panama, forcing us to cancel our flights effective July 31. Although the official notice mandates the suspension of flights until August 31, At this time, we cannot determine if this suspension will be extended. With regards to cost, we continue to focus on our cost efficiency initiatives and expect to deliver lower year-over-year unit costs for 2024, leading us once again to deliver industry-leading margins for the year. Jose will provide more details regarding our outlook. To summarize, We delivered industry leading financial results for the second quarter. We continue to deliver on our cost execution strategy. We keep expanding our network, now serving 85 destinations across 32 countries, reinforcing Panama's position as the leading hub for international travel in Latin America. And we expect to deliver industry leading operating margins for the year. As always, Our team continues to deliver world-leading operational results while providing a world-class service to our passengers. Finally, we firmly believe that our business model remains as robust and relevant as ever, and that our hub of the Americas in Panama is the best connecting hub in Latin America, making us the best positioned airline in our region to consistently deliver industry-leading results. Now I'll turn over the call to Jose, who will go over financial results in more detail.

Thank you, Pedro. Good morning, everyone, and thanks for being with us today. I'd like to join Pedro in acknowledging our great team for all their efforts to deliver a world-class service to our passengers. I will start by going over our second quarter results. We reported a net profit for the quarter of $120.3 million, or $2.88 per share. we reported a quarterly operating profit of $159.5 million and an operating margin of 19.5% in what is our seasonally lowest quarter of the year. Capacity came in at 7.4 billion available seat miles, or 9.7% higher than in Q2 2023. Load factor came in at 86.8% for the quarter, a 0.7 percentage point increase compared to the same period in 2023. Passenger yields decreased by 8.7% to 12.1 cents, mostly due to a revision of the unredeemed ticket revenue provision for tickets sold during the year 2024. As a result, unit revenues came in at 11 cents, or 7.7% lower than in the second quarter of 2023. Excluding the revision related to the unredeemed ticket revenues, RASM would have decreased by 3.8% to 11.5 cents. Unit cost for CASM decreased to 8.9 cents or 2.1% lower year over year. And finally, our CASM excluding fuel came in at 5.6 cents, a 5.8% decrease versus Q2 2023, mainly driven by lower aircraft maintenance costs due to an adjustment in leased aircraft return provisions of nine aircraft leases, which we extended during the quarter. as well as lower sales and distribution costs due to the higher penetration of both direct channels and the lower cost NDC travel agency channel. Excluding the adjustment in leased aircraft return provisions, the company would have reported an ex-fuel chasm of 5.8 cents for the quarter, a 1.7% decrease year-over-year. Now I'm going to spend some time discussing our balance sheet and liquidity. As of the end of the second quarter, we had assets of close to $5.4 billion. As to cash, short, and long-term investments, we ended the quarter with over $1.2 billion, which represents 35% of our last 12 months' revenues. And in terms of debt, we ended the quarter with $1.8 billion in debt and lease liabilities and came in with an adjusted net debt to a bid-debt ratio of 0.6 times. I'm pleased to report that our average cost of debt, which continues to be comprised solely of aircraft-related debt, is currently in the range of 3.6%, with around 70% of our debt being fixed. Turning now to our fleet during the quarter, we received 3.737 MAX 9 aircraft, ending the second quarter with a total fleet of 109 aircraft, comprised of 68 737-800s, 32 737 MAX 9s, and 9 737-700s. These figures include one 737-800 freighter and the nine 737-800s operated by Wingo. Also, in the month of July, we received our first Boeing 737 MAX 8, increasing our total fleet size to 110 aircraft. Regarding the deliveries for the remainder of the year, recently, Boeing notified us of further delays to the 2024 delivery stream, and now we expect to receive only two additional MAX 8s during the remainder of the year to end the year with a total fleet size of 112 aircraft instead of the 115 mentioned during last quarter's call. In terms of financing, we have already secured JOCO financing for these deliveries as well as for the first three deliveries of 2025. As for our 2025 fleet plan, we currently expect to receive 15 aircraft for the year, all Boeing 737 MAX 8s. As mentioned before, we extended all of our nine operating leases expiring next year. Additionally, as contemplated in an updated fleet plan, we expect to retire two of our Boeing 737-700s to end the year with a fleet of 125 aircraft. Turning now to the return of value to our shareholders, I'm pleased to announce that the company will make its third dividend payment of the year of $1.61 per share on September 13th to all shareholders of record as of August 30th. As to our guidance, we can provide the following update for the full year 2024. Due to the temporary suspension of our Panama to Venezuela flights, we now expect to increase our capacity in ASMs to approximately 9% year-over-year, instead of our previous expectation of approximately 10%. And we reaffirm our operating margin guidance to be within the range of 21 to 23%. We're basing our outlook on the following assumptions. Low factor of approximately 86.5%, unit revenues in the range of 11.5 cents, which account for the unexpected Venezuelan capacity reductions, weaker currencies in the region, and a lower fuel cost environment. Casa makes fuel in the range of 5.9 cents, and we are now expecting an all-in fuel price of $2.70 per gallon. Lastly, as you already know, last month after a career spanning over 30 years at Copa, I announced my decision to retire from the company by the end of 2024. Being part of the Copa team here has been one of the joys of my life. Our company is in great form, consistently delivering strong financial results with unit costs at the lowest level they have ever been, while continuing to build our very strong balance sheet and returning value to the shareholders. We're currently engaged in an internal and an external search for my replacement, and I will remain with the company in an advisory role after my successor is named to assist with a smooth transition. Thank you, and with that, we will open the call to some questions.

Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Savi Sith from Raymond James.

Hey, good morning, everyone. And I guess congratulations on getting some time off from the airline world, Jose. And maybe can I ask on the Venezuela site suspension impacts, like how you're thinking about the impact given the uncertainty that you alluded to, just what's in the guidance in terms of kind of how long this impacts and what kind of pressure it puts on unit revenue in the third quarter?

Sure, Xavi, and thank you for your good wishes there. So let me start by saying that the Venezuelan impact is included in the guidance, and we have taken a conservative assumption in terms of the capacity and the RASM guidance here. And we assume that there will be a buildup of the capacity related to Venezuela, either in Venezuela after August or on alternative markets. And the reason why the build-up of the capacities over a period of time will be a ramp-up of that capacity is because the flights need time to sell. But we expect basically to be back at the full capacity by December, let's say, and a ramp-up to occur between September and December. And it's all, again, just to reiterate, it's all included in the guidance, both in the capacity guidance and in the RASM guidance.

So the impact is across second half is what you have here?

Yes.

And not just 3Q. Makes sense.

Absolutely. Can I? Yes.

Got it. Just if I might, on the demand side, you've seen some meaningful local currency devaluation against the U.S. dollar over the last several months. Are you seeing any, perhaps, And they, you know, either because of that or weakening of economies, any impact on demand or any change in point of sale direction?

Hi, Sabi. It's Pedro. So, of course, the Venezuela impact is immediate. We are a network airline, so it affects beyond just the OND, Panama, Venezuela, and having to cancel from one day to the other, that has an impact in our whole network. So it's in the guidance already for Q3 and the rest of the year, as Jose will mention. And then that also is combined with the weaker currency, that you alluded to, which is affecting mostly Brazil, which is the most important market for anyone in South America, and actually in Latin America. So that's the main impact we're dealing with. It also has a network impact in our case. Otherwise, demand is okay in spite of a lot of capacity growth from the industry in general.

That's helpful. Thank you. Thank you. One moment for our next question. Our next question comes from the line of Dwayne Fenigworth from Evercore ISI.

Hey, guys, good morning. And, Jose, I don't know why you'd ever want to leave this industry. I think you're crazy.

We agree.

Just to follow up on Savi's question, is this a utilization hit, or do you actually have aircraft parked at this time? And just to maybe – I don't want to split hairs on your words, but you're assuming that by December – this capacity is reallocated to Venezuela or to somewhere else in the network. Is that the right way to think about it?

Sure, yeah, absolutely. That's the way to think about it. And there will be a ramp-up, so it's not like we will have the ability to redeploy everything immediately, but we're assuming that there is a ramp-up of that capacity, but that essentially it will be either in Venezuela or somewhere else by the final part of the year. So, yeah, and it's, I think, conservative in nature in the way that we've done it.

Okay. And then just on the – one of the things you called out in the release, this change to an unredeemed ticket revenue provision, can you just explain what that is and what changed and, you know, if that impact, you know, kind of continues? Sure.

Yeah, Duane, so it's a, indeed, it's a revision to the unredeemed ticket revenue provision that we have for tickets that we sell or that we are selling in the year 2024. So, following IFRS 15 standards, we apply, for every dollar of sales, you apply your unredeemed ticket factor, and then that gets reconciled after a year once the tickets expire. So what we did this year, just based upon observed behavior, we reduced somewhat the factor that we use. And so there is an assumption that there is a lesser percentage of tickets that will expire next year. And we therefore took the factor somewhat down. and included that here. That's something that happens every year, but in this particular year, we just saw a difference in the behavior of expired coupons, and that's all included in the guidance. It's contemplated in the guidance and the RASM guidance as well, so it's something that we've included in there.

Okay, so maybe a way to think about it is less breakage, less breakage or lower assumed breakage going forward, and so that's a that's a 2Q through, you know, the next 12 months impact. So that would impact, that's in this back half as well.

Absolutely. You got it. And it's included in the RASP guidance for the full year that we included there.

Yeah. Okay. Thank you very much.

Thank you. Our next question comes from the line of Guillermo Mendez from JP Morgan.

Hey, good morning. Good afternoon, everyone. Thanks for taking my question. And best wishes, José, on your new endeavors as well. I have just a follow-up on the first question. I guess, Pedro, you mentioned about demand still resilient despite all the capacity increase in the region. My question is if you see any kind of oversupply in any of the markets that you guys operate or how comfortable are you with the yield assumptions you have for the upcoming quarters? Thank you.

Okay. What you're saying cannot be ignored. There's always going to be more pressure on yields. when demand is growing at the pace that it has grown in Latin America. But the seats are being filled. Load factors are not hurting in general terms, at least not in our case. But when you add that up, to other factors like the weaker currencies, which, by the way, the weaker currencies, it's right now. In a month, it could be different. It could strengthen again. So we're not saying this is like a – we're forecasting the year, but things could change. But if we add a growing capacity to the other factors I mentioned, yes, there's always going to be some impact on yields. But that's all factoring in our guidance.

Super clear. Thank you. And maybe a follow-up on this. You mentioned about ending 2025 with nearly 10% fleet addition. Does it imply that we can assume a lower yield in 2025 when compared to 2024, given this additional capacity?

Well, we're growing capacity in a measured way. And we're actually growing probably half what others are growing in our part of the world. And we're growing according to the needs we have, the opportunities we see within our network. We're not trying to take land from anyone, And again, it's measured to our opportunities and to our network have what the industry in general is growing. So we're very, very comfortable with that. Plus, we have a lot of flexibility to adjust along the way. We can park the 700s and harvest the engines, or we can keep them flying, depending also on Boeing delivery. So we have a lot of flexibility. We feel.

And, you know, we are a profitability-driven company, so we'll make the best decisions we can to make sure to maximize our profitability. And by the way, we haven't issued guidance for 2025 yet, so stay tuned for that one. You know, a prelim guidance in November and then a full guidance in the February call.

Very clear. Thank you both. Thank you.

Thank you. Our next question comes from the line of Stephen Trent from Citi.

Good morning, gentlemen, and thanks for the time. And, Jose, best wishes to you, and thanks for all those times on the road and what have you. Really appreciate that.

Thank you.

And I was curious, just thinking about, to some extent, a follow-up on Guillermi's question in a different way. When you look at your opportunities to grow, any high-level view on, let's say, servicing new destinations versus increasing frequencies to existing destinations or maybe upgrading equipment or something along those lines?

Hi, Steven Pedro here. I don't think it's going to change much from what we've done in the past. Usually, you know, plus or minus 80% of our ASM growth comes from existing destinations but additional frequencies. And then the difference are new frequencies or new destinations both during the year. That ratio won't change much. This year, we've added three destinations so far. Maybe we'll add a fourth one by the end of the year. And we expect something similar in the coming years, somewhere between three and five new destinations each year. And as the region grows and our hub develops, we feel we have plenty of opportunities, including increasing our daily frequencies where we also have opportunities, valuable opportunities.

Okay, that's super helpful, Pedro. Thank you very much. And just the one quick follow-up here. I appreciate what you guys mentioned on Venezuela. Recently, there's been a bit of chop in Ecuador and what have you. High-level... do the other sort of broad markets, uh, uh, you guys serve, uh, you know, are, are we talking about relatively commerce situations where it's, you know, more business as usual?

Yeah. In reality, there isn't really any other country that has any non, you know, or political type of situation right now that, uh, is of concern.

And, and, you know, in, in, um, There will always be something, there will always be something in our part of the world. We are born and raised in this part of the world and we're used to all of this and we've been successful in the highs and in the lows and we're comfortable knowing that we're dealing with today's crisis. There will be a new one tomorrow. And we'll strive always to run a company that can succeed beyond that.

Great color, Pedro, and they're developed market carriers that would love to do half of what you guys do. So thanks very much. Thank you.

Thank you. Our next question comes from the line of Joao Frito from Goldman Sachs.

Good morning, guys. Thanks for taking my questions. I have two quick follow-ups. The first one relates to Venezuela. So you put out on the release that capacity amounts of roughly 2% of your total capacity. I just wanted to double check if this is the same case for revenues or if it's a higher or lower amount. And then on the second point, relating to the unredeemed ticket provisions, you guys did this revision in the recovery rate, right, of the non-used tickets, but you have already sold a portion of the tickets for this year. This revision in the second quarter is only related to the second quarter itself, or it already accounts for some of the tickets you guys sold for the second half, meaning the impact could be lower in the second half of the year on the revenue side. Thank you very much.

Yeah, Joel, I'll do the second part first. It is actually a catch-up of the first half of the year. The third quarter won't really have that much of a significant impact. And again, as I mentioned before, it's included in the guidance. But that's a good call-out. And indeed, the figure was also a little bit higher because in the second quarter of 2024, We included the assumption for both the first and the second quarter of the year.

In terms of your first question, what's always going to happen in a network carrier like COPPA is that when we talk about ASMs, we're talking Panama-Venezuela ASMs, and those are relatively short hauls. When we talk about revenues, we're talking about network revenues, passengers originating in Venezuela or with destination Venezuela that go to or come from all over our network. So those are going to be much longer hauls. So revenues are going to always be much higher than ASMs in any similar situation. So we can say that revenues are going to be, you know, a little bit over 10%. double the ASN, just because it's short haul connecting to long haul.

Thank you.

And again, it's all in the guidance.

The impact is all in the guidance. Super clear. Thank you. Thank you.

Thank you. Our next question comes from the line of Michael Linenberg from Deutsche Bank.

Oh, hey. Good morning, everyone. And, Jose, I echo what's been previously. You're going to be missed by the investment community, so congratulations on your new move. Thank you.

My new move is basically going and do a lot of yard work in my house and, you know, leave a hammock and then lie on it.

Sounds very nice. Anyway... Back to the Q&A, I have a couple here. I didn't see anything in the release just around Boeing compensation on the MAX 9 grounding. I think last quarter, I think you had said that you had yet to reach an agreement. We're now looking at a year's loss of capacity. I think coming into this year, we thought your fleet was going to be 121 airplanes. It now looks like we're not going to get there until the end of 2025. How should we think about that compensation? Does it even ever show up in the numbers? Maybe it shows up in the cash flow. So I guess the question is, have you reached an agreement on that, or is that still in the works?

Yeah, Mike, that's a very important question. Yes, we have reached agreement. I think it's a fair agreement. The agreement is of a confidential nature, but it is a fair agreement. And the way that accounting works, unfortunately, you can't claim like a benefit in one particular quarter. You have to, so we'll see, you know, I think in summarized terms, we'll see the impact on the DNA line, on a smaller impact on the DNA line over the next, call it, four years. So that's how it works, because you basically book any benefit that you got from the agreement with them against the aircraft, let's say, on the property client equipment line, and that flows through a P&L, through a DNA line, and we're expecting that to flow through the P&L over the next four years.

Jose, is it fair to say that it may be a smaller impact on the P&L, but maybe a larger on the cash flow because things like PDPs get pushed back? I mean, the fact that you're not getting airplanes.

Yeah. There's a portion of it there as well, of course. Okay. So, yes, you are totally correct.

Okay, great. And then just my second question, when we look at kind of the competitive backdrop, I know there were a few questions asked about oversupply. You know, I look at the COPA network and with the exception, I guess, of Porto Alegre, you know, because of the floods and the airport closure, I don't see any route cancellations. But then when I look at, you know, Wingo, based in Colombia, and I kind of look at, you know, this year, there are a lot of routes that look like they're either being canceled, and there is a bit of churn there. And I presume that that's in response to just the competitive backdrop in Colombia, which may be a little bit more, you know, intense than, say, what you're seeing. Can you talk about that, maybe what you're seeing in that market? Thank you.

Yes. Hi, Mike. Pedro here. And you're right. You kind of answered the question. The Colombia market is very, very competitive, very intense, and lower yield. So Wingo is constantly adjusting to market trends and to competition and where the opportunities are. So a year ago, they shifted a lot of capacity from international to domestic. And lately, they have readjusted that a little, put a little bit more international, reduced domestic somewhat. So they're always adjusting to the market opportunities. to remain profitable and successful and also conservative. Again, in a market that's been so volatile, they've tried to just be conservative and keep things under control. And that's been their formula, to do well and fill a niche in that very competitive market.

Okay, that's helpful, Pedro. If I could just squeeze one last one in on the share repurchase program. It did look like the shares were down a little bit. Was there any activity in this quarter, Jose, and with your cash or liquidity at 35% of LTM revenue, shouldn't we be primed for maybe a follow-on, or is that maybe a bit aggressive on my thinking? Thank you again. Thanks for everything.

Yeah, during the quarter, the program was active. We bought, I think, around $10 million worth of shares. And in the first quarter, we had bought some more. So, yeah, and, you know, we're, of course, we have a lot of means by which we return value to our shareholders, including our dividend. But we also are a growing company, so we have a lot of aircraft coming over the next couple of years. And we also have to make sure that we fund the PDPs and et cetera for our growth. And we've also been actively buying leases. We've been actively buying aircraft. So we've deployed capital in different ways over the year 2024. Great. Thank you.

Thank you, Mike.

Thank you. Our next question comes from the line of Alberto Valerio from UBS.

Hi, good morning, gentlemen. It's Pedro and Jose. Jose, good luck for the new cycle. I hope to see you around in some sports events, maybe F1. My question is regarding the redundant tickets, if there is any specific event that causes this change in the behavior of the consumer. And my second question is whether your guidance is considering further deterioration in the American market and some shift of the aircraft to Latin market. Thank you very much.

No particular consideration of a shift in the network in general terms. I think we expect the network to remain fundamental in the same way. And in terms of the first question, it wasn't really an event. I mean, this happens every year, but in particular, I think that the call was that we decided to make this sort of almost, I don't want to say retroactive because it's still part of 2024, but we just decided to, you know, actually be conservative in our approach in terms of the unredeemed ticket revenue factor that we use.

Okay, thank you very much.

Thank you. Our next question comes from the line of Danielle L. Mackenzie from Seaport Global.

Oh, hey. Hi. Jose, congrats on going out on a great run. It's been great working with you over the years, so enjoy. Yeah, a couple questions here. The plan to use the balance sheet and liquidity position to strengthen your competitive position, reinforce the network and product, going back to the press release. My first question is, If this might mean an investment in another airline that might be in distress right now, first question, or what opportunities are you seeing? And then how are you valuing these potential opportunities? It would be great if you just elaborate a little bit more here.

I'll answer that one, Dan. We usually don't play in that market. But we wouldn't comment either if we were doing something. But if you look at our track record, we've always been very conservative and grown organically. So I don't see that changing much in the future. But of course, we always be alert for any opportunity. And we did purchase an airline in Colombia 19 years ago, which is now Wingo. So we've done it before and we'll always be alert, but we're a conservative operator when we look to our past.

Yep, understood. Okay. Second question here is, I'm wondering if you can elaborate a little bit more on NDC. It seems to be driving revenue and cost savings. So I'm Curious, what percent of the tickets you're upselling today, what percent of the revenue it is, and what the growth rate is in this particular segment at this point?

Right. So our direct connect strategy has been a huge success. And it has driven some of our CASAM competitiveness and our lower CASAM. So it's been very successful. Talking about the specific numbers, you know, in general terms, GDS, so the traditional GDS channel was over two-thirds of our bookings when we started towards the end of 2022. And today is much less than a quarter of our business. So talking in general terms, we're over 80% either direct or NDC channels today. Over 80% travel agency connecting through NDC or copa.com bookings. And the traditional high-cost GDS channel is really a small percentage of our business, relatively speaking.

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

Not sure if I get exactly what you're asking. But copa.com plus NBC Connections, so direct NBC Connections are over 80% below, 80% of our business. And two years ago, it would have been only COPPA.com and other direct channels, which would have been in the 30% range.

Understood. Okay. Thanks for the time, you guys.

Thank you. Thank you. Our last question comes from the line of Tom Fitzgerald from TD Cowan.

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

Yeah, so I would say that in general terms, business travel is probably a quarter of our total revenue base. These are people who travel for business purposes, not necessarily people traveling in business class. And then the remainder is in leisure and in BFR. I would say leisure represents about 40%, and then BFR is about, you know, call it 35%. So there is a bit of a shift because before the pandemic, it was kind of a third, a third, a third. And so it's still, business rel is still, you know, a little bit less than where it was back in 2019.

Okay, that's really helpful. And then would you mind just... just kind of running through some of the tailwinds and levers you'll have next year to drive CASMX lower. Thanks again for the time, everyone.

Yeah, there's still several items out there. The first one is densification of the fleet. You know, we still have a 737-800 fleet that is undergoing a densification of the Y-class cabin. There's, you know, some of the headwinds that we had seen over the last couple years in maintenance are still being worked on, you know, as the engines mature. Additionally, of course, there's growth. You know, if we have growth of, you know, in the low double-digit range, that would also aid in terms of our chasm. And there's maybe a tad more that can be done in the sales and distribution line with Copa Connect as well. So those are, I would say, three buckets of... of tailwinds in terms of CASMX that we have on the table.

Right. Plus, of course, keeping overhead under check and growing ASMs. That formula usually works. Yep.

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

Okay. Thank you. Thank you all for participating. in our Q2 earnings call. Thank you also for your continued support. Have a great day and you know where to find us. So thanks for your support.

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