Copa Holdings SA
NYSE:CPA
Earnings Call Analysis
Q4-2023 Analysis
Copa Holdings SA
Copa Holdings, in their recent earnings call, showcased resilience and a robust financial performance for the full year of 2023, despite unforeseen operational difficulties. The company has been navigating through a particularly turbulent period, marked by the grounding of 21 of its 737 MAX 9 aircrafts due to an airworthiness directive issued by the US FAA, which led to the cancellation of over 1,700 flights, impacting first-quarter operations in 2024. Nevertheless, the airline managed to produce leading operational results, pointing towards its strong business model and strategic execution.
With a reported operating margin soaring to 23.5% for the year, up by 8.3 percentage points from 2022, Copa Holdings is asserting its industry dominance with a keen eye on efficiency and profitability. This financial success translated into a net income of $518.2 million for the year, representing $12.89 earnings per share. Adjusting for special items, such as a significant charge mainly pertaining to convertible notes settlement, the adjusted net income reached an even more impressive $675.1 million or $16.79 per share. Focused on sharing this success with its investors, the Board has greenlit a generous dividend payment of $1.61 per share for each quarter of 2024.
Copa's unwavering commitment to operational excellence was evident as they maintained a load factor of 86.8% in 2023, with stable unit revenue growth despite the hit from the MAX 9 grounding. They have worked diligently to strengthen their route network, adding exciting new destinations and improving sales distribution channels. This network fortification and strategic distribution initiatives have streamlined operations, cutting costs, and driving revenue even in the face of adversity.
Staring down a challenging 2024, Copa Holdings remains confident, providing a forecast of a 10% increase in capacity year over year. The company is projecting an operating margin between 21% to 23%, founded on assumptions such as load factors in the range of 86% to 87% and unit revenues around $0.122. With anticipated CASM excluding fuel at $0.06 and an all-in fuel price expectation of $2.85 per gallon, Copa is preparing for a year of sustained profitability and continued return on investment for its shareholders.
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Ladies and gentlemen, thank you for standing by. Welcome to the Copa Holdings Fourth Quarter Earnings Call. [Operator Instructions]. Afterwards, we will conduct a question-and-answer session. [Operator Instructions]. 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.
Thank you, Lisa, and welcome, everyone, to our fourth 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 fourth quarter highlights, followed by Jose, who will discuss our financial results. Immediately afterward, 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 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 our coworkers 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 '22 to 86.7%. Passenger yields came in at $0.14, resulting in unit revenues or RASM of $0.127. Unit costs decreased by 6.3% compared to Q4 '22, 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. And our operating margin for the quarter came in at an industry-leading 23.9%. Now turning to our main highlights 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 1.8 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%. With regards to our network in 2023, we started serving 4 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 were able to significantly increase passenger sales through both our copa.com and direct channels and our new lower cost NDC 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 costs 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 ninth 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 and the Best Airline in Central America and the Caribbean. From APEX which qualified Copa as a Five-Star Major Airline and from Conde Nast traveler, which included us as part of the top 15 major airline -- major international airlines in The Reader's Choice Award for 2023. Turning now to Wingo. During 2023, Wingo focus more on its capacity to domestic market with the start of 6 new routes in Colombia from Bogota to Barranquilla, Pereira and Bucaramanga, from Medellin to Cartagena and Santa Marta, adding Panama from Panama city here to [indiscernible]. Internationally, Wingo launched 2 new routes during the year from Bogota to Caracas, Venezuela, and a seasonal road from Cali to Aruba. With these additions, Wingo currently operates 37 routes with service to 23 cities and 11 countries. So 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 US 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 probably 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 3 new destinations that will start to operate this summer, Raleigh-Durham in the U.S., Florianopolis 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. We continue growing and strengthening our network, 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 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 for handling the MAX 9 grounding in the best way possible and of course, for keeping our passengers and our coworkers 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 cost 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 items consisted of $3.4 million of realized 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. And finally, 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 NDC travel agency channels. We want to spend some time now discussing our balance sheet and liquidity. As of the end of the fourth quarter, we had assets of close to $5.2 billion 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.
And in terms of debt, we ended the quarter with $1.7 billion in debt and lease liabilities and came in with an adjusted net debt-to-EBITDA ratio of 0.5x. I'm pleased to report that our average cost of debt, which continues to be comprised solely of aircraft-related debt is currently in the range of 3.5%, with around 70% of our debt being fixed. Turning now to our fleet. During the fourth quarter, we received 3 Boeing 737 MAX 9s. With these additions, our total fleet is now comprised of 68, 737-800s, 29, 737 MAX 9s and 9, 737-700s. These figures include 1 737-800 freighter and the 9, 737-800s operated by Wingo. As for 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 3, 737 MAX 9s and 8, 737 MAX 8s to end the year with a total of 117 aircraft. We have already secured JOLCO financing for 9 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 month 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 for 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 [Technical Difficulty]
Yes, you're back into the call.
And -- so for some reason, we got dropped out. So you can tell this is live. And so I will start again with our outlook part. And as part of my prepared remarks. So I'm going to -- I was talking about our outlook for the year 2024, and I was saying that 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 the range of $0.122 and 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 the financial impact from the grounding of 21 of Copa's MAX 9 aircraft, which took place between January 6 and January 29. Additionally, it accounts for our 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'll open the call for questions if we're still hear hopefully.
[Operator Instructions]. And our first question today will be coming from Savi Syth of Raymond James.
I'm just kind of curious on the trends 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 seat 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.
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 down -- I think that still we're seeing in the data that we have of customers that are traveling for business purposes, and it's still somewhat lower than where it was back in 2019. But it certainly has been, I'd say, supplemented by the other source of travelers that were transporting leisure VFR and there's also business on leisure that it's also been sort of -- I would say, supplementing the business travel that we've seen since the pandemic.
And the front cabin is still doing better than -- doing better year-over-year. So it's doing better than a healthy 2022 or it did better in 2023.
Interesting. 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?
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 continuing buying shares in the $200 million program that we have that is active. Plus -- CapEx -- aircraft CapEx that we have, we have already, as you recall, our financing of our aircraft is 100% via the JOLCO and then in terms of maintenance CapEx and the like is probably in the $150 million, $180 million range. So the cash flow for the year certainly sustains all of our uses of cash.
One moment for the next question. And our next question will be coming from Rogerio Araujo of Bank of America.
Congratulations for the results. I have a couple here. The first one is on the guidance. Last quarter -- in the last quarter call, you guys said that the guidance would depend on external factors, including fuel and capacity from competitors. Fuel has been flattish since then. So how about competition? Can you please talk a little bit about how it play out, new routes and some kind of aggressivity from any player there? And I think the main idea here is to check if this margin guidance that is pretty robust already includes some capacity expansions from peers or not? Or if competition is actually less [indiscernible] than expected? That's the first one.
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 seeing 10% capacity growth. The competition altogether is probably growing somewhat 50% 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.
Okay. Sounds perfect. 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 any reason to believe that the industry in the region is also more profitable than pre-COVID and that our 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?
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. I mean, 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 cost 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 are also more competitive and are also producing better results overall.
And our next question will be coming from Helane Becker of TD Cowen.
First -- 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?
Well, we'll see. Starting summer -- we have -- Helane, we have a really good track record in picking markets. And I'm not saying this as bragging or anything, but of all the new markets we have entered in the last 30-plus years, there are only 2 that were not currently flying. And that with the exception of the routes we were flying pre-pandemic and that we have not yet reactivated. So there's still some market we have not reactivated from pre-pandemic as we know, a special situation. But we have a pretty -- I think, a good track record. And Raleigh-Durham sits in a region of the U.S. that we don't serve very well today. So that part of the Southeast U.S. It's a growing market. It's also -- it's a growing region. The Tri-City area of Raleigh-Durham. There's more, let's say, ethnic Latin American population moving to that area also. It has economic growth. So we think -- and it's not well served. We will be the first flight from the Raleigh-Durham area, the first direct flight from the Raleigh-Durham area to Latin America. And that's kind of what makes us unique and what allows us to succeed in markets such as this one.
Okay. That's really helpful. And then my other question is on the dividend. I mean it's such a big increase. And I know that you like to pay out, what, 40% of adjusted pretax. But did you think about or did the Board think about a smaller increase and then increasing it during the year? Just kind of trying to get a handle on how you double -- how you thought about doubling it. Because I mean not that I'm complaining, but...
Our policy is to pay out as you well mentioned, 40% of prior year's adjusted net income. And so I think that in respect to that policy, the Board did have a very, let's say, detailed discussion about this. But in the end, this is value to the shareholders. That's the primary way where many of our shareholders get value from the company. So therefore, it's an important aspect of the Copa value proposition. And so in the end, that's a policy of the company.
And we can afford to pay which is important.
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 -- or use of cash, of course, is in continuing to grow the business.
And our next question will be coming from Pablo Monsivais of Barclays.
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 is -- has helped the demand to be so resilient. And of course, if you think that a weaker effect 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 US.
Yes, it's been a positive, of course, in terms of generating more traffic, let's say, from South America going 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 is still a growing market with a lot of interest to serve our regions. So we sit in the middle of the 2 trends, and we think one balances the other, and we have been able to succeed with strong and not so strong currencies.
I would say after the pandemic, the traffic flows that we've seen are much more balanced one. So that, I think, has helped in mitigating the impacts of currency fluctuations.
And our next question will be coming from Michael Linenberg of Deutsche Bank.
Just in rough numbers, just the impact of the MAX 9 grounding on the March quarter, I mean, you could even give me margin points or round numbers and dollars. And as sort of a tie to that -- should we -- I guess, we should assume that you'll probably receive some sort of offset from the OEM in some sort of form over time, which is typically...
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. The guidance that we issued include sort of the, let's say, negative impact of the grounding of the aircraft during the month of January and the delays that we expect as of now for the rest of the year. And 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.
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 loss opportunity, not having 20-plus percent of our capacity during that month. But at the same time, it's a strong month. So the other 80% does very well.
Yes. Should I take from what you said though, you've incurred all of the badness but any sort of potential offset Jose, 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?
It is not in any of our figures.
That's perfect. Okay. That's actually -- that clarifies that. And then my second question, this is kind of an easier one, I guess. Wingo, 9 airplanes, but now that you're only going to take 11 instead of 15, I guess, Wingo is probably likely going to stay at 9? Or is Wingo going to see some growth this year? Anyway, any color on that?
It seems that for now, Wingo is going to stay as it is this year, and I think you put it very well. So 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.
And the next question will be coming from Stephen Trent of Citi.
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 -- a little bit of unrest in Ecuador and maybe your -- you're not affected by that at all, but I would just love to get the high-level view on that.
Okay. So I mean, we are affected by what happens in Ecuador and in other countries. Maybe not to an extreme level because our -- most of our market in and out of Ecuador is VFR and its business and it's not that much leisure. So that kind of helps because leisure, as we know, the one that first takes 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.
That's 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 with 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? Or maybe it's not much of a [indiscernible] for you guys?
It doesn't really have much impact either way. But we do quote 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. Yes, there's basically no overlap. So there's no impact from that side.
And our next question will be coming from Bruno Amorim of GS.
I have a follow-up on the outlook for this year related to the guidance as well, but more specifically related to the pricing environment. Now you are guiding for unit revenues somehow below what we saw in the fourth quarter, even if we adjust for seasonality, it seems that you are guiding for lower unit revenue this year versus what we saw in the end of 2023. So just it would be great to understand the rationale behind that. Is it the result of some slight pressure on the competitive side? Or are you being conservative? How do you get to this conclusion that unit revenues will fall even if slightly during this year?
Yes, Bruno, I would say there's 3 main components. I mean -- and most of this is related to the MAX grounding. So the $0.122 RASM guidance includes the effects of January of 2024. And then in addition to that, let's say, length of haul for the year 2024 is slightly higher than -- or we expect it to be slightly higher than in 2023. So it's a little bit of an impact there. . And then finally, yes, well, we are in a lower fuel environment for the year versus 2023 in a competitive environment when we are growing in double digits, right, for the full year. So there is a little bit of an impact there. But I would say the majority of the RASM impact when you compare it year-over-year is related also to the fact that the guidance for '24 has the MAX effect in there.
May I just ask for a quick follow-up. Can you please clarify how would the MAX grounding 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 yields over the past few months. Should be kind of a positive from a capacity or supply and demand dynamics?
I'll go first, and I'll let then Jose talk about the unit revenue part. But embedded in our guidance, is the expectation of further delivery delays due to the MAX grounding. We have a few MAX 9 we're expecting this month which we're not sure when we're going to get. And we're also expecting delays on the other MAX 8s we are receiving this year and we have reduced the number of aircraft from what we -- from the numbers in our preliminary guidance last year to 11 deliveries this year. But we still have that risk of even more delays. So that's still up in the year, I would say.
Yes. And Bruno, in terms of the impact on RASM because we have to close out flights, we have to cancel flights, and we were not able to sell the last remaining seats on many of our flights because we had to reaccommodate passengers. So that's where that impact occurs in a month that is very, very strong for us.
And our final question for the day will be coming from Duane Pfennigwerth of Evercore.
I appreciate the time and nice job. So just on your 2024 unit revenue guidance, it is well ahead of what we were estimating. How do you think about the trajectory over the course of the year? I mean I assume you're influenced by what you have visibility into, which is the earlier part of the year. But maybe just big picture, how are you thinking about kind of first half versus second half change implied in the guidance?
Sure, Duane. And I say that there's a little bit of noise in the first half of RASM because of the MAX, again, going back to the MAX issue. But -- so I would say that it's more, I'd say, more robust towards the second half of the year than in the first half. There's also some seasonality involved there, but there's, I would say, more, let's say, higher level of RASM in the second half and the first -- and -- but of course, limited visibility in the second half of the year in terms of how ultimate demand behaves. So that's kind of how we're seeing it right now.
Okay. And then maybe just a longer-term question. From time-to-time, there are kind of airport infrastructure projects that can be gating factors on your growth. Can you just speak in broad strokes, how much headroom do you have with your current gating footprint? And as we look out 2, 3 years down the road, are there other projects that we're going to need to see happen? When will airport constraints be an issue for you, if at all?
Right. Yes. Well, if we continue growing at the pace we hope to continue growing, there will be infrastructure limitations eventually, let's say in the 3- to 5-year time frame. But there are a lot of initiatives, the airport authority can adopt to fix that and increase capacity beyond that term for the next 10 years. So we have the data we're working with consultants to update it and it's very doable. So we believe that the next government will have that top on their agenda. And again, it's not significant what needs to be done. The investments are not -- are very manageable, and we could extend the capacity of the airport for many years.
And Panama has had a track record of investing in its airport infrastructure over the years. So we expect that to continue going forward as well.
Yes. And not always like exactly infrastructure, some of it is just managing the aerospace and how the airport structures, its takeoffs and landings and all of that. But there's also -- there are also opportunities with taxiways and fast exit and things like that. So it's a very doable list of opportunities.
Okay. Well, we're airline analysts. So 3 to 5 years is an eternity from now, you might as well have said 100, it doesn't sound like an issue.
Thank you. This concludes the Q&A session. I would like to turn the call back over to Pedro for closing remarks.
Thank you very much, and thanks to all for participating in this call. I want to summarize a few things that -- I mean maybe we didn't go over all of them. But it's important when we think and we talk about Copa's performance and high operating margins, and we've got at least one call from some of you, I mean, more than one question related to our margins and our performance. And so I just want to summarize a few things, which I think are very, very important. We're a full-service carrier with very low CASM-ex. And this is something that we've been working at and building over the years. It's not an overnight -- we're not an overnight sensation or anything like that. This is hard work for many years. And we're also always coming up with new things. And the new thing now, which we talked about in the call, is our distribution cost. We've been able to get our distribution cost way down, especially the -- what used to be a burden, which were the GDS cost. So not only do we have now control over our sales channels, but at much, much better cost, and that makes us more competitive. It allows for better margins. We also have a very strong and efficient network, which we continue to build and strengthen. A very reliable product that clients want to fly with the best on-time performance in all of the Americas. And on the revenue side, we keep growing our ancillary revenues with the right technology, much of it developed in-house. So we're in a really good and strong competitive position to weather the ups and downs of this industry and continue having success on, as Duane said, we don't have to talk about 5 years and beyond. But for the next few years, for sure, we're in a great position. So anyway, this concludes our earnings call. Thank you for being with us, and thank you for your continued support. Have a great day, and we'll see you next time. Thank you.
Ladies and gentlemen, thank you for your participation. This concludes the presentation. You may disconnect, and have a wonderful day.