Jens Spiess

Jens Spiess asked about the level of conservatism built into Copa's 2025 guidance, specifically regarding the Q4 operating margin and implied yield, and inquired about the implied deceleration of yields in Q4 based on full-year RASM guidance.

Answer

Pedro Heilbron, CEO of Copa Holdings, reiterated the narrowed Q4 2025 operating margin guidance of 22%-23%, which represents the upper end of previous guidance, and expressed strong comfort with this range. He declined to provide specific quarterly yield guidance, and for the full-year RASM, he confirmed the guidance of $0.112, stating the company remains comfortable with that figure.

Jens Spiess asked about the level of conservatism built into Copa's 2025 guidance, specifically regarding the implied Q4 operating margin and yield.

Answer

CEO Pedro Heilbron reiterated the narrowed Q4 2025 operating margin guidance of 22%-23%, which represents the upper part of their previous guidance, and expressed comfort with that range. Jens also inquired about the implied deceleration of yields in Q4 based on the full-year RASM guidance and the outlook for the next few quarters.

Jens Spiess from Morgan Stanley asked about the outlook for the cargo business, including visibility and potential impacts from regional tensions, and questioned the expected volume increase from a new freighter.

Answer

CEO Pedro Heilbron described the cargo business as strong, low-risk, and primarily utilizing belly space on passenger aircraft, with short-term visibility. He announced a second 737-800 freighter would be added but clarified that as a single aircraft, it is not expected to 'move the needle in a significant way' on overall results.

Jens Spiess posed a hypothetical question regarding Copa's flexibility to reduce capacity or slow growth should the market environment weaken.

Answer

CEO Pedro Heilbron emphasized the company's significant flexibility, pointing to 39 unencumbered aircraft and a diversified network. He explained that the single 737 fleet type allows for easy reallocation of capacity from weaker to stronger markets, a strategy they have successfully employed in the past.

Jens Spiess asked if Copa was observing any weakness in VFR (Visiting Friends and Relatives) traffic from the U.S. due to immigration concerns and inquired about the possibility of accelerating the share buyback program.

Answer

CEO Pedro Heilbron stated that Copa is not seeing any weakness in its U.S. traffic, which he described as doing "better than before." On capital returns, he explained the policy is a dividend payout (currently 44% of prior year's net income) supplemented by a buyback program. He expects the remaining $113 million of the current $200 million buyback authorization to be executed throughout the year, driven by strong liquidity.

Jens Spiess asked for clarification on the timing of the Venezuela impact and inquired about the company's capital allocation priorities, particularly regarding share buybacks.

Answer

CEO Pedro Heilbron confirmed the impact from the Venezuela flight suspensions will continue into Q4, though at a reduced level of about half the Q3 impact. CFO Jose Montero addressed capital allocation by highlighting the generous dividend policy and an existing $200 million buyback program. However, he emphasized that significant capital will be directed towards upcoming aircraft deliveries, with CapEx approaching $900 million in 2025.

Jens Spiess asked for an outlook on the next year, specifically concerning LATAM's order book, booking curve, expected ASK growth based on the fleet plan, and the number of leases expiring in the upcoming year.

Answer

CEO Roberto Alvo outlined a goal of high single-digit ASK growth for 2026, with more detailed guidance to follow. He referenced fleet additions including A320 family, E2, and widebody aircraft, noting few expiring leases with extension options. He confirmed the fleet is sufficient for planned capacity and that the early next year booking curve aligns with current trends, despite low domestic market bookings.

Jens Spiess asked for an outlook on 2026, including the booking curve, expected ASK growth based on the fleet plan, and the number of leases expiring next year.

Answer

Roberto Alvo, CEO of LATAM Airlines Group, stated the goal for 2026 is high single-digit ASK growth, with more detailed guidance to follow. He referenced the presentation's slide 4 for fleet arrivals (A320 family, E2, widebodies) and noted relatively few expiring leases with extension options. He expects the total fleet to be around 410 aircraft by year-end and sees the early 2026 booking curve consistent with current trends.

Jens Spiess asked about the sustainability of the quarter's low cost performance, noting a non-recurring maintenance provision reversal and FX benefits, and inquired about the currency denomination of expenses.

Answer

CFO Ricardo Bottas Dourado acknowledged the one-time maintenance adjustment related to aircraft acquisitions but stressed confidence in ongoing cost-control initiatives. He noted a $0.02 CASK ex-fuel benefit from FX and stated that while about 7% of total costs (plus fuel) are in USD, over 60% of revenues are in hard currency, providing a natural hedge.

Jens Spiess questioned the drivers behind price decreases, asking for more detail on the pricing environment in the Brazilian domestic market and whether the international price decline was driven more by interregional or long-haul flights.

Answer

CEO Roberto Alvo Milosawlewitsch explained that the Brazilian domestic market faced a very high comparison base from a strong Q4 2023, but absolute demand remains healthy. For international routes, he described the environment as healthy across the board, with a notable rebound in regional traffic within South America. VP of Corporate Finance Andrés Eitel added that currency depreciation has boosted inbound traffic, supporting overall demand.

Asked for an explanation of pricing trends, specifically the decrease in local currency prices in the Brazilian market and the drivers for price decreases in international segments (interregional vs. long-haul).

Answer

The price drop in Brazil is due to a very high comparison base from Q4 2023, while underlying demand remains healthy. International segments are strong across the board (Europe, U.S., and regional), with no particular areas of weakness. Currency volatility has created offsetting effects, such as boosting inbound tourism and strong outbound traffic from markets like Argentina.

Jens Spiess inquired about GAP's strategy for the Motiva Airports acquisition, specifically if they plan to bid for all assets, consider partnerships, and whether financing would involve equity or debt.

Answer

Raúl Revuelta, CEO of GAP, stated that the company is still evaluating options for Motiva Airports, remaining open to partnerships or bidding alone. He emphasized a disciplined approach to value creation and confirmed that any potential acquisition would be financed through leverage, not equity.

Jens Spiess inquired about GAP's strategy regarding the potential acquisition of Motiva Airports assets, specifically whether the company plans to bid for all assets, consider a partnership, and if financing would primarily involve equity or debt.

Answer

CEO Raúl Revuelta stated that GAP is still analyzing different options for the Motiva Airports opportunity, remaining open to both partnerships and bidding alone. He confirmed that any potential acquisition would be financed primarily through leverage, emphasizing a disciplined approach to value creation.

Jens Spiess of Morgan Stanley sought to clarify the potential tariff increase percentage, asked about the outlook for Q4 given strong scheduled capacity growth, and questioned if GAP was at approximately 85% of its maximum allowed tariff in Q2.

Answer

CEO Raúl Revuelta Musalem indicated that tariff increases would vary by airport, with some potentially seeing double-digit hikes. He expressed optimism for Q4 capacity but noted load factors are the key variable. He also confirmed that 85% is a reasonable general estimate for tariff utilization in Q2, though it varies by airport.

Jens Spiess from Morgan Stanley sought details on airline capacity trends, particularly conversations with foreign carriers about potential reductions, and asked for an update on the tariff implementation schedule in Mexico.

Answer

Executive Raul Musalem reported that the primary international capacity reduction is at Montego Bay, driven by American Airlines. Conversely, GAP is in positive negotiations for potential new routes with Canadian carriers. Regarding tariffs, he confirmed the plan is to consider another adjustment late in the year or early 2026, pending a thorough market analysis at that time.

Jens Spiess of Morgan Stanley asked for the thought process behind the 15% tariff increase in March instead of a higher figure, and questioned if there were risks to traffic guidance from lower load factors due to airline issues.

Answer

Executive Saúl García explained the 15% tariff increase is based on market analysis to incentivize growth without disrupting traffic, noting it varies by airport. Raul Musalem added that while the economy is softening, the significant lack of aircraft capacity due to engine issues means demand can still be absorbed, making them comfortable with the current traffic guidance.

Jens Spiess of Morgan Stanley inquired about the drivers behind the sequential decline in non-aeronautical revenues and the potential impact of the US Department of Transportation's actions on Mexico City airport capacity.

Answer

CEO Adolfo Castro Rivas attributed the non-aeronautical revenue softness to unfavorable exchange rates, a slight shift in passenger mix, and operational issues at Terminal 2. Regarding the DOT situation, he noted that ASR's direct exposure to affected Mexican carriers is minimal (1.6% of US traffic) and expressed doubt that the Mexican government would significantly lift capacity restrictions in Mexico City soon.

Jens Spiess inquired about the reasons for the sequential decline in non-aeronautical revenues and the potential impact of a hypothetical lifting of US DOT restrictions on Mexican carriers.

Answer

CEO Adolfo Castro Rivas explained that the non-aeronautical revenue softness was driven by unfavorable exchange rates, passenger mix, and operational issues at Terminal 2. He stated that any direct impact from the DOT situation would be minimal for ASR, as US carriers dominate their routes, but noted that any resulting increase in Mexico City's overall capacity would be beneficial.

Jens Spiess asked about capital allocation, specifically the large dividend payment, potential interest in CCR's Brazilian airport assets, any signs of traffic weakness from airlines, and the risk to maximum tariff compliance from FX volatility.

Answer

Adolfo Castro Rivas explained the substantial dividend of MXN 24 billion is a payout of accumulated cash. He confirmed ASUR is analyzing the CCR assets and any acquisition would be debt-funded. He stated it's too early to see traffic weakness from airlines, with the main impact on Cancun being the Tulum airport ramp-up. Regarding tariffs, he noted the significant peso depreciation since Q1 2024 provides a large buffer, making him comfortable with year-end compliance.

Jens Spiess asked about potential capacity constraints at Cancun's domestic terminals if domestic airlines were to increase flights while international traffic remains weak.

Answer

Executive Adolfo Castro Rivas clarified that while there are no operational capacity restrictions in Terminal 2, there are non-aeronautical constraints, such as limited space for food services. He explained the strategic plan is to move South American traffic to the expanded Terminal 1 upon its completion, freeing up space in Terminal 2 for domestic carriers.

Jens Spiess inquired about the traffic outlook for Cancun for the remainder of the year and asked how current traffic is tracking against the assumptions in the Master Development Plan (MDP).

Answer

Adolfo Castro Rivas agreed that the situation in Cancun is challenging but expects the winter season to be better. He also confirmed that current passenger traffic is tracking below the levels forecasted in the MDP.

Jens Spiess of Morgan Stanley asked about the potential for capacity easing at Mexico City Airport (MEX), sought clarification on the timeframe for the +/- 3% capacity flexibility, and inquired about aircraft delivery and redelivery plans for H2 2025.

Answer

President & CEO Enrique Javier Beltranena Mejicano stated he does not foresee any slot capacity improvements at MEX for at least 1.5 to 2 years. CFO Jaime Esteban Pous Fernández clarified the capacity flexibility referred to 2026 and confirmed plans to redeliver 3 aircraft and receive 8 new aircraft in the second half of 2025.

Jens Spiess from Morgan Stanley asked about the potential for capacity easing at Mexico City Airport (AICM), sought clarification on whether the three-percentage-point capacity flexibility applied to 2025 or 2026, and inquired about aircraft delivery and redelivery assumptions for the rest of the year.

Answer

President & CEO Enrique Javier Beltranena Mejicano stated he does not foresee further slot capacity increases at AICM for the next 1.5 to 2 years. CFO Jaime Esteban Pous Fernández clarified that Volaris will receive eight new aircraft and redeliver three in the second half of 2025. He and EVP Holger Blankenstein confirmed the +/- 3% capacity flexibility applies to the 2026 guidance, not 2025.

Jens Spiess sought clarity on the drivers of the lower capacity guide, asking for the number of 2025 aircraft redeliveries and associated expenses. He also questioned if the Q2 TRASM guide was conservative and the potential impact of a stronger peso.

Answer

Airline Executive Vice President Holger Blankenstein confirmed 5 aircraft redeliveries for the year, with an incremental expense impact of over $90 million. President and CEO Enrique Beltranena stated the Q2 guidance reflects current visibility and confirmed that a stronger peso than the guided MXN 20.20-20.40 range would present an upside to results.

Jens Spiess sought clarification on the full-year CASM guidance, noting a potential discrepancy with the Q1 guidance. He also requested more detail on the expected progression of aircraft on ground (AOG) numbers through 2025 and into 2026-2027.

Answer

Chief Financial Officer Jaime Pous clarified that the CASM ex-fuel guidance of $0.055-$0.056 was for Q1 only, and the full-year 2025 figure should be similar to the 2024 full-year level of $0.054. He projected an average of 30 aircraft on ground for 2025, potentially higher in Q1, and expects a similar level in 2026, but noted it was too early to give firm numbers for 2026-2027.

Jens Spiess asked about the relative profitability of international versus domestic routes, requested clarification on the company's recent fuel hedging, and questioned how the U.S. dollar revenue mix could reach 50% with balanced capacity growth.

Answer

CEO Enrique Beltranena reiterated a focus on profitability over market share. CFO Jaime Pous clarified they hedged 30% of fuel for Nov-Jan at a $2.25 strike price. Enrique Beltranena explained the revenue mix shift will be driven by maturing routes, new international frequencies, and higher ancillary revenues on international flights.