Ladies and gentlemen, thank you for standing by. Welcome to Copa Holdings First Quarter Earnings Call. [Operator Instructions] As a reminder, this call is being webcast and recorded on May 14, 2013. Now I will turn the conference call over to Joe Putaturo, Director of Investor Relations. Sir, you may begin.

Thank you very much operator, and welcome, everyone, to our first quarter earnings call. Joining us today are Pedro Heilbron, CEO of Copa Holdings; and Jose Montero, our Chief Financial Officer. First, Pedro will start with our first quarter highlights, followed by Jose, who will discuss our financial results. Immediately after, we'll open up the call for questions. Copa Holdings first quarter results have been prepared in accordance with International Financial Reporting Standards. In today's call, we will discuss non-IFRS financial measures. A reconciliation of non-IFRS to IFRS financial measures can be found in our first quarter earnings release, which has been posted on the company's website, copa.com. In addition, our discussion will 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 that are subject to change. Many of these risks are discussed in our annual report filed with the SEC. Now I'd like to turn the call over to our CEO, Pedro Heilbron.

Thank you, Joe, Good morning, to all, and thank you for participating in our first quarter earnings call. I first want to congratulate all of my coworkers for another outstanding quarter. As you can see from our first quarter earnings release, we're off to a great start for the year. Among our main highlights: Available seat miles increased almost 20% year-over-year, passenger traffic grew very much in line with capacity as a result of strong demand trends throughout most of our network. This resulted in a healthy revenue environment, as yield and unit revenues, RASM, came in higher on a quarter-over-quarter basis. Additionally, although lower year-over-year when adjusting for length of haul, RASM was actually up for the quarter. On top of this very healthy revenue performance, we were also able to reduce our x fuel unit cost and are on track to meet our cost target for the year. As a result, we delivered an operating margin of 22.2%, representing a year-over-year and quarter-over-quarter margin expansion and undoubtedly, one of the best operating margins in the airline industry. On top of these outstanding financial results, we also continued delivering a world-class product, with on-time performance for the quarter coming in above 90% and among the best in the industry. Our first quarter performance looks even more impressive when we consider that in the last 24 months, we have grown capacity by approximately 50% and added 14 new destinations to our network. For this year, we expect another year of double-digit capacity expansion but more moderate than in 2011 and 2012, when we accelerated growth to transition our hub in Panama from 4 to 6 connecting banks. So this year's 14% growth is more in line with our historical growth levels. In addition, the capacity we're adding this year will…

Thank you, Pedro, and good morning, everyone. Thanks for joining us. As you know, this is my first earnings call as CFO of the company, and I would like to take this opportunity to thank Pedro, our Board of Directors and my coworkers for supporting me throughout my 20-year career here at Copa. I also want to congratulate our entire team for their efforts. We had a very strong first quarter. We're off to a great start for the year, as we expanded capacity and revenues by almost 20%. We're able to maintain very competitive unit costs and continue strengthening our competitive position as well as financial position of the company. In terms of financial results, net earnings for the quarter came in at $113.8 million or earnings per share $2.56 compared to last year's first quarter net income of $95.9 million or earnings per share of $2.16. However, excluding a few hedge mark-to-market gain, a $3.4 million and a $13.9 million charge related to the devaluation of the Venezuelan currency back in February, underlying net income for the quarter came in at $124.4 million or earnings per share of $2.80, close to a 40% year-to-year increase compared to last year's first quarter underlying net income, $90.6 million or adjusted earnings per share of $2.4. In respect to traffic, we continue to see strong demand for air travel throughout our network, with revenue passenger models increased 19.45% year-over-year and a slightly higher capacity expansion. As a result, we delivered a very healthy load factor for the quarter, strong demand allowed us to improve our yields and RASM quarter-over-quarter. On a year-over-year basis, we saw a small decline in yields and RASM of 0.8% and 1.5%, respectively. However, adjusting for a 6.3% increase in length of haul, yields increased 1.5% and…

Thank you, Jose. Now we will open up the call for some questions.

[Operator Instructions] Our first question comes from the line of Michael Linenberg from Deutsche Bank.

I have a couple of questions. Jose, in the press release when you highlight your unit costs performance, there's a mention of the timing of certain expenses that impacted it in the quarter. And when I looked at the press release, it looks like that the advertising expense was a little bit lower. Is that the only timing event? Or are there other expenses where timing had some impact?

We -- there are always some timing expenses associated kind of with the issues in the first quarter. Advertising is one of them and there are some IT projects that will be initiated later in the year. And as you know, there are similar cost items that will increase throughout the year.

Okay, very good. My second question has to do with your comment about all of the aircraft coming in on operating leases. When I look at where your profitability is and where it seems to be headed and I look at some of the potential terms in the marketplace, wouldn't it make more sense to put those airplanes on balance sheet? Or is this more of a move to maintain a balance between leased versus owned? Can you just talk about why you're pursuing operating leases on all of the airplanes that are coming in for the rest of the year? What's underlying that? What's driving that?

Well, Mike, we always want to keep a balance between our aircraft, our owned aircraft and our leased aircraft. And so we thought given our current composition of the fleet that -- in this year, we wanted to maintain these airplanes as leased. And so just -- especially there's an issue of flexibility in the fleet.

Okay, great. And just if I can squeeze in one last one. When you look at where your capacity growth is and you look at the increase in revenues or passenger revenues, there's a strong -- they're sort of running in tandem. But when I look at your cargo, other and mail, that is up only about 7%. It's a bit less. And I'm just -- I'm curious is that a function of the fact that as you fly much longer haul, you can't carry as much cargo because of the weight penalty? I mean, why is that lagging the passenger revenue growth at such a big difference?

Yes, you're right. It's associated with the fact that we were running high load factors and that we do have a portion of our network that essentially carries passenger bags more than cargo, and so that's kind of the reason.

And our next question comes from the line of Duane Pfennigwerth from Evercore Partners.

What was an earlier Easter worth to the March quarter? And how should we think about that impact into June?

Well, yes, Easter did come in the first quarter, actually in the very end of the quarter. The second quarter is usually a low-season quarter. So we do see essentially that this year it will be no different in that way. I mean, there was some impact but it was not necessarily material to what we see in Q2.

Okay. And then can you just let us know what you're assuming for jet fuel, I guess, before the impact of your hedge and taxes? It feels like your guidance is actually a bit above the current feature's curve.

Yes, I'll take that one, Duane. This is Pedro. It's very early in the year. Fuel is very volatile, as we all know. And we could have gone with a curve, but we've seen that the curve hasn't worked that well in the past. So -- plus also, not every country where we operate goes exactly what the fuel curve or the spot price. So that's our best estimate of where we think fuel is going to be for the rest of the year. But -- and by the way, we're also averaging in what has already happened in the first quarter. So we're taking that into account also. So that's kind of our best estimate, but who knows.

Okay, that's great. And I'll sneak one last one in here. On your -- and we appreciate that conservatism, by the way. On your RASM guidance, you indicated flat versus, I think, up about 1% previously. Yet, your revenue trends accelerated from the fourth quarter into the first quarter when you last gave, I guess, higher revenue guidance for the year. So my question is, is that based on something you can see today? Or is it an assumption based on the historical relationship between fuel and revenue?

This is Pedro, again. I think it's a combination. I mean, it's partly what we expect given a lower fuel guidance, and we've seen how fuel and yields have correlated in the past. But also yes, we are seeing yields and RASM staying kind of flattish to slightly down. That's what we're seeing. So with fuel coming down, we are not expecting much -- a strengthening there.

And our next question comes from the line of Eduardo Couto from Morgan Stanley.

I have a question on dividends. If I'm not wrong, I think you guys had a Shareholders' Meeting last week. Just want to know if there's any news in terms of dividend payment, if we can still expect around 30% payout for the middle of the year and maybe something extraordinary towards the year end. So just a current view on dividend payment.

Eduardo, so our dividend policy is up to 30% of net income paid as dividend. And our dividend for 2013 was paid ahead of time in December of 2012, as you know. So our dividends for this year has already been paid. The board would have to approve an extraordinary dividend or a change of policy, which has not yet happened. So that has not happened. But as we have said before, if our cash level grows way above what the company needs, we're sure our board will make the right decision. They won't let us just stay with more cash than what's needed. But there's nothing -- nothing has been decided yet.

But do you have an idea of timing to -- for a decision on that, Pedro?

I would be speculating if I told you about timing right now because it has not been discussed. But I think our cash levels right now, even though on the high end of where we want to be or where we've been in the past, they are still within range of where we've been in recent years. But again, as we go above that level, I'm sure allocation will be made by the board. That has not happened yet and the decision has not been made.

And our next question comes from the line of Hunter Keay from Wolfe Research.

This is actually Jared Shojaian in for Hunter. So just to follow up on that commentary on cash deployment, if I look at -- it looks like your share count came down slightly sequentially from fourth quarter. Did you guys buy back any stock? And can you just remind us if you have an existing authorization in place?

No, we do not have any authorization in place and we did not buy any stock. If it came down, and we don't have the numbers in front of me, most have been an immaterial amount.

Okay. Yes, it was small. Just wondering if you guys had started something towards the end of the quarter or if it was maybe a change in strategy. Okay. So as far as excess cash, what metrics do you look at? Is it a cash to LTM revenue? Is it cash to an air traffic liability metric? Because if I look at your balance sheet, you now have $733 million in cash, only $785 million in short-term liabilities, of which $369 million is the air traffic liability. So I'm just trying to figure out why you need so much cash and exactly how you think about that going forward.

So first, I should say that in the way -- in the world we live in, there's probably no such thing as excess cash. But we obviously have cash needs, and that has a limit. So we look at how fast we're growing. We look at our CapEx ahead of us and we try to keep a conservative balance, which in the past has been around 30% of 12 -- last 12-month revenue. It's kind of where we'd like to be and where we've been in the past. So if we go above that number and, again, considering our future growth plans and CapEx needs, there might be more than what we need to accomplish what I just said. So I'm sure the board will take a look at, but no decision has been made yet.

And our next question comes from the line of Jim Parker from Raymond James. James D. Parker - Raymond James & Associates, Inc., Research Division: Just a -- Pedro, perhaps an update on the Canal expansion status. And probably more important than all of that is, what happens to a lot of those people that are being employed in the Canal once we get to the end of the expansion? And how are they absorbed in the local economy?

Okay, the story is very good. The Canal was supposed to be done by the end of 2014. But apparently, it's slightly delayed. So now they're talking of mid-2015. And the interesting thing with the Canal expansion is that although it generates some employment, the real story starts once the expansion opens for business because a lot more revenues are going to come into the economy and into Panama, and that's going to be an additional boost to an already strong and growing economy. So actually, it's going to be better when it opens. In terms of the employment, I don't remember the exact number but it's not a significant number, and the economy of Panama has basically full employment. So the economy, in general, needs those people to come back into the economy because there are other major projects going on, including a large mining operation that will need a lot of employment that the country cannot provide right now. Tourism is growing. Real estate remains strong. So I see no problem in the workforce from the Canal expansion coming back into the rest of the economy. Actually, it's something that will be welcomed. James D. Parker - Raymond James & Associates, Inc., Research Division: Okay. Question for Jose. Jose, well you explained the other net, the other nonoperating. If you break out the mark-to-market gain on fuel hedges and the Venezuelan loss write-down, it looks like there are some pretty substantial year-to-year changes. Can you shed a little bit of light on the sources of those changes?

Well, just to tell you a little bit about Venezuela, we have -- the current loss associated with the amount of the funds that were in a sense had not been presented to the Venezuelan authority for repatriation. So because the Venezuelan authority essentially, they're -- they've been honoring the -- their exchange rate asset that's been valid at the time of presenting a presentation of the documentation. So that's the one -- the $13 million loss that we incurred. And with respect to hedges, we essentially have -- some hedges have come into -- in the money. Specifically, we've seen -- we've had some hedges in crude that were in the money for the first quarter. So that's essentially what our current -- what has come down -- especially now the first part of the second quarter has been the crack spread more than the crude. So we were able to gain on the hedges that we had for the first quarter. James D. Parker - Raymond James & Associates, Inc., Research Division: Yes. Jose, if you break those 2 items down, if you exclude them, looks like your non-op income expense was an expense item of $2.2 million this year versus $7 million a year ago. So I'd like to know.

Yes, the rest is interest and it's essentially the change of interest year-over-year, interest expense and the netting out of interest expense and net interest income.

[Operator Instructions] Our next question comes from the line of Stephen Trent from Citi.

Just one question for me. Just taking a look at your fuel hedge positions and you hit on this a little bit, but the -- for the remainder of 2013, you're sort of hedging around 33-some-odd percent on average, which seems to be above what you've done historically. And I'm wondering what's the sort of driver of that, as well as the driver of hedging 10% of 2015. Is this something that you're seeing in development of the new routes that you've launched versus the lower density traditional routes? Anything in the -- that you're seeing in the tea leaves leading you take a higher hedge positions?

Steve, so we're not modifying our hedge policy. We're actually within the range of our policy. However, as I mentioned before, given the recent drop in fuel and especially in the jet fuel crack spread, we've taken some discretionary positions in jet fuel through -- for this year and for the next 2 years. So that's essentially what it is. We're not modifying our policy for now, but we're taking advantage of these opportunities as they come.

So you saw an opportunity on the pricing side as opposed to some shift in terms of the economics on the new routes?

Yes, yes.

And our next question comes from the line of Bob McAdoo from Imperial Capital.

Just could you give us a little bit of an insight as to what the fleet deliveries might be in '14? And in round numbers, what that might turn into in terms of capacity? Obviously, a piece of it is going to be the '14 impact of things put in during '13. But just in round numbers, what those things might look like?

So, Bob, this is Pedro. We have 8 737-800s delivered -- that will be delivered in 2014. We also have 4 737-700s leases expiring. And we have not made a final decision in terms of how many route leases will we retain, all, some, none, et cetera. So that's still up for analysis here in the company. So we could roll as many as 8 aircraft or less if we return some of those 700 leases. In terms of ACM -- ASM percentage, it's going to be in the high-single digits or low-double digits.

Our next question comes from the line of Pablo Abraham from BBVA.

I have 2 questions left. The first one is if you could give us more color of the current proportion of the fleet in terms of how many airplanes you have in lease -- are leased and how many are owned? And the second question is with regarding if you're expecting a significant impact in the operation next summer, especially because the FIFA World Cup is in Brazil and you are flying to 6 cities that will host matches.

Yes. So right now 69% of our fleet, total 59 aircraft are owned; and 31% or 26 aircraft, for a total of 85, are leased. So that's kind of what the makeup of leased versus owned that we have. In terms of the summer, we actually fly to 7 -- the 7 cities that we fly in Brazil are World Cup host cities. And we're still in the middle of our high season. So we -- and our high season in Brazil especially always have a lot of traffic. So we expect it to be a good impact to us, but it's not necessarily -- we -- any different or too different from what we have already seen in previous years. Because of the fact that the World Cup essentially is just a contained event for 1 month. But as I say, we do expect it to be a good summer next year.

Pablo, this is Pedro. Except for one thing that could happen. If Panama makes it, then that's another story.

And I'm showing that we have our last question from Bianca Faiwichow.

I just would like to listen to your view on competition for the next 2 years, especially coming from Avianca, TACA and LatAm. Do you think there is enough space for the 3 companies? And also when we consider the American Airlines in the next 5 years more realized?

Okay. We face strong competitors who have consolidated and are building their own operations, their own hub. But when we think of the -- of what Latin America is today, it's a growing region, a fast-growing region with a growing middle class. I think there's plenty of space for 3 or 4 major airlines. So we have no problem with what's going on and we have smart rational competitors also. So it's airlines doing what makes sense for itself and again, in a growing a stronger region. So we're okay with what we're seeing. We're not seeing anything that's out of the ordinary, that's irrational or that would affect our plans in a material way.

Okay. And also regarding the expansion of the Tocumen Airport, should we see you adding capacity as in 2011 and 2012, let's say, around 20% when the expansion is ready? Or should we expect something around low double-digit growth?

Right. So before 2011 and 2012, our growth was averaging somewhere between 10% and 14%, in that range. We accelerated growth in 2011 and 2012 to take advantage of opportunities that were out there and to strengthen our transition from 4 to 6 connecting bank. What we said is in the coming years, our growth will be more in line with what used to be before, again 2011. So that's what we should see going forward in that growth, in that 10% neighborhood.

That -- I'm not showing any further questions at this time. I would like to turn the call back over to CEO, Pedro Heilbron for closing remarks.

Okay. Thank you, all. This concludes our first quarter earnings call. Thank you for being with us and thank you for your continued support. We will see you next time. Have a great day.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone, have a great day.