Copa Holdings, S.A. (CPA) Q3 2021 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to Copa Holdings' Third Quarter Earnings Call. During the presentation, all participants will be on a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this call is being webcast and recorded on 18th, November, 2021. Now, I will turn the conference call over to Daniel Tapia, Director of Investor Relations. Sir, you may begin.

Thank you, Laurie and welcome everyone to our third quarter earnings call. Joining us today are Pedro Heilbron, CEO of Copa Holdings; and José Montero, our CFO. First, Pedro will start by going over our third quarter highlights, followed by José, 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, copa.com. Our discussion today will also contain forward-looking statements, not limited to historical facts that reflect the company’s current beliefs, expectations, and/or intentions regarding future events and results. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially and are based on assumptions subject to change. Many of these are discussed in our annual report filed with the SEC. Now, I’d like to turn the call over to our Chief Executive Officer, Mr. Pedro Heilbron.

Thank you, Daniel. Good morning to all and thanks for participating in our third quarter earnings call. Before we begin, I’d like to thank all our co-workers for their commitment to the company and recognize their continuous efforts and dedication to keep Copa at the forefront of Latin American aviation, to them, as always, my utmost respect and admiration. As you may have seen in our earnings release published yesterday, we're glad to report improved financial results for the third quarter. The increasing vaccination rates and reduced travel restrictions in Latin America are positively affecting air travel demand in the region, enabling us to grow capacity quarter-over-quarter, while improving load factors. Since restarting operations in Q3 2020, we have increased flight from almost zero to nearly 70% of our pre-pandemic capacity in Q3 2021. Going forward, we expect further relaxation of travel restrictions and a continued demand recovery, which should allow us to deploy additional capacity in the fourth quarter and 2022. But of course, COVID has not gone away and we've seen in other parts of the world, additional waves of the virus could affect demand in the future. So, we will remain focused and flexible in terms of capacity, adjusting our plans as needed. Now, I'll highlight some of our third quarter results. In terms of capacity, we reached almost 70% of third quarter 2019 ASMs compared to 48% of 2019 capacity in the second quarter. Load factor came in at 79%, an improvement of two percentage points compared to the second quarter on an almost 50% quarter-over-quarter ASM growth. Revenues increased by 46% over the previous quarter to $445 million. Our ex-fuel CASM decreased from $0.76 in Q2 to $0.62 in Q3, reaching 2019 unit cost levels at 70% of 2019 capacity. We reported an operating profit of $59 million and an operating margin of 13.3% in the quarter. Excluding a $10.4 million passenger revenue adjustments, that company would have reported an operating profit of $48.6 million and an operating margin of 11.2%. We had a cash buildup of $54 million and ended the quarter with a cash balance of $1.3 billion and a total liquidity of over $1.6 billion. On the operational front, the company delivered an untimed performance of 89.4% and that completion factor of 99.8%, ONCE again among the best in the industry. This results a true testament to our employees' continuous commitment to delivering a world-class product to our passengers. With regards to our network, we're excited to start our first new destination since the beginning of the pandemic. Beginning in December, we will offer service to three new cities, Armenia and Cucuta in Colombia and Atlanta in the U.S. By the end of the year, Copa will provide service to 72 destinations in North, Central, South America, and the Caribbean. And we expect to recover service to the rest of our pre-pandemic network during 2022, strengthening our position at the most complete and convenient hub in Latin America. During the quarter, we agreed with Boeing to accelerate the delivery of 12 737 MAX 9 that were originally intended to be delivered starting in 2025. We will receive two of these aircraft in 2022 for a total of seven MAX 9 deliveries next year and the other 10 aircrafts will be added to Copa's deliveries from 2023 through 2025. As to Boeing [ph], during the fourth quarter, it expects to receive two aircrafts from the Copa fleet to end the year with a total of eight 737-800. In closing, I'd like to reaffirm that we have a proven and strong business model, which is based on operating the best and most convenient network for inter-Latin America travel from our hub of the America leveraging Panamax advantageous geographic position, with the region's lowest unit cost for a full service carrier, best on-time performance and strongest balance sheet. Going forward, the company expects that at top of the Americas will be an even more valuable source of strategic advantage. Now, I'll turn it over to José who will go over our financial results in more detail. José Montero: Thank you, Pedro. Good morning, everyone. Thanks for being with us today. Hope you're doing well. I'd like to join Pedro and acknowledging our great corporate team for all their efforts and great spirit during these many months of the pandemic. I will start by going over our third quarter results. Our capacity came in at 4.4 billion available seat miles, which amounts to 69% of the capacity operated per quarter of 2019. Load factor came in at an average of 79% for the quarter, an increase compared to Q2 while operating 49% more ASMs. We reported a net profit of $8.2 million or $0.19 per share. Excluding special items, we would have reported a net profit of $29.9 million or $0.70 per share. Special items for the quarter are comprised mainly of an unrealized mark-to-market loss of $32.1 million related to the company's convertible notes issued in 2020 and $10.4 million in revenues related to unredeemed tickets, which we are not included in our underlying results as they correspond to sales made during 2019 and early in 2020. We reported a quarterly operating profit which came in at $59 million. Excluding the $10.4 million in unredeemed ticket revenues, we had an adjusted operating profit of $48.6 million for the quarter. Our operating margin was 13.3%. Excluding the passenger revenue adjustments, we would have reported an operating margin of 11.2%. Unit cost excluding fuel were better than in the second quarter at $0.062 per ASM, driven by a quarter-over-quarter capacity growth of 49%. We continue with our cost savings initiatives and we are now targeting to achieve the unit cost below $0.06 once we reach above 90% of our pre-COVID-19 capacity. Our yields for the quarter came in at $0.12, a decrease of 3.4% compared to the second quarter, while operating more ASMs. During the third quarter, we had a cash buildup of approximately $54 million, driven mainly by increased sales during the period. As a reminder, for our cash build of measure, we exclude all extraordinary proceeds from asset sales, but include CapEx and the payment of our leases and other financial obligations. I want to spend some time out discussing the balance sheet and liquidity. As of the end of the third quarter, we had assets of close to $4.2 billion and our cash short and long-term investments ended at $1.3 billion. We also ended the quarter with an aggregate amount of $345 million in unutilized committed credit facilities, which added to our cash, brought our total liquidity to more than $1.6 billion. In terms of debt, we ended the quarter with $1.6 billion in debt and lease liabilities at similar levels to the ones reported for the end of the second quarter. Turning now for fleet. In July, we finalized the sale and delivery of our last Embraer 190 and during the quarter, we delivered two Boeing 737-700s to their new owner, the end of the third quarter with 87 aircraft; 68 737-800 70%, 13 737 MAX 9s, and six737-700. These figures, we include aircraft currently in temporary storage that we plan to reactivate in the upcoming months. During the fourth quarter, we expect to receive two more 737 MAX 9s to end the year with a total of 89 aircraft. As the remainder of the year, based on the current state of the demand environment and air travel restrictions, we can provide the following outlook for the fourth quarter of 2021. We expect capacity to be approximately 83% of Q4 2019 levels at about $5.1 billion ASMs and we expect our operating margin to be approximately 4%. Our Q4 2021 outlook is based on the following assumptions; revenues of approximately 80% of Q4 2019 levels at about $545 million, CASM ex-fuel of approximately $0.61, and oil price of $2.50 per gallon, an increment of approximately 17% quarter-over-quarter. Given the uncertainty, it is still premature to give a full year 2022 guidance. However, for the first half of the year, we preliminarily expect our capacity measuring ASMs to be approximately 92% of the capacity operated during the first half of 2019. Thank you. And with that, we'll open the call to some questions.

Thank you. [Operator Instructions] Our first question is from Hunter Keay of Wolfe Research. Your line is open.

Good morning everybody. Pedro, what is your level of involvement around capacity and growth decisions? Does as every new market that you add or remove or add to need your approval?

Yes, definitely. We're a relatively small team and we're all very involved in those kinds of decisions.

Okay. And what about spending money, Pedro, what's your level of involvement in the budget process? Not only setting it, but also monitor and spend? And I don't -- that's not a COVID question, it was really, how have you done things before COVID? How are you planning on doing things after COVID?

I think if you ask the team, they'll tell you that I'm too involved and I always been very involved, maybe to the point of obsession, and that really hasn't changed. We haven't had to adjust because we've always had that culture of being very involved, looking after the details, looking after every item in the budget. Same with route planning and the whole thing. Again, we're a small team and we're all very involved in everything. José Montero: But Hunter, during the pandemic, the focus has even been stronger on these items. And so we have been even more strict and careful in the way that we spend our money and how we track that. And so there's quite a bit of involvement from -- from all involved and Pedro mentioned his own personal time on this.

Can you give me an example of maybe a lesson learned from a cost perspective that you're going to keep in place going forward, even when things get better? José Montero: Well, I would say -- I think a good example is the fleet. I think some of the great movements that we've made in fleet over the last several months in terms of just going to an open fleet, it's been a very, very good move and that creates a lot of besides the gauge benefit that you get, you also get a lot of simplicity in terms of execution of costs throughout many areas with flight operations, airports, maintenance, et cetera. So, that's one that I think it's been very, very positive for us.

Thank you very much.

Thank you. And our next question is from Savi Syth of Raymond James. Your line is open.

Thank you. Good morning everyone. Just in the cost execution has been pretty remarkable here and José, I missed if you said you would get to $0.06 or sub $0.06 when you got to 90% of 2019 capacity. If you can clarify that. And then just along those lines, I was wondering if we can start thinking about maybe sub-$0.058 as you get to 2019 capacity. And what some of the tailwinds and headwinds that you might see over the next two years? For example, I'm guessing performance bonuses will start up again next year, if the current trends holds. So, just kind of curious if you can give a little bit more color on how you're thinking about unit cost? José Montero: Yes, Savi. Our expectation as of now is that when we reach that 90% of 2019 capacity that we will be below the $0.06 mark. So yes -- and in terms of what are some of the tailwinds that we have, I mean, we have a lot of projects ongoing. I'll go back to the fleet itself, in terms of the uniformity in the fleet, and as we put in additional maximum, it will be a good improvement. I think that there's -- always contract renegotiations and savings that we've performed that I think we will -- we shed a lot quite a bit over the last several months in terms of, of our overall costs. And -- so yes, well there's more there. There -- certainly we're working on this every day and there's an opportunity I think for -- as we grow to bring it probably in further down, but at this stage, we'll reserve that to 2022, when we get closer to the figure will -- but I think we're in good track to bring it down below $0.06 and even below there, as we mentioned,

And Savi, you're right, there will be expenses that maybe we haven't had to the same level during the pandemic like performance bonuses, but those are always based on surpassing our targets, and on much better performance and results. So, they pay for themselves.

Is there a level that you think is too low -- that you can't reach? Like, well, what's the Promised Land, I guess, in terms of what you can hit? José Montero: Yes, I would say for now, we'll keep it at $0.06 somewhere in the -- in the five high $0.05 range is something where that is very doable.

I appreciate it. Thank you. José Montero: Thank you, Savi.

Thank you. [Operator Instructions] And our next question is from Mike Linenberg of Deutsche Bank. Your line is open.

Yes. Hey, good morning, everyone. Maybe we could just start on the cost side. José, you were guiding to $0.066, you came in at $0.062 to congratulations on being flat to 2019 on slightly less than 70% capacity, which obviously, underscores the operating leverage tailwind of your story. Where did you make up? Like, what were the positive surprises on the cost side? And are these timing benefits that maybe dissipate over the next couple of quarters, or are these things more permanent? Can you just run through because it was a pretty visible cost speed? José Montero: Absolutely Mike. Yes, and I have to start by like saying that we've been in this company-wide effort to keep our costs down. That's that was always been part of our corporate DNA, but we improved on that over the past year and a half. I would say specifically for Q3, there were a set of restart related expenses that actually came in lower than what we thought, so it was -- we could argue it was a little bit of timing and we thought that there were some expenses that that we're going to be somewhat higher than what we thought initially. And looking forward, we gave a guide now for Q4 of $0.061. So, I think that will be sort of in that level, at least for Q4.

Okay, great. And then just my second question, and this is probably José or Pedro, now that you have 13 737 MAX 9s, and the fact that -- like, you're going to get to more than another seven, so it's going to become a much bigger part of your fleet. It does have a product that historically that is very unique to Copa from a historical perspective, and I'm getting at the fact that you have the lie flat seat, which when you think about all the service that has been withdrawn in the region, even connecting over Panama, if you can say fly from San Fran to Sao Paulo, and lie flat to a lie flat. I haven't asked this question in previous quarters, because I didn't think you had enough shells to really give a good answer. But when we think about the uptake in the premium cabin, what are you seeing -- are you getting better pricing? Are you at or levels, similar to maybe some of the U.S. competitors are -- is the pricing on par with some of the non-stop service because this is your flagship product, and I feel like you can really roll this out and take advantage of those who are willing to pay up for it. So, any color that you can provide on that on that product because I think it's a fantastic product? Thank you.

Yes, thank you, Michael. A few comments. So, we need to have enough shells as you well said, to guarantee the service on a given market. So, for example, a San Francisco and a Sao Paulo will have a guaranteed Dreams, as we call it, our product, guaranteed Dream service. So, once it's guaranteed, we can price it better consistently. And so far, we been getting a premium for the Dreams product. And also I should say that our costs are better than options through other hubs or non-stop options when they are -- they're usually not that many. So, we can do well even pricing it below what was available before for a similar product.

Great. Thanks everyone. Great quarter. José Montero: Thank you.

Thank you.

Thank you. And our next question is from Alejandro Zamacona of Credit Suisse. Your line is open.

Thank you. Hi, Pedro, hi José, Daniel. Thank you for taking my questions. Just a quick question on yield. What can we expect for 2022? I mean considering that on one side, you're expecting further significant progress and capacity and this could push yields lower, but also the business traffic hasn’t recover and this could help to have a better yield environment. So, any thoughts or call around this may be useful? Thank you? José Montero: Yes, Alejandro so, it's still early, we haven't provided full year guidance for 2022, but I would say that system-wide the yield environment has been improving and as we put in capacity, there's -- but I would say that, at least initially, for the first part of the year, it could be offers in between 19 base in the kind of mid-single-digit range, so that's kind of -- first kind of, look into the early part of 2022 in terms of the yield compared to 2019. So, it will still be awkward, but at a lower rate than where we were during throughout most of 2021.

Okay. Thank you.

Thank you. And our next question is from Duane Pfennigwerth of Evercore ISI. Your line is open.

Hey, good morning. It's nice to see that sandbaggers, don't die, they just take a little break.

Thanks for your question Duane.

Okay. Sure. So, just on restart, right, can you give us some examples of like what's ahead of you, kind of, what you're considering? Are there any pockets where labor availability is more strained or -- and maybe you could just kind of qualitatively talk about pilots, for example?

Yes. Okay. So, your first comment I had to -- like pause and think about it and I should say that, we're not trying to sandbag. Honestly, this pandemic has been very difficult to predict. And even three months ahead it's like two years in normal times. So, demand came back, at least, in this quarter and what we're seeing in the next few quarters, is much faster and stronger than what we would have expected some months ago. So, I think that's important to keep in mind that that times are very different. In the old days, we could predict things, but we grew capacity quarter-over-quarter 50% and it was hard to tell then how was demand -- how demand was going to react. Back in November of 2020, which seems like 10 years ago, we grew capacity quite a bit from Q4 2020 to Q1 2021 and demand did not show up -- did not materialized, so we had to pull back. So, that's kind of the things we're dealing with in this pandemic. So, it's always good for demand to remain strong and that's kind of what we're hoping or what we're seeing right now. In terms of labor, we think we're okay. We are about -- in the next maybe month and a half or two months, we would have brought back from furlough all of our pilots. We have already brought back all of our flight attendants and we're even rehiring flight attendants that took voluntary leave programs. And after that started hiring new flight attendants. So, in pilots we will soon bring back everyone that that was in furlough. We have pilots that took voluntary leave, we've contacted them and a high percent of them is willing to come back. And we're also a strengthening our own in-house pilot academy. So, we're growing that also. So, right now, we feel we're fine in that respect. But again we're always cautious and always alert because this pandemic is always full of surprises, José Montero: And Duane flexibility is key in all aspects. In this way that we've been managing it for the last four months.

That's all very fair. And if I could just ask maybe a little follow-up on the folks that are coming back from voluntary leave. When you reach out, when you call them, when you email them and say, hey, let's get back, demand is recovering, is the rate at which they are productive consistent with your expectations?

Yes, totally. And we have a very, very strong training center and we have very good instructors and they're dedicated and committed. And if someone is not up to par, then that person won't cut the filters. So, the people that joined the company are always at the highest levels.

Okay. Thanks very much for the thoughts.

Thank you.

Thank you. And our next question is from Bruno Amorim of Goldman Sachs. Your line is open.

Thanks very much and congratulations on the performance this quarter. So, I just have a very quick follow-up on the cost performance. We saw wages, salaries down by 40% versus the third quarter of 2019, which implies that on a per ASM basis, this number here is around 13% below pre-crisis level. So, considering everything that was discussed, the potential increase in bonuses and everything going forward, do you still expect for this cost line on a per ASM basis to be below pre-crisis levels on a sustainable basis or not? Thank you very much.

Yes, our expectation is that it would remain below pre-pandemic levels, is mostly -- will mostly come from overhead adjustments and operational efficiencies. As we grow ASMs and flight, we will increase overhead, but we hope that we will increase capacity by a higher percentage, so we can keep that relation we have right now. And again, even if it changes somewhat, and it will probably change with the performance bonuses and some of the people we need to bring back, it will still be below pre-pandemic levels.

Thank you. And if I may just a follow-up on the competitive environment, what can you comment on what are you seeing from your competitors, maybe new initiatives from players who were maybe not direct competitors in the past? I know you don't comment on a specific case, but if you can comment broadly what are you seeing from a competitive landscape perspective that would be great? Thank you very much.

Okay. There's quite a bit of action I would say. We try not to advertise our competitors, but there is action in the region from -- especially from either new entrants or -- not new entrants, but new entrants to the region to some of the markets, ULCC. So, there's a quite a bit of activity. That's -- it's a reason why we've always been so focused on our unit costs and we always bet that having our unit costs as low as possible and below any full service carrier and very close to low cost carriers, is the key to future success. And that combined with our strong network, which we're keeping strong and growing and everything else we do in terms of having world leading on-time performance and a strong product, we think that’s the key to our success. We have a very strong hub in the best geographic position and if we do all the other things -- or if we continue to do everything else correctly, we should be able to succeed in the future, even under new competition, which is something that we've always had to deal with.

Thank you and congratulations again. José Montero: Thank you, Bruno.

Thank you.

Thank you. And our next question is from Pablo Monsivais of Barclays. Your line is open.

Hi, Pedro. And thanks for taking my question. I have kind of a follow-up question on the revenue side. I am very curious to learn what type of passengers for the demand segment is driving such strong performance? It is just leisure-driven, it's perhaps faction tourism or corporate is coming back quicker than expected. What is driving this result? And also going forward, do you think that, for example, if you're thinking about leisure, how leisure would look like when we return to normalcy perhaps in the first half of next year? Thank you. José Montero: Yes Pablo, José here. I would say that the big drivers are our leisure and VFR traffic, more so than business. Before the pandemic, you could argue that breakdown of traffic for us was about a third each segment. And now there's probably more of a 40% leisure, 40% VFR and about 20% business or business is off versus where it was before. But it is -- it isn't a vaccine tourism anymore. Vaccine tourism at least in our region occurred I want to say back in the second quarter. Today, it's more just real leisure of people wanting to go into vacation after being locked up for a long period of time. So, that's, kind of, what we're seeing in terms of the patterns.

And, for example, do you think about that leisure market driving demand. If we take into consideration a higher inflation in the region and weaker currencies, should we expect that this demand from leisure market is sustainable for 2022?

It is what we're seeing right now. We are seeing no signs of demand slowing down and we think we're going to stay on this path, at least, that's how we're seeing it right now when we look at future bookings.

Terrific. Thank you very much guys. José Montero: Thank you, Pablo.

Thank you. And our next question is from Josh Milberg of Morgan Stanley. Your line is open.

Great. Good day, everyone and thanks for the call. I had a follow-up on the issue of competition and wanted to ask if you could comment on how much your yields have been helped by either U.S. carriers, regional ones, bringing capacity back at a slower pace than you guys on overlapping routes? And then a related one is also I believe that Avianca's new CEO make comments in the press recently that that airline is shifting to a point-to-point strategy and just wanted to hear your views on the relevance of that announcement for Copa?

Yes, so they have announced. I mean U.S. carriers have brought up -- have brought back capacity to a higher level than pre-pandemic. So, most, if not all, U.S. carriers are offering more ASMs now, what they offered in 2019, I'm talking in Latin America. Some of the major hub-and-spoke carriers that when -- or are going through chapter 11 procedures, so they are below, but then everyone else is above 2019. So, it's a mixture there. Yes, a Avianca, as you well mentioned, made declarations, and I think they even published their chapter 11 exit plan or something. And it's going to be more of a low cost strategy with densified planes, point-to-point service and lower yields. So, yes, we've heard that and we're confident that we will be able to maintain our cost advantage and be able to compete under any scenario. And we are we're prepared for that and we're preparing further for that kind of competitive environment.

Thank you very much, Pedro. José Montero: Thank you, Josh.

Thank you. And our next question is from Stephen Trent of Citi. Your line is open.

Thanks very much guys and appreciate you taking my question. The first one is actually kind of a follow-up to Pablo's question. When we think about the stickiness on the fare side, especially, let's say on some of your low density routes, is there -- is it fair to say that there's still so much pent-up demand that you are seeing very good fare pass through even on non-business travelers?

What we're seeing right now, I'm sure I would call it pent-up demand. What we're seeing is that people want to fly and travel like they did before the pandemic. And in a way, it's been surprising to the degree that this is going on, because we are not seeing the fear of traveling that we expected maybe a year ago, or nine months ago. And I think it's just regular demand. It's just people going about their business, going about their lives, and just getting out and traveling as much as they can afford or they want to or -- so I would not call it pent-up demand right now.

Okay, very helpful Pedro. And as my follow-up just very quickly, appreciate the color and 2022. Any high level view for next year, how many flight banks you guys might be running out of document or it's still too early to say?

Well, we run six flight banks and I don't think that's going to change. We've been doing it for a while. We're still not all the way back to the number of flights we had pre-pandemic. We still have to restart a number of destinations and that will happen throughout the year 2022. So, I think 2022 is a year where we need to get back to what we were in 2019 in terms of the size of the hub, the connectivity, the number of flights. So, that kind of what we'll be doing most of the year. José Montero: And always looking for new opportunities from the hub as well as we mentioned in this quarter as well, we are adding cities into the network that are interesting and unique.

Okay. Let me leave it there. Thanks very much guys.

Thanks Stephen.

Thank you. And our last question is from Dan McKenzie of Seaport Global. Your line is open.

Hey, thanks for squeezing me in here. Just following up on that last question on pent-up demand, I think the rule of thumb historically in Latin America has been two times GDP and are you thinking that once things normalize, it might still be two times or could pent-up demand drive at something higher to like, say three times or even higher than three times? José Montero: So, it's -- I think, Dan, it's early to say where it's lined up, but if you look at the macroeconomic factors, the economies are in a particular level where yes, I think air travel demand will grow eventually at two to three times GDP growth, I think that that level of where the Latin American economies are still maintains itself after COVID. So, yes, in the longer term, I think I believe that that's going to be the case. But still COVID is not over, that's newer thing, right? You have to be mindful that it's still an environment that might have some movement or volatility over the next several months.

Yes. And that actually gets my next question here and it just sort of ties to operations for the current quarter and how you've been managing operations over the pandemic. And with respect to the current quarter, I'm just wondering how the network plans have evolved, so I'm looking at Brazil, I'm seeing some cuts to Brazil, for example. So, it looks like you're managing flights based on demand trimming, when you need to adding where you can. And so yes, it doesn't look like it's new to the quarter, but where I'm going with this is do the changes weigh on profitability or do they actually help with profitability? José Montero: I would say that we're looking at it very carefully, almost constantly. But I think that we are always looking for the opportunities to improve on our profitability. Also it's all about building back the network. I think that the key factor here is ensuring that we build a network as quickly and as effectively as we can to get to a point where the sort of capacity of the network is as close to where it was to prior to the pandemic and that's, I think, the driving factor that we're looking at.

And then what we're seeing is -- what you're saying, which is true, it's also a result of what I was saying earlier about the difficulty in predicting what's ahead during this time. So, we've had to make more changes and adjustments along the way that we're used to, hopefully, in the next few quarters, we'll be able to have a more predictable and stable operation and just stick to it.

Yes, understood. If I could just squeeze one last one in here. Mike and I actually have the same question on Dream seats here. And so I guess if I could just elaborate on that question. I'm just wondering, if today you're selling it as an actual lie flat first-class seat or just simply as a generic business class seat at this point. And I guess if you're not really selling it as a flagship product, what is the timeframe for when you might feel like you're ready to go live with that?

We do sell it for a premium when we can guarantee it in every flight in a given market. So, there's a few markets where we can already do that. It all depends on the number of shells we're operating. So, as we get more MAX 9, we add the number of markets right now. It's probably somewhere around five markets, I think -- yes, it's like four or five markets where we guarantee the Dreams product and in those cases, there is a premium we charge for the product.

I see. Okay. Thanks for the time you guys. José Montero: Thank you.

Thank you, Dan. Operator? Go ahead.

Yes, there are no further questions. Do you have any closing remarks?

Okay, thank you, operator and thank you all. This concludes our earnings call. Thank you for being with us. Thank you for your continued support. Have a great day and we'll see you in the next one. Thank you all.

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