Copa Holdings, S.A. (CPA) Q4 2014 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to Copa Holdings Fourth Quarter and Full Year Earnings Conference Call. [Operator Instructions] As a reminder, this call is being webcast and recorded February 12, 2015. Now I will turn the conference call over to Rafael Arias, Director of Investor Relations. Sir, you may begin.

Thank you very much, Beth, and welcome, everyone, to our fourth 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 fourth quarter and full year highlights, followed by Jose, who will discuss our financial results. Immediately after, we will open up the call for questions from analysts. Copa Holdings' fourth quarter financial 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 the non-IFRS to IFRS financial measures can be found in our fourth 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 fact 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 and uncertainties 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, Rafa. Good morning to all and thank you for participating in our fourth quarter and full year 2014 earnings call. As always, I want to congratulate our coworkers for their efforts in delivering another solid quarter and year. 2014 was a solid year in terms of financial results and one of our best in operational performance. In fact, I am pleased to say that just a few weeks ago, FlightStats awarded Copa as the Best Airline for Latin America in recognition for our high operational standards and on-time performance in 2014. All this would not have been possible without the hard work and dedication of our world-class team. Our vision remains to be the best option for intra-Latin America travel by connecting passengers in Panama, the most completed efficient hub in the region, by offering our customers great service and convenient schedules and by delivering world-class operational standards, including world-leading, on-time performance, which ultimately results in industry-leading financial performance. Among our main highlights for 2014, we were able to deliver another year of strong growth as both traffic and capacity increased 9.5%. We continue to strengthen our network by adding 5 new cities: Montréal in June, our second destination in Canada; Fort Lauderdale and Georgetown, Guyana in July, with Fort Lauderdale being our 10th destination in the United States and Guyana, the 30th country in our network. In addition, we added Campinas and Santa Clara in December. Campinas is our eighth destination in Brazil and Santa Clara is our second destination in Cuba. So we ended the year serving 69 destinations in 30 countries in the Americas, by far the most complete and convenient network for intra-Latin America travel. On top of these new cities, during the year, we added frequencies to 16 of our existing destinations. We also continue enhancing our customers' travel experience by inaugurating our fifth Copa Club, which is located in Medellin, Colombia. We announced the launch of our new loyalty program, which will start in July. During 2014, we took delivery of 8 737-800 aircraft to end the year with a consolidated fleet of 98 aircraft, one of the youngest, most efficient and modern fleets in the region. We also continued looking for efficiencies and cost savings. We closed the year with 18 737-800 equipped with Scimitar Winglets, which reduced fuel consumption by another 2%. On the operational front, our team once again delivered excellent numbers with on-time performance coming in above 90% and a flight-completion factor of almost 99.8%, placing us once again among the best and most reliable airlines in the industry. So we continue delivering what our passengers expect from us, a superior network for intra-Latin American travel with more choices, better schedules and a world-class product. Nevertheless, despite achieving a healthy load factor of 76.7% for the year, our unit revenues decreased almost 5% in 2014. Specifically, in the second half, we experienced a double-digit percent decline in unit revenues, driven mostly by the capacity reductions in Venezuela and a large shift to U.S. dollar sales in that market as well as weaker yields in other markets. Now turning to the main highlights for the fourth quarter. We delivered an operating margin of 17.7%. Passenger traffic increased 8% year-over-year on 10% capacity expansion. Yields decreased 11%, which led to a year-over-year decrease in unit revenues of almost 13%. Adjusted for length of haul, yields would have decreased 6% and unit revenues 8%. On the cost front, adjusted unit cost came in 7% lower due to a lower fuel price year-over-year and a 4% improvement in CASM x fuel. For 2015, we expect to grow capacity in the mid- to high single digits. Even though we will receive 9 new 737-800s throughout the year, we expect net aircraft growth will be no more than 2 aircraft. Thus, this year's incremental capacity will be mainly the full year effect of flights added during 2014. Our 2015 expansion plan will likely include several new destinations. We have already announced New Orleans, our 11th city in the U.S., which will start in June, and expect others to be announced soon. This new destination will provide unique a fleet to our network as we continue to enhance Tocumen Airport, the hub of the Americas, as the most complete and convenient hub. In addition to our network expansion, we will continue implementing initiatives to improve our product and service as well as generate efficiencies. To name a few, we will launch our own loyalty program in July, which will enhance our knowledge and service of our top customers and should bring attractive ancillary opportunities in the near term. We will initiate the implementation of savers customer sales and service reservation system, which once implemented, will help improve our service and provide additional revenue opportunities. And another important initiative will be to continue working together with the Tocumen Airport authority in the final stages of the South Terminal airport expansion project in order to ensure and optimize hub operation and connectivity. Turning to our current demand environment. Load factors are trending flat to slightly up during the first quarter, but at the expense of lower yields. Aside from the Venezuela situation, yields are being affected by the general economic outlook for Latin America as well as currency weakness versus the U.S. dollar, particularly in South America. This has led us to reduce our expectations for unit revenues for the year. Economic prospects for the region remain weak compared to prior years. And there are few signs of a significant recovery during 2015. According to the IMF, economic growth for Latin America and the Caribbean in 2015 should be about 1.3% overall -- very similar to the growth experienced in 2014. Yet overall, international air traffic in our region should continue to grow, but at a slower pace, which is why we have reduced capacity growth to single digits. This should allow capacity to existing markets to school up [ph] and will help mitigate yield pressures. Our home country, Panama, continues to outperform the region. For 2015, the Panamanian economy is expected to grow at similar levels from 2014, approximately 6% GDP growth. This should have a positive impact on demand for our services as we continue to strengthen our preferred network for intra-Latin America travel. Turning over to fuel prices. While lower fuel prices have brought additional pressure to some Latin American economies and currencies, overall, we think it should be positive for earnings as fuel represented nearly 38% of our costs last year. The general expectation is that fuel prices will remain close to 5-year lows in 2015. That being said, we don't expect fuel prices to remain this low forever. Capacity and further discipline will be particularly important this year in order to improve overall yields and secure healthy earnings for the future once the regional economies recover back to historical levels of growth. So to recap, the fundamentals of our business model remain intact. We operate in mostly underserved markets where in most cases point-to-point service is not an option and can only be served efficiently through a hub. Our Panama airport has the best geographic location and infrastructure to serve the intra-Latin America market and accommodate our future growth. We continue strengthening our network, the most complete network for intra-Latin America travel. We're taking the necessary measures to adjust our network and capacity growth to better reflect the current market demand environment. We have competitive and improving unit costs, which will benefit significantly from lower fuel prices. We continue implementing the necessary initiatives to improve our passenger experience and deliver of our world-class product. And most importantly, we have a very committed and dedicated team, who day in and day out run a very competitive and successful airline. We're very well-positioned strategically, financially and operationally to take advantage of future opportunities and continue delivering world-class financial results. With this, I will turn over the call to Jose who will go over our financial results.

Thank you, Pedro. Good morning, everyone, and thank you for joining us. First and foremost, as always, let me begin by joining Pedro in congratulating the entire team for another solid year. During 2014, we added 8 new 737-800s to our fleet, grew capacity by almost 10%, improved x fuel unit cost by 4%, and announced our first-ever share repurchase program, which, combined with our quarterly dividend, continues to return great value to our shareholders. Nonetheless, our 2014 profitability was affected by nearly 3% lower revenues year-over-year in the second half of the year. As we have previously mentioned, the weaker revenues were mainly due to the capacity reductions performed in Venezuela around midyear, the shift of our sales away from the Venezuelan bolivar as well as the slowdown in other South American markets. Reported net earnings for full year 2014 came in at $371.4 million, which translates to earnings per share of $8.37 and an operating margin of 19.8%. However, excluding special items, which include a fuel hedge mark-to-market loss of $116.6 million, underlying net income came in at $494.6 million or adjusted earnings per share -- up 6% when compared to an adjusted EPS of $10.53 last year. Looking at the fourth quarter, we grew capacity by 10% year-over-year, as we continued strengthening our Hub of the Americas in Panama City. Revenue passenger miles increased 8% year-over-year as we continue to see weaker demand for air travel during the quarter, particularly in some South American markets, which resulted in a consolidated load factor of 75.1%, a 1.4 percentage point decrease over Q4 2013. Furthermore, passenger yields came in 6% lower year-over-year, adjusted for length of haul, which combined with the lower load factor resulted in a revenue decrease of almost 4% to $671 million. On the expense side, fourth quarter operating expenses excluding special items increased 2.8% year-over-year and cost per available seat mile decreased almost 7% to $0.103 from $0.11 in Q4 2013. The lower CASM was driven by 12% reduction in fuel unit cost due to 10% lower jet fuel prices and a 4% improvement in x fuel CASM, which came in at $0.067 mainly from lower sales-related expenses. In fact, fuel prices at this time continue to be much lower than last year and expectations are that they will remain lower than in previous years. This could create additional pressure in yields given that several economies in the region are dependent on commodities and that some regional currencies have devalued during the past several months, making our fares more expensive in local currency terms. However, we expect the benefit of lower fuel prices to be net positive for us. As we mentioned during our last earnings call, on an annualized basis, we expect our expenses to vary by $5 million per each dollar change in the price of crude. In terms of operating earnings, [indiscernible] operating earnings for the fourth quarter came in at $118.8 million, translating to an operating margin of 17.7%, down year-over-year versus an adjusted operating margin of 23.1% in the fourth quarter of 2013. Looking at nonoperating income and expense. The fourth quarter generated a net nonoperating expense of $81.9 million, mainly consisting of an $89.1 million fuel hedge mark-to-market loss and a net interest expense of $1.6 million. With respect to fuel hedges, our hedge positions remained unchanged since the end of the third quarter. So December 31, we had in place the following coverage: for 2015, we had coverage for 27% of our projected volume, almost entirely in jet fuel swaps at an average equivalent price of $2.74 per gallon. And for 2016, we had hedged 16% of our projected volume with jet fuel swaps and an average of $2.70 per gallon. Turning to the balance sheet. We continued to strengthen the position of the company with assets reached $4.1 billion at the end of the year, for an increase of almost $120 million versus the end of 2013. Owner's equity totaled approximately $2.1 billion, debt plus capitalized leases totaled $1.9 billion and our adjusted net-debt-to-EBITDA ratio, excluding cash in Venezuela, came in at 1.6x, the lowest in our peer group and one of the best in the industry. In terms of debt, we've closed the year with approximately $1.1 billion in bank debt, about 57% of which is fixed rate, with a blended rate including fixed and floating rate debt of approximately 2.6%. Looking at cash, short and long-term investments, we closed the year with almost $1.2 billion, which represents approximately 43% of last 12 months' revenues. However, as of the end of the year, $485 million of our cash was in Venezuela pending repatriation. Excluding all the cash in Venezuela, the company has $675 million, which represents roughly 25% of last 12 months' revenues. As to Venezuela, the impact of the recent announcement by the government regarding the exchange rate and mechanism for repatriation is unclear at this point. It is important to emphasize that our bolivar exposure has decreased in the last 6 months as we have been successful in shifting sales in the market to points outside of Venezuela and based primarily to the U.S. dollar. And as of February 4, 2015, our bolivar balance pending repatriation in Venezuela stood at $478 million, down from $528 million back in June of 2014. In accordance with our dividend policy, our Board of Directors approved our 2015 dividend equivalent to 40% of our reported net income for 2014. As a result, on March 16, we'll pay our first-quarter dividend in the amount of $0.84 per share to shareholders of record as of February 27. In addition, we already initiated and continue to execute the $250 million share buyback program approved by our board back in November of 2014. In terms of fleet for 2015, our original plan published in August 2014 was to receive 8 Boeing 737-800s, bring 3 additional 737-800s via operational leases and return 5 aircraft with expiring leases for a net growth of 6 aircraft. Nevertheless, last quarter we announced we would be making adjustments to our fleet plan, given our reduced capacity growth in 2015. In that regard, we're currently in discussions and evaluating several options in order to bring the net fleet growth down to between 0 and 2 aircraft for lease [ph]. So going back to our results and to recap. Demand for air travel in our region continues to expand, albeit at a slower pace. Yields will continue to be affected due to the full year effect of the capacity reductions in Venezuela and the macroeconomic environment in Latin America. We continue looking for efficiencies in order to reduce our unit costs and are receiving significant benefit for lower fuel prices. We have one of the strongest balance sheets in the industry and we continue to return incremental value to our shareholders. In terms of our guidance for 2015, as in past years, last November, we provided preliminary guidance for the year ahead. Given significantly lower fuel prices, the economic outlook in the region and demand trends, we're updating our 2015 full year guidance as follows: we're maintaining our capacity growth in terms of ASMs at plus or minus 7%, which is consistent with the fleet plan adjustments I mentioned earlier. Load factor is expected to come in at plus or minus 76%. We're lowering our RASM guidance to plus or minus $0.118 based on lower yields due to a weaker regional economic outlook and the effects of currency devaluations. We are maintaining our CASM x fuel guidance at plus or minus $0.066. We're lowering our fuel price assumption for the year at an effective price per gallon, including into plane and net of hedges to approximately $2.45. And with respect to our operating margin, we are raising our guidance to the 16% to 18% range. Thank you and with that, I'll turn it over to Pedro for his closing remarks.

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

[Operator Instructions] Our first question comes from Helane Becker of Cowen.

Just kind of wondering about the traffic outlook that you're seeing. Is traffic responding to lower fares? Or are you seeing declines in traffic in the region, in the Latin regions?

Right. So far, traffic is holding up at -- you can see from our earnings, our traffic release that came out yesterday where traffic was pretty much flattish versus same quarter a year before, but at lower yields. So we're sacrificing yields to keep traffic and hopefully maximize unit revenues.

Okay. Is that -- are you just -- is that in one particular region? Or is it kind of throughout the system?

We're seeing the weakness mainly in South America. The yield weakness maybe in -- and mostly in South America. And that affects -- in a way, it affects the Caribbean where we have a lot of connections.

Our next question comes from Savi Syth of Raymond James. Savanthi Syth - Raymond James & Associates, Inc., Research Division: Just to follow up on what Helane was asking. Obviously, the fourth quarter, I think the yields came in better than you had expected in November. So I was wondering if the kind of lower revenue outlook provided is something that you're actually seeing today or you're anticipating as that you might have that weakness as you go through -- kind of into the seasonally slower periods.

No, it's what we've seen -- what we're seeing today. And actually, our guidance expect some strengthening in the second half of the year. Savanthi Syth - Raymond James & Associates, Inc., Research Division: Got it. And then, if I may, on Venezuela. So sales were 25% in 2014. I was wondering if you could provide a little bit color on what it might have been in first half versus second half given the capacity cuts and what you think it might be in 2015.

Well, I think that the Venezuelan sales -- first of all, the most important thing to mention is that our sales in Venezuela have been essentially dollarized. We're selling the U.S. dollars as of now. And sales are essentially in the low teens basically or -- yes, I'm sorry, I'm seeing here the wrong figure here. It's around 6% estimated for 2015, Savi.

It was around 9% in the fourth quarter. It fell from 9% down to 6% this year.

Yes.

Our next question comes from Michael Linenberg of Deutsche Bank.

Just to clarify, the 9% to 6%, so that's the Venezuelan point-of-sale, which I think averaged maybe around 15% in 2013?

No, it's Venezuela sales in general. Remember that we're essentially selling -- we've been successful at shifting the demand to a non-Venezuela demand, essentially.

I know, but I'm just trying to reconcile your Venezuelan point-of-sale in 2013 was 15%. So the 9% and the 6%, they would reconcile with that number? That's all.

Yes, the figure that we issued, the 6% that we've been discussing is the Venezuela-related revenue that we have, not point-of-sale.

Perfect. Oh, so it's Venezuelan revenue. Okay.

Correct.

Then if I could just squeeze in a few more questions here. With respect to Venezuela, as you have moved to do more of your sales outside of Venezuela, I think the initial concern was that the profitability overall would be -- it would decline significantly, and I'm sure it's come under meaningful pressure on one hand. On the other hand, we've seen other airlines reduce capacity to and from the market by about 70%. And then so if we look at how much capacity you've taken out, you've taken out a lot, but Copa is still -- of any foreign carrier, probably offers one of the most comprehensive schedules into that market. As a result, have you seen maybe a better result out of Venezuela than you initially expected? I mean, I know the numbers are down, but is the overall performance maybe better than what you thought 6 months ago?

I would say yes. But obviously, profitability is way down because we're no longer selling those very high bolivar-denominated fares with very high yields. So we reduced capacity. We shifted sales to lower yielding U.S. dollar fares. However, our flights have very good load factors, which allow us to do an effective revenue management job. So the profitability of those flights, it still tops for us, obviously a lot less than what it used to be.

I would add one more thing, Mike, that the -- part of the issue is that also there's a viable market between Venezuela and Panama, right? So between the 2 countries, there's a viable market in there.

So just from what you're saying, it sounds like -- so Venezuela is still profitable, though, right? That's -- at least -- it's down, but it's still a profitable market for you?

So Venezuela is a very profitable market for us on less capacity. And as Jose mentioned, it's mostly that in the last few years a very -- a vibrant, business traffic and regular traffic, ethnic traffic between Venezuela and Panama has been created. There's a strong Venezuelan community living in Panama, and there's a lot of people going back and forth. So that remains a very healthy business, even though we have less capacity.

That's great. And then if I -- the reduction in the amount of cash trapped in Venezuela, Jose, can you just talk about the underlying elements, like what drove that? Like for example, did you get money back from the government during the quarter? And if you did, at what rate did you get that cash?

Okay. Yes. So I believe that in our Q3 earnings call, I mentioned that we closed out the month of October with $499 million pending repatriation. So since then, most of the burn off that we had has actually been operational in nature. Around $14 million of this has been burnt off in just our regular operation during our expenses that we incurred in Venezuela. And the rest, there is a slight adjustment or a slight effect associated with a devaluation that occurred in the SICAD I rate. And part of our sales in 2014 -- or our 2014 sales fluctuate with the SICAD I rate, so that equates to about $7 million of the change. We had not received payments in the last 2 months from Venezuela. But I think the story there is that we've gotten ourselves in a position whereby we have -- we're no longer -- because we've been able to shift the demand to a U.S. dollar demand, and we still have these expenses there, we're starting to burn off the bolivars as we had mentioned previously.

Jose, what would be a good run rate per quarter? Would we -- could we expect $10 million or $15 million to burn off per quarter, maybe $20 million per quarter? What -- from an operational basis.

Yes, I would say -- you know what, it's about between $4 million to $5 million a month. So I think that's a sound figure to take into account.

Okay. Good. And then just one last one on the share repurchase program. You said you had initiated it. From the press release, there wasn't any sort of detail on what you've accomplished thus far. Can you tell us how much of it you've actually gone through at this point?

Yes, as of the end of the quarter, as of December 31, we've purchased around 183,000 shares.

Our next question comes from Duane Pfennigwerth of Evercore.

I just wanted to follow up. I could have my notes wrong, but I think through the first 3 quarters of this year or last year, you said it was about 15% of revenue? Again, correct me if I'm wrong, and then you're saying 9% in the fourth quarter. So I just wanted to check, is $350 million round about the right number of Venezuela revenue? And if so, how much of that would have been recognized in bolivar?

So yes, it was 9%. So it came down in Q4, and I would say that of that -- of the total revenues for the year, we -- I would say about 6 -- $70 million during the initial part of the year were sold in bolivars and the rest was in dollars. But most of the bolivar sales that we had for 2014 were during -- or the bolivar sales that we had during 2014 were during the early part of the year. So towards the latter part of the year, we had essentially 0 bolivar sales.

Okay. Does that $340 million, $350 million in total revenue from Venezuela in '14, does that sound in the ballpark correct?

I think it's probably a little lower than that, I would say.

Okay. And then just on the guidance. I was wondering if you could -- just following up from Savi's question. It feels like in 4Q, revenue came in a little bit better and yet your guidance for '15 is a bit reduced. And appreciate you said that you're seeing it, it's not based on estimates, but I wonder what maybe was better than you expected in the fourth quarter? And is that not persisting? Or is it something that you're seeing incremental weakness here in the early part of the year?

Right, so the latter. We're seeing incremental weakness in other markets, mainly in South America. The Venezuela situation, we know it already. That's under control, that hasn't really changed. But we've seen incremental weakness in many South American markets, a product of a slowing -- slowing economies in Latin America was something that started towards the end of last year. Devaluation in a number of currencies, some of that is impacted by the lower fuel prices that affect our fuel-exporting countries. And then we also have a length of haul impact that is affecting our unit revenues. As we have shifted capacity both from Venezuela and from domestic Colombia to longer segments, we're moving a lot of longer-haul passengers, which come with lower unit revenues.

Pedro, I wonder if you'd comment on January, specifically, your flattish loads. How should we be thinking about RASM for that month? How much are yields down versus what we were seeing in the fourth quarter?

We don't give specific yield guidance. But what I can tell you, directionally, is that in our 2015 unit revenue or RASM guidance, we are expecting a slightly better second half of the year.

Our next question comes from Thomas Kim of Goldman Sachs.

I'm just wondering about your capital return priorities and specifically, I'm curious about the DPS cut. Does it have anything to do with the buyback? And just basically, any color around how you're thinking about your capital returns would be very helpful.

Yes. So the -- our policy, our dividend policy, is essential to distribute 40% of prior year's net income. So that policy remains in place. And I think that the gap in the dividend payment per share is related specifically to our dividend policy. So our dividend policy remains unchanged. Of course, that was affected by the ultimate results of the net income of 2014. So that's that. There's not really been a change in the distribution policy in the company.

That's helpful. And then just with regard to your RASM guide, I know you won't necessarily go into the details of it, but I guess I'm curious if you can at least help us parse out what impact Venezuela is going to have, just because there's obviously still a lot of uncertainty around that, hence all the questions from Michael on that. And then I think -- I think we need to be fair in also ensuring that we're capturing the impact of possibly longer stage lengths. So to whatever extent you can comment on your RASM guide being affected by both Venezuela and presumably a longer stage length, that would be very helpful.

This is Pedro. So we don't factor in the length of haul of the passengers. Venezuela in the fourth quarter was in the high 80%, so almost close to 90% of the weakness. If we look at January, it's more closer to 70%. And the difference comes from other markets. If we were to factor length of haul, then -- and we look only at unit revenues of course, then the length of haul impact is going to be somewhere between 25% and 30%. And then Venezuela maybe another -- it's 2/3 of the difference. And the rest of the other markets. Mainly as mentioned, South America.

That's really helpful. And then just my last question is with regard to your operating margin guide. It's great to see that you've bumped it up and obviously, that has to do with fuel. But as I was going through my own numbers, I would have thought your margin guide would have been higher, and I'm just wondering if we might be missing something there? So -- I would have thought you might have seen something like 18%, 20% for the year, and so could you comment on how the fuel savings are anticipating drops in bottom line and what is the puts and takes around that?

This is Pedro again, and it's basically directly related to the weakness we're seeing in unit revenues. So the minute we get those unit revenues back up and when the economies start growing again at a better pace, et cetera, we will see the immediate impact on our operating margins. Right now, we are projecting and guiding to weakness in unit revenues and it's directly related to that.

Our next question comes from Bernardo Velez of GBM. Bernardo Velez Diego Fernandez - GBM Grupo Bursátil Mexicano, S.A. de C.V. Casa de Bolsa, Research Division: I was wondering how much do you keep track of other airlines in Latin America, meaning -- or my main question goes to what are you guys seeing in terms of the cash stuck in Venezuela? Or why haven't you guys done any of the markdown from the [indiscernible] denominated bolivars?

Well, this is Jose here. The reality is that there is really no rule or accounting practice established related to the treatment of the money that airlines have, or right now in our case, that we have in Venezuela. So that's the reasoning. I think that what we followed is marking or adjusting the sales that we had in 2014 that were made under SICAD I at the rate at which SICAD I had varied. But an important thing to mention is that during 2014, we actually received payment for some months of 2013 at the 6/30 [ph] exchange rate. So therefore, the government, at least during a certain part of 2014, honored some of the sales that we had during 2013 at the exchange rate at which we sold it. Bernardo Velez Diego Fernandez - GBM Grupo Bursátil Mexicano, S.A. de C.V. Casa de Bolsa, Research Division: Okay. And then also I was wondering, what will be the effect on -- if let's say the Venezuelan government decides that airlines should be -- or the money generated in Venezuela should go to the new, recently approved or the recently announced floating rate. Would you guys have any problem with that or should we expect another capacity cut?

Well, first of all, I think on an ongoing basis or going forward, as we have mentioned earlier, we really are not really exposed to the bolivar on an ongoing basis, given the fact that we're selling outside of Venezuela, primarily in U.S. dollars. However, one important aspect to mention is that it is really unclear at this point what the very recent announcements that the government has made on exchange rate and the mechanisms, what the impact would be. So there is in terms of the prior amounts that we have, we don't have necessarily clarity on that. But on an ongoing basis, our sales are performing essentially outside of the country. So they're not subject to these exchange control mechanisms.

This is Pedro now. But truth is that if the new exchange mechanism works as the government of Venezuela is promising that it would, then we're fine with it. I mean, as long as we can get our money out right away, we would sell at any exchange rate. It doesn't really matter. The key is getting our money on a regular basis. So -- but in the meantime, as Jose mentioned, we are staying on the sidelines. Bernardo Velez Diego Fernandez - GBM Grupo Bursátil Mexicano, S.A. de C.V. Casa de Bolsa, Research Division: Okay. Got it. On to another subject. I was wondering if you have any updates regarding your development of your own loyalty program. Are these -- are they changing in strategy or partnership with United Continental Holdings?

Okay. So we're going to make the next announcement in March. So next month, we'll be sharing more information, the branding of the program and other details, so I can't get ahead of that. But I would say that it's going to be obviously very positive for the company, net positive. And in terms of revenues and net results, that will be mostly starting in 2016. This will be a kind of a [indiscernible] year. And we will retain the reciprocity with MileagePlus and the other members of Star Alliance. So hopefully we're going to come out with something that is net-net better for the company and for our frequent flyers.

Our next question comes from Hunter Keay of Wolfe Research.

I'm trying to figure out the ASM guidance, which I think is unchanged from about 7%. Just to be clear, you said you're in the process of renegotiating some of the aircraft delivery schedules. If you do cut that down from a 0 to 2, that would presumably change the ASM guidance. And if it does, should we assume a proportionate headwind on CASM x fuel? Or do you guys feel like if the ASM guide comes down, there's some cost-savings opportunities that would allow you to keep that CASM x fuel guide reasonably close to where it is now?

Hunter, this is Jose here. Yes, the guidance that we have, plus or minus 10% for 2015 already includes a fleet plan that would be between 0 and 2 aircraft worth of growth for a year. So it's already included in there. And the same applies to our CASM x fuel guidance for the year. So the -- that fleet plan, that adjusted fleet plan that I mentioned, has that in there.

And another thing, we don't grow in terms of aircraft. Most of the growth we're guiding to will come from the full year effect of what we've done in 2014. But we are making some schedule changes that would improve the utilization of the fleet and we will get additional flying hours and we'll get some growth from that improvement.

And just a couple of weeks ago you guys announced SabreSonic as a reservations provider. And one of the things you said in your release was that you're talking about sort of this growing personalization about what SabreSonic can provide. We saw Avianca a couple of weeks ago announce a second checked bag fee. I'm wondering if there's sort of an evolution in Latin America, a growing desire for customers down in your markets to only pay for what they use. And will SabreSonic allow you guys -- Pedro, you even talked about ancillary opportunities in the context of a new loyalty program. Are there opportunities for you guys to monetize the product a little bit more vis-à-vis what this SabreSonic tool will allow you to do on the ancillary side?

So the answer is a definite yes, but we don't really have anything to announce or to communicate right now. But yes, you're right.

[Operator Instructions] Our next question comes from Dan McKenzie of Buckingham Research.

I'm wondering to what extent you've factored Brazil into your updated revenue outlook. And the concern is not Brazil per se. Obviously, your exposure there is smaller. It's just simply that Brazil can have a very impact on the other markets you serve and then obviously, demand across Latin America. So 1.3% GDP for the region, things are weakening, and so what I'm hearing from you is that maybe that 1.3% forecast is probably wrong. So I guess, just going back here, how are you thinking about Brazil, the potential for it to move your forecast one way or the other, just given potential contagion here?

So we are including the Brazil that we're seeing today. So based on the demand forecast we have for Brazil, which is weaker than the Brazil of even a year ago, especially in terms of yield. So we're moving the traffic, but at lower unit revenues. For all the reasons you've mentioned including devaluation. We're not including a Brazil getting worse than what we're already seeing right now. But it's weaker. Again, we're seeing a Brazil with lower yields and that's in our guidance.

Okay. Very good. And then can you just remind us what is the -- what percent of the revenue is tied to business travel versus leisure demand? And of those 2 segments, what is -- what are the -- what's more worrisome from your perspective? Or how do we think about those trends?

You got cut out for a split second, so could you repeat the question again?

Sure. So I'm just wondering if you can remind us what percent of the revenue is tied to business versus leisure demand? And of those 2 segments, what's more worrisome from your perspective? Or how we should think about those trends as we look ahead?

So business has always been in the 40% range. The difference is a split between leisure and VFR, visiting friends and relatives. It's hard to tell when the economies are weak. Usually both markets are affected one way or another. And again, we have not seen a shift of traffic one way or the other. What we've seen is weakness in unit revenues, and that's kind of what we're expecting for the rest of the year.

Our next question comes from Stephen Trent of Citi.

Just 2-or-so follow-up questions from me. The first is, if you could refresh our memories on the expansion of Tocumen Airport. The last time the airport expanded a bunch of jet bridges, you guys seemed to be in a bigger capacity expansion mode versus the 7% you're calling for, for this year. How are you thinking about the airport's expansion versus your ASM guidance? And what potential competitive impact are you watching out for there?

Well, the airport, the current expansion project is going to take the airport from 54 total gates -- I'm sorry, from 34 total gates to 54 total gates. So it's 20 additional gates. And right now, during a few of our peak hours, we are already over that -- over the 34 gates. So by the time the airport is ready towards the end of 2016, most of those 20 gates are going to be needed. I mean, there will be some cushion, which is always good to have because we plan to continue growing, but it will be well utilized. The other carriers, for example, Lufthansa just announced a flight in November from Frankfurt. Lufthansa, as you know, is a Star Alliance partner, going to tie into our network. So that takes additional space. And there'll be more of that coming. So by the time those 20 gates are ready, we actually think the airport is going to have to start building the next expansion phase, which will be another 10 gates.

Okay. So some of that is going to be filled by other airlines. And how would you say that would...

Probably not in a significant way, but when it's only 20 gates, it's not like every gate counts. So and even if we slow down a little to 7%, then whatever we do next year, our growth continues. And there's going to be a need again. Today, we're topped off, so we're using remote positions. Now, we work better in contact positions. So we think the airport is building the right capacity at the right moment.

Okay. Pedro, very helpful. And just 1 or 2 other follow-ups. I was curious, when I look at the quarter itself, I was a little surprised to see no tax payment. And could you just give a little color as to what happened there?

This is Jose. So essentially it's a little bit of timing for throughout the year. And it's also as the year passed, there's a different -- we're operating in 30 countries, so there's different tax schemes in every country. And just the kind of breakdown of that, work through it and as a good guy in our tax expense. And then the other thing is also, with our reduction of Venezuela capacity, that check actually created a good tax guy as well because Venezuela has a relatively high tax base.

Got it. And just one last question with respect to Bernardo's follow-up on his question looking at Venezuela. It's clear that you're charging in dollars. Would you still envision any potential demand impact if Venezuela requires fares to be sold at a different exchange rate? Certainly for a Venezuelan citizen, that would increase the cost of your ticket in local currency terms and just wanted to see how you're thinking about that?

Actually -- this is Pedro -- that has already happened. So no, we do not see a demand impact. If there's any impact, I mean, it will be positive. If there's a way where sales can be reactivated in local currency and the airlines get paid right away, but there -- we don't see any impact from the exchange rate because that already happened.

Our next question comes from Savi Syth of Raymond James. Savanthi Syth - Raymond James & Associates, Inc., Research Division: Just -- I wanted to touch on the cost side. So I understand the length of haul is impacting your unit revenue. But I would expect your length of haul to also help on the cost side and also maybe some of the currency weaknesses. But could you remind me, and I know part of the cost increases is related to the kind of frequent-flyer program changes, but could you help us understand why unit costs are flat this year?

Yes, there are a couple of items there, Savi. One of them is -- actually, some of these aircraft returns are also imputed in that x fuel CASM figure that we put out. And there's always some inflationary pressures in airports and lower flight fees in the region that come into play. We believe that there are, of course, opportunities in distribution cost, et cetera. And of course, that $0.066 CASM x fuel guidance also gives, as you mentioned, the FFP -- initial cost of the FFP program.

Savi, this is Pedro. Also, if you look at our numbers, you'll see that costs are driven by stage length, and stage length has increased by a lot less than length of haul. So in many cases, it's more of a similar network in terms of stage length, but passengers are -- so we're moving in more deep South to Caribbean versus domestic Colombia or Venezuela to Caribbean. So passengers are going longer hauls, which is lower yields. Flights are flying longer stage length, but not by as much. So there's a difference there. Savanthi Syth - Raymond James & Associates, Inc., Research Division: Got it. That's helpful. And then just a couple of quick other kind of housekeeping items. One, what is the tax rate expected for this year? And then two, on the hedging front, given that fuel might be at a lower level for some time, have you changed the strategy on the hedging front?

Okay. So regarding taxes, I think you can expect our tax rate, blended tax rate to be between 10% and 12% in 2015. And regarding hedges, we have a long-standing hedging policy of a minimum of 25%, maximum 50%, and we're looking at this closely, looking at the market closely. We already have around 30% -- 27% hedge for 2015, but we're looking at opportunities and we'll keep to our policy on an ongoing basis.

Our next question comes from Duane Pfennigwerth of Evercore.

Lot of questions around demand. I wanted to ask you one on supply. It seems like you guys are doing the right thing in taking a hard look at your growth rate and maybe restructuring your order book. But what are you seeing across your markets? What are you seeing your competitors do? I don't know if there's a metric you can track because there really isn't any good one, given the nature of your network. But if you could talk about kind of competitive supply, maybe what you saw in the back half of 2014 versus what you're seeing now?

Okay. So this is Pedro. In the back half of 2014, I should say that we saw more growth than what we had seen in previous years. Not a huge difference, but more anyway. And growth, it's in kind of every markets, so you have U.S. carriers flying south. So the Caribbean, which doesn't affect us that much, so South America also. You have growth from the south -- the Latin American carriers within the region. So we've seen a lot of that in the last 3 years, a little bit more last year. But the thing is that, that growth is in -- I mean, whatever we grew is in place, and now it's in place with slowing economy. So it's not that there's no room for that growth, it's the economy slowing down. So what we expect and are seeing so far is that every airline is actually pulling back and that no one is going to grow much in 2015. At least that's kind of what we've seen from the announcement, from the plans that other airlines have made public, et cetera.

Okay. I mean, do you -- I guess, slower growth rates, but I mean, you're not seeing capacity cuts in your market. Is that a fair statement?

That is a fair assessment. Yes.

And our final question comes from Thomas Kim of Goldman Sachs.

I appreciate that this call has gone on long, but I did have a couple of follow-up questions. One, with regard to the cost side in productivity gains, can you talk about potential operating leverage from your increased headcount? And what are you expecting for your headcount growth this year?

We're expecting our headcount to go up less than our ASM growth and -- much less than our ASM growth. I would say probably not even half of the ASM growth that we're expecting for the year.

And it's directly related to the additional flight hours or ASM. That's all that's going up. We need additional pilots, flight attendants but it's all directly related to aircraft line.

Helpful. And then, I wanted to just ask a follow-up to one of the earlier questions on point-of-sale. I recognize that, with regard to Venezuela, you are booking effectively in U.S. dollar terms. But a couple things. I wanted to, one, confirm that you are actually charging your point-of-sale customers in dollar terms. And how does that actually happen? Are they using U.S. credit cards or what? And then, I am kind of curious, what is the percentage of point-of-sale still from Venezuela?

It's hard to tell because of the way kind of -- because of what you just described. So it's hard to come up with that information. And I don't know, I think we better pause [ph] on that one.

At this time, I'm showing no further questions, so I'd like to turn the call back to Pedro Heilbron for closing comments.

Okay. Thank you. Thank you for all your questions. This concludes our fourth quarter earnings call. Thank you for being with us today, and thank you for your continued support. Have a great day and a great weekend.

Ladies and gentlemen, thank you for your participation. This does conclude today's presentation, and you may disconnect. Everyone, have a wonderful day.