Earnings Call Transcript - CPA Q4 2023

Operator, Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Copa Holdings Fourth Quarter Earnings Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we'll conduct a question-and-answer session. As a reminder, this call is being webcast and recorded on February 8, 2024. I will now turn the conference over to Daniel Tapia, Director of Investor Relations. Sir, you may begin.

Daniel Tapia, Director of Investor Relations

Thank you, Lisa, and welcome, everyone, to our fourth 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 fourth 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, 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.

Pedro Heilbron, CEO

Thank you, Daniel. Good morning to all and thanks for participating in our fourth quarter earnings call. 2023 was a very strong year for Copa as we reported solid financial results. I would like to extend my sincere gratitude to all of our co-workers for their commitment to the company and our passengers. As always, they have my deepest respect and admiration. Thanks to a continued healthy demand environment in the region and our consistent execution in keeping ex-fuel unit costs low and increasing revenues, we were able to deliver industry-leading financial results for the quarter and the year. Summarizing the main highlights for Q4, passenger traffic grew 11.1% compared to the same period in 2022, in line with our capacity growth of 11%. As a result, the load factor for the quarter increased by 0.1 percentage points compared to Q4 2022 to 86.7%. Passenger yield came in at $0.14, resulting in unit revenues or RASM of $0.127. Unit costs decreased by 6.3% compared to Q4 2022, mainly driven by a lower jet fuel price and lower sales and distribution costs. Excluding fuel, unit costs or CASM-Ex came in at $0.06, a 1.6% decrease compared to Q4 2022. Our operating margin for the quarter came in at an industry-leading 23.9%. For the full-year 2023, passenger traffic increased 15.7% compared to 2022 while our capacity grew by 13.4%. As a result, our load factor for the year increased 1.8 percentage points to 86.8%. Unit revenues or RASM increased 3% year-over-year to $0.125, driven by a 1.6% increase in passenger yields and the 1.8 point increase in load factor mentioned before. CASM-Ex fuel came in at $0.06, 0.3% below 2022, and operating margin for the year came in at 23.5%. Regarding our network, in 2023, we started serving four new destinations: Austin and Baltimore in the U.S., Manta in Ecuador, and Barquisimeto in Venezuela. With these additions, we now serve 81 destinations in 32 countries in North Central South America and the Caribbean, as we continue strengthening and solidifying our position as the most complete and convenient connecting hub in Latin America. We're able to significantly increase passenger sales through both our copa.com and direct channels and our new lower-cost NBC travel agency channel, and are glad to share that as of today, more than 75% of our total sales are sold via these channels, considerably lowering our distribution cost and reducing our dependency on the traditional GDS channels. To put it in perspective, prior to the launch of our new distribution strategy in September 2022, the percentage of sales through our direct channels was only around 40%. On the operational front, Copa was recently recognized by Cirium for the 9th time as the most on-time airline in Latin America in 2023. In fact, according to Cirium, Copa's on-time performance of 89.5% was once again the highest of any carrier in the Americas and among the highest in the world. Additionally, last year Copa Airlines received multiple recognitions, such as from SkyTrax for the eighth consecutive year as the Best Airline in Central America and the Caribbean, from APEX, which qualified Copa as a Five Star Major Airline, and from Condé Nast Traveler, which included us as part of the top 15 major international airlines in the readers' choice awards for 2023. Turning now to Wingo. During 2023, Wingo focused more on its capacity to domestic markets with the start of six new routes in Colombia from Bogota to Barranquilla, Pereira, and Bucaramanga from Medellin to Cartagena, Santa Marta, and in Panama from Panama City to David. Internationally, Wingo launched two new routes during the year, from Bogota to Caracas, Venezuela and a seasonal route from Cali to Aruba. With these additions, Wingo currently operates 37 routes with service to 23 cities in 11 countries. Now I'll go over our expectations for 2024. As you already know, the grounding of 21 of our 737 MAX 9 following the airworthiness directive issued by the FAA impacted our operations from January 6 to January 29. This unexpected disruption forced us to cancel around 20% of our daily flight schedule, which represented more than 1,700 flights. I'm glad to share that thanks to our team's hard work, commitment, and dedication, we were able to take care of our passengers in the best possible way and, once approved by the FAA, promptly returned to operations the grounded planes in a safe and reliable manner. Boeing has been and continues to be an important partner for Copa, and we remain committed to our relationship in the long-term. Nonetheless, we hold them accountable for the grounding and its impact on our passengers and our financials, for which we expect to be fairly compensated. Aside from the impact of the grounding on our Q1 2024 financial and operational results, it seems that this year's 737 MAX deliveries are likely to be further delayed, reducing our estimated capacity growth for the year to approximately 10% from our original expectation of between 12% to 14%. Going forward, we continue to see a healthy demand environment in the region as we again expect to deliver strong financial results in 2024. Continuing with our network growth plans, this week, we announced three new destinations that will start to operate this summer: Raleigh-Durham in the U.S., Florianópolis in Brazil, and Tulum in Mexico. With these additions, we will reach 81 destinations in 32 countries, as we continue to solidify our leadership position as the hub with the most international destinations in Latin America. We believe our business model is as 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 industry-leading results. To summarize, we delivered industry-leading first quarter and full-year financial results while continuing to grow capacity. We continue to deliver on our cost execution strategy and strengthen our network as the most complete and convenient hub for travel in the Americas. We also 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. Now I'll turn it over to José, who will go over our financial results in more detail.

José Montero, CFO

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 while handling the MAX 9 grounding in the best way possible, and of course, for keeping our passengers and our co-workers safe. Their commitment is key to our success as a company. I will start by going over the main highlights for the full-year 2023. Our load factor increased year-over-year by 1.8 percentage points to 86.8%. Unit revenues improved by 3% versus 2022 to $0.125, mainly driven by a 16% reduction in the average price of jet fuel. Our unit cost came in at $0.096, a 7.1% reduction versus 2022, while our ex-fuel unit costs came in at $0.06 or 0.3% lower year-over-year. As a result, our operating margin for the year was 8.3 percentage points higher than in 2022 at 23.5%. Reported net income for the full-year 2023 came in at $518.2 million, which translates to earnings per share of $12.89, excluding special items, namely a $156.9 million net charge related mostly to the settlement of the company's convertible notes, which we closed during the third quarter. Adjusted net income came in at $675.1 million or adjusted earnings per share of $16.79. Now, turning to our fourth quarter results, we reported a net profit for the quarter of $191.8 million or $4.55 per share. Excluding special items, our adjusted net profit came in at $188.4 million or $4.47 per share. The fourth quarter special item consisted of a $3.4 million unrealized mark-to-market gain related to changes in the value of financial investments. We reported a quarterly operating profit of $218.9 million and an operating margin of 23.9%. Capacity came in at 7.2 billion available seat miles, or 11% higher than in Q4 2022. Our load factor came in at 86.7% for the quarter, a 0.1 percentage point increase compared to the same period in 2022, driven by a 7.1% decrease in yields year-over-year. Unit revenues came in 7.3% lower versus Q4 2022 at $0.127, mainly driven by lower jet fuel prices. Unit costs, or CASM, decreased to $0.097, or 6.3% lower year-over-year. Our CASM excluding fuel came in at $0.06, a 1.6% decrease versus Q4 2022, mainly driven by lower sales and distribution costs due to a higher penetration of both direct sales and the lower-cost NBC travel agency channels. I'm going to spend some time now discussing our balance sheet and liquidity. As of the end of the fourth quarter, we had assets with close to $5.2 billion. As to cash, short and long-term investments, we ended the quarter with over $1.2 billion, which represents 34% of our last 12 months' revenues. 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, during the fourth quarter, we received three Boeing 737 MAX 9s. With these additions, our total fleet is now comprised of 68 737-800s, 29 797 MAX 9s, and 9 737-700s. These figures include one 737-800 freighter and the nine 737-800s operated by Wingo. As for our 2024 fleet plan, as Pedro mentioned in his remarks, deliveries will likely be further delayed in the year. Therefore, we are embedding in our capacity guidance a preliminary figure of 11 aircraft deliveries for the year 2024. Our current fleet plan calls for receiving three 737 MAX 9s and eight 737 MAX 8s to end the year with a total of 117 aircraft. We have already secured JOLCO financing for nine out of these 11 expected deliveries in 2024. Turning now to the return of value to our shareholders. I'm pleased to announce that our Board of Directors has approved a dividend payment in 2024 of $1.61 per share per quarter to be paid in the months of March, June, September, and December, subject to Board ratification each quarter. I'd like to highlight that the 2024 dividend payment represents a significant increment year-over-year versus the dividend paid during 2023. The first quarterly payment will be made on March 15 to all shareholders of record as of February 29. As to our outlook, we can provide the following guidance for the full-year 2024. We expect to increase our capacity in ASMs by approximately 10% year-over-year and we expect to deliver an operating margin within the range of 21% to 23%. We are basing our outlook for the year 2024 on the following assumptions: load factor within the range of 86% to 87%, unit revenues within a range of $0.122, CASM-Ex fuel to be in the range of $0.06, and we are expecting an all-in fuel price of $2.85 per gallon. Our 2024 full-year guidance includes a financial impact from the grounding of 21 of our MAX 9 aircraft, which took place between January 6 and January 29. Additionally, it accounts for a current estimate of the full-year capacity impact due to the MAX 9 grounding coupled with anticipated further aircraft delivery delays throughout the year. It's important to note that our preliminary capacity guidance of approximately 10% is subject to adjustments, pending changes in the aircraft delivery schedule for the remainder of 2024. Thank you. And with that, we're open the call for questions, if we're still here, hopefully.

Operator, Operator

Thank you. Our first question today will be from Savi Syth of Raymond James. Your line is open.

Savi Syth, Analyst

Hey, good morning. I just kind of curious on the trend you're seeing on the premium seating side versus economy compared to 2019. I know you've talked in the past about a lot of ULCC growth in the region, but I think the kind of the mix has changed. And so, curious what you are seeing on premium versus economy fares and revenue trends.

José Montero, CFO

Savi, I would say that in general terms, the entire trend of RASM, we're still seeing a very healthy demand environment in the region. However, when you split it down, I think that still we're seeing in the data that we have of customers that are traveling for business purposes that it's still somewhat lower than where it was back in 2019, but it certainly has been supplemented by the other source of travelers that were transporting leisure and VFR. There's also business and leisure that has also been supplementing the business travel that we've seen since the pandemic.

Pedro Heilbron, CEO

And the front cabin is still doing better year-over-year. So it's doing better than a healthy 2022 or it did better in 2023.

Savi Syth, Analyst

Interesting. Thank you and I apologize if I missed this, but how much of the share buyback have you done? And any thoughts on just cash flow this year in terms of what you need for CapEx versus other uses?

José Montero, CFO

Sure. No. Look, Savi, during the fourth quarter we had some activity in the buyback program, but with the MAX situation in January, our priority was mostly in making sure that we got the fleet back in the air. But for the year, we expect our cash flow to be able to sustain the dividend and for us to continue buying shares in the $200 million program that we have that is active.

Savi Syth, Analyst

Thank you.

José Montero, CFO

We have already financed our aircraft 100% through JOLCOs. For maintenance CapEx and similar expenses, we're looking at a range of 150 to 180. Therefore, the cash flow for the year will definitely cover all of our uses of cash.

Operator, Operator

One moment for the next question. And our next question will be coming from Rogerio Araujo of Bank of America. Your line is open.

Rogerio Araujo, Analyst

Yes. Thank you everyone for the opportunity and congratulations on the results. I have a couple of questions. The first is regarding the guidance provided last quarter. During that call, you mentioned that the guidance would be influenced by external factors, including fuel prices and competitor capacity. Since fuel prices have remained stable, can you discuss how competition has developed with new routes and the level of aggression from other players? I'm particularly interested in whether the robust margin guidance reflects any capacity expansion from competitors or if the competitive landscape is not as intense as anticipated. That's my first question. Thank you.

Pedro Heilbron, CEO

Yes. Competition is as expected. It hasn't changed from what it was when we gave preliminary guidance a few months ago. Overall, if we put all the competition together in Latin America, the numbers are above what we're growing ourselves. It's going to be like we're saying, 10% capacity growth. The competition altogether is probably growing somewhat mid-double digits, 50% above that. And again, it varies a lot depending on the airline, but that's the same we were seeing before. So there hasn't been any change there and it is included in our guidance for the year.

Rogerio Araujo, Analyst

Okay. Sounds perfect. Thank you. And my second question is regarding margin sustainability. Copa has been operating at a higher margin than historical levels. One of the reasons is the cost reduction. That seems to be sustainable. But maybe the question is, is there any reason to believe that the industry in the region is also more profitable than pre-COVID or that a margin normalization is to be expected at some point in time? So what do you guys think about this current higher margin sustainability going forward for Copa? Thank you.

Pedro Heilbron, CEO

So, of course, we're only guiding for 2024 and we're keeping our margin guidance quite high. I would agree that the industry in Latin America is more profitable right now than pre-pandemic. We've always run a very lean and competitive airline, and even more so today than what it was before. We have controlled our distribution costs and actually reduced them significantly with our direct strategy, our direct connect strategy. So that's been significant. We're also more competitive overhead-wise and taking advantage of the growth in ASMs. And I would say that other airlines in the region, in their case maybe through Chapter 11 and the like, they are also more competitive and are also producing better results overall.

Rogerio Araujo, Analyst

Okay. Fair enough. Thank you very much. Congratulations again.

José Montero, CFO

Thank you, Rogerio.

Operator, Operator

Thank you. One moment for our next question. And our next question will be coming from Helane Becker of TD Cowen. Your line is open.

Helane Becker, Analyst

Thanks very much. And I have two questions. One is, I noticed that you guys said you were thinking about or had announced Raleigh-Durham as your next U.S. City. And I'm wondering what the attraction of that market is. Like how did you pick that market versus other markets that might have had more demand, or is the demand there really high?

Pedro Heilbron, CEO

Hi Helane, we have a solid history of selecting markets, and I'm not trying to boast, but out of all the new markets we've entered in the last 30 years, there are only two where we don’t currently operate, apart from those routes we haven't restarted since the pandemic. Although we have some markets that remain inactive from before the pandemic, we have a strong record overall. Raleigh-Durham is located in an underserved region of the Southeast U.S., which is experiencing growth. The area is seeing an increase in the ethnic Latin American population and has economic development. We believe it's a market that isn't well served, and we will be offering the first direct flight from Raleigh-Durham to Latin America, which distinguishes us and positions us for success in such markets.

Helane Becker, Analyst

Thank you, Pedro. I appreciate your insights. My other question is about the dividend. The increase is significant, and I understand you typically aim to pay out around 40% of adjusted pre-tax earnings. Did you or the Board consider a smaller increase that could be adjusted later in the year? I'm curious about the decision-making process behind such a substantial increase. Not that I'm complaining, it truly is a large jump.

José Montero, CFO

Our policy is to distribute 40% of the previous year's adjusted net income. The Board engaged in a thorough discussion regarding this matter. Ultimately, this approach delivers value to our shareholders, which is a key way many of them benefit from our company. Therefore, it's a significant part of our value proposition. This is the company's policy.

Pedro Heilbron, CEO

And we believe this is important in relation to value.

José Montero, CFO

Cash-wise and cash flow-wise, the generation of cash that we expect to have sustains this, plus the growth of the company, which is the other source of the use of cash. Of course, it's in continuing to grow the business.

Helane Becker, Analyst

That's very helpful. Okay. Thanks, team. Have a good day.

Pedro Heilbron, CEO

Thanks, Helane.

Operator, Operator

Thank you. One moment for the next question. And our next question will be coming from Pablo Monsivais of Barclays. Your line is open.

Pablo Monsivais, Analyst

Hi, thanks for taking my question. I have a quick question in terms of the demand and the macro environment. To what extent do you think that the strong local currencies have helped in demand to be so resilient? And of course, if you think that a weaker FX might be a headwind, given that the central banks in the region might lower interest rates this year. I just want to pick your brain on how do you see the FX and its direction versus the demand environment for Europe. Thank you.

Pedro Heilbron, CEO

Yes. Hi, Pablo, it's been a positive, of course, in terms of generating more traffic, let's say, from South America growing north. However, we're well-positioned and very well diversified. And if the currency was to weaken in Latin America, meaning a stronger dollar, then I guess we would pull more traffic from the U.S. and more tourists and visitors from the U.S., which are still a growing market with a lot of interest to serve our region. So we sit in the middle of the two trends, and we think one balances the other. We have been able to succeed with strong and not so strong currencies.

José Montero, CFO

And I would say, after the pandemic, the traffic flows that we've seen are much more balanced, Pablo. So I think that has helped in mitigating the impacts of currency fluctuations.

Pablo Monsivais, Analyst

Perfect. Interesting to hear. Thank you.

Operator, Operator

Thank you. One moment for the next question. And our next question will be coming from Michael Linenberg of Deutsche Bank. Your line is open.

Michael Linenberg, Analyst

Yes. Good morning, everyone. Just approximately quantifying the impact of the MAX 9 grounding on the March quarter. You could provide me with margin points or estimated dollar amounts. Additionally, should we expect to receive some form of offset from the OEM over time, as is typically the case?

José Montero, CFO

Mike, look, we're not going to get into the financial details of the MAX impact at this time. There's a pending negotiation with Boeing. However, we do expect to be fully and fairly compensated.

Michael Linenberg, Analyst

Okay.

José Montero, CFO

The guidance that we issued includes sort of the, let's say, negative impact of the grounding of the aircraft during the month of January and of the delays that we expect as of now for the rest of the year. The issue with Q1 is that we don't really publish per quarter guidance, so we'll have to leave it at that for now.

Pedro Heilbron, CEO

And I would add, Mike, that January is one of our strongest months of the year, if not the strongest month. So this happened in the middle of such an important month for us, which is a good and a bad, of course. So it's a significant lost opportunity, not having 20%-plus of our capacity during that month, but at the same time, it's a strong month. So the other 80% does very well.

José Montero, CFO

Yes.

Michael Linenberg, Analyst

Should I take from what you've said, though, you've incurred all of the badness, but any sort of potential offset, José, as you sort of alluded to, being fully compensated, that is not in the quarter, right? Any sort of offset that you would get over time.

José Montero, CFO

It is not in any of our figures.

Michael Linenberg, Analyst

That's perfect. Okay. That actually clarifies that. And then my second question, this is kind of an easier one, I guess Wingo, nine airplanes, but now that you're only going to take 11 instead of 15, I guess Wingo is probably likely going to stay at nine. Or is Wingo going to see some growth this year anyway? Any color on that? And thanks for taking my questions.

Pedro Heilbron, CEO

Yes. It seems that for now, Wingo is going to stay as is this year. I think you put it very well. It's going to be a difficult year in terms of having additional capacity or planes available, even though their markets are doing quite okay.

José Montero, CFO

Thanks, Mike.

Operator, Operator

Thank you. One moment for the next question. And the next question will be coming from Stephen Trent of Citi. Your line is open.

Stephen Trent, Analyst

Good morning, gentlemen, and thanks very much for the time. I was curious on the first question, if you guys sort of have any broad geographical color on what might be happening to demand, given what we're seeing from some of the U.S. airlines. I know there's been some unrest in Ecuador and maybe you're not much affected by that at all, but we just love to get the high-level view on that. Thanks so much.

Pedro Heilbron, CEO

Okay. So, I mean, we are affected by what happens in Ecuador and in other countries, maybe not to an extreme level, because most of our market in and out of Ecuador is VFR and is business and it's not that much leisure. So that kind of helps because leisure, as we know, is the one that first stays away when there are disturbances and things like that, which is what has happened in Ecuador. So there is an impact, but not that significant. Overall, most markets in Latin America are okay in terms of our market and where we do our business. Of course, some are always stronger, many are stable; a few might be weaker. So I would say there's nothing specific to highlight besides the fact that we never give out like very specific details on regional demand.

Stephen Trent, Analyst

Very helpful color, Pedro. I appreciate that. And just one more for my follow-up. When we look at Gol and Brazil having some financial issues, I'm assuming this really doesn't have much of an impact on you guys at all, given I think you may do some sort of limited code share with them, but does it create opportunities to the extent that gives any pullback from them on the international side? Maybe it's not much of a look for you guys.

Pedro Heilbron, CEO

Yes, it doesn't really have much impact either way. But we do code share with Gol in Brazil and we also have a frequent flyer relationship reciprocity. So Gol operating in a complete and healthy way is positive for us and we expect that to be the case, but we're not direct competitors, so with basically no overlap, so there's no impact from that side.

José Montero, CFO

Not much overlap.

Pedro Heilbron, CEO

Yes, there's basically no overlap, so there's no impact from that side.

Stephen Trent, Analyst

Okay. Super helpful, gentlemen. Thanks so much.

Pedro Heilbron, CEO

Thank you, Steve.

Operator, Operator

Thank you. One moment for the next question. And our final question for the day will be coming from Bruno Amorim of GS. Your line is open.

Bruno Amorim, Analyst

Hi, thank you for taking my question. I have a follow-up on the outlook for this year regarding the guidance, specifically about the pricing environment. You are guiding for unit revenues to be somewhat below what we experienced in the fourth quarter. Even when considering seasonality, it appears you are predicting lower unit revenues this year compared to the end of 2023. I would like to understand the reasoning behind this. Is it due to slight pressure from competition, or are you adopting a conservative approach? What leads you to conclude that unit revenues will decrease, even if only slightly, this year? Thank you very much.

José Montero, CFO

Yes, Bruno, I would say there are three main components. Most of this is related to the MAX grounding. The $0.122 RASM guidance includes the effects from January 2024. Additionally, the length of haul for 2024 is expected to be slightly higher than in 2023, which has a minor impact. Furthermore, we are in a lower fuel environment compared to 2023 in a competitive landscape, and we are experiencing double-digit growth for the full year. So, there is a small impact there. However, I would emphasize that the majority of the RASM impact, when comparing year-over-year, is primarily due to the MAX effect included in the 2024 guidance.

Bruno Amorim, Analyst

Thank you. May I just ask for a quick follow-up? Can you please clarify how would the MAX groundings affect unit revenues? And couldn't we also think of more groundings and eventually more delays on the production of new aircraft, which was kind of the marginal news over the past few months to be kind of a positive from capacity or supply and demand dynamics?

Pedro Heilbron, CEO

I'll start, and then José will discuss the unit revenue aspect. Our guidance includes the expectation of further delivery delays because of the MAX grounding. We anticipate receiving a few MAX 9 this month, but the timing is uncertain. We're also expecting delays with the MAX 8 aircraft we are scheduled to receive this year. We have lowered our delivery expectations from what we initially projected to 11 deliveries this year. However, there is still a risk of additional delays, so that situation remains uncertain.

José Montero, CFO

Yes. And Bruno, in terms of the impact on RASM is because we had to close out flights, we had to cancel flights, and we were not able to sell the last remaining seats on many of our flights because we had to re-accommodate passengers. So that's where that impact occurs in a month that is very strong for us.

Bruno Amorim, Analyst

That makes sense. Thank you very much.

Operator, Operator

Thank you. One moment. This concludes the Q&A session. I would like to turn the call back over to Pedro for closing remarks.

Pedro Heilbron, CEO

Thank you very much for joining us on this call. I want to recap a few key points regarding Copa's performance and our high operating margins. We received several questions from you about our margins and performance, so I want to highlight some important aspects. We are a full-service carrier with very low CASM-Ex, a result of many years of hard work and dedication. This hasn’t happened overnight; it has taken significant effort over the years. We're constantly innovating, and recently, we've made strides in reducing our distribution costs, particularly with GDS costs that were once a burden. Now we have better control over our sales channels at more competitive prices, which enhances our margins. We also maintain a strong and efficient network that we continue to strengthen, offering a reliable product that customers prefer, with the best on-time performance across the Americas. On the revenue front, our ancillary revenues are growing thanks to the right technology, much of which we developed internally. This positions us well to navigate the industry's fluctuations and achieve ongoing success. As Duane mentioned, we don’t need to focus on long-term projections, but for the next few years, we are in a strong position. This wraps up our earnings call. Thank you for your continued support. Have a great day, and we look forward to seeing you next time. Thank you.

Operator, Operator

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