Copa Holdings, S.A. (CPA) Q2 2011 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to Copa Holdings' Second Quarter 2011 Earnings Call. [Operator Instructions] As a reminder, this call is being webcast and recorded on August 4, 2011. Now I would like to turn the conference over to Mr. Joe Putaturo, Director of Investor Relations. Sir, you may begin.

Thank you very much, operator, and welcome, everyone, to our second quarter earnings call. Joining us today are Pedro Heilbron, CEO of Copa Holdings; and Victor Vial, our Chief Financial Officer. First, Pedro will start with our second quarter highlights, followed by Victor who will discuss our financial results. Immediately after, we'll open the call for questions from analysts. We kindly request if you could limit yourself to one question with a brief follow-up so we can accommodate all questions. Copa Holdings' second quarter financial results have been prepared in accordance with International Financial Reporting Standards. In today's call, we will discuss non-IFRS financial measures. A reconciliation of non-IFRS to IFRS financial measures can be found in our second quarter earnings release, which has been posted on the company's website, copaair.com. In addition, our discussion will 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 that are subject to change. Many of these risks and uncertainties are discussed in our annual report filed with the SEC. Now I'd like to turn the call over to our CEO, Pedro Heilbron.

Thank you, Joe, and good morning, everyone. I'm glad you could join us this morning for our second quarter earnings call. As always, my gratitude and recognition goes out to our co-workers for delivering a very strong second quarter, one in which our operating revenues grew more than 40% and in which we delivered an operating margin of 17.6%. Especially, I would like to thank all those who were involved in making our recent transition to a 6-bank hub, a huge success. Congratulations on a job well done. Among the main highlights for the quarter, demand continued on a very positive trend with passenger traffic increasing 28% for the quarter. Our consolidated load factor came in at a very healthy 76.3%, even more so when you take into account our year-over-year capacity growth, which was about 20%. On top of that, we saw a very healthy revenue environment as both yields and RASM were significantly higher year-over-year, even with a substantial increase in our average length of haul. This very strong revenue performance along with a slight year-over-year reduction in ex-fuel CASM allowed us to deliver record second quarter revenues and earnings, as well as one of the best operating margins in the industry. On the operational front, we had a very eventful quarter highlighted by our transition on June 15 from a 4-bank to a 6-bank hub operation. The transition to a 6-bank hub marks a major milestone in our operation and will give us significant advantage over our competitors by providing our passengers with more and better flight options, by permitting significant schedule improvements to major destinations in North and South America and by allowing us to better utilize the Tocumen Airport infrastructure, personnel and equipment by spreading our operations throughout the day. The launch of our 6-bank hub was also timed to coincide with the beginning of our 2011 expansion plan as we launch service to 4 new cities: Toronto, our first Canadian destination; Porto Alegre and Brasilia, increasing our Brazilian destinations from 4 to 6; and Nassau, our 11th city in the Caribbean. In addition to these new destinations, we added frequency to several important cities, including Bogota, Rio de Janeiro, Miami, Mexico City and Santiago. In short, we have strengthened our Hub of the Americas, the leading hub for intra-Latin American travel. And this will continue in December when we expand service to 3 new additional destinations: Chicago; Asuncion in Paraguay; and Cucuta, Colombia and increase frequencies to even more cities. By year's end, our network will serve 57 cities in 28 countries in the Americas, by far the most complete and convenient network for intra-Latin American travel. Also, on the operational front, during the quarter, in April, we took delivery of one Boeing 737-800. As a result, our fleet at the end of the quarter stood at 66 aircraft, 40 Boeing NG's and 26 Embraer-190s with an average age of less than 5 years. In July, we took delivery of our fourth 800 this year, with 6 more deliveries scheduled before year end to end 2011 with a fleet of 73 aircraft. For the quarter, Copa Holdings reported on-time performance of 89.2% and a flight-completion factor of 99.2%, which once again places us among the best in the industry and South and Latin America. In short, we had a great quarter financially and operationally and are very encouraged with demand trends and the strength of business travel in our region. As a result of our strong first half and a positive outlook for the rest of the year, we're projecting higher unit revenues, which should help us mitigate the impact of higher fuel costs. The outlook for the region, and for Panama in particular, continues to be very positive. As a whole, the region's GDP is expected to grow close to 5% in 2011. In addition, Panama is expected to have another year of outstanding economic growth, forecasted to come in between 8% and 9%, as our country consolidates itself as one of the most important trade and business hubs in our region. We believe the economic environment is very favorable, especially in light of our expansion plans, which calls for more than 20% capacity growth this year and similar growth next year. The continued expansion of our operations will be facilitated by the conclusion of the Tocumen Airport north terminal expansion in the fourth quarter of this year. The north terminal would add 12 new jet bridges to an already superior airport infrastructure and along with our 6-bank hub, would allow us to execute our planned growth for several years. The new gate will reduce our current use of remote positions and new taxiways, ramp and support areas will expedite the flow of aircraft. The expanded and more efficient airport and other product-driven initiatives, such as the introduction of the Boeing Sky Interior in all of our new deliveries, the expansion of our Panama Presidents Club and the launch of new PClubs in Santo Domingo and Guatemala City, the recent introduction of our mobile website and electronic boarding passes and our expected entrance into a Star Alliance by April next year, are all part of our efforts to improve our passenger experience and consolidate our leadership as the preferred airline for intra-Latin America travel. To summarize, we're very pleased by our second quarter results, especially the successful launch of our 6-bank hub. Our demand and revenue outlook for the second half are very positive, supported by a healthy regional economic environment, which should allow us to do well even with higher fuel costs. And finally, we're driving the necessary initiatives to maintain the loyalty and preference of our passengers. That said, we feel we're very well positioned to take advantage of opportunities ahead. We're all continuing to deliver world-class results. Thank you, and now I would turn it over to Victor, who will go over our second quarter results and full year guidance in more detail.

Thank you, Pedro, and good morning, everyone. Thanks for joining us today. First, thanks again to the whole team for their efforts and hard work, and congratulations on another great quarter. This morning, we're reporting a 40% year-over-year increase in net earnings for the second quarter, as consolidated net income came in at $41.3 million. Excluding a $15 million fuel hedge mark-to-market loss, underlying net earnings came in at $56.6 million, or EPS of $1.28, for a 53% increase over last year's adjusted net income of $37 million. We had another quarter of strong growth as we added another aircraft to our fleet, 4 new destinations to our network and more frequencies to key markets resulting in 23% growth in available fleet [ph] miles. With respect to traffic, second quarter traffic growth outpaced capacity growth as revenue passenger miles increased more than 28% year-over-year, leading to an increase of 3.2 percentage points in consolidated load factor, which came in at 76.3%. In addition, yields increased more than 11% year-over-year, contributing to a 16% increase in unit revenues or PRASM as we continue to be successful in our efforts to manage base fares and fuel surcharges in order to offset higher fuel prices. Strong capacity growth together with rising yields and load factors resulted in strong revenue growth with operating revenues climbing 41% year-over-year to $428 million. On the expense side, second quarter operating expenses increased 36% year-over-year while cost per available seat mile increased 10%. However, excluding fuel, unit cost decreased close to 1% year-over-year to $0.069, mainly as a result of capacity growth and a 9% increase in average stage length. With respect to our main operating expenses compared to the second quarter of 2010, fuel expense increased 65% as a result of increased capacity and a 38% rise in the effective price per gallon of jet fuel, including a $9.7 million realized hedge gain in Q2 '11 versus a realized hedge gain of less than $1 million in Q2 '10. Salaries and benefits increased 24%, mainly due to additional headcount to support capacity growth. Passenger servicing increased 26%, mostly as a result of an increase in passengers carried. Commissions increased 30% for the most part due to a higher passenger revenue base. Reservations and sales increased 28%, the main driver being an increase in passenger revenue. Maintenance, materials and repairs increased 38%, mostly as a result of capacity added and more engine events during the quarter. Depreciation increased 21%, mainly due to additional aircraft and fares. Flight operations, landing fees and rentals increased 10% as a result of additional departures. And other operating expenses decreased $1.5 million. Moving on to operating earnings. Consolidated operating earnings for the second quarter came in at $75.4 million, approximately 73% above Q2 '10, with our operating margin coming in at 17.6%, 3.2 percentage points above last year's second quarter operating margin when our effective cost of jet fuel was 38% lower. Looking at non-operating income and expense, Q2 generated a net non-operating expense of $24.4 million, mainly consisting of a net interest expense of $6.2 million and a $15 million fuel hedge mark-to-market loss. With respect to our fuel hedges, during the second quarter, we had 26% of our volume covered, approximately 2/3 of which was through jet fuel swaps at an average of $2.09 per gallon and another 1/3 covered with crude oil swaps at an average of $79 a barrel. In addition, we currently have in place the following coverage: for the third quarter of this year, approximately 22%, 1/3 of which was covered using jet fuel swaps at an average of $1.83 a gallon and 2/3 using crude oil swaps at an average of $87 a barrel; for the fourth quarter of this year, approximately 19% has been covered, 60% of which was covered through crude oil swaps at an average of $84 a barrel with the remainder being covered using jet fuel swaps at an average of $1.83 a gallon; and with respect to next year, we currently have hedges for 10% of our projected consumption at an average equivalent price in the range of $87 a barrel. Now turning to our balance sheet. We ended the quarter with $2.8 billion in assets, owners equity reached $1.2 billion, debt plus capitalized leases totaled approximately $1.4 billion and our debt to equity ratio currently stands at 0.9x, about half of what it used to be just 5 years ago. In terms of debt, we closed the quarter with $1 billion in bank debt, 54% of which is fixed rate debt with a blended rate, including fixed and floating rate debt, coming in just below 3%. With respect to cash, we closed the quarter with $456 million in cash, short-term and long-term investments, which is approximately 29% of last 12 month's revenues. Ample cash will continue funding our expansion plans. So to summarize, we grew capacity in terms of ASMs 23% year-over-year. We added frequencies to key markets, added 4 new destinations to our network and transitioned our operation in Panama to a 6-bank hub operation. We have the balance sheet and liquidity to continue funding our growth and most of all, as always, our team continues to deliver a world-class product. In terms of our full year guidance, given our performance during the second quarter, the economic outlook in the region and air travel demand trends, we are updating our guidance as follows: we are increasing our capacity forecast from plus or minus 20% to plus or minus 21%; we're also increasing our load factor guidance from plus or minus 74% to plus or minus 75%; we are raising our RASM guidance approximately 4% from plus or minus $0.132 to plus or minus $0.137 to reflect higher expected yields and load factors; we're also raising our CASM ex-fuel guidance from plus or minus $0.066 to plus or minus $0.067 in order to reflect costs related to generating increased revenues as per our new RASM guidance; with respect to fuel, we're now assuming for the year an effective price per gallon, including into plane and narrow hedges of approximately $3.25 compared to our previous assumption of $3.19 per gallon; and with respect to our operating margin, we are revising our guidance from a range of 18% to 20% to a new operating margin guidance of a range of 19% or 21%. Thank you. And with that, I'll turn it over to Pedro for closing remarks.

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

[Operator Instructions] Our first question is from Jim Parker of Raymond James. James Parker - Raymond James & Associates, Inc.: Pedro, Victor and Joe, I was very pleasantly surprised with the strength in your unit revenue. I'm curious, and of course that's in the seasonally weakest quarter of the year, I'm curious if you were surprised with that?

Well, as you know, we see things a little bit ahead of time. So we have advanced bookings and so we have some visibility into the very near future. So we were not overly surprised, and we have seen how Latin America and our markets in particular have continued to strengthen this year. But maybe, if we had talked 6 months ago, then we would've been a little bit more surprised. James Parker - Raymond James & Associates, Inc.: Now are you seeing that this strength in the second quarter is continuing? And perhaps not, because you're actually suggesting that the load factor in the second half of the year may be down?

This is the Victor, Jim. I think you need to consider the fact that the heavy growth, in terms of ASM, is actually is ahead of us. It's coming in the second half of the year. It's a little bit distorting when you look at quarterly ASM growth year-over-year because if you remember last year, the heavy growth came in the second half. So you're comparing against a higher base. In the third quarter of this year, we're actually growing 10% ASMs versus second quarter. And in the fourth quarter of this year, we're growing another 5% the third quarter. So considering that, we do believe that you have to reflect that load factor guidance that, based on the consideration. However, our RASM guidance for the year is up 4% versus what we gave you before. And if you look at RASM by quarter, for third or fourth quarter, it's not that different. It's a little bit higher than actually what you saw in the first and second quarter of this year, if you do the numbers. So I think the short answer is we expect demand to remain strong but you do have a lot more capacity being deployed in the second half of the year.

Our next question is from Nic Sebrell of Morgan Stanley.

I was hoping you'd talk about the fleet a little bit. Obviously, with 20% plus growth this year and slowly getting visibility to next year, I mean, we know what your fleet plan looks like, but you've been surprisingly upside. So thinking about any follow-on orders to the 737, A, do you see any opportunity next year that you might have to raise the fleet plan? Maybe not for next year but in out years? And B, what do you think about the announcement that Boeing made of re-engining the 737 associated with the American order? Yes, I know, probably there's limited things you can say, but in as much as we can understand, how you feel about a new engine versus a new design versus another option?

This is Pedro. Well, first, Nic, here we're taking delivery of 13 aircraft, and we're planning to return 3 leased aircraft. So that's a net of 10. We'll be at the same net number at this year. After that, we have a similar number in 2013, and that number comes down a little in 2014 and 2015. So we see markets behaving the way they have up to now. There's always a possibility that we could lease additional aircraft for 2013 and beyond to supplement what we have on order. But we have an interesting number of firm orders and options for those years. But we could supplement it with leases, 2013 and beyond, not for next year. With 13 delivers next year, we are okay. In terms of the new Boeing aircraft, well, we need something starting in 2018 and beyond. I mean, we have lots of options in 2018. We have nothing ordered after 2018. So as of 2019, we will need to order new aircraft. And we're obviously very interested in any new development. But we do not know enough right now about that new Boeing aircraft. We're going to be meeting with them in the coming weeks, and we hope to gather enough information to be in a position to make a decision. I don't know if it's going to happen overnight but again, we still need to learn a lot more about this aircraft. And yes, we're an interested party.

Do you think there's any opportunity for you to impact any design changes or updates in the aircraft? Obviously, you're a significant customer?

We definitely think so. Not only from the standpoint of being a significant customer but also given how we operate the aircraft. We basically operate the 737 NGs to kind of its maximum performance limit. So we have particular needs that will be of interest, I think. They are of interest to us and to Boeing. So the signals we have received is that yes, we could be having a significant role.

Our next question is from Duane Pfennigwerth of Evercore Partners.

Wanted to follow up to Jim's question on sort of seasonality, and is there something about the network that's changed that has de-seasonalized it?

This is Victor. Well, I guess your question arises from the fact that the second quarter came in so strong. I think it's hard to say. Generally speaking, the second quarter is always our low season, always has been our low season. I think in the future, it will probably be -- continue to be our low season. So we saw very strong demand in the second quarter, it's hard to say but -- whether next year, we'll see the same strong demand. Also you have to consider that the conference of last year is somewhat easy, because last year's second quarter was affected by Colombia and Aires, and it was rather soft. So it makes this quarter, the second quarter, look specially strong. So I don't think -- my short answer will be I don't think we have done anything structurally to de-seasonalize our patterns.

But what I would add to that is that in markets we serve, the base of business travelers, et cetera, has always led to a low, what we can call, a lower season quarter for our second quarter, but never a weak low season. I mean, we've always had positive numbers and double-digit operating margins even in our seasonally lower season second quarter.

Appreciate that. I'm thinking from the perspective of the implications for the rest of the year. And specifically, do you still expect what you normally see in terms of the seasonal uplift in revenue trends from 2Q into 3Q.

Okay, and this is Victor again, Duane. Yes, but I think you need to consider again what I mentioned earlier to Jim, that you have a lot of ASMs that are being deployed in the second half of this year. Part of it has to do with starting 4 new destinations. We added 4 new destinations to our network in June. So that's something we're going to have to carry for the next few quarters. New destinations take time to develop. We've been doing pretty well with recent years, but they are new destinations. We also have frequencies, several frequencies, to key markets that we added also in the second quarter, that you're going to see that develop during the remainder of the year. So you have that. Again, you need to consider. And then the fact that you are heading into a high season, which is the third quarter. And the fourth quarter is also pretty strong. And that's how we're coming up with our guidance we provided.

Our next question is from Ray Neidl of Maxim Group.

I'm just wondering, other sources of potential revenue that you can leverage off of this. You're expanding the Panama City airport quite aggressively, there's a lot of land around there. There's going to be another phase of growth, probably in 3 or 4 years, which I know you're going to participate in. Do you -- do you see any future participating in the development around the airports, such as new hotels, condos, office buildings? And secondly, I believe that Panama could be a prime location for an air freight terminal. Is there any thoughts about investing in a subsidiary that might move in that direction as well without affecting your main airline?

Okay. It's Pedro, Ray. We do expect a lot of growth and development in the areas you have just mentioned. Actually, the airport just purchased a large piece of land right next to it, which belonged to the government. However, we do not expect ourselves to be involved directly in those investments. I think we are going to continue to focus our resources and our time in developing the airline. But we know there's a lot of interest in developing hotels, convention centers, business parks, et cetera, around the airport. The airport is a government-owned corporation. It operates as an independent corporation, but it's government-owned. And they do have the flexibility to get involved in those projects, although they will probably do concessions or a similar arrangement. The cargo terminal is also interesting, and we think Panama has potential. But it's not our expertise. It's not what we do best. We have our resources taken up by the passenger side, and we think we're going to stay true to that vision.

Okay, great. One specific question on the company. You mentioned your fuel hedge positions, which are pretty light. I think when you were in New York a couple of months ago, you said that the hedges were less important, that you're more important strategy for controlling fuel cost was doing fuel surcharges, which are open in many of your markets, plus the fact that you want to keep the fleet modern. Is that pretty much the strategy?

That is pretty much the strategy, Ray. This is Victor. But we still have our hedging strategy that we think has been working just fine over the past 7, 8 years. So we're going to continue to enter into hedges and hedge up to 25% of the volume looking forward 12 to 18 months and then use the combination of swaps, using crude oil and jet fuel swaps. So we'll continue doing that. But, I think the fact remains that given demand trends and given the pricing environment, we feel less pressured to go much above that 25% level that I just mentioned. Because we do have the flexibility for our policy to go higher than 25% up to 50% on a discretionary basis.

Our next question is from Tais Correa with Goldman Sachs.

Joe, Pedro and Victor, actually looking to these revenue trends that you have been showing, I wonder if you could give more details on the pricing strategy? How do you see elasticity of demand to prices giving you increased yields by more than 10% year-on-year? We understand that was part of fuel-price surcharges strategy but going forward, how do you see if there is room for further increasing fares aside from fuel increases? Or even on a flip side, how much more do you think RPM can be extended through yield stimulus? Any way to further maximize rev by increasing load factors? Could you give more color on that, please?

Yes, it's Pedro. There's certainly a combination of factors influencing our improvement in unit revenues. Obviously, the price of fuel forces many to look at opportunities to improve unit revenues so it makes it easier for competitors to match price increases, which is not always the case. Also, we've had very strong demand throughout our markets. Demand allows you to implement better pricing and also to be more effective in revenue managing our capacity. So that combination of factors, I would say, is what has happened up to now, and we do not see that changing going forward, at least not for the rest of the year. We see a healthy demand environment. Hopefully, fuel will stabilize, but we are positive on what we're seeing right now.

[Operator Instructions] Our next question is from Michael Linenberg with Deutsche Bank.

Quick question here, just on the ramp-up of new cities. I mean, how has that changed given the growth of the hub? I mean, you've been much more active in adding new destinations, and I'm sure in the past, there are maybe initially losses that you incur. And so at times, you have to be somewhat -- you have to be somewhat modest in a number of new destinations. But it seems like you have picked up the rate of additions as the hub has grown. And I'm just -- I'm wondering if the ramp up is actually a lot faster today because the hub and spoke in Panama is much more robust as a connecting complex than what is was, even as recently as just a few years ago.

This is Pedro. If we look at our average of new destinations per year for the past 5 or 6 years, it's probably going to be around 5 per year or something like it. What happened is that in '09 and 2010, we didn't open any new destinations. We just opened St. Maarten at the end of 2010, nothing in '09. So again, one at the end of 2010 in 2 years. So we're kind of catching up. And we did that on purpose. After the '08 financial crisis, we decided to be on the conservative side, consolidate what we had opened in the previous 3 years where we opened around 15 new destinations. So we spent 2 years consolidating that. But we had some pent-up demand, some of the market we had been analyzing for a while. And also, there's strong growth in Latin America right now. So it's the right timing. So I would say it's that, more than anything. These are markets that we've been waiting to fly for a while, and it's just the time right now.

Okay, that's helpful. And then, just on my second question, can you just update us on maybe dynamics in the Colombian market? And when you look at your own business, where is your split today, domestic versus international, and sort of where do you think the Copa Colombia unit will be over the next 12 months in that regard?

Well, if you look at what we're doing right now and at our traffic figures for the quarter, we have reduced our domestic ASMs in Colombia and obviously increased international quite a bit. So that leaves us with kind of the following picture. We have a domestic presence, which is enough to serve our passengers, our frequent travelers, et cetera, but it's not a growing domestic presence. Again, it has actually shrunk a little. We're very strong in Colombia to hub Panama, so we've been adding cities at the end of the year, we have added frequencies. And we have a niche, a small niche, international operation out of Bogota. And we don't see that changing much in the coming months. I mean, Colombia is a very important market for us. Copa Colombia plays a key role. But again, it's going to be a small but reasonable domestic presence, a niche international operation and a very strong Colombia to Panama hub network. And yields are better in the domestic market, as you know. The country's doing okay. So we are satisfied with our positioning there.

Our next question is from Dan McKenzie with Rodman & Renshaw. Daniel McKenzie - Rodman & Renshaw, LLC: A glance at the schedule data suggests that incoming competitive capacity is greater in the back half of the year relative to the first half. And it looks like it's from both Avianca and Aires, or maybe I should call Aires, LAN, now. And I know your citing increased demand, but how confident are you that the increased demand can outstrip the competitive capacity? And I guess, in other words, does the revised outlook factor in what could be perhaps weaker pricing in a number of markets?

Where we are -- we have our niche, and we're staying there where our niche is. And so we have reduced domestic capacity. We have strengthened our Colombia to Panama hub service, and so we have actually moved away somewhat from the competition in the domestic market that Avianca or LAN are producing. So we do not -- we're not forecasting a negative impact on our yields or, in general, our Colombia revenues. And actually, we think we've made the necessary moves to avoid that.

Right. Dan, this is Victor. And again, if you look at our RASM guidance today, we increased RASM guidance by 4%. We do expect yields to remain strong. But don't forget that we also raised our projection vis-à-vis fuel prices from $3.19 per gallon to $3.25. So obviously, that's going to have an impact in the second half of the year. We'll have to see where fuel prices come in. Today, the prices were down, but they've kind of been up. So very tough to project fuel prices for the next 6 months, even for the next 2 months, but that's probably having an impact in your financial projections, higher fuel prices. But prices we do expect to remain strong. Daniel McKenzie - Rodman & Renshaw, LLC: Oh, okay. So it sounds like your -- kind of your network planning team has checked all the boxes here. But I guess, coming at that same question slightly different, is it because that 75% of your markets have 20 or fewer passengers each way that -- is that what's giving you confidence in the pricing backdrop and the ability to raise that pricing? Is it the fact that your -- I don't know, I don't want to say monopoly in 75% of your markets, but is that really as we think about the Copa business model, what's going to continue to drive margins as we look ahead?

Right now, I would say that it has more to do with the strength of the economies in Latin America and how we have a middle class that's growing and flying more. Business traffic, it's strong. It is more commerce among our countries. There's just a lot of economic activity in our region. And traveling, air travel, is very important in a continent that has no good roads and no good road connectivity, lack of train service, et cetera. So we are the way you do business in Latin America and we connect a bunch of countries that don't have a better option. So it's that combined with the strength of the economy.

And to add to that, that combined also with what we think is probably the most convenient hub in the region and a world-class product with superb on-time performance and great customer service. So you combine all that, you will get your passengers coming in and filling your planes at a decent fare. Daniel McKenzie - Rodman & Renshaw, LLC: Okay, I appreciate that. And I'll just add to your point, the roads that are there, from personal experience, are not necessarily safe.

Our next question is from Helane Becker of Dahlman & Rose. Helane Becker - Dahlman Rose & Company, LLC: Two questions. One, are there any capacity issues around El Dorado Airport that would affect you, that might limit any long-haul growth you might want to do? And my second question is, with respect to your employees, I think at one point last year, there was some negotiation going on. And I just wondered if that had concluded and where things are with labor?

Okay. So El Dorado is very restricted of course. It would not have a major effect on us mainly because, again, as mentioned before, we have reduced our domestic flying out of Bogota, El Dorado. So actually, we are in a slightly better position than we were before. And we're not planning to grow internationally out of that airport. But it is very restricted. There is no room to grow there actually, during peak times at least. Very limited. But again, our growth is mainly out of Panama City. The airport is growing here. It has great facilities, and we have all the capacity we need to continue to grow in the coming years. So in that sense, we're in a very good position. And actually, what you have mentioned is an advantage we have. Okay, in terms of labor, we have no negotiations going on right now, and we have a very good relationship with our labor groups. We have good communications and -- I mean, labor, it's a permanent job. You always have to deal with it. You always have to listen to their needs. You always have to have good communication. So it's not something that goes away that you fix one day and you think there will be no issues the following day. But given all of that, we have very good relations, open communications, and I'm positive that that's going to continue that way in the future. Helane Becker - Dahlman Rose & Company, LLC: Are there any plans to -- I think when we were down there a while back at the second to last analyst meeting, there was some discussion about building a train or maybe mass transit from the airport to downtown Panama City. Anything up with that?

Well, the country is building a new metro system in the city of Panama. So that's going on. It's a major investment. We think it's going to transform our city for the better. They're building the first line, and the first line will not reach the airport. Maybe future lines, but not this first investment.

Our next question is from Stephen Trent of Citigroup.

Most of my questions are answered, but 1 or 2 if I may. If you could please refresh my memory, I believe there is a second airport somewhere close to Panama City, maybe it's an old U.S. military airport. Am I correct in saying that Copa has the right to use that airport in the event, heaven forbid, that something goes wrong at Tocumen?

That is correct. That's Howard Air Force Base, which was a large U.S. Air Force base some years ago. The runway is in perfect condition, and we actually use it today as an alternate. We're basically the only users. And there's also a maintenance facility there owned by Singapore Technologies. So yes, that airport will be used as a backup.

Perfect, Victor. And just one last question, looking at your advanced bookings and what have you, are you seeing any sort of shift out of your advanced bookings coming from North America? And part of -- sort of broadly speaking, roughly how much revenue do you generate out of North America specifically?

Yes. This is Victor, Steve. What we've seen from North America is pretty strong traffic trends that we've been seeing there for several months now. Right now, North America represents probably at least 12% of our sales by point-of-sale. So it's an interesting mix of our revenues. And as you know, we added Toronto to our mix of destinations in North America in June. So we'll see how that goes. And we operate already to JFK, D.C., Miami, Orlando and L.A. And don't forget that we plan to start Chicago in December. So it's roughly 11%, 12% right now.

Our next question is from Bob McAdoo with Avondale Partners.

Just quickly about competition, whatever. Obviously, a year or so ago, we had the problem with a low-fare carrier in Colombia. And as I understand now that, that's gone with LAN owning them. Is there any place else in your system where you see low-fare competitors who might be starting up? Obviously, within Brazil, we have, it seems like more and more people trying to start airlines. And I think -- and the world is starting to recognize that Latin America, as you say, doesn't have the roads and the trains. But is there anybody else out there that you see is starting up an airline that may be somebody we should be watching that might be causing problems down the road?

We do not see it right now. There are a number of low-cost carriers as you mentioned already. We could not tell if there's anything planned right now. We cannot see it. And the conditions in our region are kind of different to other parts of the world in the sense that there are only a few large enough countries. Then internationally, you would have to fly to the same airport, paying the same cost as everybody else. So you wouldn't have an advantage there. But again, you never know. That's something that's very, very hard to predict. But in general, we think we have a very healthy competitive environment right now in Latin America. We have a number of strong carriers, but they're all rational, and we do not have a tenth of weak carriers trying to fight for the last passenger. So I think we have a healthy environment. There's good competition, but it's not excessive.

And the irrationality is gone out of domestic Colombia now, that's correct?

For the time being, yes.

I'm showing no further questions in the queue at this time. I would now like to turn the conference back over to Mr. Pedro Heilbron for any further remarks.

Okay. Thank you all. This concludes our second quarter earnings call. Thank you for being with us, and we'll see you next time. Have a great day.

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