Copa Holdings, S.A. (CPA) Q1 2024 Earnings Report, Transcript and Summary

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 16, 2024. Now I'll turn the conference over to Daniel Tapia, Director of Investor Relations. Sir, you may begin.

Thank you, Varun, and welcome, everyone, to our first quarter earnings call. Joining us today are Pedro Heilbron, CEO of Copa Holdings; and Jose Montero, our CFO. First, Pedro will start by going over our first quarter highlights, followed by Jose, who will discuss our financial results. Immediately after, we will open the call for questions from analysts. Copa Holdings' financial reports have been prepared in accordance with International Financial Reporting Standards. In today's call, we will discuss non-IFRS financial measures. A reconciliation of the non-IFRS to IFRS financial measures can be found in our earnings release, which has been posted on the company's website, copaair.com. Our discussion today will also contain forward-looking statements not limited to historical facts that reflect the company's current beliefs, expectations and/or intentions regarding future events and results. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially and are based on assumptions subject to change. Many of these are discussed in our annual report filed with the SEC. Now I'd like to turn the call over to our CEO, Mr. Pedro Heilbron.

Thank you, Daniel. Good morning to all, and thanks for participating in our first quarter earnings call. Before we begin, I would like to extend my sincere gratitude to all our coworkers for their commitment to the company. Their continuous efforts and dedication have kept Copa at the forefront of Latin American aviation. To them, as always, my highest regards and admiration. Once again, we're pleased to report strong financial results. Despite facing a significant headwind in January with a partial grounding of our 737 MAX 9 fleet, we were able to deliver once more industry-leading operating margins while growing capacity year-over-year. These results were driven by a continued robust demand environment in the region and our ability to maintain low ex fuel unit costs. Among the main highlights for the quarter, passenger traffic grew 7.1% compared to the same period in 2023. Load factor for the quarter came in at 86%. Passenger yields came in at $0.14, 3.8% lower year-over-year, while unit revenue or RASM came in at $0.125, a 4.6% decrease compared to Q1 '23. Unit costs decreased by 6.9% compared to Q1 '23, mainly driven by lower fuel, aircraft maintenance and distribution costs. Excluding fuel, Unit cost or CASM ex came in at $0.061, a 2% decrease compared to Q1 2023. As a result, Operating margin for the quarter came in at 24.2%, 1.9 percentage points higher than in the first quarter of 2023. On the operational front, during the quarter, Copa earnings on-time performance was again recognized by Cerium as the highest of any airline in Latin America. In fact, Copa's Q1 on-time performance, averaging above 90% was the highest of any carrier in the Americas and amongst the highest in the world. I would like to take this opportunity to recognize our more than 8,000 coworkers who day in and day out deliver a world-class travel experience to our customers. Their contributions are key to our success. Turning now to our network growth plan. As we mentioned in our previous call, we expect to start 3 new destinations next month. Raleigh Durham in the U.S, Anapolis in Brazil and Tulum in Mexico. I'm glad to comment that early bookings are coming in at healthy levels, and we expect these routes to have a solid start. With these additions, we'll serve 85 destinations in 32 countries, solidifying our leadership position as the hub with the most international destinations in Latin America. Turning now to our expectations for the rest of the year. We continue to see a healthy demand environment in the region. And as you saw in our earnings release published yesterday, we are reaffirming our guidance for the year, which includes an operating margin within the range of 21% to 23%. Jose will provide more detail during his presentation. To summarize, we delivered industry-leading first quarter financial results. We continue to deliver on our cost execution strategy. We'll grow to 85 destinations by this summer, further strengthening our network, the most complete and convenient hub for intra-America travel. We continue to see a healthy demand environment in the region and expect to once again deliver strong operating margins in 2024. And as always, our team continues to deliver world-leading operational results. Finally, our business model is a solid and as relevant as ever. And our hub of the Americas in Panama is the best connecting hub in Latin America, making us the best positioned airline in our region to consistently deliver. Now I'll turn it over to Jose, who will go over our financial results in more detail.

Thank you, Pedro. Good morning, everyone, and thanks for being with us today. I'd like to join Pedro in acknowledging our great team for all their efforts to deliver world-class service to our passengers. I will start by going over our first quarter results. We reported a net profit for the quarter of $176.1 million or $4.19 per share. These results include the negative impact of approximately $44 million due to the grounding of 21 of the company's Boeing 737 and MAX 9 aircraft in January and exclude any compensation from Boeing related to the grounding. We reported a quarterly operating profit of $216 million and an operating margin of 24.2%. Capacity came in at $7.1 billion available seat miles, or 8% higher than in Q1 2023. Load factor came in at 86% for the quarter, a 0.7 percentage point decrease compared to the same period of 2023, while passenger yields decreased by 3.8% to $0.14. As a result, unit revenues came in at $0.125 or 4.6% lower than in the first quarter of 2023. Mainly driven by lower jet fuel prices, unit costs or CASM decreased to $0.095 or 6.9% lower year-over-year. And finally, our CASM, excluding fuel, came in at $0.061, a 2% decrease versus Q1 2023, mainly driven by lower aircraft maintenance and lower distribution costs as we continue deploying our Corporate Connect NDC strategy. Excluding the negative impact on cost and capacity of the partial grounding of our 737 MAX 9 fleet in January, the company would have reported an ex fuel CASM of approximately $0.58 for the quarter. I'm going to spend some time now discussing our balance sheet and liquidity. As of the end of the first quarter, we had assets of close to $5.2 billion. As to cash, short- and long-term investments, we ended the quarter with over $1.1 billion which represents 32% of our last 12 months' revenues. And in terms of debt, we ended the quarter with $1.7 billion in debt and lease liabilities and came in with an adjusted net debt-to-EBITDA ratio of 0.5x. I'm pleased to report that our average cost of debt, which continues to be comprised solely of aircraft-related debt is currently in the range of 3.5%, with around 70% of our debt being fixed. Turning now to our fleet. We ended the first quarter with a total fleet of 106 aircrafts comprised of 68 737-800s, 29 737 MAX 9s and 9 737-700s. These figures include one 737-800 freighter and the nine 737-800s operated by Wingo. During the first quarter, and as part of our ongoing fleet management initiatives, we purchased two of our leased Boeing 737-800 aircraft. With this transaction, we ended the quarter with 73% of our aircraft being owned and 27% of their operating leases. As to our current MAX delivery scale so far in May, we have received two additional 737 MAX 9s and for the remainder of the year, we expect to receive 7 additional aircraft, one additional 737 MAX 9 and 6 737 MAX 8 to end the year with a total of 115 aircraft. We have already secured Jolco Financing for all these 2024 deliveries. In April, we signed a confidential agreement with Boeing related to the January grounding. Following IFRS accounting standards, we expect that the compensation amount will be amortized through the depreciation line in our income statement over the coming 4 years. Turning now to a return of value to our shareholders. I'm pleased to announce that the company will make its second dividend payment for the year of $1.61 per share on June 14 to all shareholders of record as of May 31. Additionally, during Q1, the company executed approximately $40 million of its share repurchase program. As to our outlook, we are reaffirming our full year operating margin range guidance of 21% to 23% and a capacity growth in the range of 10%. We are basing our outlook on the following assumptions: load factor of approximately 87%, unit revenues were in the range of $0.12; CASM-Ex fuel to be in the range of $0.59 and we are expecting an all-in fuel price of $2.85 per gallon. Thank you. And with that, we'll open the call to some of your questions.

[Operator Instructions] Our first question comes from the line of Savi Syth of Raymond James.

I was wondering if you could talk about the unit revenue that you're basing your guidance on, it's kind of ticked down here a little bit. Just wondering what drove that and how you're thinking about kind of the year-over-year RASM progression over the next few quarter

Yes, Savi, I'll start first, First I have to say that our RASM performance or our outlook of $0.12 is still very strong. It's very high levels compared to other periods that we've been at. And in addition to that, you know what, it's early on in the year. So our visibility for the second half of the year is limited still. There's still a lot of water to come down on to the bridge. And in general terms, we are in a competitive environment. So we're looking out for that. Additionally, we have seen a -- it's kind of like a more technical item. We've seen a little bit of an increase or an increase in direct sales. And so as more direct sales have come in, there's a slight reduction in yields related to the surcharge that we're not recovering on tickets that are sold indirectly. So it's a little bit of that as well. And I have to close by saying that our guidance for the year is still in the 21% to 23% range, which is very, very strong performance for the full year. I don't know, Ped, do you want to add something there.

Yes. And also, we're lowering our unit cost ex guidance, which is also very important because that's something we control better and gives us better control over our margin performance.

Valid point. I guess on that, just a follow-up on that comment Pedro. Is this -- and then -- and what Jose was talking about, is this a pull forward of what you were expecting and kind of reflected in that $0.058 target for 2025? Or are you thinking is your unit cost kind of coming in better than you were thinking?

I think that it's in line with what we guided to on our target -- our multiyear target of reaching 5.8% by next year. So we're on track for that. And we're very confident and comfortable with our 5.8 target for 2025.

Our next question comes from the line of Duane Pfennigwerth of Evercore.

Very strong results, especially considering the grounding. On unit cost, obviously, there's some noise in the first quarter. But maybe you can just help remind us what are kind of the factors driving improvement in unit cost beyond the first quarter, maybe like normalized unit cost reduction. Can you just remind us what the maybe 1, 2, 3 drivers of that are?

Yes, Duane, great question. And I would say that there's -- the #1 item that continues being a great contributor to our reduction in CASM is distribution. It continues to be a great story. And so it's been a great component to our cost execution over the last several quarters, and we expect that to -- as they continue sort of maturing it will continue being a very good contributor to our cost base. Number two, I would say that maintenance last year -- maintenance, we had a slight increase related to engine issues. And that, as we expected, is being more under control this year and we're getting also some benefits in our maintenance line associated with some of the lease transactions that we performed with the buying of leases and some of the lease extensions that we've signed and lowering some of the return conditions. So that's another item that I think is of note. Going forward, remember that we are in the process of densifying a portion of our 737-800 aircraft. We expect that to be also concluded sometime in 2025. So that will also be a contributor to our CASM going forward as well. Of course, now there are headwinds in certain of our cost lines as well. There is inflationary pressures and costs that are more difficult for us to control, such as airspace, user fees and airport charges, et cetera, that take away a tariff of these improvements and efficiencies that we have achieved. But in essence, we are very confident about our cost performance going forward. And our track record so far has been very, very good after the pandemic.

And when we also -- we also keep our whole overhead cost very tight under control. So as we grow capacity, there's also a benefit there.

And then I guess just conceptually, how do you approach full year guidance at this time in the year? As you said, there's a lot of the game left to play in the second half. But if we were just considering the results here in the March quarter, and the outlook that you see right now, all else equal, does that put upward pressure on that range or downward pressure on that range? Because I agree it's hard to raise 22% to 23% EBIT margins at this point in the year.

Yes. It's early in the year, as you well said. And we never roll the dice. We're always pretty conservative in our outlook. And of course, work very hard for our results to be in the upper half of our projections, and that's what we're doing right now.

Our next question comes from the line of Rogério Araújo of Bank of America. Rogério Araújo: I have a couple here. The first one, we noticed some weakness in Latin America yields for the U.S. airline this quarter. And that was kind of a mismatch on what Copa reported. If you could please clarify a little bit on the differences of addressable markets between U.S. airlines and Copa and any difference that you are noticing in this trend of the demand in those address -- in those different addressable markets would be great. And I can make the second question afterwards.

Right. Thanks, Rogerio. I would say the -- maybe the bigger difference is that we're extremely strong in intra- Latin America. The U.S. to Latin America is important to us. but we're much stronger in intra-Latin America. Plus U.S. airlines are very strong in U.S. to leisure Caribbean and U.S. to leisure Mexico and those are not huge markets for us. Actually, we hardly play in those markets. We're not playing in those markets. So we have differences. And our markets remain quite strong. Besides the adjustment -- downward adjustment in unit revenues, which we have already communicated. Rogério Araújo: Okay. Pretty clear. And my second question is regarding the two purchases of [leisure] aircraft that Copa did this quarter. How many aircraft are owned by Copa right now are on encumber. And is there a trend here? Can this continue to happen? And what do you think visit -- will ultimately increase the EBITDA cash conversion for the company in the future, if that keeps rising. So that's why I'm interested about it. But anything you could share would be great.

Yes. Rogerio, we bought two of our aircraft that were under operating leases during the quarter, and we are expecting to be selective or opportunistic in terms of deploying capital that way. We believe the 737 NG is a great asset to own. And so we've been in negotiations with different or the lessors to see if we can find a deal that is convenient for us. In terms of the number of aircraft that we have on encumber, just to give you -- I think in my prepared remarks, I mentioned that around 73% of our aircraft, of our total fleet of 106 aircraft are under -- are owned by the company. And in terms of the aircraft that are fully unencumbered by -- on our fleet. It's around almost 40 of our aircraft are fully unencumbered. So yes, it's quite a bit of a strong position that we have in terms of our fleet.

Our next question comes from the line of Helane Becker of TD Cowen.

I appreciate that you guys are conservative, but one question I had was with respect to Boeing delivery delays. I guess from what you said, Jose, you're not really expecting too many because you're thinking of ending the year with 115 aircraft. Does that include the 2 you bought off lease?

No, no, no. The tool that we bought off lease were already in the base. So these are 9 deliveries that we're getting new from Boeing of which we've already received 2 MAX 9. So sure, we took delivery of 1 MAX 9 yesterday. So -- and we have another Max 9 coming next week. And then for the remainder of the year, the latest carriers that we will receive 6, 737 MAX 8 to end the year with the 115 that you need.

Okay. That's helpful. And the other question I had was with respect to -- I guess with respect to your demand. You're seeing an 87% load factor, which I think you're forecasting for the quarter and the year as well. How does the demand look for either Panama South or within Panama relative to as 3 or 5 years ago since it's so much higher than it was back in the last decade.

Yes. It's stronger than before, definitely. And for example, tourism in Panama is growing at a very healthy double-digit rate, and that's helping the O&D Panama traffic. Of course, our main market is the connectivity we provide through our hope of the Americas here. So our bigger markets are connecting up and down in East and West in a way and most markets remain robust in general terms, even though there's a lot of new capacity from us and from other airlines, we're still guiding to a very high load factor. So that tells something about the strength of the market.

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

Congrats for the results, really strong. Two quick ones on our side. First one on tax rate. We see a slight increase of tax rate this quarter. Should we consider this for the future? And if you could remind us what is the methodology in Panama? I note 5%. And for the connections you guys don't have to pay an extra tax. The second one about the fuel price. We noticed that quarter fuel drops. But on the guidance, you keep of [2.85] just wondering if you is cautious or if you see a worsening scenario for the future, or if the fuel price keeping the way that is at this moment, we should see further huge decrease and margins should keep it stable as you plan in the guidance?

All right. So Alberto, I think for your planning purposes, you could assume that our blended tax rate for the full year 2024 should be in a range of about 14%. That's, I think, the best way to model it in financially. I think -- sorry, can you repeat the second question? Was it related to our fuel price assumption?

Yes. The fuel price on the guidance, you noticed that you keep the same from the fourth quarter results, but...

We use the fuel price that we see in the forward curve, and we just simply put it into our guidance. So we don't necessarily take a view on fuel and where is it going to be? We don't want to be predictors of fuel prices. So therefore, it is in the way that we saw it we were preparing our full year guidance. And it will vary throughout the year, definitely, but that's the price that we looked at in the curve. Of course, that includes as well the realized price during the first quarter.

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

Jose, I want to go back to just on the maintenance line, and this is sort of a follow-up to Rogerio's question. When we look at this quarter, what was the benefit in, I guess, maybe millions of dollars that you got when you decided to put the airplanes on balance sheet and take them off lease. And the way you answered this question, I got the sense that this will continue through the year that maybe you're contemplating additional transactions through the year to take, whether it's 800s or whatever take them off lease and put them on balance sheet?

Yes. I would say that the best way to model it from a CASM perspective is that we expect that the CASM -- maintenance CASM line is going to be kind of flattish on a CASM basis throughout the 4 quarters of the year. There's a couple of reasons there. I would say, number one, well, there's a growth and everything that goes throughout the year. But yes, there could be further transactions going forward. But also movement there, and there are good guys there related to some of the lease extensions that we have performed in prior periods that create, let's say, better return conditions. And so that also flows through the P&L through the maintenance line. And then there's another component to it that also creates, let's say, a good guy in the maintenance line in 2024 versus 2023. And it's related to engine maintenance as well that we had, as you recall, last year, all the items with the LEAP and -- and so that -- some of that is also in there as well. So it's a mix of things. I would say that the lease transactions and lease extensions are probably represented by about maybe half of the benefit and the other half is related to [indiscernible] and maintenance and the like.

Great. That's super helpful. And then just my second question, when we look at your fleet plan in November of 2023 when you were sort of telling us what you were contemplating for the full year. This is obviously before the door plug. You were going to get 15 airplanes and then we went to 11 and now we're at 9, and I'm not even sure are we even going to get 9 based on what we're hearing from other carriers and news coming out of Boeing. Where was your gross CapEx? What was the gross CapEx plan for 2024 when it was 15 and now that we're at 9, where are we now in, call it, I guess, hundreds of millions of dollars, what's the rough number?

Right now, our estimate for CapEx with this fleet plan, the gross capital is around $700 million. With the original fleet plan, it was in excess of $1 billion, yes.

Wonderful. So lots of dry powder. But no, I'm going to let you finish Pedro, sorry.

No, it's great. I'll rather hear your comments. But no, no, what I was going to add is that not related to the CapEx question or maybe it is, but most of our growth of our ASM growth this year is going to come from the full year effect of our growth in 2023. So even if some of our later in the year deliveries get delayed into the following year, it won't have a significant effect on our ASM growth projected for 2024.

And that's kind of the reason why the capacity guide stayed the same at 10%. We already were assuming a set of delays on these deliveries as impactful to the year.

Our next question comes from the line of Pablo Monsivais of [indiscernible].

Just two questions, and one is related to Mike's and to make sure that I get the number of the CapEx guidance for 2024. I heard it was $700 million, but just want to make sure that. And a question is I want to pick your brain on the competitive landscape, some Latin American carriers are putting more capacity other U.S. carriers are saying there's overcapacity. What are your over thoughts on where the competitive environment is moving?

Yes. So our main competitors in the region, and I will name them, have been growing capacity at a pace that's probably 2x and at times, 3x our own. But coming out of the pandemic, we grew a lot faster than all of them. So they have they have caught up in this past year. But -- and I also expect -- we also expect their growth to slow down year-over-year as it lapped the previous growth. And so far, our load factors remain high I'm not sure about theirs, but ours remain high. So the market has been able to absorb the capacity. And I'm -- I am expecting, at least hoping that capacity growth will be rational going forward. The airlines in our region are well managed. And everybody wants to deliver strong financial results. So that usually means they're being very rational with capacity. But so far, the market has responded well.

Our next question comes from the line of Daniel McKenzie of Seaport Global.

Congrats on the stellar first quarter results. I've got a couple of questions here. They're really focused on sort of the longer-term investor from a longer-term investor perspective. And the first one really just is on growth and revenue segmentation. And so with respect to growth, just how sustainable is growth? And how are you thinking about the right growth rate longer term? And then separately, I'm wondering if you could share what percent of the overall revenue is perhaps premium revenue? And I know you don't break out corporate, and that's not the question here. It's just really similar to how U.S. airlines are defining it just from a segmentation perspective.

Okay. Dan, let me give it a shot. So we are confident that we can sustain a growth -- an ASM growth rate above what you're seeing right now, I mean, above the 10%, we were planning to grow more than 10%. We did not get all the deliveries we expected, but we're fine with that. We have no issues with that. And next year, we should be growing at over 10%. You won't see us growing at 20% or 30%, but growing in the -- somewhere between the low teens to the mid-teens, we can probably stay in that range for a number of years, and we see good opportunities in terms of overall market demand new destinations, et cetera. So we're pretty confident that we can maintain for a number of years in the medium to long term, actually a really, really healthy ASM growth. But the way we are, just the way we have always run this airline, we always remain flexible to adjust either way. The opportunity is such that we can grow faster. We have means of doing it, but we usually cover the downside. So we have a lot of flexibility to cover the downside if things were to slow down. We've always done and we've done it effectively. That's kind of the mentality of our Board also. So that flexibility is important in our plan. In terms of revenue segmentation, leisure became after the pandemic, it became a high-quality segment in many ways. And as we have explained in previous calls. Our -- today, our leisure is around 40% and visiting friends and relatives is in the 35% range. The business is in the 25% to 20% range depending on the quarter. So that's kind of the range. But again, leisure is different than before. There's a segment of leisure that is a little bit more higher fare.

Yes. That was terrific. And then I guess going back to an earlier question. So for those investors again, trying to understand the margin outperformance in the current cycle versus the last cycle. What are the top 3 things that are behind that from your perspective? So the 21% to 23% margins today versus 18% to 20% historically. Is it as simple as pent-up demand, sort of high-value leisure? Or is it perhaps more structural in nature, just given where your cost structure is. So really, the question just kind of gets down to how longer-term investors should think about the business.

Right. That's an interesting question, and it allows me to talk a little bit briefly about how we have changed as a company. And one of our values as a company is continuous improvement. So we're always looking for better ways of doing things. So if we compare the Copa today to the pre-pandemic Copa, for example, we have better unit costs. We have better revenue management and pricing. Today, we can sell basic fares that don't offer much except as the passenger pays more for it, and we can distribute them directly to the customers, saving significant costs on GBS and the like. So we are a lot more competitive against any other airline business model. We're also -- I would say, we have streamlined our network. There's still around 8 destinations that we were flying pre-pandemic that we're not flying to right now. But instead, we have like, I don't know, somewhere between 12 and 14 destinations we were not flying to before. So we're flying to more places. It will be 85 by next month, which is 5 more than what we flew in 2019. So stronger network, better unit cost, better, better technology, better pricing. Our digital technology, for example, today is mostly developed and owned by us before it was all third-party company. So we have better technology and better cost. So I guess I could keep on going, but we're a better airline and we're more efficient. We're more effective and we're more competitive. We also have more competition. So we had to be better to be able to deliver the margins we're delivering. We could not just sit with our arms crossed to see what would happen.

Right. That's wonderful. Thanks for that comprehensive answer, Pedro.

Yes. I'm sorry for the advertising.

Our next question comes from the line of Guilherme Mendes of JPMorgan.

My first one is on capital allocation. We continue to see leverage coming down. And how should we think about capital allocation going forward, if any excess of capital should be distributed into dividends and buybacks? And if there's an optimal level of leverage that we could consider for this long-term growth and profitability going forward? And the second one is on Colombia. I know it's actually small for you, but if you could share how Wingo is performing and how the competitive environment is in Colombia post the 2 airlines to live in the market last year?

So Guilherme, in terms of capital allocation, I would say, first, yes, our balance sheet certainly right now is a very, very strong leverage. So it's a high point. And I think we have to be mindful that we have a lot of aircraft coming. So we have a lot of capital expenditures that are going to be put in back into the business over the next 1.5 years. Our fleet plan that we put in our 20-F or 2025 has around 16 airplanes coming next year. So it is quite a bit of growth that we will put back into the business over the next several years. Number two is that we have -- we've been very active in return of value to our shareholders. This year, we have -- essentially, the Board decided to almost double the dividend vis-a-vis last year and our policy is as the business continues being successful, we distribute that to our shareholders. So -- and we've complemented that as we put out in our first quarter results, and we also bought back $40 million worth of shares during Q1. So it's a mix of everything. First, I'd say it's putting it back into the company for growth and then followed by the return of value to our shareholders.

In terms of Colombia, Colombia [indiscernible], a very competitive market. It's -- it goes through its wave, but it's always very competitive. In terms of one of your specific questions, capacity today in Colombia is close to 20% -- domestic Colombia is around 20% higher than before when the 2 airlines that failed were operating. So even without those 2 airlines, capacity is about 20% higher. That includes one new entrant that started, I think, late last year plus the growth from the incumbents. Wingo is performing well, maybe the better performing airline in Colombia, I'm not sure. But we're keeping capacity flat at Wingo, they operated last year 9 aircraft. And this year, they're operating 9 aircraft, 9 737-800s. So we don't have an ambitious plan. It's just a very difficult market in general. So we would rather keep capacity under control and results in a healthy level, and that's kind of what we're doing with Colombia and with Wingo.

And our last question comes from the line of Jay Singh of Citi.

It's Jay Singh dialing in for Stephen Trent. My first question is, looking at the U.S. market, we see that inflationary pressures pushed CASM ex above 2019 levels and is likely to continue going forward. As for Copa, where you executing on the cost side and realizing in terms of maintaining such a low CASM next year?

Yes. Jay, look, we, of course, are cognizant that the U.S. has been going through a significant period of inflation over the last several years. And we are seeing some of that in airport fees, handling fees in the U.S., hotel rooms for crews in the U.S., all those have been putting some pressure on our CASM. But in Latin America, in general, the inflation has not been as prevalent as it has been in the United States. So therefore, we have not had as much pressure as some of the U.S. airlines. And in addition to that, we've been very active in pursuing as Pedro just mentioned, better ways to do our own operations. So we've been very active in -- after the pandemic and just seeking reductions in costs and efficiencies going forward. overhead, there are fleet decisions that we have made and distribution strategy, maintenance, specification, et cetera. I mean we'd done a lot over many, many swim lanes in order for us to be competitive. But we are seeing some of that inflation in the U.S., albeit not at the same level as the U.S. carriers.

And my second question is, how are you able to maintain the 10% capacity guide inside of the Boeing delivery delays?

You 10% or -- if I understand your question correctly, it's how is it that we're maintaining our capacity guidance in spite of the Boeing delays. Yes. Yes, the 10% assumes the current scenario that we have for aircraft deliveries for the remainder of the year. And as Pedro mentioned before, the large portion of our growth for 2024 is just simply the full year effect from 2023 of the capacity that we put in throughout the year 2023. So of course not that much subject to the aircraft and aircraft that come in later in the year do not really have that much of an impact if they were to be delayed up until 2024 -- 2025. So it is the number that we have right now on 10%, and we'll -- there are changes in the future, we'll see and we'll let the market know.

This concludes the question-and-answer session. I would now like to turn it back to Pedro Heilbron for closing remarks.

Okay. Thank you, sir. So thank you all. This concludes our first quarter 2024 earnings call. Thank you for participating. And as always, thank you for your continued support. I hope you have a great day.

Ladies and gentlemen, thank you for your participation. This does conclude the presentation. You may disconnect, and have a wonderful day.