Ladies and gentlemen, thank you for standing by. Welcome to Copa Holdings First Quarter Earnings Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. As a reminder, this call is being webcast and recorded on May 11, 2023. Now I will turn the conference call over to Daniel Tapia, Director of Investor Relations. Sir, you may now begin.

Thank you, Felicia, 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 co-workers 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. Today, we're pleased to report strong results for the first quarter and a solid outlook for the year. Despite the continued high fuel prices in the quarter, we were able to deliver an operating margin of 22.3%. These results were mainly driven by a robust demand environment in the region which led to an improved load factor as well as an increase in passenger yields during the quarter. Among the main highlights for the quarter, passenger traffic grew 7.1% compared to the same period in 2019 outpacing our capacity growth of 2.8%. This resulted in an 86.8% load factor, a 3.5 percentage point increase compared to Q1 2019. Passenger yields came in at $0.146 or 20% higher than the first quarter of 2019. While cargo revenue was 52% higher, resulting in unit revenues or RASM of $0.131, a 25.5% increase compared to the first quarter of 2019. On the cost side, our unit cost excluding fuel came in at $0.062 or 2.1% higher compared to Q1 2019. As a result, our operating margin came in at 22.3%, 5.5 percentage points higher than in the first quarter of 2019. On the operational front, Copa earnings delivered an on-time performance of 92.2% and a completion factor of 99.9%, once again amongst the very best in the world. I would like to take this opportunity to express my recognition for more than 7,000 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 fleet. We received two 737 MAX nine aircraft during the quarter and we expect to receive 10 more MAX nine during the remainder of the year to end 2023 with a total fleet of 109 aircraft. With regards to our network as we mentioned in our last call, we plan to start new service to the cities of Manta in Ecuador and Baltimore and Austin in the US starting this summer. With these additions, we will serve 80 destinations in 32 countries in North, Central, South America and the Caribbean, as we continue to strengthen and solidifying our position as the most complete and convenient hub in Latin America. Finally, with regards to Wingo, Wingo continues its regional expansion with the announcement of three new domestic Colombia routes from Bogota to Barranquilla, Pereda and Bucaramanga and one international seasonal service from Cali in Colombia to Aruba. With these additions, Wingo will operate 34 routes with service to 21 cities in 10 countries. Now, turning to our expectations for 2023. As you saw in our earnings release, we increased our operating margin guidance to a range of 22% to 24%, mainly driven by the current solid demand environment in the region as well as a lower fuel curve for the remainder of the year. As always, Jose will provide more detail regarding the full year's outlook. To summarize, we're off to a very good start in 2023 and expect to keep seeing a healthy demand environment throughout the year. We continue growing and strengthening our network the most complete and convenient hub for intra-Latin America travel. And as always, our team continues to deliver world-leading operational results while maintaining our costs low. Lastly, we're as confident as ever in our business model. We continue to deliver solid margins and competitive unit costs while offering a great product for our passengers, making us the best positioned airline in our region to consistently deliver industry-leading results. Now, I'll turn it over to Jose, who will go over our financial results in more detail.

Thank you, Pedro. Good morning, everyone. Thanks for being with us today. I'd like to join Pedro in acknowledging our great team for all their efforts to deliver a world-class service to our passengers. I will start by going over our first quarter results. We reported a net profit for the quarter of $121.5 million or $3.07 per share. Excluding special items, net profit came in at $157.8 million or $3.99 per share. First quarter special items are comprised of an unrealized mark-to-market loss of $37.9 million related to an appreciation in the value of the company's convertible notes and a $1.7 million unrealized mark-to-market gain related to changes in the value of financial investments. We reported a quarterly operating profit of $193.2 million and an operating margin of 22.3%. Capacity came in at $6.6 billion available seat miles or approximately 3% higher than in Q1 2019. Load factor came in at 86.8% for the quarter, a 3.5 percentage point increase compared to the same period in 2019 while passenger yields increased 20% to $0.146. As a result, unit revenues came in at $0.131 or 25.5% higher than in the first quarter of 2019. Driven by higher jet fuel prices, unit costs or CASM increased 17.2% versus Q1 2019 to $0.102. And our CASM excluding fuel came in at $0.062, a 2.1% increase versus Q1 2019, mainly driven by additional engine maintenance costs, changes in supplemental rent provisions related to aircraft utilization as well as additional lease engine costs, plus an increase in our sales and distribution costs as a function of higher sales during the period. I'm going to spend some time now discussing our balance sheet and liquidity. As of the end of Q1, we had assets of close to $4.9 billion. And in terms of cash short and long-term investments, we ended the quarter with $1.2 billion, which represents 36% of our last 12 months' revenues. So our debt, we ended the quarter with $1.7 billion in debt and lease liabilities and achieved a net debt-to-EBITDA ratio of 0.6 times. 80% of our aircraft debt is fixed and I'm happy to report that our blended cost of aircraft debt for the quarter came in at an annualized rate of 3%. Turning now to our fleet. During the first quarter, we received two Boeing 737 MAX 9s to end the quarter with a total of 99 aircraft compared to 102 aircraft in our fleet at the end of 2019. With these additions, our total fleet is now comprised of 68 737-800, 22 737 MAX 9s and nine 737-700s. These figures include one 737-800 freighter and the nine 737-800s operated by Wingo. Two-thirds of our fleet continues to be comprised of owned aircraft and one-third of our aircraft are on their operating leases. During the remainder of 2023, we expect to receive 10 additional aircraft, all Boeing 737 MAX 9s to end the year with a total fleet of 109 aircraft. Finally, I'm pleased to inform you that this past month of March, our Board of Directors approved a quarterly dividend of $0.82 per share, subject to Board ratification each quarter, which reinstates our dividend payout of 40% of prior year's adjusted net income. We made our first quarterly payment during the month of April and the second payment would be on June 15 to all shareholders of record as of May 31. As to our outlook, based on the strength of the current demand environment, we can provide the following guidance for full year 2023. We expect to increase our capacity in ASMs versus 2022 within a range of 12% to 13%. We now expect an operating margin within the range of 22% to 24%. We're basing our outlook on the following assumptions: load factor of approximately 85%, unit revenues within the range of $0.125, CASM ex fuel to be in the range of $0.061. And finally, we're expecting an all-in fuel price of $2.85 per gallon. Thank you. And with that, we'll open the call to some questions.

Thank you. The first question comes from Stephen Trent from Citi. Stephen, please go ahead.

Good morning gentlemen and thank you very much for taking my questions. I was wondering kind of on a high-level basis if you could discuss the opportunities related to the renewed strategic alliance with United Airlines from August 2021 and what you might be seeing in terms of the potential for a joint business agreement maybe revisiting that down the line. Thank you very much.

Yes. Hi, Stephen, it's Pedro. We have a strong partnership with United that dates back to the time of Continental, and we are also part of Star Alliance. This combination of our relationship with United and our membership in Star Alliance allows us to effectively serve the regions where we operate and maximize our earnings. Additionally, we have a letter of intent concerning a joint business agreement with Avianca and United, but that has yet to be implemented due to the pandemic. I'm not sure if it will be implemented or if it will simply expire, as there’s over a year to make that decision. Nonetheless, we believe we've established the necessary alliances that provide the most value to Copa.

Super I really appreciate that. And just my one follow-up I believe you talked in the past about the LEAP engines driving kind of a one-time relatively smallish CASM ex headwind into this year? And any high-level view on whether that's going to ease as we move through 2024?

Yes, I'll let Jose answer.

Yes Stephen, let me just say that yes there are some, I would say, short-term headwinds related to the LEAP engine. Most of the costs that we've seen so far this year are associated to short shop visits that some of the engines require to as part of campaigns that are being performed in the worldwide fleet of the LEAP. We're seeing an improvement in the performance of the engine. And we are relatively advanced in the majority of these campaigns. And so going forward in the rest of 2023 we expect to have a lesser number of engines going into a shop and/or with some of the fixes that are required. And so that actually flows into our $0.061 CASM guidance that we have for the full year vis-à-vis the CASM ex guidance that we had issued back in February.

Super helpful gentlemen. Thank you for the time and looking forward to seeing you on Tuesday.

Thanks, Stephen. Same here.

One moment for the next question. The next question comes from the line of Savi Syth of Raymond James. Savi, please go ahead.

Thank you. Good morning everyone. I was curious you usually a fairly conservative team in forecasting and the kind of revenue outlook improvement is pretty meaningful. Just curious what trends you're seeing that kind of gives you confidence necessarily on to kind of take those numbers up.

Hello, I'll begin and Pedro can add to this. The first point is that the first quarter showed a strong demand environment, which is part of the reason we adjusted our unit revenue guidance upwards. Additionally, looking ahead, especially for the second quarter, the demand environment remains strong. However, we need to acknowledge that our visibility for the rest of the year is limited. We have also considered some seasonality in our guidance. We're aware that there is a significant amount of capacity entering the market and we're closely monitoring fuel prices as well. Overall, we're confident in our 12.5% guidance, primarily due to the performance in Q1 and our outlook for the first half of the year.

And the only thing I would add Savi is that our guidance even though it has been improved as you all mentioned still puts us at a lower RASM for the second half of 2023 compared to the second half of 2022. And that's because of the decreased fuel curve and the additional capacity coming into our markets. So we're still projecting lower RASM in the second half of the year.

That's helpful. And along those lines for my second question, I wonder if you could talk a little bit about, what you're seeing on the business demand standpoint. It seemed like it was a slow progress over the last few quarters. Have you seen any improvement there?

There's still some improvement, but things have changed at least in our part of the world since the pandemic. So leisure is our strongest segment now. Is not as much as half, but it's in the 40% of our split between leisure VFR business and business has come up somewhat, it's like in the mid-20s, maybe a little bit less than that percent in terms of that same split, but slight improvement in the last few quarters, nothing very significant.

Perfect. Thank you.

Thank you, Savi.

One moment for our next question. The next question comes from the line of Guilherme Mendes from J.P. Morgan. Guilherme, please go ahead.

Good morning, Pedro, Jose, Daniel. Thanks for taking my questions and congrats on the pretty strong results. First question just a follow-up on the assumptions behind the guidance. I think it's clear on the CASM front, but just wondering, in terms of the capacity addition versus small reduction. Just wondering if it's related to any potential bottlenecks on the supply side of the industry and on the rest guidance thinking that probably it implies a stronger yield for the year despite of lower fuel cost as well, so if you could please just further explain how you're seeing demand environment going forward?

Yes. I'll start…

And then, the second question. Sorry go ahead.

Yeah. I'll start and then, I'll let Jose add. So in terms of capacity well Copa itself is receiving 12 aircraft in the year. So that's quite a bit some capacity. And then, our peers in Latin America are getting back to pre-pandemic levels which were not the case in 2022, but will be the case from now on the rest of 2023. So all of that together plus there are other airlines especially OCCs which are growing faster than pre-pandemic. So when we add all of that up it's a considerable number of additional seats in our region. Demand is there of course, so we're confident on the demand and we're confident that there's enough demand but more capacity plus lower fuel usually it tends to result in lower unit revenues.

Yeah, Guilherme in terms of the capacity movement that we made in terms of our full year guidance it is yeah, related to the latest forecast that we have in terms of aircraft deliveries for the year. So that's what we have in terms of our best knowledge as of now in terms of new craft deliveries.

Very clear. Thank you. And the second question is in terms of the capital allocation. And naturally the dividends already out. You have the buyback open as well. So thinking that leverage remains below one-time net debt to EBITDA if you see room or maybe an extraordinary payment or a more aggressive buyback? Thanks.

We have reinstated our dividend, which the Board approved in March, and it amounts to 40% of our previous year's adjusted net income. We're satisfied with this level. Additionally, our buyback program has been active throughout the first half of the year. It's important to note that we have a significant number of investments related to aircraft that are essential for our business growth. Therefore, part of our capital is focused on the growth of Copa. Furthermore, we need to ensure flexibility in managing our liabilities as we convert these investments.

Very clear. Thank you. Have a great day.

Thank you.

Thank you, Guilherme.

One moment for our next question. The next question comes from the line of Michael Linenberg from Deutsche Bank. Michael, please go ahead.

Hey. Good morning everyone. And that was a great forecast. A couple here, one, the move to add additional domestic service in Colombia by Wingo was that in response to the suspension of Avelo and Ultra? Is it a tactical move? Is it a harbinger of maybe getting bigger in the domestic Colombia? And is there an opportunity for you to maybe get some of the slots that will potentially be released as a result of consolidation and rationalization in the Colombian market? That's my first question. Thank you.

Wingo is not a major player in the domestic Colombian market. It operates nine 737-800 planes. The capacity shift is due to a stronger domestic market compared to some international routes that have seen increased capacity. This change is tactical and limited. While the shutdown of certain airlines has a positive impact, it mainly benefits other established airlines in Colombia. Wingo is not significant and did not directly compete with the airlines that are no longer flying, so the overall impact is minimal. However, there is better strength in the domestic market, which is why Wingo has reduced frequencies in underperforming international markets and redirected them to the improving domestic market. This is again a tactical decision.

Anything on the booked Bogota slots that potentially become available, are you in line to try to grab some of those for your use?

Right. So, although, there are no plans to grow the Wingo fleet in an aggressive way, we tend to be disciplined and Wingo continue taking advantage of opportunities and not just taking a bunch of aircraft. So Wingo will remain disciplined and opportunistic, but the Bogota slots are very important because it was very difficult for Wingo, it is very difficult for Wingo to publish an advanced schedule and fly at the right time at the peak times when most passengers want to fly, because up to now the slots in Bogota has been dominated by a single carrier. And so hopefully this is going to change and make Bogota, which is like the only one of the very few slot restricted airports in our continent, it will make it more competitive and it would allow Wingo and others to offer service at the time passengers want to fly. So we see that as a positive development.

Okay, great. And then this is just another sort of network question, Pedro. One of the things that we saw coming out of COVID is we saw a lot of the big global hubs initially only benefit from the recovery of local traffic. And I think as things have started to turn on, we're seeing a lot more what we call sixth freedom traffic, third and fourth freedom connections, which is something that you specialize in. And so when you look at the commentary out of say a Turkish or an Emirates or a Cathay Pacific, you're really starting to see that benefit. And I think when I look at Copa and I look at capacity coming online by some of your competitors where I think you really outshine the competition is all of the connections that you fly in city pairs that nobody else serves. And I suspect that maybe that wasn't seeing as much service in the earlier part of the recovery period and that's starting to turn on now and those are markets that are uniquely served by Copa. Is that right? Is that something a trend that you've been seeing in your markets or maybe your connecting markets turned on from day one?

Well, we've seen strength throughout our markets and throughout our network. And we're staying true to our vision and to our business model. So coming out of the pandemic, we went back to doing what we've always done in a very focused and disciplined way. And that demand has been there from the beginning I would say, but it's obviously stronger now and it continues to grow. It's holding up. And there's more capacity from other airlines and from ourselves coming in, but the whole market has improved. And yes I think you're right. We have something unique about our network and we hope to continue developing it.

Okay. Well, great. Great results, and thanks for answering my questions.

One moment for the next question. The next question comes from the line of Bruno Amorim from GS. Bruno, please go ahead.

Yes. Thank you for taking my questions. So I'd like to hear from you if possible what's your vision for the next few years in terms of the competitive dynamics and the expected profitability for the business. Of course, adjusting for eventual volatility in macro conditions, which might happen. My point here being that if you look in the 2010 to 2014 cycle margins were around 20%. I'm talking about EBIT margin then between 2015 and 2019 margins hovering around 15%. So if you were to guess for the next few years are we more in the type of market that we saw between 2016 and 2019, or is it possible to sustain margins around 20% even though you are not growing as much as back that cycle 2014 when the region was growing. But eventually after the pandemic, you might see structurally less competition just trying to figure out, what will be the new normal going forward and it would be great to hear your thoughts around that. Thank you.

We have provided guidance only for 2023 and do not want to speculate about future years. However, we are focused on improving every aspect of the company to make Copa more competitive as we grow. Currently, we see a strong demand environment and a positive outlook for our business model centered around our hub in Panama. There are many opportunities to enhance connectivity and expand to new cities. We will continue to prioritize being cost-competitive, punctual, and ensuring a friendly passenger experience with a motivated and efficient workforce. Although there is always competition, we hope there will be space for different business models that effectively fit the market size. As long as we maintain that balance, we believe we will be fine and strive to consistently perform better than our competitors. Beyond 2023, we will need to wait for further earnings calls for additional insights.

Thanks, great. Thank you. And that’s great perspective. If I may just a very quick follow-up then. After the capacity you expect to come back, during the year as you mentioned, will you be in the same position in terms of overlaps and competition overall vis-à-vis, the pre-pandemic scenario more or less competition? Can you comment on the competitive landscape after this capacity that you expect to come back is in place?

The competition is quite public, so we likely have similar information. However, the competitive landscape has changed. It’s not less intense than previously; if anything, it’s become more dynamic and possibly more aggressive. There’s been a shift towards low-cost offerings, which makes us one of the few remaining full-service airlines in our region. There is still a market for that. Nevertheless, we face significant competition and strive to be as aggressive as anyone, especially given that a larger percentage of our passengers are now leisure travelers compared to before the pandemic.

Very good. Thank you very much.

Thank you, Bruno.

The next question comes from Helane Becker of Cowen. Helane, please go ahead.

Thanks, operator. Hi, guys. Thank you for the time. So you guys are coming up to New York next month and holding your Investor Day. When we think about things you can say, have you thought about the focus of that and what you can update us on? I don't want to run ahead of it, but I'm kind of wondering what to look forward to?

Hopefully, we can enjoy a good meal and a productive Q&A session. However, as you know, our story doesn't change much from year to year. We consistently follow the same business model, always seeking ways to improve and enhance what we do. We'll discuss what we're working on, what we're focusing on, what improvements we're making, what is effective, and what might need adjustments, but there won't be any major surprises. We have a consistent approach to our operations, and as long as no significant changes are required, our goal is to keep improving. So, expect more of the same, and now, Jose, please continue.

I would just add, well first of all for certain things Helane, we try to take one day at a time. So we're preparing earnestly for the earnings call and then maybe next week, we'll start working on the details of the Investor Day. But I would say, a couple of things to add to what Pedro mentioned, number one is that at our last Investor Day was here in Panama back at the end of 2019, before the pandemic. So we are cognizant that, it's important for you to get face time with us. And I think part of what we have in store is also getting face time with members of management that are beyond us too. So, I think that that's also an important part of it. And just simply, provide an update on some of the initiatives that we had discussed back three years ago. So I think that's kind of what we have in mind.

Okay. I have a last. And then my follow-up question is something I think Jose, that you talked about in terms of capital allocation with respect to share repurchase and the convert which I think is callable. Did I interpret your answer correctly that either one of those is up – is fair game that you would buy back to convert? If it made sense.

Yes. I don't want to speculate. I don't want to get into necessarily details of potential avenues that we might pursue. But I would say that we at this stage want to maintain flexibility in terms of the options that we have. So I think that the balance sheet is very, very strong and we have – we want to keep alternatives open to minimize the cost for us in terms of the settlement of the convert. So – and yes, we're also cognizant that the convert has a call option in there and we – all alternatives are on the table right now every day.

Thank you.

One moment for your next question. The next question comes from the line of Daniel McKenzie of Seaport Global. Daniel, please go ahead.

Hey, good morning, guys. Congratulations on the quarter and the outlook here. Just have a couple of questions. The first really ties to revenue from premium seating. And I'm really just trying to get a basic understanding on this part of the story. So I guess first, what percent of the revenue is it today versus what it was in 2019? And then just related to that how quickly is that growing?

Yes. Okay. So let me start and then I'll let Jose, follow up. So then – we don't share that specific information but what I can say is that premium demand and premium yields are above pre-pandemic levels. So load factors are better, yields are better and premium seating profitability is better than pre-pandemic.

Yes. Well, and also our paid load factor at business class, which we don't disclose but we can say directionally that it is higher today than where it was back in 2019 as well. So I think that's another data point that's important.

Okay. And then I guess a second question here is just a question on the new distribution strategy that you've talked about in the past, what percent of the revenue is booked on Copa's website today versus the GDSs? And how does that compare to 2019? And then to what extent is that helping you to capture some additional revenue say from upsell opportunities or bundling? And then tied to that how material are the cost savings that you're seeing from this new strategy?

Okay. I'll start and if I leave anything out – so big, big picture. Pre-pandemic, we could say that one-third of our distribution was direct and two-thirds were indirect so agencies and the like. And today we're very close to flipping those numbers where two-thirds will be direct including NDC connections and one-third is going to be traditional travel agency GDS bookings. So we're about to flip the numbers, the ratios, as I just mentioned. And that of course comes with considerable savings including that we're charging a surcharge for traditional GDS bookings, which make up for any cost difference. So I don't know if we are sharing yet any cost saving numbers but when we add the revenue impact so the revenue…

I mean I think that so far – I mean this – first of all we have to say that this started in Q3 of last year. So it is still an ongoing process that we have. But it is from let's say ROI perspective or a cash perspective performing, I think as expected or maybe a little bit better. But as Pedro mentioned, there's a portion of the benefit here that shows a factoring revenue because of the fact that we have a fee that we charge for sales that are not performed on NDC channels or on our own direct channels. Now going forward, our expectation is that the actual costs – pure cost of distribution should come down in the manner that our direct channel, sales continue growing. So we have an expectation that that will come over the next several quarters. And that benefit actually, that channel shift benefit then is included in the guidance of $0.061 guidance at least for the end of this year. But again, there's a kind of a change of model and so it will be with us for many years to come.

And as important is the fact that now we have much better control of our distribution and that's going to allow us to do more things in the future that would lower costs and improve revenues of course.

Yes. That’s perfect. Thanks so much you guys. Okay, then.

Thank you.

One moment for your next question. The next question comes from the line of Alberto Valerio of UBS. Alberto, please go ahead.

Hi, Pedro, Jose. Thank you for answering my questions and congratulations on the impressive results. I'm interested in understanding the difference between the guidance provided in mid-February and the current guidance you're sharing today, which is about two and a half months later. We've already discussed that demand is stronger, and you mentioned possibly having greater exposure to high-income business travelers. Are there any additional factors to consider, such as exposure to specific regions like North America or South America, or any variations in the travel behavior of different customers? Any insights you can share would be very helpful.

In a very simple way, what Jose mentioned before was that we now have visibility on the first half of the year and a lower fuel curve. These two factors are the main drivers behind the improved operating margin guidance.

Yes. I would say that in terms of regional performance, I would say that most of our regions are performing very well ahead of what we had before. And as Pedro mentioned first half is performing well. And when you look at the operating margin guidance we cannot forget about fuel as well. When we provided our guidance back in February, fuel was at higher level than where it is today as well.

We can say also that competition is less here was in the past because when we see fuel drop in the past we see yields come down. And according to the guidance that you guys provided you could be flat for this year given which if you grow in double-digit now?

No not necessarily. As I mentioned before our RASM guidance implies a lower RASM for the second half of 2023 than the actual RASM we delivered for the second half of 2022 the year before. So we are factoring in a lower than 2022 RASM and that's the lower fuel curve and capacity from competitors. But again having the better visibility for the first half of the year allowed us to adjust RASM upwards for the full year.

Fantastic, fantastic. And my last one here on the working capital. It came a little bit above what we had estimated for the quarter. Just wondering whether it's something not recurring in this quarter on the working capital matters. Thank you again for taking my question. Congrats on the result.

I would say, Alberto, that from the ATO perspective, our single ATO is actually down for the quarter. Sales are still ahead. There are some factors related to refunds of tickets and expired coupons, but I believe there is also some seasonality at play. Those are the main drivers.

Fantastic. Thank you.

Thank you.

Thank you.

One moment for the next question. The next question comes from the line of Araujo Rogerio of Bank of America. Araujo, please go ahead.

Yes, this is Rogerio Araujo. Thank you for the opportunity, Pedro, Jose, and Daniel. I have a question. The last time we observed margins similar to what Copa was delivering was before 2015, when Venezuela was performing well and significantly boosting that margin. On a similar basis, is there a reason to believe that Copa is more profitable now compared to that time? In other words, is there any reason to think that Copa's structural margin is higher now than it was before? If so, what do you think are the main drivers of this change? Thank you very much.

Thank you, Rogerio. As I mentioned earlier, we are constantly striving to be a more competitive airline. We don’t rely solely on strong revenues since we understand that our industry experiences cycles. Instead, we focus on maintaining competitive costs and improving our efficiency and productivity. We have become a significantly more efficient and productive airline compared to 2013 and 2014. The key improvements include a lower CASM Ex, which enhances our efficiency. We’ve worked diligently to enhance our CASM Ex, leading to better unit costs that enable us to remain profitable even with lower yields. This improvement is also due to having a more effective fleet, primarily consisting of 737-800 and MAX 9 aircraft, which have lower operating costs than before. We have implemented numerous measures to boost our efficiency, such as conducting our own C checks in-house, which we did not do previously. Our distribution strategy is yielding positive results, and we have other initiatives in place. We have also densified the fleet to some extent, with more developments planned. Overall, we are much more competitive now, with better unit costs and greater efficiency than we had in 2011, 2012, and 2013, when our margins were similar but revenues were likely stronger.

Okay. Pretty clear. Congratulations for the very strong results and all these cost reduction and efficiency in the past years.

Thank you very much, Rogério.

One moment for your next question. The next question comes from the line of Josh Milberg of Morgan Stanley. Josh, please go head.

Hey Pedro, Jose, it's great to speak with you both and congratulations on your results. I have a couple of follow-up questions and I apologize if I'm being repetitive. First, you mentioned your competitors' efforts to restore capacity. Could you elaborate on that? Specifically, how have aircraft delivery delays affected this, and on the Avianca side, have you experienced any impacts from their strategic shifts regarding the network or otherwise? That's my first question. Secondly, could you provide more details about your fleet plan and what it might indicate for capacity growth in 2024? I know you've said it's early to discuss next year, but I understand you have 737-800s scheduled to come off lease, and your plan appears to involve retaining those. Any additional insights would be appreciated.

Thank you, Josh. I'll discuss the fleet plan in a moment, but I want to start by mentioning that we have published our 2024 plan. This year, we are set to receive 12 aircraft, and next year, we anticipate receiving 8 MAX eights, though it could have been more if it weren't for delays from Boeing. As you may know, both Boeing and Airbus have experienced delays, with some ranging from three to four months, and possibly even longer for next year. We have officially stated we expect 8 aircraft, but we are optimistic about receiving more once we get updated information from Boeing. Additionally, we have several leases expiring, which we plan to renew as needed, depending on the deliveries from Boeing. It's essential to balance lease expirations with Boeing deliveries and our demand forecasts. Currently, everything appears positive, so we are hopeful to secure more aircraft and that demand remains robust. Jose, would you like to add anything regarding the fleet?

Yeah. I think that's very complete. In terms of 2024 as Pedro mentioned we have right now our plan is published in our Investor Relations website including the eight aircraft that Pedro mentioned for 2024.

In terms of competitors, there's not much more to add; I prefer not to give them free publicity. However, you asked about Avianca. We do compete quite a bit with them and have always done so, even though we are partners in Star Alliance with code sharing and frequent flyer reciprocity. I would describe our competition as friendly and healthy. Avianca is continuing to grow their hub and offers non-stop flights. They've changed their business model after going through Chapter 11, making them a strong competitor. It's evident that they are a serious contender. We are also growing and competing, maintaining a balance as both we and they expand. Most of our competitors are back to pre-pandemic capacity, as are we. LATAM and other smaller airlines have likely surpassed those levels. We operate in a dynamic market with strong demand, which is what we anticipated.

Thank you, Josh.

Please hold for the next question. The next question comes from the line of Duane Pfennigwerth of Evercore ISI. Duane, please go ahead.

Hey, good morning. This is Jake Gunning on for Duane. So just to put a finer point on previous questions about geographic demand strength. On a previous call, you talked about point of sale for US versus local, could you talk about just how that's trending now?

I don't think it's changed much. We see strength in most of our regions and markets. South America is not as strong relatively speaking as it was before, but it is still positive. That could change from one quarter to the next. The US point of sale remains pretty strong, even though the US dollar has lost some value, it still has a lot of strength. The US economy is still strong, despite efforts to slow it down; it is resilient. So, I don’t think anything has changed that much from our previous call.

Okay. And then on capacity just given demand strength and the capacity constraints where or how much more would you want to grow without these constraints?

So our fleet plan I think is a good reflection of our growth plan. We're getting 12 MAX 9s this year. Next year we have published eight MAX 8 we'll be getting. But as I mentioned if we could get more because we were supposed to get more. But due to delays, we're not getting them all in 2024 the ones we were expecting to get originally. So if we can get a few more we'll be very happy and we're waiting to hear from Boeing maybe that would happen. So that gives you an idea of our growth which is in the double-digit range.

No, I was just going to say Jake that I think a good way to look at it is to consider the preliminary full year guidance we issued back in November, which had a 15% growth. We could argue that this reflects our regional expectations for growth. So yes.

Okay. That make sense. Thank you and have a nice day.

Thank you.

Thank you.

Thank you. I would now like to turn the call back over to Pedro Heilbron. Pedro, please go ahead.

Yes, thank you very much. And so thank you all. This concludes our earnings call for the first quarter of 2023. And so I'll take also this opportunity to announce that we'll have our Investor Day as I think Helane mentioned. It's going to be on June 22 in New York City. You should be getting the invitations and any other details in the next couple of days. So hope to see you then next month and have a great day. Thank you as always for your support.

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